Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 4 - Evidence, June 16, 2009
OTTAWA, Tuesday, June 16, 2009
The Standing Senate Committee on Transport and Communications, to which was referred BillC-7, An Act to amend the Marine Liability Act and the Federal Courts Act and to make consequential amendments to other Acts, met this day at 9:32 a.m. to give consideration to the bill.
Senator Lise Bacon (Chair) in the chair.
[English]
The Chair: We have on our agenda this morning BillC-7, An Act to amend the Marine Liability Act and the Federal Courts Act and to make consequential amendments to other Acts.
We have as witnesses from the Canadian Bar Association, Simon Barker, Chair, National Maritime Law Section; and Kerri Froc, Lawyer, Legislation and Law Reform. Welcome to our committee. We will hear from you first, and then senators will ask questions.
Kerri Froc, Lawyer, Legislation and Law Reform, Canadian Bar Association: The Canadian Bar Association is pleased to appear before the Senate committee today on BillC-7, amending the Marine Liability Act and the Federal Courts Act among others.
The Canadian Bar Association, CBA, is a national association with about 37,000 members across the country. The primary objectives of the organization are improvements in the law and improvement in the administration of justice. It is in this light that we have made our written submissions, which have been circulated to you in advance, and make our comments to you today.
The CBA has been engaged in consultation with the government on marine liability amendments since at least 2005, and we are pleased to see progress made on this issue. We appeared before the House of Commons committee to discuss the concerns that we had about the bill.
I will ask Mr.Barker, the chair of the National Maritime Law Sectionto make substantive comments about two significant issues that remain outstanding. One is in relation to adventure tourism and the other is the proposed lien for Canadian ship suppliers.
Simon Barker, Chair, National Maritime Law Section, Canadian Bar Association: Good morning, honourable senators. Thank you for allowing me to sit before you this morning to speak about the proposed amendments to the Marine Liability Act, otherwise known as BillC-7.
The Marine Liability Act has been law in Canada for some eight years, having come into force on August8, 2001. We have an interesting situation in that, prior to 2001, we had one piece of legislation that contained many of the shipping matters in the country called the Canada Shipping Act. In 2001, we broke it apart. We have the operational technical stuff now in the Canada Shipping Act, 2001, and we have the Marine Liability Act. Eight years later, we are trying to put the connection back together in part, and it is having some unintended effects.
I appeared as a witness before the House of Commons Standing Committee on Transport, SCOTIC as it is now called, on April23, 2008. I appeared in the same role that I am today, as the chair of the National Maritime Law Sectionof the Canadian Bar Association. I appeared a week before the representative of the Canadian Maritime Law Association, CMLA. The two law associations are very close to each other; the membership is pretty much the same. The submissions for both organizations were similar; there were a few minor points between the two.
The National Maritime Law Sectionof the Canadian Bar Association made two submissions; I believe you have those two submissions before you today.
SCOTIC made amendments to the bill, some of which improved the text and were welcome. One, in particular, did not improve the text. That one was made in relation to clause12, the proposed lien for Canadian ship suppliers.
I was up in Montreal yesterday at a continuing legal education session of the Canadian Maritime Law Association. Those sessions occur not every year but on quite a regular basis. The association tends to choose subjects that are in the forefront of the law — improvements in the law, problems with the law — subjects that will generate debate and discussion, and puts together an education program. I have never attended an education session before and heard a speaker — Robert Jetté of New Brunswick — talk about something that was actually not law. He picked up on BillC- 7, as it had been amended at the House of Commons committee. Therefore, the lawyers are now debating something that you are also debating. I have text of some of comments from them that might help you in your deliberations today.
The other comment I want to make on the subject of adventure tourism is that we believe the House of Commons committee missed an opportunity to improve the bill. Minister Baird, when he was here before you last Wednesday, said:
When things go wrong and when accidents happen, Canadians expect their government to ensure that their interests are protected by modern legislation that includes proper compensation.
On the subjects of the Canadian ship suppliers' lien and adventure tourism, the bill goes a long way to doing that. However, it has two stumbling blocks. The stumbling blocks are the ones that we will discuss with you today. I do not believe the bill, if you pass it as written, will allow proper compensation. It will allow compensation, but the question is whether it will allow proper compensation, as the minister has set as his objective.
I think the opportunity that the House of Commons committee missed was to amend clause9 of the bill. Clause 9 is where you see the exemption for marine adventure tourism activities. The inclusion of a requirement that a marine adventure tourism activity be seaworthy at the commencement of the voyage and properly crewed was missed.
I think it would be fair to say that, on the subjects of the marine lien, clause12, and adventure tourism, clause9, there was much confusion in the lower house. Certainly, that was true the day I appeared before the committee. I sit here before you this morning looking to you as the upper chamber for that sober second thought for which you have become renowned. The phrase that I always remember my grandmother telling me is "the devil is in the details,'' and, in this situation, I think the devil is very much in the details.
Everyone on the government side of the shop and the private bar are all in agreement with the broad strokes. We all think BillC-7 is a very good piece of legislation: It will increase oil spill compensation; it addresses the ship arrest provisions that have been out there, which have been problematic for so long; and it will bring the text into line. However, where we start to have some disagreements is when looking at some of the small details.
Clause 9 concerns liability for passengers. In 2001, the Marine Liability Act, MLA, brought into Canadian law the Athens Convention, an internationally agreed liability regime for loss of life or personal injury for passengers travelling on board ships. I call it a "big ship'' convention. It is for ferries and passenger cruise ships. It establishes amounts on the basis of a shipowner's liability to their passengers.
The part of the Athens Convention to keep in mind as you have your deliberations is that Article18 does not allow a shipowner to contract out of liability. It makes what have become effectively known as waivers null and void.
With respect to Part 4 of the act, the big ship convention, in effect, once we brought it back here to Canada, we applied it to both domestic and international carriage of passengers by ship. Since 2001, the marine adventure tourism industry in this country has been subject to Part 4. They are not allowed to use waivers, according to the law of the land. That is causing them problems, as the House of Commons committee heard.
Clause 9, therefore, in effect will remove or exclude a marine adventure tourism activity from Part 4 of the MLA. It will take them out of that regime. In the submission of the Canadian Bar Association, which is dated April21, we said that we think it is reasonable to exclude adventure tourism activities from Part 4 of the Marine Liability Act. However, if you allow it to happen, we will see a return to the common law in relation to the carriage of passengers in those activities for those ships.
More specifically, we will see the return of what are known as waivers, the ability of an operator to contract out of liability. Waivers, in and of themselves, are not a bad thing; they are a source of work for lawyers when matters get into courtrooms.
I was in Barrie, Ontario on Saturday of last week, zip-lining with my daughter for her birthday with six of her friends, and I was asked to sign a waiver when I walked into the office to pay the money and log in the kids. As a lawyer, I am probably as bad an example as anyone, but I signed the line that said, "I have read the terms and conditions and I understand them.'' I signed it because I had seven kids by my side saying, "Dad, let us go. We need to get out of here.''
Waivers help these organizations, but I also relied upon the fact that my wife had done her homework and she found a safe zip-lining operation in Barrie. As we spent the afternoon there, they were a safe operation. They did everything right; they had all the right cables and so on. Therefore, I had no problems, in the back of my mind, signing that piece of paper.
