Facts
Decision

Facts

Sonicblue Airways, formerly operated by International Express Aircharter Ltd (IEA), was an airline based in Vancouver, British Columbia. On January 21 2006 a Sonicblue Cessna 208 Caravan crashed at Port Alberni en route to Vancouver from Tofino. The crash reportedly related to engine failure. One crew member and two passengers died; there were five survivors.

The crash – and IEA's safety record – quickly attracted media attention and Transport Canada took immediate action, suspending Sonicblue's air operator certificate, effective at 11:59pm on Januay 22 2006 (the day after the crash).

IEA's business was affected immediately. Its bank made a formal demand for payment of IEA's indebtedness on January 26 2006. On January 30 2006 Transport Canada officials arrived at IEA's place of business for a scheduled audit to find that its operations and maintenance facilities had been closed. A receiver was appointed on March 14 2006.

On March 17 2006 Transport Canada's enforcement division laid five charges against IEA for violations of the Canadian Aviation Regulations and fined the company a total of C$125,000. On March 22 2006 Transport Canada cancelled IEA's air operator certificate outright based on "the public interest and, in particular, the aviation record" of the company.

Transport Canada's quick and decisive action was informed by its history of involvement with IEA and Sonicblue. After a series of incidents between 2002 and mid-2004, which resulted in several charges and fines for violations of the Canadian Aviation Regulations, IEA was put under a Transport Canada enhanced monitoring programme. IEA was subject to this programme from August 1 2004 to January 10 2006, just days before the crash occurred.

However, immediately after the programme officially ended, unannounced inspections took place on January 11 and 12 2006. Six IEA aircraft were found to be overdue for required scheduled maintenance and problems with record keeping were noted. Two months later, IEA was fined the maximum allowed (C$25,000 per violation) for five violations of maintenance requirements under the Canadian Aviation Regulations.

While this was going on, in February 2006 IEA applied to the Transportation Appeal Tribunal of Canada (TATC) for a review of Transport Canada's decision to issue the January 2006 notice of suspension. The TATC is intended to provide an independent review of administrative or enforcement actions taken by the minister of transport and certain other specified persons. A single member of the TATC heard evidence over the course of four days in March and April.

On July 11 2006 – well after IEA's air operator certificate had been cancelled and it had been put into bankruptcy – the TATC found that Transport Canada had erred on several grounds in issuing the original notice of suspension. The matter was sent back to the minister for reconsideration.

On February 11 2008 a Transport Canada reconsideration panel upheld the TATC's decision and recommended that "the Minister's reason for suspending Sonicblue's [air operator certificate] not be supported".

Eighteen months after the crash, the Transportation Safety Board investigation revealed that it had in fact been caused by a manufacturing defect and not a maintenance issue. The investigation found that the engine had lost power when a compressor turbine blade failed as a result of overstress extension of a fatigue-generated crack.

By this time it was too late for IEA and Sonicblue. Following the various enforcement actions taken by Transport Canada, IEA's bankruptcy had resulted in significant financial losses to its owner, Ranjit Singh Gill.

In 2008 Gill commenced legal proceedings against Transport Canada, as well as Trevor Heryet (Transport Canada's Pacific regional manager of commercial and business aviation) and David Nowzek (the director of civil aviation), alleging that they were liable to him for negligence in having suspended IEA's air operator certificate. He also claimed that Heryet and Nowzek were liable for misfeasance in public office. He claimed as damages his business losses and alleged these to be in the range of C$10 million to C$12 million.

Decision

Gill's case was dismissed by the trial court in April 2014. The negligence claim was rejected on a finding that Transport Canada did not owe a duty of care to Sonicblue, while the claim in misfeasance was not made out because Transport Canada's officials were found not to have acted in a malicious, arbitrary, high-handed or oppressive manner.(1)

Gill appealed only the dismissal of the negligence claim.

The decision of the three-judge panel of the British Columbia Court of Appeal was released on July 28 2015.(2)

A private law duty of care is the first element that must be established in any action in negligence. The analysis of whether a government regulator owes such a duty to those affected by its regulatory mandate and actions must take into account the surrounding regulatory context, which "may contemplate the existence of a duty of care, be inconsistent with one, or be neutral".

As the appeal court noted, "as a general proposition, statutory duties or powers imposed on a regulator to promote the public interest do not create a duty of care to specific members of the public"; this may be distinguished from a regime that "intends to benefit or protect the interests of particular persons or a discrete class of persons, in which case a duty of care may arise".

The authority to suspend an air operator certificate is found in Sections 6 to 7.21 of the Aeronautics Act. Transport Canada had suspended IEA's air operator certificate on the basis of its revocation of its operations manager's authority because of purported failures to properly discharge his responsibilities. Because an operator must have an operations manager to hold an air operator certificate, this revocation led to the decision to suspend.

This basis for suspension was later found to be invalid. In fact, the operations manager was not responsible for the issues potentially engaged by the January 21 2006 crash at all, making revocation of his authority baseless. Further, it turned out that the crash had nothing to do with IEA or its maintenance programme.

Nevertheless, the appeal court upheld the trial judge's decision that Gill had failed to establish that Transport Canada owed him or IEA a duty of care, and that therefore his claim could not succeed.

The appeal court held that the trial judge had been correct in identifying public safety as the "overriding purpose of the power to suspend" an air operator certificate, and that the promotion of safety is owed to the travelling public as a whole.

While the act contains no statement of purpose, Section 4.2 gives the minister a number of broad powers, which were viewed by the appeal court:

"as reflecting statutory purposes consistent with the promotion of the public interest in an efficient and safe aeronautical industry, but not as reflecting specific obligations to protect the specific interests of particular participants in that industry."

The appeal court also reproduced a lengthy section of the trial court's review of the principal elements of the regulatory regime, including pertinent provisions of the Canadian Aviation Regulations and the grounds for cancellation or suspension of an air operator certificate under the act. The appeal court held that the "evident and overriding purpose" of the regulatory scheme "is to ensure public safety"; and rejected the suggestion that in discharging its duties Transport Canada has a duty to consider the economic consequences for the operator if its air operator certificate is suspended.

The appeal court distinguished a 2007 decision of the Supreme Court in which it was found that a police officer owed a duty of care to a suspect under investigation. The suspect had been arrested, tried and wrongfully convicted and jailed for crimes that he had not committed. While the 2007 case dealt with the suspect's liberty interest and a criminal investigation into harm that had already occurred, the appeal court held that Transport Canada's actions engaged only economic interests, and that "the suspension of the [air operator certificate] should be seen as an investigation into public safety and a step taken to prevent the potential of future harm to public safety".

While it was clear in this case that Transport Canada and IEA had a history of close and direct interactions, because Transport Canada was found to have acted in the public interest and in its capacity as regulator, no private law action in negligence could lie.

For further information on this topic please contact Carlos P Martins or Andrew W Macdonald at Bersenas Jacobsen Chouest Thomson Blackburn LLP by telephone (+1 416 982 3800) or email (cmartins@lexcanada.com or amacdonald@lexcanada.com). The Bersenas Jacobsen Chouest Thomson Blackburn website can be accessed at www.lexcanada.com.

Endnotes

(1) Reported at 2014 BCSC 582.

(2) Gill v Canada (Minister of Transport) 2015 BCCA 344.

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