Decisions

TATC File No. Q-2942-41
MoT File No. N5504-50955

TRANSPORTATION APPEAL TRIBUNAL OF CANADA

BETWEEN:

Eider Aviation (2431-9154 Québec Inc.), Applicant

- and -

Minister of Transport, Respondent

LEGISLATION:
Aeronautics Act, R.S.C. 1985, c. A-2, s. 7.7
Canadian Aviation Regulations, SOR/96-433, s. 606.02(2) and 606.02(5)


Review Determination
Carole Anne Soucy


Decision: November 18, 2004

TRANSLATION

The applicant, 2431-9154 Québec inc., having admitted the material elements of the offence alleged by the Minister and having provided no defence allowing me to modify the Minister's decision, the contraventions are confirmed, and the total amount of the monetary penalty is $10,000. This amount, payable to the Receiver General for Canada, must be received by the Tribunal within thirty-five (35) days of service of this determination.

A review hearing on the above matter was held July 20, 2004, at the courthouse in Sept-Îles, Québec.

BACKGROUND

The applicant is the holder of a flight training unit operator certificate. To this end, it owns a Beech 19 aircraft registered as C-GNEV. To be in compliance with the Canadian Aviation Regulations (CARs), the owner of an aircraft used in flight training must subscribe for liability insurance covering risks of injury to or death of passengers. It must also subscribe for liability insurance covering risks of public liability.

Insurance policy no. 360AC-349817, subscribed for by Mr. Lévesque, president of the applicant, valid from October 11, 2002, to October 11, 2003, specifically excluded the use of the above-mentioned aircraft for the purposes of the flight training school, limiting its use to pleasure and private business.

From October 22, 2002, to December 19, 2002, the applicant conducted several flights on the Beech B19 registered as C-GNEV for the purposes of flight training.

Further thereto, on September 2, 2003, a notice of assessment of monetary penalty was sent to the applicant. Schedule A of this notice reads as follows:

You have contravened subsection 606.02(2) of the Canadian Aviation Regulations;

Between October 24 and December 19, 2002, inclusive, as holder of a flight training unit operator certificate, you permitted the operation of the BE-19 aircraft registered as C-GNEV without having subscribed, in respect of every incident related to the operation of the aircraft, for liability insurance covering risks of injury to or death of passengers.

PENALTY: $5,000

You have contravened subsection 606.02(5) of the Canadian Aviation Regulations;

Between October 24 and December 19, 2002, inclusive, as holder of a flight training unit operator certificate, you permitted the operation of the BE-19 aircraft registered as C-GNEV without having subscribed, in respect of every incident related to the operation of the aircraft, for liability insurance covering risks of public liability.

PENALTY: $5,000

The monetary penalty of $10,000 was to be paid on or before October 8, 2003. On October 7, 2003, Mr. Lévesque sent the Transportation Appeal Tribunal of Canada an application for review; hence the hearing and this determination.

THE LAW

Section 7.7 of the Aeronautics Act stipulates as follows:

7.7 (1) Where the Minister believes on reasonable grounds that a person has contravened a designated provision, the Minister shall notify the person of the allegations against the person in such form as the Governor in Council may by regulation prescribe, specifying in the notice, in addition to any other information that may be so prescribed,

(a) subject to any regulations made under paragraph 7.6(1)(b), the amount that is determined by the Minister, in accordance with such guidelines as the Minister may make for the purpose, to be the amount that must be paid to the Minister by the person as the penalty for the contravention in the event that the person does not wish to appear before a member of the Tribunal to make representations in respect of the allegations; and

(b) the time, being not less than thirty days after the date the notice is served or sent, at or before which and the place at which the amount is required to be paid in the event referred to in paragraph (a).

(2) A notice under subsection (1) shall be served personally or by ordinary mail sent to the latest known address of the person to whom the notice relates.

