Decisions

CAT File No. Q-2745-26
MoT File No. 5015-7-11799 (NAMJ)

CIVIL AVIATION TRIBUNAL

BETWEEN:

National Metal Finishing N. M. F. (canada) Ltd., Applicant

- and -

Minister of Transport, Respondent

LEGISLATION:
Aeronautics Act, R.S.C. 1985, c. A-2, 7.1(1)(b)

Conditions of issuance


Review Determination
Faye H. Smith


Decision: February 17, 2003

I refer the matter back to the Minister to reconsider its decision to suspend manufacturer certificate of approval No. 20-01 effective February 17, 2003, and for reconsideration of an appropriate time frame within which the company can work to meet the conditions of issue of the certificate. The condition for reinstatement for the first ground of suspension has been met. In the light of the factors discussed in the Air Nunavut Ltd. matter and of the changes which have taken place over the past month, I would ask that the Minister reconsider whether short term relief as requested by the company during its continued operation can be granted.

A review hearing on the above matter was heard on February 14, 2003 at the Federal Court of Canada in Montréal, Québec.

BACKGROUND

National Metal Finishing N.M.F. (Canada) Ltd. [herein referred to as NMF] is a supplier and manufacturer of aircraft parts and assemblies holding manufacturer certificate of approval No. 20-01 issued by the Department of Transport under date of October 31, 2001.

The Minister of Transport issued a notice of suspension dated January 16, 2003 of the above certificate with the effective date of suspension being February 17, 2003. NMF requested a review of the Minister's decision and a review hearing was scheduled for February 14, 2003.

NOTICE OF SUSPENSION

The notice of suspension reads as follows:

Pursuant to paragraph 7.1(1)(b) of the Aeronautics Act, the Minister of Transport has decided to suspend your Manufacturer Approval Certificate indicated above for the following reasons:

The company no longer meet or comply with the conditions subject to which the document was issued. Refer to the appendix attached.

APPENDIX TO NOTICE OF SUSPENSION OR CANCELLATION

Grounds for the Suspension or Cancellation

The company no longer meets the conditions of issuance of its certificate as stated in the Airworthiness Manual Chapter 561.103 (a), (2), (3) and (4).

1. The company no longer meets the conditions of AWM 561.107.

  • The company has laid off the competent personnel necessary to manufacture and to inspect the aeronautical products it manufactures under its approval at the Mirabel plant.

2. The company failed to maintain a quality program as required by Section 561.109.

a) The quality program did not provide, as applicable, for the control of the quality of all manufacturing operations and was proven of being not capable of ensuring that each aeronautical product conforms to its approved design data. Ref: AWM 561.109(a)

  • Products were installed onto higher assemblies when the said products were received from outside sources without proper certification documentation.
  • Products were certified and released when the company's documentation showed they did not meet the type design data.
  • Control procedures for checking and calibrating inspection equipment at established intervals did not address all customer supplied tooling.
  • The current Quality Assurance System did not provide for timely and effective corrective actions for deficiencies that had been raised since they later reoccurred.

b) The Quality Program Manual contains insufficiently detailed descriptions of the written quality program procedures. Ref: AWM 561.109(d)(1)(iii).

c) The approved Quality Program Manual does not contain a description of the inspection system currently in place within the company. Ref: AWM 561.109(d)(1)(iv).

d) The written quality program procedures do not provide, as applicable, instructions and data necessary to control manufacturing and inspection operations. Materiel Review Board actions and internal quality audits. Ref AWM 561.109(d)(2).

3. The company no longer has, at both facilities, personnel pursuant to Section 561.111, capable of performing all tests and inspections necessary to ensure that each item produced conforms to its type design data and is in a condition for safe operation.

  • The company no longer has appointed and authorized personnel to certify, on its behalf, that an aeronautical product conforms to approved design data and is in a condition for safe operation.

Conditions for reinstatement

The company shall demonstrate it meets all conditions for issuance of a manufacturer approval certificate which includes the following;

1. Demonstrate to Transport Canada it has all of the competent personnel necessary to manufacture and to inspect all products for which it was approved.