I am saying to you today, with respect to clause9 and the marine adventure tourism activities, that if you add a requirement to clause9 that the operator provide a seaworthy ship, properly crewed at the commencement of the voyage, that will mean that poor operators will not be able to hide behind their waivers in the event that the ship is not seaworthy as it pulls away from the dock.
You will not know that as a passenger when you sign the waiver in the kiosk or office before you get on the boat. However, if the ship pulls away and it is not seaworthy, that will mean down the line in a courtroom if that poor operator tries to hide behind that waiver, he will not be able to because the unseaworthy ship will push him back into Part 4 of the act, and Part 4 says that waivers are null and void. He will not be able to hide behind it.
Good operators — the ones that appear up in the Ottawa Valley and in British Columbia, the ones that you see in the harbour in Montreal, the Lachine rapids — need not worry. They have safe operations, they will still be able to use waivers, and they will still be able to look after themselves.
The concept of seaworthiness at the commencement of a voyage is not a new concept. We have it in the Marine Liability Act today in the cargo liability provisions. It is a concept that has existed in the shipping world since about the 17th century and the days of the Lloyd's Coffee House in London, England which was the birthplace of marine insurance. It is not a new concept by any stretch of the imagination.
The lien clauseis clause12. The lien clausewill help Canadian ship suppliers when they supply to foreign vessels. That is a good thing. What you see before you in the submissions of the Canadian Maritime Law Association, the Canadian Bar Association and the government are differences in the level of the detail that should be attached to that protection.
In our supplemental submission to SCOTIC, which was dated April30, there was some confusion when I appeared on the 23rd on the subject of the link. I had made an offer to the House of Commons committee to supply them with some words. They took me up on that offer. It is the same with every volunteer, if you put yourself out there, sometimes you do not want to hear the answer; but they took us up on that offer.
We went back, and the CMLA had some words that they had proposed for the lien clause. The Canadian Bar Association was very happy with those words. We went a bit further than the Canadian Maritime Law Association with two modifications, but the revisions that you see to proposed new section139 appear in the submission dated April30, 2009. That wording is a modification of a proposal originally developed by the Canadian Maritime Law Association. You have all the practitioners in this field together on the subject of what words should appear for the lien clause.
At the House of Commons committee, at the clause-by-clauseanalysis, we had a series of amendments proposed. I think there were four or five amendments and there were amendments amending amendments and amendments conditional upon amendments. It was a normal clause-by-clausemelee, if I can put it that way. Amendments were dropped; amendments came forward.
In the report from SCOTIC, a number of amendments are suggested for clause12, but one says: "(b) replacing line 13 on page59 with the following: `equipping of the foreign vessel.''' It goes on to talk about the Canadian Shipping Act — subject to section251 of the Canada Shipping Act, 2001. It was the government amendment at SCOTIC; other amendments were stood down and that one was allowed to go forward.
That wording that appears in the bill, as reprinted at report stage, was the subject of the discussion at the Canadian Maritime Law Association continuing legal education seminar yesterday. I can tell you, from having been there and having had coffee with various people and having been lobbied when they heard where I was coming today, that a great deal of confusion and legal discussion ensued about the words that were added at the report stage.
If I may be permitted to read to you a part of Mr.Jetté's paper yesterday, it sums it up nicely. He says, concerning the Marine Liability Act amendments, BillC-7 and proposed new section139:
However, when the legislation was drafted and the Bill introduced the Sectioneliminated the mention of ranking, removed the concept of extinguishment of the lien after a bona fide sale, and had added the claims described in subsection22(2)(n) of the FCA (less construction) to the class of claims covered by the lien and most disturbing eliminated the necessity of any involvement by the owner.
More consultation at the Committee level occurred and further representations were made to SCOTIC and ultimately oral representations were made before the Committee by both the CMLA and the CBA Maritime Law Section. Changes were made to the language by the Committee
— those are the phrases to which I referred —
which now resulted in the reintroduction of some owners' involvement by the addition of subsection2(1) in the final text. However, this "owners' involvement'' was not applicable to all claims. Furthermore, the claims for stevedoring and lighterage had the additional characteristic of being subject to Section251 of the Canada Shipping Act, 2001.
The debate that went on yesterday was about whether, with the words "subject to,'' the provisions on stevedoring and lighterage in the Canadian Shipping Act, 2001 come first or those in the Marine Liability Act. The conclusion at the end of the day was that it was lots of grist for the lawyers and judges in the years to come. However, would that protect Canadian ship suppliers? There was a doubt. If the intent of the minister's bill is to protect Canadian ship suppliers, his words do not cut it, simply put.
The point that I want to make to you today is that you have an opportunity to rethink the lien provision. You also have an opportunity to rethink the adventure tourism provision. I would urge you to do so as the upper chamber.
Those are my submissions. I would be pleased to answer any questions that you may throw at us.
The Chair: There will be questions, to be sure. I tried to follow what you were saying to us, but in your submission of April30 to the Standing Committee on Transport, Infrastructure and Communities, you recommended a revision to proposed new section139, the maritime lien that you just mentioned.
Do you still think the wording of the bill should be changed again in proposed new sections 139(1), (2), (2.1), (3) and (4) and a time limit should be added to proposed new section139(5) in order to provide necessary safeguards? I do not know if I heard you correctly, but I want to ask the question just the same.
Mr.Barker: The answer is yes, I do believe that the proposed new sectionshould be changed.
As I mentioned in my statement, I have never had a situation where I have gone to an education session to learn about something that is proposed law. Normally, we talk about law that is on the books and that judges have had a chance to think about and cogitate about. Usually, one judge has said one thing and one judge has said another; a Court of Appeal judge decides to weigh into it and has said something else, and the lawyers get to mish and mash it all together.
This is the first time I have ever been to an education session where we were actually talking about something that is proposed. Mr.Jetté's paper was tensive because, as he said, it was a moving target. It had come out of the House of Commons committee and was coming into your committee today.
The point I wanted to make was that the words that were proposed in the April30 submission were words that the CMLA had a chance to sit down and think about. The Canadian Bar Association then had a chance to review it. We agreed with them. We made a couple of modifications, and they have come forward. They were words that were thought through rather than in the heat of a clause-by-clauseanalysis and in the days before. I believe the words that you see on April30 have the agreement of the private bar.
The Chair: Do you still want the amendment?
Mr.Barker: We suggest that you change the amendment that appears in the bill as printed at report stage.
The Chair: BillC-7, in clause1, was amended by replacing line14, on page1, "a person carried on board a vessel propelled manually by paddles or oars; and'' with "propelled manually by paddles or oars and operated for a commercial or public purpose; and.''
Is the modification of the meaning of "passenger'' clear enough to limit the liability in the case of adventure tourism?
Mr.Barker: The amendment that was made at SCOTIC on that point was a good amendment. It is a solid amendment.
The Chair: Do you agree with that amendment?
Mr.Barker: We agree with that amendment.
The Chair: Another change to the original BillC-7 is the addition of "stowaway'' to classes of persons to which the limits of liabilities do not apply, such as clauses 3 to 8. Proposed new section28(3)(c.1) says: "a stowaway, a trespasser or any other person who boards a ship without the consent or knowledge of the master or the owner;''
That is at page3 of the bill. Do you have any comments on that matter?