Subsection 606.02(2) of the CARs stipulates:

(2) Subject to subsection (3), none of the following aircraft owners shall operate an aircraft unless, in respect of every incident related to the operation of the aircraft, the owner has subscribed for liability insurance covering risks of injury to or death of passengers in an amount that is not less than the amount determined by multiplying $300,000 by the number of passengers on board the aircraft:

(a) an air operator;

(b) the holder of a flight training unit operator certificate; or

(c) the operator of a balloon in which fare-paying passengers are carried on board pursuant to Subpart 3.

Subsection 606.02(5) of the CARs stipulates:

(5) No aircraft owner referred to in paragraph (2)(a), (b) or (c) shall operate an aircraft unless, in respect of every incident related to the operation of the aircraft, the owner has subscribed for liability insurance covering risks of public liability in an amount that is not less than

(a) $1,000,000, where the maximum permissible take-off weight of the aircraft is not greater than 3 402 kg (7,500 pounds);

(b) $2,000,000, where the maximum permissible take-off weight of the aircraft is greater than 3 402 kg (7,500 pounds) but not greater than 8 165 kg (18,000 pounds); and

(c) where the maximum permissible take-off weight of the aircraft is greater than 8 165 kg (18,000 pounds), $2,000,000 plus an amount determined by multiplying $150 by the number of pounds by which the maximum permissible take-off weight of the aircraft exceeds 8 165 kg (18,000 pounds).

EVIDENCE AND ARGUMENTS

The applicant admitted all material elements of the offence alleged by the Minister. However, its representative, Mr. Lévesque, argued that the numbered company 2431-9154 Québec inc. did not go by the name Eider Aviation but rather Sept-Îles Aviation.

The operator certificate, under "Name of Flight Training Unit," reads: 2431-9154 Québec inc. (E/S/A Eider Aviation).

However, on insurance policy M-2, the name of the insured is given as 2431-9154 Québec inc. / Sept-Îles Aviation Enr.

In the circumstances, and in the absence of documentary evidence before the Tribunal of the "assumed name" within the meaning of the Act respecting the legal publicity of sole proprietorships, partnerships and legal persons (R.S.Q., c. P-45), I will use the numbered name, 2431-9154 Québec inc., and avoid discussion.

Let us turn now to the reason for disputing the penalties, which Mr. Lévesque finds excessive.

Mr. Tamborriello filed a number of documents in evidence, briefly explaining their content before discussing the penalties.

First, Exhibit M-1, being insurance policy number 360A-349817, valid from October 11, 2002, to October 11, 2003, which is limited to the operation of the Beech 19 for "Pleasure & Private Business," covers Mr. Lévesque and another pilot, Stéphane Lachance.

Exhibit M-2 , an insurance policy subscribed for after the occurrences, was valid from May 20, 2003, to April 3, 2004. The heading "use" reads: "Commercial (instruction & leasing)," and the pilots named are "Jacques Lévesque, Christophe Valentin and any pilot approved by the above-named instructors."

The evidence filed in a bundle as Exhibit M-3 consists of correspondence between Mr. Ghislain Charette, of the company Charette Assurances, and Mr. Tamborriello further to a requisition of the latter. A communication of January 2004 reads: in October 2002, even if Mr. Lévesque had requested a commercial quote for his entire fleet of aeroplanes, including his Cessna 402, the Charette company would have refused because it had no market for the C-402. However, it probably could have insured the Beech 19 with another insurance company, as was done in April 2003.

Finally, Exhibit M-4 is the list of uninsured flights. Some ten flights between October 24 and December 19, 2002 are listed, with the name of the pilot-in-command and that of the student or passenger, as the case may be. In most cases, these flights were conducted by pilots needing further training.

Mr. Tamborriello then explained the penalties that were assessed.

First, according to the schedules of the CARs, for offences related to subsection 606.02(2), companies are subject to a maximum penalty of $25,000. The same applies to subsection 606.02(5). He argued that these are independent designated provisions. Subsection (2) relates to insurance covering passengers on board, and subsection (5) covers public liability. He went on to say that the legislation allows one penalty for each offence.