2. Implement an efficient Quality Program which will address the following:

a) Establish adequate control of the quality of all manufacturing activities by defining written instructions and by qualifying personnel to:

  • Purchasing and receiving inspection procedures which ensure that aeronautical products received from outside sources are accompanied by the appropriate documentation.
  • Final inspection, certification and releasing procedures to ensure the product manufactured meet its type design data and that the documentation is adequate and has been properly completed.
  • Procedures to ensure that all customer supplied tooling is calibrated and calibration frequency has been established.
  • Procedures to report and action non-conformances in order to provide for timely and effective corrective actions of deficiencies found during product inspections and system audits.

b) Submit a Quality Program Manual which incorporates sufficient descriptions of the procedures in-use proving that the company has the necessary control over manufacturing and inspection operations.

c) Submit a Quality Program Manual reflecting the inspection system in place.

d) Submit quality program procedures sufficiently detailed to provide, as applicable, instructions and data necessary to control manufacturing and inspection operations, Material Review Board actions and internal quality audits.

3. Appoint and authorize inspectors to certify products on its behalf and ensure this personnel is competent.

THE LAW

Chapter 561 of the Airworthiness Manual, Manufacture of Aeronautical Products:

561.103 Eligibility

(a) To be eligible for a DOT manufacturer approval an applicant organization must meet the following conditions:

[...]

(3) Show that it has established and can maintain a quality program described in Section 561-109 for any aeronautical product for which it requests a manufacturer approval; and

(4) Utilize personnel pursuant to Section 561.111, capable of performing all tests and inspections necessary to ensure that each item produced conforms to its type design data and is in a condition for safe operation.

[...]

561.109 Quality Program

(a) The applicant shall have a quality program, acceptable to the Minister, which is planned and developed in conjunction with other management functions. The quality program shall provide, as applicable, for the control of the quality of all manufacturing operations and be capable of ensuring that each aeronautical product conforms to its approved design data.

[...]

(d) [...]

(iii) A list and a brief description of written quality program procedures pursuant to Section 561.109(d)(2), [which states: Written quality program procedures which provide, as applicable, instructions and data necessary to control manufacturing and inspection operations, Materiel Review Board action and quality audits;]

(iv) A brief description of the inspection system which encompasses, as applicable, all phases of production from the inspection of purchased material, through fabrication and assembly to the inspection of the finished product, as described in Section 561.109(d)(3), [which states: An inspection system which; (i) Establishes where, throughout the production cycle, inspection will be performed, including that required at a supplier's facility, (ii) Identifies the nature of inspection to be performed and provides appropriate instructions at each place of inspection, (iii) Establishes final inspection procedures for a completed product or component, including, in the case of an aircraft, the manufacturer's flight test procedures and checklist, (iv) Establishes control procedures for checking and calibrating inspection equipment at established periods using reference standards traceable to national or international standards, and (v) Establishes records that inspections have been completed as planned. The system shall provide for timely and effective corrective actions for deficiencies found during inspection, together with records of such actions.]

561.111 Inspection Personnel

[...]

(b) Appoint and authorize inspectors to certify, on behalf fo the manufacturer, that an aeronautical product conforms to approved design data and is in a condition for safe operation. The applicant shall establish inspection criteria in regard to aeronautical products to be certified, and shall specify the knowledge and expertise required to perform the inspections. The qualifications and competence of the appointed inspectors shall have been determined by the applicant and must be acceptable to DOT.

AGREED STATEMENT OF FACTS

After an opening statement by the Minister's representative, a short adjournment was granted to the parties to enable them to sign an agreed statement of facts which was filed as Exhibit M-1 and reiterates the grounds of suspension as set out in the Notice of suspension dated January 16, 2003 with the following two changes:

Paragraph 1. of the grounds for suspension in the Notice is deleted and replaced by paragraph No. 3) of the agreed statement of facts. Further the second paragraph under item 3. in the grounds for suspension of the Notice is amended as follows: The company no longer has appointed and authorized personnel to certify products manufactured at the Mirabel facility, on its behalf, that an aeronautical product conforms to approved design data and is in a condition for safe operation.

THE ISSUE

The Minister's representative, Mr. Burroughs, advised the Tribunal that with the filing of the agreed statement of facts, the issue therefore was whether the Minister was reasonable in demanding that the conditions of reinstatement be met in a time frame of thirty days.