Mr.Barker: No. I understand that was a submission of the Canadian Maritime Law Association. It is a solid submission, and I think it makes sense.
The Chair: Does it make sense to you?
Mr.Barker: It does.
The Chair: Thank you.
Senator Johnson: Welcome to the committee this morning. Your three concerns are adventure tourism, maritime liens and limitation period.
In terms of adventure tourism, can you define what you mean by "significantly greater risk?'' Is that a term that can be quantified? Does it have any standing in law? What does it oblige the operators of these tourists to do that the legislation as it is now does not?
Mr.Barker: When you say, "significantly greater risk,'' what do you mean; significantly greater risk to whom?
Senator Johnson: To customers. I am asking what you mean by "significantly greater risk''. It is in your submission.
Mr.Barker: Of April21?
Senator Johnson: Yes, to the committee. In the House of Commons, did you make these arguments when you appeared there?
Mr.Barker: Where do you see the words "significantly greater risk?'' I am just trying to follow it.
Senator Johnson: It was in our notes here. The Canadian Maritime Law Association recommends that the bill "be amended to require that participants be exposed to a `significantly' greater risk than passengers are normally exposed to.'' I am asking you to define what you mean there and whether or not you think that is an issue.
Mr.Barker: As a representative of the Canadian Bar Association, I cannot speak on behalf of the Canadian Maritime Law Association. They are in Montreal today having their annual general meeting.
Senator Johnson: That was another law association, the Canadian Maritime Law Association.
Mr.Barker: Right. The plan is to take adventure tourism out of Part 4 of the Marine Liability Act. The justification the government has given us for exempting vessels engaged in adventure tourism from the provisions of the Marine Liability Act is that when you go white-water rafting, engage in a marine adventure activity or go zip-lining in the trees in Barrie, to use my other example, you consent to some degree to the risks involved. You are looking for the thrill. You are seeking out vessels that permit you to engage in thrill-seeking activities.
When you are on a ferry going from Cape Breton to Newfoundland and Labrador or when you are on a ferry going from Vancouver to Victoria, you are not seeking out a thrill; you merely want to get from point A to point B. Those are two different scenarios.
When you are a passenger on a ferry, you are not asked to sign a waiver. You buy a ticket; you go onto that vessel with your luggage, car, kids, family, dog and bunnies or whatever, and you go from points A to B. The shipowner in those situations should not be able to contract out of any liability. There should be a basis of liability and an amount of compensation if that ship gets into trouble. That is what the Athens Convention tries to do and does successfully.
When I am looking for white-water thrills up in the Fraser Canyon, in the Ottawa Valley or the Lachine Rapids, I am there because I want to engage in a somewhat dangerous activity. I know that it is dangerous because that is why I have gone there in the first place. To sign a waiver to say, "I acknowledge the risks involved'' is not stepping outside the logical parameters of the ballpark.
We are saying, as lawyers, that if you want to take or if the government wants to take adventure tourism out of Part 4 of the Marine Liability Act, it is a policy decision and there is nothing wrong with that policy decision in its context, then do it correctly. Ensure that whomever you take out are good operators and not bad operators.
In the consultation process before the bill came into the house, Transport Canada initially came up with an idea that they would focus on the ship as the trigger to get the marine tourism activity out of Part 4. It was felt by many people that that was not the way to approach it. Consultations and meetings took place with departmental officials, and the proposal was put forward that the nature of the activity should be what gets you out of the bill.
You see this rather convoluted drafting, if I can put it that way, because it was the only way that you could do it in clause9, proposed new section37.1, which states:
"This Part does not apply to an adventure tourism activity that meets the following conditions ...''
Therefore, you are trying to describe the activity by determining if it is not that type of activity, in which case it is not subject to Part 4. If the activity does not meet these conditions, it will be subject to Part 4.
We are saying that, for example, if I get in a Zodiac — an inflatable boat — on the St.Lawrence River and go out to chase the humpback whale around the Saguenay-St.Lawrence Marine Park with my children, I am being exposed to an aquatic environment. It would require safety equipment and procedures beyond those normally used in the carriage of passengers. Presumably, in a Zodiac, I would be wearing a life jacket. On a ferry, however, I would have access to a life jacket and know where the muster stations are, but I would not be required to wear a life jacket. I may have clip lines on to ensure I do not fall out of the Zodiac. I would be exposed to greater risks than passengers are normally exposed to.
I will use the example of the Saguenay again. When you go whale-watching, you have a choice. You have a large ship on which you can stand on the railings and look down on the whales as they are frolicking in the water, or you can be in a Zodiac right beside the whales. One, I would suggest, is more akin to being a passenger on a ferry, and the other is more akin to being an adventure tourism activity. The risks have been presented to me, and I have accepted in writing that I will be exposed to the risks.
When I took my children up to the Saguenay last summer to go whale-watching on a big ship, I was not asked to sign a waiver. That would mean that particular whale-watching operation would not be a marine adventure activity for the purposes of this act. If I had got into the Zodiac, I might have been asked to sign a waiver, which would have been the difference between the two.
I am saying that there should be another paragraphinserted to say that the ship I get into is seaworthy at the commencement of the voyage and is properly crewed. If the adventure tourism activity does not ask me to sign a waiver and does not have a seaworthy ship, then it is not a marine adventure tourism activity and is subject to Part 4 of the Marine Liability Act.
Senator Johnson: Let us cut to the chase. The big deal here, of course, is that the House of Commons met five times on this bill. The bill has been passed by the Parliament of Canada, and you generally applaud it.
Are you suggesting we send the bill back for your amendments? It will probably be rejected again. Our position is that the bill should be passed and put into legislation. That is the reality. What do you expect us to do?
Mr.Barker: I do not believe the bill has been passed by the Parliament of Canada, because I thought the Senate was part of the Parliament of Canada. I believe it has been passed by the House of Commons.
Senator Johnson: It has passed the House of Commons; that is right.
Mr.Barker: It is now being considered here in the Senate, as the upper chamber. If you believe that a bill coming out of the House of Commons is not correct, you have the ability to consider it and amend it.
Senator Johnson: I have been here 19 years. I am well aware of that.
Mr.Barker: The bill has not been passed by Parliament.
Senator Johnson: The bill has been passed by the House of Commons. They met five times.
Could the bill take care of the issues you raised in the regulations?
Mr.Barker: No, because if a waiver is signed and a waiver is allowed to stand, and an accident happens where someone gets hurt and they cannot get past the waiver, then the legislation will not meet the minister's intent and will not provide proper compensation if the vessel is unseaworthy when it leaves the dock. The regulations will not be able to address the issue.
Senator Stratton: Did you make a presentation with this information to the House of Commons?
Mr.Barker: Correct.
Senator Stratton: How many times did you make your presentation?
Mr.Barker: Just once, on April23.
Senator Stratton: Did the House of Commons reject it?
Mr.Barker: In the Commons committee, the Liberal side, the opposition side of the committee, took the comments on board and proposed an amendment, which was voted down by the government side of the committee. It was not a unanimous position at the House of Commons committee.
Senator Stratton: In essence, it was rejected by the House of Commons?
Mr.Barker: Correct.