Moreover, the Aviation Enforcement Manual, a reference used in the Department of Transport to ensure that penalties are uniform, recommends a penalty of $5,000 in each case for a first offence, $12,500 for a second offence and $25,000 for a third offence.

Mr. Tamborriello also argued that, pursuant to section 7.31 of the Aeronautics Act, each flight is considered an offence. He pointed out that in this case, he preferred to regard all flights as a whole leading to a single offence, rather than the possible ten.

He went on to say that compliance with the regulations is necessary to promote safety. Insurance is very important for an operator, and the public is entitled to expect that an operator is insured. It is also a question of protecting the operator in the event of an accident.

Mr. Lévesque made the following arguments on behalf of the applicant. He contended that the risks had been limited during the flights conducted from October 22 to December 19, 2002, since the pilots involved were holders of a commercial licence. He objected to the excessive monetary penalties, in view of his misinterpretation of the insurance coverage.

DISCUSSION

Considering the documentary evidence;

Considering the applicant's admission of the material elements of the offence alleged by the Minister;

Considering the clarity and preciseness of the cover notes of the insurance policies;

Considering the fact that the applicant provided no evidence of the defence recognized by the Aeronautics Act, specifically section 8.5;

Considering the fact that the Minister used the usual applicable standards for the determination of sanctions;

Considering the fact that the Minister regarded all uninsured flights conducted as a single offence;

Considering the fact that the applicant presented no relevant mitigating circumstance allowing me to reduce the penalty;

Considering the fact that the protection of the public and of the pilots is at stake;

Considering the fact that the law is clear and leaves no room for interpretation;

Considering the principles of denunciation, deterrence and rehabilitation, and the enforcement recommendations for determining the amount of the monetary penalty;

I must confirm the Minister's decision.

DETERMINATION

The applicant, 2431-9154 Québec inc., having admitted all elements of the offence alleged by the Minister and having provided no defence allowing me to modify the Minister's decision, the contraventions are confirmed, and the total amount of the penalty is $10,000.

Carole Anne Soucy
Member
Transportation Appeal Tribunal of Canada


Appeal decision
Faye H. Smith, Michel Larose, Pierre J. Beauchamp


Decision: May 3, 2005

TRANSLATION

We allow the appeal and reduce the monetary penalty to $5,000. This amount is payable to the Receiver General for Canada and must be received by the Transportation Appeal Tribunal of Canada within fifteen days of service of this decision.

An appeal hearing on the above matter was held Tuesday, March 1, 2005, at 10:00 hours at the courthouse in Sept-Îles, Québec.

BACKGROUND

The Appellant is appealing the determination of the member, Carole Anne Soucy further to a request for review made by the Appellant, Eider Aviation (2431-9154 Québec Inc.). The Minister of Transport had decided to send a Notice of Assessment of Monetary Penalty to Eider Aviation (2432-9154 Québec Inc.) on September 2, 2003, pursuant to section 7.7 of the Aeronautics Act for the following reasons:

You have contravened subsection 606.02(2) of the Canadian Aviation Regulations;

Between October 24 and December 19, 2002, inclusive, as holder of a flight training unit operator certificate, you permitted the operation of aircraft BE-19 registered as C-GNEV without having subscribed, in respect of every incident related to the operation of the aircraft, for liability insurance covering risks of injury to or death of passengers.

PENALTY: $5,000

You have contravened subsection 606.02(5) of the Canadian Aviation Regulations;

Between October 24 and December 19, 2002, inclusive, as holder of a flight training unit operator certificate, you permitted the operation of aircraft BE-19 registered as C-GNEV without having subscribed, in respect of every incident related to the operation of the aircraft, for liability insurance covering risks of public liability.