THE MINISTER'S EVIDENCE

The Minister called two witnesses for the purpose of showing that in the circumstances of the case the 30-day delay was reasonable given the grounds cited.

Mr. Pierre Pépin, Superintendent of Products and Services gave evidence to address the importance of the standards and legislation. He reviewed the modification and rewrite of the legislation and standards relating to the quality assurance systems. He referred as well to the eligibility conditions in section 561.103 of the Airworthiness Manual stating that NMF admitted its failure to meet subsections (2), (3)and (4). As well, he cited the responsibilities of an approved manufacturer as set out in section 561.117. He referred to the consequences to the company of non-compliance as set out in paragraph 561.207(e).

Mr. Pépin stated that he had a number of visits to the company in December and in January. At this time he became aware of the departure of key personnel at NMF. In December, 2002 he again met Mr. Bergeron who had recently been nominated by the President as Quality Assurance Manager. Mr. Pépin stated that at this time there were outstanding actions to be taken and that verbal advice was given by the Minister and a further extension granted. It was at this time that the three letters dated December 9, 10, 11, 2002, and filed as Exhibit M-5 herein, were sent to the company indicating the contents of the inspection and the non-conformance. After these letters, the company became more pro-active. On January 16, 2003 a Notice of suspension was served on NMF with the effective date of the suspension to take place on February 17, 2003.

When cross-examined by Mr. Bergeron, Mr. Pépin agreed that the company had improved. He indicated that there should be proper documentation for each part of the assembly. Otherwise the information is not transmitted. He added that there are risks and safety concerns. Finally he stated that the inspectors at Transport Canada had given extensions for a year.

Mr. Alain Dussault gave evidence on the subject that NMF did not have a safe system. Mr. Dussault has been a Civil Aviation Inspector at Transport Canada since October of 2001 and has over sixteen years experience in the aviation industry. He reviewed the manufacturer certificate of approval and its responsibilities. He addressed the meeting and plan of action outlined in the material dated October 22, 2001, and filed as Exhibit M-4. He added that the inspectors made visits regularly respecting manufacturing and quality assurance.

Over the course of these numerous visits and inspections, there were a number of anomalies and non-conformities which were corrected by the company. However, many of them recurred and a further inspection revealed problems in the numbering of parts. The inspection of the spring of 2002 confirmed other areas of non-compliance. Subsequently Transport Canada decided to have the company prepare another action plan with extensions. During the supervision of the company in August of 2002 it was apparent that the company had not taken the necessary actions and at that time received another extension to the month of October.

Mr. Dussault reviewed the company's manual and found major omissions relating to personnel. He indicated that some non-conformities are normal. It is important to identify the problem, the cause and it is necessary to have an action plan. Mr. Dussault was of the opinion that the company had demonstrated that it did not have an adequate quality assurance system. The problems continued and there were quality alerts where the inspectors would identify and inform them of the non-conformities. Additionally, the company was informed that its quality program manual was not acceptable as it did not conform to section 561.109. Mr. Dussault reviewed the requirements of the levels of the manual in some detail. At this time there was a new manager and new president. The company did not inform Transport Canada as it was required to do.

He states that the three letters mentioned by Mr. Pépin above as Exhibit M-5 were given to Mr. Cook, the President, on December 12, 2002 when he visited him and found that the problems were not corrected and that the action plan was needed quickly. Mr. Cook took things in hand but it seemed to Mr. Dussault that there was a lack of transfer of information among the executives. Inspections on the 12 and 13 of December disclosed the same non-conformities. The decision was then made by Transport Canada to suspend the document because the company was not responding with an action plan that produced results.

In cross-examination, the inspector agreed that since the beginning it is better and is getting better on some things but there are others that are not. Inspector Dussault discussed in detail the problems of identification, placarding, and other areas of non-compliance in quality control. He indicated that the company must take control, make a plan and meet the conditions within the deadlines. Regarding the requirement for the manual, he indicated that it may not be necessary to rewrite it. It may be simpler to have a blended copy.

NMF'S EVIDENCE

Mr. Bergeron on behalf of NMF in his opening statement submitted that there had been improvements. However, the 30 days were not sufficient. He admitted that the delay would have been long enough but unfortunately there had been changes in personnel and that this directly affected the situation. Further, he stated that there were some weaknesses in the documentation. The last extension of time had been based on hiring a consultant because they wanted to simplify things.