Senator Cochrane: You mentioned adventure tourism. I have been whale-watching, and I was not asked to sign a waiver. However, in order to get a licence to operate a boat and a tourist facility or business, there must be something in the language that implies that, should an accident happen, there is compensation for passengers. This should all happen within the contract before they get a contract.
Mr.Barker: A number of safeguards exist for those of us who go whale-watching or engage in marine adventure tourism activities or board ferries. The Canada Shipping Act, 2001 and Transport Canada's Marine Safety regulate those operations. Through their compliance and enforcement policy, they supervise those operations.
My understanding is that the government's enforcement policy is a good one. Good operators are subject to the regulatory regime that the Canada Shipping Act, 2001 puts together from a safety point of view.
There was some confusion at the House of Commons level over the two sets of enforcement that exist. One is a regulatory enforcement regime and the other is a free-market regime. If you are operating a business and you can get insurance, then the insurance market is saying that they have reviewed the business that you are in and feel comfortable, so they are giving you insurance. That is free-market regulation because if they do not think you are running a good operation, you will not get the insurance; and if you do not get the insurance, you will not be able to operate, unless you have deep pockets and can self-insure.
If someone gets hurt, they have the ability to go after the operator of the activity. The operator of the activity might have assets. There might be a corporation they can go against. The company might be insured. If the court concludes that the operator was negligent when you got hurt, then mechanisms are out there.
Part 4 also has a compulsory insurance regime. Part 4 says that if you are subject to Part 4, you will have compulsory insurance. There is no compulsory insurance today because the government has not put forward compulsory insurance regulations. We heard at the House of Commons level that those regulations are on hold pending passage of this bill.
For those operations that are in Part 4, when this bill passes, there will be insurance as an asset in the event that a victim is able to convince the court that there was negligence on the part of operator. That insurance policy will be a source of compensation, and, to go back to the minister's words of last Wednesday, proper compensation.
If you pass this bill, you are taking adventure tourism out of Part 4 and out of the need for compulsory insurance, so they will not have that asset. We are saying that if you are taking the adventure tourism activity out of a compulsory insurance regime, then you should tighten up the doorway to allow them to get out of that regime. If they have a seaworthy ship, there will be less need for insurance; if they have an unseaworthy ship, they should have insurance.
Senator Cochrane: Transport Canada would not allow them to be on the water if they did not have all the security and safety, would they?
Mr.Barker: No, they would not. Transport Canada's compliance enforcement, to my knowledge, is very good. However, as with all line departments, they do not have the resources or people they would like to have. They are moving toward an audit called the insurance process, so they hit all of the operators some of the time but not all of the operators all of the time. To ensure that you have a proper system, you do need some form of free-market regulation.
Senator Zimmer: Good morning and thank you for your presentation. Mr.Barker, when I look at you and hear your voice, I have a tremendous urge to call you Hugh Grant, and I am sure you have heard it before.
Mr.Barker: I have heard that a number of times.
Senator Zimmer: It is compelling, so I will not look at you.
Mr.Barker: All I can say, senator, is that I wish I had a fraction of his talent and a fraction of his money.
Senator Zimmer: My first question was asked by Senator Johnson. The second is on the topic of the proposal to amend Part 6 of the Marine Liability Act to implement the 2003 Supplementary Fund Protocol to the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992 that would have better prepared Canada for serious oil spill and ensure that full compensation is available for all victims, considering the fact that oil spills do not respect state borders.
How were oil spills dealt with before the adoption of an international approach?
Mr.Barker: I am happy to say that Canada has been on the forefront of pollution prevention for many years. We can date back our pollution protection and our pollution legislation to 1970 and the Canada Shipping Act. Canada and the International Maritime Organization, IMO, have been very involved with the International Oil Pollution Compensation Funds for many years.
We have been attacking the thread of all pollution from the day the Arrow grounded in Chedabucto Bay in Nova Scotia to the day the Irving Whale sank in the Gulf of St.Lawrence. Transport Canada has a very good pollution regime: aerial surveillance; oil spill response organizations; the Coast Guard has a response capability and Fisheries and Oceans Canada help it too.
From a pollution prevention point of view, I think the country is well served in the event that there are oil spills. There will be oil spills. There is no doubt that oil gets in the water, birds will be affected and fisheries will be affected. We had a small barge problem in the late 1980s just before the Exxon Valdez went aground in Prince William Sound. The Nestucca spilled over 800tonnes of oil into the water, and we had a great deal of fallout because of a breakdown with the management system.
We still have problems today with the management system of oil spill response, but that has been addressed through regular consultations and negotiations with industry. BillC-7 will further advance our pollution legislation in this country.
The bunkers convention is not really an item of note for us because we have had a bunkers regime for many years in this country. It is nice to see the supplemental funds and increase in limits. It will give our victims of oil spills more compensation in the event that they need it. We have never had a big spill in this country, and, touch wood, we never will. Therefore, more than sufficient compensation is out there. BillC-7 talks about amendments to the Ship-source Oil Pollution Fund, the government agency here in town that helps victims from a compensation point of view, governance of that fund that builds solid on those points.
I think, from the pollution perspective, this bill is a very good one and will further the good legislation already out there.
Senator Mercer: Thank you for being here today.
I made a decision a long time ago not to go to law school, and I have reconfirmed that decision again this morning.
What seems so simple is not so simple, obviously. I will go back to the adventure tourism aspect of the clause. You talked about the seaworthiness of the vessel. How do you define "seaworthiness'' of a white-water raft used on the Ottawa River, for example? How do you determine if it is seaworthy?
Mr.Barker: It is an excellent question, and you should have gone to law school. When I went to law school, I wanted to be a barman. I ended up going down another path.
What is "seaworthy'' depends very much on the facts of the particular case. You could say that seaworthiness is the ability to float. When I say the "concept of seaworthiness,'' there is no definition to which I can point you.
The concept came up in days of the Lloyd's Coffee House where you had sailing ships leaving England to go to the four corners of the empire to get trade out there, such as spices, and bring it back in to Europe. The idea was that when you invested in that adventure, there were no insurance companies in those days, so you got business people together. That is where "64 shares in a ship'' came from in that you would all contribute to the venture. The ship would leave the port in England in a condition that was fit to go to sea for four, six, eight or twelve months. You could not say what would happen once it left the headland or went over the horizon. It may not have come back in a seaworthy condition, or it may have limped back, taking on water. However, when it left England, it was floating and properly equipped because you had the ship suppliers there; you could provision a ship; and get the crew.
When I say a "seaworthy ship that is properly crewed,'' I could have a situation where, on a Monday, I have an inspection from Transport Canada. I pass that inspection. We have to remember that the inspection is based upon the minimum standards that the Canada Shipping Act requires. The standards that are agreed in the regulations are just minimum standards. Good shipowners will go above those minimum standards. However, the compliance and enforcement teams are just looking for the bare minimum that complies with the regulations.
Therefore, I could have an inspection on the Monday that passes. On the Wednesday, I could have a training situation and could take a ding to my boat and lose some seaworthiness; I could have a small leak. However, I can look at it and say, "It is fine. I have a tour going out tomorrow. It is fine, and I will look after it on Friday when I get it into the repair yard.''