PENALTY: $5,000

REASONS FOR APPEAL

Following the review, the Tribunal member confirmed the decision of the Minister of Transport and upheld the total amount of the penalty assessed of $10,000.

The Appellant, through its representative, Mr. Jacques Lévesque, applied to the Transportation Appeal Tribunal of Canada to appeal the determination of the member, Carole Anne Soucy, and it reads as follows:

December 15, 2004      TATC File No. Q-2942-41

MoT File No. N5504-5095

I am applying to appeal the above-mentioned case.

THE FACTS

The facts are admitted by the Appellant and a good summary of them can be found under the heading Background in the Review Determination:

The applicant is the holder of a flight training unit operator certificate. To this end, it owns a Beech 19 aircraft registered as C-GNEV. To be in compliance with the Canadian Aviation Regulations (CARs), the owner of an aircraft used in flight training must subscribe for liability insurance covering risks of injury to or death of passengers. It must also subscribe for liability insurance covering risks of public liability.

Insurance policy no. 360AC-349817, subscribed for by Mr. Lévesque, president of the applicant, valid from October 11, 2002, to October 11, 2003, specifically excluded the use of the above-mentioned aircraft for the purposes of the flight training school, limiting its use to pleasure and private business.

From October 22, 2002, to December 19, 2002, the applicant conducted several flights on the Beech B19 registered as C-GNEV for the purposes of flight training.

THE LAW

Subsection 606.02(2) of the CARs:

(2) Subject to subsection (3), none of the following aircraft owners shall operate an aircraft unless, in respect of every incident related to the operation of the aircraft, the owner has subscribed for liability insurance covering risks of injury to or death of passengers in an amount that is not less than the amount determined by multiplying $300,000 by the number of passengers on board the aircraft:

(a) an air operator;

(b) the holder of a flight training unit operator certificate; or

(c) the operator of a balloon in which fare-paying passengers are carried on board pursuant to Subpart 3.

Subsection 606.02(5) of the CARs:

(5) No aircraft owner referred to in paragraph (2)(a), (b) or (c) shall operate an aircraft unless, in respect of every incident related to the operation of the aircraft, the owner has subscribed for liability insurance covering risks of public liability in an amount that is not less than

(a) $1,000,000, where the maximum permissible take-off weight of the aircraft is not greater than 3 402 kg (7,500 pounds);

(b) $2,000,000, where the maximum permissible take-off weight of the aircraft is greater than 3 402 kg (7,500 pounds) but not greater than 8 165 kg (18,000 pounds); and

(c) where the maximum permissible take-off weight of the aircraft is greater than 8 165 kg (18,000 pounds), $2,000,000 plus an amount determined by multiplying $150 by the number of pounds by which the maximum permissible take-off weight of the aircraft exceeds 8 165 kg (18,000 pounds).

REPRESENTATIONS OF THE APPELLANT

The arguments of the Appellant's representative were brief. He took the position that the member erred in confirming the amount of the monetary penalty of $10,000 and that this monetary penalty was excessive because this did not constitute a danger to others. He admits that an error had been made, but considers a penalty of $10,000 to be excessive for what he claims was a misinterpretation. He argues that, since this error did not result in a safety hazard, the penalties assessed were far too high in the context of a small flight training school.

REPRESENTATIONS OF THE MINISTER

The Respondent argues that the member did not err in confirming the amount of the monetary penalty assessed against the Appellant by the Minister of Transport, for the following reasons:

  • The principles for determining the appropriate amount of a monetary penalty to be assessed were discussed in Minister of Transport v. Kurt William M. Wyer.[1]
  • Among these principles, one of the desired objectives of assessing a penalty is to denounce conduct described as "reprehensible".
  • In the present case, the Respondent argues that the offender exhibited wilful blindness or negligence in refusing to find out the real nature of the insurance coverage of the aircraft registered as C-GNEV through its administrator, president and majority shareholder, Jacques Lévesque.

It is established that the cover note, filed in evidence as Exhibit M-1, left no doubt as to the insurance coverage of the aircraft registered as C-GNEV.