Mr. Bergeron called Mr. Roger Haché to testify on behalf of NMF. Mr. Haché is the President of NMF. He has been involved in the manufacturing industry for more than 27 years. He originally commenced working at NMF to install a computer system to help with the delivery of products. He stated that NMF found itself in a difficult situation and had difficulty following the regulations. The company is always moving; everyone has their own expertise. He stated that things are getting better and they have cleared up things this morning. It is a question of communication for NMF to assure quality control. He further indicated that the number of employees has diminished by almost half due to finances.

Mr. Haché reviewed the many reasons why suspension of the manufacture and approval certificate at this time would be catastrophic. In the short run, he indicated that it would take two months to fix the program. In the long term he stated that they needed more time and more assistance. He respects the Transport Canada inspectors and he knows that they are doing their job. Mr. Haché stated that the letters addressed to Mr. Cook produced much effort. What seemed to be a mountain now seems to be more clear and even four months could fix it long term.

THE MINISTER'S ARGUMENTS

The Minister argued that the grounds for suspension were not contradicted in the Minister's evidence. The company had indicated that their consequences were financial. The Minister had shown flexibility toward the company and has tried for 14 months to get to a conclusion but the company still has not met the conditions. The Minister has lost confidence and after many deadlines have not been met, the Minister must assure conformity. With strict supervision of the company including many visits, the Minister has demonstrated by its letters that it wants corrective actions taken in a short time but has not received a response. Mr. Burroughs submits that these are reasonable actions on the part of the Minister prior to the sending of the Notice of suspension.

The representative for the Minister refers to prior Tribunal jurisprudence relating to the importance of the notice and the issues of fairness. He urges that after one year the company still has not met all the conditions of issue and the status quo cannot continue. He asks that the Minister's decision be confirmed.

ARGUMENTS ON BEHALF OF THE APPLICANT (NMF)

Mr. Bergeron on NMF's behalf indicated that there had been many improvements, however, there are still some remaining. The conditions cannot be met before the 17th of February as the complete manual is to be submitted, corrective actions must be taken. He indicated that more time was need to finalize matters. He further indicated that the cases referred to in the Minister's argument involved matters that were not the same as NMF. One could not compare them. He summed up by stating that safety is not implicated in the products produced by NMF.

DISCUSSION

I refer to the case of Air Nunavut Ltd.[1] wherein the Federal Court referring to Baker v. Canada (Minister of Citizenship and Immigration)[2] stated:

the Supreme Court of Canada discussed the factors recognized in jurisprudence as relevant to determining what is required by the common law duty of procedural fairness in a given set of circumstances, inter alia, the nature of the decision being made and the process followed in making it, the nature of the statutory scheme, the importance of a decision to the individuals affected and the legitimate expectations of the person challenging the decision.

The Federal Court applied these factors to the Air Nunavut Ltd. matter as follows:

[...]

A second factor is the nature of the statutory scheme. The Act confers on the Minister a discretional power to impose a suspension of a Canadian aviation document when a holder no longer complies with conditions subject to which the document was originally issued. The exercise of this statutory discretion is dictated by concerns such as public safety.

A third factor is the importance of the decision to the individuals affected. The greater the impact, the more stringent procedural protection is required. In the present case, the Minister has to balance the severe financial effect the suspension of the Canadian aviation document has on the applicant, with the promotion of aviation safety.

Although it is true that the Act does not require prior notice before the issuance of the suspension notice, it is trite law that there exists a general common law duty to act fairly on every public authority making an administrative decision which is not legislative in nature and which affects the rights, privileges or interests of individuals. Cognizant that the holding of a certificate is not a right, I am of the view nevertheless, that a temporary suspension will adversely affect the business of the document holder as well as inconvenience passengers booked to travel with Air Nunavut.

Therefore, considering that there was no immediate threat to aviation safety, that a chief pilot application was pending, that there was confusion regarding whether the applicant's chief pilot was on site or not, and given the potential negative impact on the applicant's livelihood, I am of the view that a minimal duty of fairness was required before suspending the certificate.