On the Thursday, I could take out a bunch of people on my boat and have them sign a waiver, not realizing that the ding I took from the training accident might be more serious than I thought. I could spring a full leak and the boat could get into trouble. I would then have a serious situation on the Thursday. It would have still passed the Transport Canada inspection on the Monday. Transport Canada would not have visited it on the Wednesday after the accident because I might not have thought it was a serious enough accident to report to Transport Canada.
Therefore, you could have a situation with circumstances where the judge would get all of this information after the fact, would have a victim standing in front of him, there would be a waiver on the table and the judge would be able to conclude, "Well, we did not realize until the testimony here today in the trial that there was an accident on the Wednesday that caused a slight ding, and you should have done something then. Technically, at the commencement of the voyage on Thursday that was not a seaworthy vessel.''
That waiver will not hold at that point because Part 4 will suddenly apply and waivers will be null and void, and that victim will get an ability to get compensation that the waiver would have otherwise prevented. Until you have that fact situation present itself, it is very difficult to say whether or not seaworthiness exists. It is a term that is very dependent upon the facts of each particular case.
Senator Mercer: We could not put in place regulations covering all possibilities. The Americans could have changed all manner of rules, but they still could not have kept the skipper of the Exxon Valdez sober.
Mr.Barker: That is a good example. If you have an obligation to have a seaworthy ship that is properly crewed, is a drunken skipper at the commencement of the voyage "proper crew''? That ship, at that moment, might not comply.
Senator Mercer: I want to go to your letter of April30 to Mr.Merv Tweed, M.P., Chair of the Standing Committee on Transport, Infrastructure and Communities in the other place. On page2, paragraph3 starts: "Not all charterers should be able to bind the ship owner.'' You then say that there are three types of charterers. I have read it and reread it; now I would like you to explain to me in laymen's terms what the three types of charterers are?
Mr.Barker: The question was also asked by the committee in the other place. The explanation I gave to them was to think of it as a landlord-tenant situation on land. The shipowner is the landlord. The bare-boat charterer, who has complete possession and control of the ship, is akin to someone renting your house for 12 months. The relationship between the landlord and tenant in that situation is that if anything happens to that house during the course of those 12 months, the tenant will look after it —maintain it, cut the grass, fix it, paint it. The tenant has complete control and use of that property for the period of the rental. In the shipping business, we call that person who has complete control of the ship the bare-boat charterer.
A time charterer has less control but has control for a period of time. You can say that a time charterer has a ship for three months. What you tend to find in the shipping business is that a time charterer has less control of the ship than a bare-boat charterer in that the master and crew of the ship are already on the ship and are representing the owner. The time charterer basically takes the master and the crew. The decisions made on the ship are the decisions of the master and crew. Therefore, time charterer has to make fewer decisions.
A voyage charterer has even less possession and control of the ship. A voyage charterer can simply be the owner of a container, and they are asking the shipowner for a little piece of that ship to take the container — whether it is a 20- foot or 40-foot box — from Vancouver to Japan to deliver it. For the purposes of the voyage from Vancouver to Japan, the voyage charterer is renting that little space.
Senator Mercer: Therefore, his liability is much less.
Mr.Barker: Yes, his control and liability are much less. In the lien context, we are talking about the ability of someone to bind an owner. It would be the same as me coming up to the rented house and asking if I can fix the roof. You say, "Sure, you can fix the roof; there is a hole in it.'' When I say that I will bill you to fix the roof, you say that that is fine, to go right ahead. The tenant says to fix the roof. I fix the roof and then turn around, as the supplier, and send the bill to the owner, who says that he or she will not pay me for that because the owner did not tell me to do it, and instructs me to go see the tenant. However, the tenant has no money. The same is true in the shipping business.
If a supplier is supplying food, fuel and other provisions to a ship in the port of Halifax, for example, the supplier will want to know that the person he or she is contracting with, the master, has the ability to bind the owner. When the bill is not paid, then the owner will pay the bill. We are saying that not everyone has the ability to bind the owner.
The bare-boat charterer should be able to bind the owner; a time charterer should be able to bind the owner, but a voyage charterer should not. Why would people who ship one container on a ship to Japan say to the person supplying the fuel or the food to the ship that they will pay that bill? You know they never will.
We are trying to focus on who can contract with the owner. The shipping act words that were put into the bill in the other place talk about the Canada Shipping Act, 2001. The Canada Shipping Act, 2001 talks about a concept that we invented back during the period of 2000-2002 with BillC-15 and the amendments to the shipping act of an authorized representative. An authorized representative is the master in the Canada Shipping Act, 2001 legislation, but the master might not be able to bind an owner.
In one piece of legislation, the Canada Shipping Act, 2001, you are talking about one person binding; and now in the Marine Liability Act, you are talking about a different person binding. When you say "subject to,'' you then give it to a judge to say that the rules of statutory interpretation apply. Which law is correct and who is in charge? That will benefit lawyers and judges but not ship suppliers. It does not make sense to me to see you pass a bill that creates confusion from the day it starts. That is why I am asking you to rethink that lien provision.
Senator Mercer: It always benefits lawyers.
Senator Housakos: How would you recommend strengthening the lien sectionof the bill to clarify some of the confusion?
Mr.Barker: By using the words that appear in our submission of April30, 2009. The words were based on a proposal of the Canadian Maritime Law Association and were reviewed by the Canadian Bar Association, and the private bar is comfortable with those words. The amendment is sitting before you in the submission of April30.
Senator Mercer: That leads to my question because that is a good question that Senator Housakos has put.
What are the consequences if we do not? What happens if we pass the bill, as amended from the House of Commons, and we do not put in these recommended amendments that you have proposed? What will the consequences be in two years' time after the law has been changed? What are the potential risks to Canadians and to Canadian businesses if we do not do this?
Mr.Barker: The globe will continue to rotate; that is the good news. The business will still go on. Ships will still trade and ship suppliers will still supply ships. Canadian ships suppliers might occasionally not be able to recoup some money that they lose. Lawyers with silken tongues might be able to take the difference between the Canada Shipping Act, 2001 and the Marine Liability Act and twist the words. As Mr.Jetté said yesterday in Montreal, they could say "There is some confusion, Your Honour, so let the foreign vessel go.'' The risk is that the minister's intent will not be met. Some Canadians will lose monetarily. Some victims will not get compensation, but in the greater scheme of things, life will go on.
Senator Housakos: When I look at BillC-7, I appreciate your point of view on the maritime adventure tourism sectionof it and the legal point of view on the lien sectionon foreign vessels. However, we should not lose sight of the main component of BillC-7, which is to deal with pollution liability. It has gone a long way in dealing with oil spill pollution and bunker fuel pollution and bringing this into conformity with various international conventions.
The second element is the passenger liability for cruise ships; the third element is the lien on foreign vessels; and the last element, where it exempts marine adventure tourism operators, was more a reaction based on the first three parts of the bill rather than anything else.
It is important to be cognizant of the fact that when I insure my Volvo, I get a certain type of insurance; when I insure my Porsche, I get a different type of insurance. If I had a Ferrari — which I do not — and I was racing it at the St-Eustache racetrack on the weekends, I would have a difficult time getting insurance for it; if I did, I would probably be paying more than the car is worth.