Moreover, according to the Appellant's president and majority shareholder himself, insurance was to him a "fairly vague" field.[2]

The Respondent argues that this limited knowledge of the field of insurance ought to have compelled the Appellant, through its president and majority shareholder, to find out how it was really permitted to operate its aircraft, as a reasonably prudent person would have done in the circumstances.

In assessing the monetary penalty, the Minister of Transport had to take this conduct into consideration and denounce this behaviour.

Deterrence is also one of the objectives of the sanction.

In order to deter whomever from committing these offences, a relatively stiff penalty must be assessed to avoid the absurd situation where it would be economically more profitable to commit the offence than to pay the insurance premiums for the coverage required by the regulations.

The evidence showed that an annual premium of $1,350 was required for use related to "pleasure and private business," while a considerably higher premium of $6,121 would have been required for commercial use.

- Exhibits M-1 and M-2 filed in evidence at the hearing of July 20, 2004.

The Appellant, through its administrator, president and majority shareholder, Jacques Lévesque, admitted having used the aircraft commercially without having the appropriate insurance coverage.

The Appellant therefore derived an economic benefit compared to other similar operators meeting the regulatory requirements with respect to liability insurance.

In assessing the monetary penalty, the Minister of Transport had to take into consideration this factor to deter the Appellant and other members of the aviation community from contravening the regulatory powers respecting liability insurance.

The Respondent respectfully submits that there were aggravating considerations in this case that justified the amount of the penalty assessed against the Appellant, namely:

  • That as a flight training unit, it should be setting an example for regulatory compliance in the aeronautical community;

  • That about ten flights were conducted without the required insurance coverage, according to Exhibit M-4 filed in evidence.

The Respondent respectfully submits that, in view of the desired objectives and the factors to be considered in the determination of a sanction, the decision to assess a penalty of $10,000 against the Appellant was, and still is, a judicious combination of deterrence and reform favouring absolute compliance of the rules.

CONCLUSION

At the review hearing, the Appellant admitted the facts of the two counts as worded in Annex "A" of the Notice of Assessment of Monetary Penalty, being content to dispute only the amount of the penalty assessed.

The evidence showed that an annual premium of $1,350 was required for use related to "pleasure and private business," while a much higher premium of $6,121 was required for commercial use.[3] We agree with the submissions of the Minister's representative that the Appellant therefore gained economic profit compared to other similar operators meeting the regulatory requirements with regard to liability insurance.

However, we are not satisfied that there were aggravating circumstances in this case that justified the amount of the penalty assessed against the Appellant. It seems to us that the aggravating factors are the same for all corporations in the aviation community. If the penalty can be increased because the flight training unit must set an example for regulatory compliance in the aeronautical community, the Act and the schedule of sanctions in the Canadian Aviation Regulations would set higher penalties to be assessed against flight training units for all contraventions of the regulations.

It remains for us to consider the appropriate amount of this penalty. First, what amount will serve to deter any party from committing these offences? And secondly, we must consider the risk of creating an economic impact that is too great for the operator of this flight training unit given the nature and seriousness of the alleged offences. For this panel, an amount of $5,000 should serve as a deterrent and be appropriate in the circumstances.

As the Appellant, 2431-9154 Québec Inc., has admitted all the elements of the offence alleged by the Minister, the contraventions are upheld and, in view of the foregoing, we reduce the total amount of the penalty from $10,000 to $5,000.

Reasons for Appeal Decision:

Mrs. Faye Smith, Chairperson

Concurred:

Dr. Michel Larose, Member
Mr. Pierre Beauchamp, Member


[1] File no. O-0075-33, ruling of the Appeal panel of the Civil Aviation Tribunal of December 16, 1988

[2] Transcript of the hearing of July 20, 2004 - page 8

[3] Exhibits M-1 and M-2 filed in evidence at the hearing of July 20, 2004