Introduction

In early 2018 the Federal Court reviewed a 2015 Transport Canada decision to issue a civil aviation safety alert (CASA) against Rotor Maxx Support Ltd (for further details please see" Federal Court upholds minister's intent to issue civil aviation safety alert").(1) CASAs are non-mandatory notifications issued by the regulator which contain important safety information and recommended actions for appropriate stakeholders.

The court had previously declined to grant an injunction preventing the issuance of the CASA.

Background

Rotor Maxx is a certified Transport Canada approved maintenance organisation, which specialises in the maintenance and repair of Sikorsky helicopters. To address the maintenance and repair of out-of-production aircraft, approved maintenance organisations are authorised to recertify undocumented parts under the Aviation Regulations.

At issue between Rotor Maxx and Transport Canada was whether Rotor Maxx had met the requirements for recertification of such parts. Initially, Transport Canada took issue with three impugned parts recertified by Rotor Maxx.

In response to these concerns, Rotor Maxx argued that the parts at issue were non-critical and that, in any event, it had conducted the appropriate material and dimensional analysis and comparison with a known authentic part.

Regardless, Transport Canada required that Rotor Maxx implement a corrective action plan (CAP) to address its concerns. Rotor Maxx proposed three CAPs, all of which were rejected.

As a result, Transport Canada informed Rotor Maxx of its intention to issue a CASA on 17 March 2015. The issuance of the CASA, as argued by Rotor Maxx, would significantly affect its commercial viability.

Rotor Maxx applied for a judicial review of Transport Canada's issuance of the CASA on 24 March 2015.

In deciding the matter, the Federal Court considered whether:

  • Transport Canada had engaged in procedural fairness when issuing the CASA; and
  • the decision to issue the CASA had been reasonable.

First issue: procedural fairness

After considering the underlying facts, the court held that procedural fairness in this case would require:

notification to Rotor Maxx about all the parts tested; the reasons Transport Canada felt that all the criteria for a CASA were met; an opportunity to respond; and a transparent procedure to recertify parts. In other words, procedural fairness required the absence of a moving target of what was needed to have an approvable CAP, an explanation about how the criteria for a CASA were met, and an explanation about the other options available if the criteria were not met.

In the judicial review before the Federal Court, Rotor Maxx argued that the procedural history of the matter demonstrated a breakdown in its relationship with Transport Canada to the extent that Rotor Maxx's procedural fairness rights had been breached.

For example, Rotor Maxx argued that it had initially been advised that only three undocumented recertified parts were impugned. However, it later learned (after commencing legal proceedings) that the decision to issue the CASA had been based on an additional 17 undocumented recertified parts. This had deprived Rotor Maxx of the opportunity to address all of Transport Canada's concerns – especially with regard to the other 17 parts.

Rotor Maxx further argued that its right to procedural fairness in the issuance of the CASA had arisen from a policy letter issued by Transport Canada, which was intended to act as an interpretive tool for Transport Canada personnel to consider certain proposed amendments to the Aviation Regulations that were germane. However, the proposed amendments that the document had intended to address never came into force.

It was evident in some of the correspondence between Transport Canada and Rotor Maxx that the regulator had proceeded with its inquiry into Rotor Maxx as if the policy letter was in play and the amendments to the regulations were in force. In other exchanges, Transport Canada had proceeded as if the policy letter was invalid or did not exist. This had created a confusing situation for Rotor Maxx, as it was unclear which protocols it had to comply with when recertifying undocumented parts.

As such, on the grounds of procedural fairness alone, the Federal Court found that the decision to issue the CASA should be quashed.

Second issue: reasonableness of decision

The court then turned to the issue of whether the substance of Transport Canada's decision to issue the CASA was reasonable. It had at least three reasons justifying its ultimate ruling that it was not.

First, Transport Canada argued that the CASA had been issued as a matter of urgency. However, this was not borne out by the facts. The initial investigation by Transport Canada had been a lengthy affair, followed by:

  • discussions between Rotor Maxx (with the involvement of a third-party consultant) and Transport Canada around CAPs; and
  • subsequently, a CASA consultation process that had taken approximately two months to compete.

These delays caused the court to find Transport Canada's assertions that the matter had been urgent to be "unintelligible and unjustifiable".

Second, in its correspondence with Rotor Maxx, Transport Canada alleged that Rotor Maxx had continued to recertify undocumented parts during the CASA consultation process. However, the evidence demonstrated that Rotor Maxx had voluntarily suspended the recertification of parts well before the period in which it was alleged to have engaged in this activity.

Finally, Transport Canada asserted that Rotor Maxx had labelled certified undocumented parts as 'new'. The court also found that this was not the case and that Transport Canada had known this to be incorrect prior to making the allegation.

For these three reasons, the court held that the decision to issue the CASA should be quashed on the basis that its substance had been unreasonable.

The CASA was quashed and an order was made to have it removed from any published form. Further, Transport Canada was ordered to pay CASA's costs in the matter.

Lessons learned

The issuance and subsequent challenge to the CASA was a long and commercially costly ordeal for Rotor Maxx.

Apart from the adverse publicity associated with the CASA, there was a significant financial cost. Even though Rotor Maxx was awarded just over C$100,000 in legal costs, its actual legal costs were several times that amount.

This case demonstrates how difficult, time consuming and expensive regulatory issues can be to resolve.

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

Endnotes

(1) Rotor Maxx Support Ltd v Canada (Transport), 2018 FC 97.

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