As I understand the bill, if you look at the stakeholders that are in the marine adventure tourism business, both good operators and bad operators, they seem to be quite pleased that they were exempt from this bill. What would be the repercussions on the marine adventure tourism industry if we make this bill applicable to them?
Mr.Barker: If you pass this bill, marine adventure tourism activity will not be subject to this act. That is Part 4 of this act. It will take it out of this act. That would be the effect of that.
I will be very honest and tell you that as a maritime lawyer in this country, I was a little personally conflicted coming here today. I would very much love to see BillC-7 passed. I think it will improve Canadian maritime law. I am very happy as a maritime lawyer to see the amount of marine activity in Parliament right now, from the House of Commons all the way up through the Senate. Many marine bills are going through the house right now, and it is very encouraging.
Therefore, yes, I would like to see BillC-7 pass. Should it pass this week as worded, or should it pass another day with better wording? That is the question that you must grapple with at clause-by-clauseconsideration later this morning.
Looking back over 25 years of my marine career, I think three or four months is a short period of time. I have seen the Canada Shipping Act, 2001 be proclaimed in 2007. I have seen the Marine Liability Act pass in 2001. The adventure tourism industry has been in the Marine Liability Act now for eight years. They are still in business. They have not been able to use waivers for the last eight years, according to the law. They are still in business.
I saw an advertisement as recently as yesterday in Montreal for a marine tourism activity in the Lachine Rapids area. They are still doing business. Waivers will help them in their business — there is no doubt about that — but they are surviving without them because they are good operators; they are seaworthy operators. Putting clauses in the bill about seaworthiness will not change the way they do business.
The insurance market has changed dramatically since 2001 when we brought in compulsory insurance with the Athens Convention. It took a huge beating in the third quarter of 2008, and it is still reeling in the second quarter of 2009. Can I get insurance today? Yes, I can get insurance today. Does the insurance company have the investments that they used to have? They probably do not. They might be pickier about who they insure today, but they will still insure good operators. I believe the good operators will get insurance whether or not you make it compulsory because the free market will regulate it to a large degree.
This is a very good bill. It should be passed by the Senate. Should it be passed as written today? I am sitting here before you today saying that it should have two changes made to it; it should be sent back to the House of Commons; and it should be voted on. You have time to get it right. Get it right, get it passed and life will go on.
Senator Housakos: If I understand you correctly, you feel that if BillC-7 was applicable to marine adventure tourism activities, it would not have an impact on the industry?
Mr.Barker: It will have an impact on the industry in that it will formally take them out of Part 4 of the act. As to whether it will have an operational effect, they have been trading for the last eight years, the bill has been there, they have been subject to it and they are still in business.
Senator Housakos: However, their liability would not be as high as it would be under BillC-7, would it?
Mr.Barker: The question is whether they have had any accidents in those eight years. Their liability does not increase in any way because you pass a bill in the house. A liability is a liability because they are out there in the field doing what they do. They were doing the same thing last year and the year before, and they will be doing it again next year.
In effect, what you are saying is that if you pass the bill today, they will be able to go back to using waivers. Have they been using waivers up to now? I suspect they have, contrary to Canadian law, because a waiver will only be addressed as an issue in the event that an accident occurs and a judge gets to see it as a barrier.
Senator Housakos: Why were they so keen on going back to having use of these waivers that they have not had in the last eight years?
Mr.Barker: I think a waiver is recognition by the person signing it that you are engaging in something that is abnormal.
When I went zip-lining in Barrie, I knew that by taking my 11-year-old up into the trees 30 feet above ground, something could go wrong. If something went wrong, I could not then say that I did not know what might happen. It is the recognition that you are about to engage in an activity that is more than simply taking a ferry from points A to B.
If I had been a passenger on the ferry the Queen of the North the night that it hit the rock, I would not have been consenting to what happened that evening. I would have been asking BC Ferries to take me from points A to B, away from that rock. However, the ship sank. That is an activity that the shipowner should not be able to contract out of.
With respect to white-water rafting, personally, I do not see anything wrong, as a member of the Canadian public, in signing a waiver if I know that I will be engaging in something that is a bit risky. I am there because I wanted it to be a little risky. My daughter wanted to go zip-lining because it is exciting to be up in the trees 30 feet above the air. Equally, she had a harness on and had gone through a comprehensive safety situation. The company was very good because they kept saying, "Clip, clip, clip, clip.'' As a result, that afternoon, no one got hurt. We all signed waivers.
Senator Housakos: Thank you, Mr.Barker.
The Chair: Are small operators aware of the waiver clause?
Mr.Barker: I believe that with all of the advisers for small businesses, be they lawyers, accountants or insurance brokers, the industry is very aware of the benefit of a waiver.
Senator Merchant: This has been very enlightening. You give good examples, and you are easy to follow.
I have a different question only because you made recommendations about the limitation periods. Can you explain to us what that is about?
Mr.Barker: Right now, limitation periods are scattered throughout the legislation. Some are two-year periods; some are one-year periods. If you want to make a claim for damage to cargo, you have one year to make that claim from the discharge of a container or cargo from a ship. With a collision, you have two years. Different periods are put out.
The proposal in BillC-7 is to have a general limitation period of three years because there is some confusion out there with the application of limitation periods that exist in the provinces today. Remember that we are in a federal jurisdiction of navigation and shipping.
However, if you take adventure tourism out of the act, you return it to the common law, in effect. That, then, exposes it to the provincial jurisdictions again. Therefore, different limitation periods would apply. If I am in the Lachine Rapids and I get hurt, I would have three years to sue the operator. If I am in Ontario, I have two years to sue the operator. I used to have six years in Ontario. I believe it is six years in Nova Scotia. When I was in British Columbia, it was two years out there. We have different periods to do different things.
Because of the interplay between the Federal Courts Act and the provincial laws, there was a bit of confusion about what would happen if it fell out of one of the specific limitation periods. The government put a proposal together to say that there should be a three-year general limitation period in the bill. That is a good thing. It is a good and solid amendment.
The only point that the Canadian Bar Association was making in the House of Commons was that if you have two years here, three years there and one year here, there should be a way to just have one period. It is very simple. The result is that one of the biggest causes of lawyers getting sued is missing limitation periods. When you have one, two, three, four years or whatever, there is more potential for matters to fall through the cracks.
It was a submission that made sense, but if you approach it in a logical way, you would have to amend the whole act. You would have to change periods that appear in international conventions. That is just not doable. The point that we make is that we would like to see some harmony in the legislation for limitation periods.
The point that I made to the House of Commons is that there is something called a tolling agreement. A tolling agreement is where you can extend a limitation period by agreement. If the plaintiff and the defendant agree, and they are talking to each other and think they can settle a case, but they have to do it before Friday because the limitation expires Friday, in order to allow them to continue the conversation with a view to settling, they can extend that limitation period for, say, three months.
We do this all the time under the cargo liability regime. We have insurance companies in Europe and Asia and claimants in Canada. We are always going back and forth, so the shipping lines regularly give time extensions to allow the settlement discussions to continue. Rarely do I see a cargo case go to court; they always settle out of court.