As indicated by the Minister's representative, the two cases cited differ from the facts before us. In Skyward[3], the conditions of reinstatement were met prior to the effective date of suspension. When the Applicant sought review of the Minister's decision to suspend, the right of review was not granted as the conditions of reinstatement had been met. The same result occurred in the case of Aviation Les Iles Ltée and Minister of Transport[4]. It is important to consider that in each of these two cases that since the conditions of reinstatement were met, there was no possibility of the suspension ever taking effect. In the Air Nunavut Ltd. case, the notice of suspension was dated November 6, 1998 and took effect on November 7, 1998 and I recall that the conditions for reinstatement were met at some time prior to the review hearing which took place on November 20, 1998.

In the case before me, the suspension has not taken place at the time of the review hearing on February 14, 2003 but is to take effect at midnight, on Monday, February 17, 2003 which is 30 days after the date of the notice. This has provided the Applicant the opportunity to have the Minister's decision reviewed prior to the effective date of the suspension.[5]

It is important to note that contrary to a notice of suspension issued under section 6.9 of the Act, when a suspension is imposed pursuant to section 7.1, no waiting period is prescribed before a suspension takes effect. When a document is suspended, the person to whom it was issued must return it to the Minister immediately upon the effective date of suspension[6].

Regarding a suspension under section 6.9 of the Aeronautics Act for alleged contravention, the Tribunal member must review the facts and evidence put forth by the minister relevant to the time of the commission of the offence. However, the case before me is a section 7.1 suspension for failure to meet or comply with conditions of issue. I must review the factual situation as it exists at the time of review and may consider the progress in the intervening period since the date of the notice of suspension in arriving at my determination.

On the facts of this case as disclosed by the witnesses on behalf of the Minister, I am satisfied that the Minister has been diligent in its supervision of the company and that Transport Canada inspectors have aided the company throughout the 14 months of their interaction. The evidence of Mr. Pépin and Mr. Dussault attest to the ongoing problems they faced. The company has had many difficulties and over the past number of months has undergone changes regarding executive staff. It is acknowledged by the Minister's witnesses that there have been improvements and that they are continuing to improve. It is admitted that they have not been able to meet the conditions of reinstatement in the 30 days time period prior to the effective date of the suspension which is midnight on February 17, 2003.

In addition to the past tolerances, I am of the opinion that fairness in this case requires that the Minister afford the company a greater time frame in which to comply with the conditions of reinstatement. The company President Mr. Haché indicated that two months would be an adequate short term extension. In the intervening 30 days, since the date of the notice of suspension, things have improved. Both of the Minister's witnesses have acknowledged improvements. There have been changes in senior management. The condition for reinstatement for the first ground of suspension has been met. There is no evidence before me that the Minister has concerns regarding threats to public safety and there is no evidence of bad faith on the part of the company's executives.

DETERMINATION

I refer the matter back to the Minister to reconsider its decision to suspend manufacturer certificate of approval No. 20-01 effective February 17, 2003, and for reconsideration of an appropriate time frame within which the company can work to meet the conditions of issue of the certificate. The condition for reinstatement for the first ground of suspension has been met. In the light of the factors discussed in the Air Nunavut Ltd. matter and of the changes which have taken place over the past month, I would ask that the Minister reconsider whether short term relief as requested by the company during its continued operation can be granted.

Faye Smith
Chairperson
Civil Aviation Tribunal


[1] Air Nunavut Ltd. v. Canada (Minister of Transport), [2001] 1 F.C. 138.

[2] [1999] 174 D.L.R.(4th) 193.

[3] Skyward Aviation Ltd. v. Minister of Transport, CAT File No. C-2159-10 (decision on a preliminary motion).

[4] August 12, 1988 Civil Aviation Tribunal Member Jocelyne Rouleau (the notice of suspension was dated February 17, 1988 to take effect on March 18, 1988, and the conditions of reinstatement were met before the prescribed date) CAT File No. Q-0116-10.

[5] Subsection 7.1(5) of the Aeronautics Act "... the Tribunal shall forthwith appoint a time, as soon as practicable after the request is filed...".

Subsection 37(1) of the Aeronautics Act "... matters shall be dealt with by the Tribunal or member as informally and expeditiously as the circumstances and considerations of fairness and natural justice permit."

[6] Canadian Aviation Regulations, section 103.03, SOR/96-433.