We think tolling agreements should be recognized. The ability is in the act today, within the cargo liability, to do that. The difficulty we have in the provinces is that Ontario does not allow tolling agreements in the provincial jurisdiction, whereas British Columbia does. The position that we were adopting at the House of Commons level is that this is federal legislation. This is an opportunity to put in tolling agreements that get over this problem. No one at the House of Commons level felt that it was worth moving that suggestion forward.
Senator Merchant: Are you happy with that? For now, you can let that go, then? What reason did the House of Commons give that they were not prepared to do that?
Mr.Barker: No. This is the personal dilemma I had last night with coming before you today. I recognize that if you make a single amendment in this committee, it goes back to the House of Commons. I appreciate that.
You should not be changing commas or adding the words "and'' or "or.'' You should be asking whether this is something that is worthy of further consideration. Is this something that many people have thought about and do not agree on, or is this just six of one and half a dozen of the other?
The world will not stop just because tolling agreements are not in the legislation. I am an Ontario lawyer and also a British Columbia lawyer. I know that if I am in Ontario, tolling agreements are not allowed, so if I do not reach resolution with the defendant by the Friday, I start the lawsuit. The Ontario rules and the provincial jurisdiction are good in that I can start a lawsuit on a Friday and then have 30 days to fill in the details before I serve someone.
While we do not allow tolling agreements in Ontario, there are other ways to get around the problem. In British Columbia, I can keep talking to the plaintiff or the defendant, as the case may be, so we can get around the problem there.
When I was thinking about this last night, I thought: Are there any issues that need to be addressed by this upper chamber? I personally believe that adventure tourism is an issue that you need to think about because the adventure tourism industry is asking you to remove them from the law. I understand why the industry wants to be removed from the law, and we support the removal from the law, but we support it in a conditional way.
With respect to ship suppliers' liens, I do not want any Canadian suppliers to be out of pocket. I had a practice in Vancouver where I defended Americans. I defend many Americans. American suppliers had a better time of it in Canadian courts than did Canadian suppliers. There is something morally wrong about that.
BillC-7 levels the playing field to a degree, but it does not level it totally. The words that you have before you on the maritime liens will cause problems for some people and benefit others. That does not seem like good law to me. It seems weird to be having lawyers debating something that is not even the law of the land yet. You have an opportunity to catch your breath and say, "Hold on a minute. If they are debating the bill already, let us rethink it.''
If you rethink the bill and send it back, the House of Commons can pass it and send it back up again. You have mechanisms in Hansard. Admittedly, time is the enemy. However, with the Fisheries Act amendments, for example, we had BillC-45, which died on the Order Paper. It became BillC-32. As BillC-32, it was exactly the same piece of legislation, and it died on the Order Paper. It will no doubt come back as another House of Commons bill, and we will make submissions on it. I suspect the submissions on the Fisheries Act will not differ from the submissions on BillC-32 and BillC-45. Life will go on.
Is it good law? Yes. Can it be better? Yes.
Senator Wallace: Thank you, Mr.Barker. I would like to talk about the maritime lien provision, proposed new section139. As I read proposed new section139 as it is now and look at the amendments that the Canadian Bar Association has suggested, I think the intention of allowing suppliers to have this lien is obvious; it is to give them greater certainty that they will be paid. I suspect there has been a history with foreign vessels that once the materials are supplied, the work is done and the vessel leaves the jurisdiction, the opportunity to be paid undoubtedly leaves with it as well. The lien gives them some security.
It is somewhat comparable to the mechanic's lien situation with real estate. Suppliers of materials or labour to real estate have a lien and are merely required to show that they have provided the labour or the material and that the real estate benefits. That is at the heart of it. The real estate benefits, and, therefore, the supplier should be paid.
In the same way, what this legislation is getting at is that the vessel presumably benefits from the materials that were provided for the benefit of the ship, and, therefore, there is an entitlement to the lien.
Proposed new section139 relates only to foreign vessels. Could you tell us how the lien rights suppliers compare in a situation where it is a Canadian-flag vessel versus a foreign-flag vessel?
Mr.Barker: A policy debate took place before the bill was introduced about whether or not the provision should be for foreign-flag vessels or Canadian vessels. If you supply a ship, you do it by way of contract. If someone does not pay you, you have a breach-of-contract situation. If I am a ship supplier in Halifax and a Canadian ship is sitting at the wharf in Dartmouth, for example, and they do not pay, my mechanism to get my money back is to walk down to the Nova Scotia court and sue that Canadian company in Nova Scotia for breach of contract, and use the small claims court or the Nova Scotia court system, as the case may be.
I do not have that ability if it is a foreign-flag vessel because the minute the vessel gets clearance from the Canadian Coast Guard, it is gone, and there is no way I am going to Panama or Cuba or Guatemala to start a small claims court action.
If I am a ship supplier, I have a choice. If that foreign-flag vessel is on what is called a line of service and they come to Halifax on a regular basis, which they do, they will not get supplies the next time they come into port until they pay me what they owe me. I had that very situation a couple of months ago with Islamic Republic of Iran Shipping Lines as a manager. They were not paying their bills in Vancouver. We threatened to arrest the ship. They ignored us until one of their ships got a contract with the Canadian Wheat Board and was scheduled to come back to Vancouver. Lo and behold, a line of credit was arranged and all the bills in Vancouver were paid the day before the ship came back into port.
As a ship supplier, do I chase them down on day one, or do I wait patiently for day nine until the rotation comes back again? Many of the ships that come into Canadian ports are on a line of service either on the Asia-Pacific route or the European route, and they are always coming back in, so we may get them.
The lien becomes a real issue when we have — I dare not mention this word too often in these economic times — a bankruptcy. When you have a bankruptcy, the secured creditor — the financial institution — invariably scoops the lot as a secured creditor. The ship suppliers — also called "necessaries men'' — rank below the bank in priority in a bankruptcy. When you have a bankruptcy, invariably the ship supplier does not get paid.
The quirk, the moral unfairness I was talking about, is that American suppliers do get paid because they get paid before the bank. They have what is known as a maritime lien. Proposed new section139 gives the Canadian suppliers a lien so that in the event of a bankruptcy, they will go above the secured creditor. To do that, they should be able to bind the owner. The government amendment in the House of Commons restricts it to stevedoring and lighterage. It does not help the bunkers supplier, and it does not help the guys supplying the food, to some degree.
However, the way that the bill is worded, they will still be able to move above the secured creditor. Proposed new section139 is a good thing for Canadian suppliers because it will put them on the same footing as American suppliers, from a maritime lien perspective, in a bankruptcy. If there is no bankruptcy, it is business as usual.
Senator Wallace: Having said that, we talked about who the winners and losers could be if proposed new section139 is enacted in its present form. Canadian suppliers would be definite winners. They would have a lien on the vessel, and that, obviously, would put them in a stronger position than they are today.
The losers and the ones who would have a problem and who would want to restrict proposed new section139 are the lenders; that is, those who have mortgages on ships. The last thing they would want to see is someone having a lien that could have priority over their mortgage.
Is that not the reality of what is behind these suggested amendments to proposed new section139; namely, to give greater protection to the lenders and less protection to the Canadian suppliers?
Mr.Barker: I think it is the other way around: It gives some protection to suppliers.
I have heard no submissions from the Canadian Bankers Association that they have a problem with some suppliers jumping above them in the priority list.
Senator Wallace: Banks generally do. They like to minimize those things.
Mr.Barker: They do, but they recognize that, when a ship is to be sold by judicial sale because of a bankruptcy, the ship's supplier's bill is much smaller than the security the bank has in that ship.
I think the potential losers are the ship suppliers who think they might be above the bank, but, because of some silken tongue, they find that because of confusion between the Marine Liability Act and Canada Shipping Act, 2001 and the actual authority to bind the owner they do not have the priority they thought they had. The loser could potentially be the Canadian supplier after a bankruptcy if the legislation as worded causes the confusion and doubts. That was the subject of the debate yesterday in Montreal.
Senator Wallace: However, the amendment you are suggesting would restrict the ability of a supplier to maintain the lien. It makes it more restrictive than what proposed new section139 now provides.
Mr.Barker: Yes; that is correct.
Senator Wallace: We can use our own assumptions as to who benefits and why it is there. That is the bottom line. It does make it more difficult and puts greater obligations on the supplier.
Having said that, I look at the second page, third paragraph, of your presentation of April30, and it says:
At the same time, suppliers should not be required to inquire each and every time into whether the person contracting for supplies has ownership of the vessel. Rather, some burden can be placed on a ship owner, where they have entered into a charter agreement, to notify suppliers if the charterer does not have the authority to act on their behalf.
Therefore, a shipowner could have the burden to notify suppliers if the charterer does not have the authority. Otherwise, if the supplier goes ahead and supplies without dealing with someone who has authority, the supplier will be out of luck.
In the case of a foreign-flag vessel, knowing where foreign-flag shipowners are based, how would they even begin to know to whom they must give notice? How do they know where the ship will go?
I raise all of that from the practical side. How will suppliers know who they are entitled to rely upon before they supply the materials?
I think it is highly unlikely that the circumstance you have stated there could ever arise.
Mr.Barker: The question is a good one, sir.
The person who is in the middle of the loop, doing all the talking, is the ship's agent. Canada had a good network for ships' agents. Ships' agents talk to shipowners, and they have authority to bind ships on behalf of owners. The ship's agent is the one who gets the wire transfer of funds from Iran, Panama or whatever, and the ship's agent is the one that distributes the money to the suppliers.
When I had a ship in Vancouver in dry dock and I was providing it, I would call the ship's agent; the ship's agent would call the ship's supplier; the ship's supplier would take the stuff to the dry dock. The money would come into the ship's agent's account and the ship agent would pay the ship supplier. Therefore, there is a very good mechanism out there to do it.
You are correct when you say that the way the lawyers have worded proposed new section139 would be to require a contract with the vessel owner or person authorized by the vessel owner. A paper trail would be needed in the system to show that the person contracting with the supplier had the authority to do that.
I would suggest that should make the ship's supplier more comfortable to know that the person he or she contracts with has the authority to do what he or she says that they do; namely, spend the money. Yes, it is more restrictive. However, I do not believe the paperwork that would be required would be overly burdensome because of the role of the ship's agent in the game.
Senator Wallace: We have two lawyers here, and this is not what most people want to get into around this table. However, this is important, and, as you say, "the devil is in the detail'' and the words that are used.
For proposed new section139(2), your suggested revision is to add the words "pursuant to a contract with the vessel owner or a person authorized by the vessel owner.''
When we speak of "person authorized,'' would that have to be express authority or apparent authority? In other words, you are talking about written contracts, but if a supplier is dealing with someone who has the apparent authority, that simply means a written contract may not exist because that person happens to be the ship's captain. You would assume that someone in that position has the apparent authority to bind the vessel owner. Therefore, suppliers could safely supply and know they are protected.
Does "person authorized'' cover someone with apparent authority or express authority?
Mr.Barker: It is a mixture of both. If you look at our proposed new subsection139(3), it says, "a bare-boat or time charterer is presumed to have the authority,'' so there it would be implied, unless — and there is a reverse obligation — there is writing in advance that the bare-boat or time charterer does not have that authority.
It is saying that the owner would say to the ship's agent, "No, you cannot do this.'' Therefore, everything else is allowable. It is a mixture of the two.
Senator Wallace: The practical reality is that the supplier will not be supplied with either the bare-boat charter agreement or the time charter agreement. He will not see that. He or she will have a person in front of them.
What I am trying to get at is how do they know with certainty that that person in front of them can make a commitment that will allow that maritime lien to attach? I am saying that that person has the apparent authority — there is no paper; nothing provided. It is simply a situation where a ship's captain arrives and says, "We have an emergency. We need this work done. Please do it. We are on a tight schedule, and we know what the daily rate of the vehicle is.''
Can the supplier rely upon the apparent authority of that individual, or, as you suggested earlier, does it have to be in writing?
Mr.Barker: No, I think the implied has to be the case. The norm applies unless the owner says in writing it does not apply. The addition of proposed new subsection139(3) has to kick in there. That is why when you see the underlined words of the amendments, you put the restrictive up front, which is pursuant to a contract, and then you put in the checks and balances in proposed new subsection139(3) and (5).
The point being made by both the CMLA and the CBA was that it is a package. I will tell you that in the words that were proposed by the CMLA, the words they copied to some degree were from the U.S. system. The U.S. system is way more restrictive. We have done what we do in Canada on a regular basis; we try to take the middle ground, the compromise ground.
Remember, the principle we are dealing with is that we are trying to put Canadian ship suppliers on the same footing as the U.S. ship suppliers from a marine lien bankruptcy situation, an arrest-of-ship situation. The American model was good, but it went too far. I would suggest this is the better model to follow. The proposal made by the government in SCOTIC is less restrictive.
Senator Wallace: I have a final point, which is purely a legal comment. In proposed new subsection139(2), you have added the words on the second line "pursuant to a contract.'' Then it goes on and leads into (a) and (b). I think in (b), you have left the existing words of the sectionin — "out of a contract.'' I think it is redundant.
If we are talking about each and every word meaning something, from a drafting perspective, there is a redundancy there. Once you have added the words in proposed new subsection139(2), "pursuant to a contract,'' and it goes on and qualifies (a) and (b), it seems to me the words leading into (b) should have been deleted.
Mr.Barker: I do not disagree. The devil is in the details.
Senator Wallace: It is not to nitpick, but you are here convincing us that this has been well thought out and the words matter. I think that is an oversight. Hopefully, it is the only one.
Senator Dawson: I do not know what your timing is, Madam Chair. I do not want to get into a debate if we are sitting tomorrow.
The Chair: You are allowed your question, but the second item here on the agenda is in camera consideration of a draft report. That is briefing notes that we have from the Shipping Federation of Canada and the Canadian Maritime Law Association. I have asked some people to give us some briefing on the two written presentations we have here.
My suggestion would be that we go through that before we leave today and come back tomorrow. I would ask the officers who are all here from the department to react to what we heard this morning. This will help us to consider the clauseby clause, if amendments are requested or not.
Senator Dawson: In that case, I will pass.
The Chair: Thank you, Mr.Barker and Ms.Froc. We will certainly consider what we have heard this morning. The officers have taken notes, I noticed, and they will tell us how they feel about it tomorrow. Thank you for your presentation.
Mr.Barker: Thank you for the time. We do appreciate it. Thank you, honourable senators.
(The committee continued in camera.)