Decisions

TATC File No. W-3287-33
MoT File No. SAP-5504-55141 P/B

TRANSPORTATION APPEAL TRIBUNAL OF CANADA

BETWEEN:

Raymond Jerry Lee, 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, 700.02(1)


Review Determination
James E. Foran


Decision: February 12, 2008

Citation: Lee v. Canada (Minister of Transport), 2008 TATCE 8 (review)

Heard at Yellowknife, Northwest Territories, on November 20, 21 and December 12, 2007

Held: I confirm the Minister's decision to assess a monetary penalty of $1 000 for each of the 12 offences against the applicant, Raymond Jerry Lee. The total monetary penalty of $12 000 is to be made payable to the Receiver General for Canada and must be received by the Transportation Appeal Tribunal of Canada within 35 days of service of this determination.

I. INTRODUCTION

[1] In the early part of October 2004, Transport Canada initiated an investigation to determine whether 3584674 Canada Inc., carrying on business as Arctic Air, had operated an air transport service during the previous month without having an air operator certificate (AOC) authorizing it to do so.

[2] The Enforcement Branch of Transport Canada had received information that Arctic Air might have transported passengers in its Cessna 185 aircraft for compensation during September 2004 and that there might have been an incident during one of those flights which caused damage to the aircraft while passengers were on board.

[3] As a result of that investigation, on September 1, 2005, the Minister of Transport decided to issue monetary penalties in the total amount of $12 000 against the applicant, Raymond Jerry Lee, pursuant to section 7.7 of the Aeronautics Act, R.S.C. 1985, c. A‑2 (Act). The Minister alleges that on 12 different occasions between September 9 and 14, 2004, the applicant was the "pilot-in-command" of the Cessna 185 aircraft and operated an air transport service when Arctic Air did not hold a valid AOC. Each of the 12 flights took place at or near Lac du Sauvage in the Northwest Territories.

[4] The applicant has requested a review of those monetary penalties by the Transportation Appeal Tribunal of Canada pursuant to section 7.91 of the Act.

II. LAW

[5] Sections 3(1), 7.7(1), 7.91(1), 8.4(3) and 8.5 of the Act read as follows:

3. (1) In this Act,

. . .

"commercial air service" means any use of aircraft for hire or reward;

. . .

"hire or reward" means any payment, consideration, gratuity or benefit, directly or indirectly charged, demanded, received or collected by any person for the use of an aircraft;

. . .

7.7 (1) If the Minister believes on reasonable grounds that a person has contravened a designated provision, the Minister may decide to assess a monetary penalty in respect of the alleged contravention, in which case the Minister shall, by personal service or by registered or certified mail sent to the person at their latest known address, notify the person of his or her decision.

. . .

7.91 (1) A person who is served with or sent a notice under subsection 7.7(1) and who wishes to have the facts of the alleged contravention or the amount of the penalty reviewed shall, on or before the date specified in the notice or within any further time that the Tribunal on application may allow, file a written request for a review with the Tribunal at the address set out in the notice.

. . .

8.4 (3) The pilot-in-command of an aircraft may be proceeded against in respect of and found to have committed an offence under this Part in relation to the aircraft for which another person is subject to be proceeded against unless the offence was committed without the consent of the pilot‑in‑command and, where found to have committed the offence, the pilot‑in‑command is liable to the penalty provided as punishment therefor.

. . .

8.5 No person shall be found to have contravened a provision of this Part or any regulation, notice, order, security measure or emergency direction made under this Part if the person exercised all due diligence to prevent the contravention.

[6] Section 700.02(1) of the Canadian Aviation Regulations, SOR/96‑433 (CARs), provides the following:

700.02 (1) No person shall operate an air transport service unless the person holds and complies with the provisions of an air operator certificate that authorizes the person to operate that service.

III. EVIDENCE

A. Minister of Transport

 (1) Kevin John Shott

[7] Inspector Kevin John Shott testified that he was assigned to investigate allegations that Arctic Air had transported passengers in early September 2004 and that during one of those flights, there had been a crash landing near Lac du Sauvage with passengers on board. He indicated that this was a matter of concern because Arctic Air had apparently surrendered its AOC before those flights took place.

[8] In December 2004, a letter of investigation was sent to Mr. Lee who was believed to be the operator of the aircraft. No reply was received and it became apparent that Mr. Lee had not received that letter or, for that matter, a follow-up letter also sent that month. Inspector Shott subsequently located Mr. Lee and spoke to him by telephone on March 15, 2005. In summary, Mr. Lee indicated that he had voluntarily surrendered the AOC the previous year and advised Inspector Shott where the journey log for Arctic Air could be located.

[9] Inspector Shott next determined that Mr. Lee had transported passengers working for Aurora Geosciences Ltd. (Aurora) to survey sites in the Lac du Sauvage area during the month of September 2004. As a result of inquiries with representatives of that company, Inspector Shott obtained an invoice from Arctic Air to Aurora dated October 1, 2004 (exhibit M‑1). That invoice contains a notation "09/09/04 YK-Lac du Sauvage 5 days @ $1,000.00" for a total of $5 000.

[10] Inspector Shott next produced a certificate from the Secretary, Department of Transport, dated November 7, 2007 that the AOC issued to Arctic Air had been voluntarily surrendered on August 26, 2004, had been accordingly suspended on that date and had not been reinstated at any time thereafter (exhibit M‑2). Attached to that exhibit is a letter from Mr. Lee dated September 20, 2004 submitting the AOC of Arctic Air for voluntary suspension to which is attached a receipt stamp from Transport Canada dated August 25, 2004. Also attached is a letter to Mr. Lee dated August 26, 2004 confirming the suspension effective August 26, 2004. It is apparent that Mr. Lee's letter was incorrectly dated and should have stated August 20, 2004 rather than September 20, 2004.

[11] Inspector Shott testified that he obtained the journey log of Arctic Air to confirm that flights had taken place on or about September 9, 2004 (exhibit M‑3). Inspector Shott referred to page 84 of that exhibit and more particularly to the six entries dated September 9 to 14, 2004 inclusive. These six entries show the point of departure and destination to be "Degras", and indicate that three persons were on board the aircraft on each occasion and that the pilot was Mr. Lee.

[12] Inspector Shott testified that Lac de Gras and Lac du Sauvage are in close proximity to each other being only a few minutes away by air. Inspector Shott referred to column 13 "Remarks", for the September 14th flight and to the note "holy rt float" which he interpreted as likely meaning "hole – right float". Inspector Shott indicated that these journal entries understated the actual number of flights that took place. He advised that, based on his discussions with employees of Aurora, there were actually two flights each day commencing September 9, 2004 and concluding September 14, 2004, namely, a positioning flight in the morning and a return flight back to the campsite at the end of the day. This constituted 12 flights in total.

[13] Inspector Shott tendered a facsimile letter from Aon Reed Stenhouse Inc., dated March 15, 2005, advising that Arctic Air's insurance coverage with respect to the Cessna 185 aircraft lapsed on July 20, 2004 at the insured's request (exhibit M‑5). Inspector Shott testified that insurance was an essential requirement for a valid AOC: "you can't have one without the other". He concluded that, based on his investigation, Arctic Air had provided an air transport service without holding a valid AOC authorizing it to do so. Inspector Shott also concluded that this was an appropriate case in which to invoke the vicarious liability provisions contained in section 8.4 of the Act, and more particularly, the "pilot‑in‑command" liability provision contained in section 8.4(3). He considered this to be appropriate after reviewing the operations manual of Arctic Air (exhibit M‑6) and determining that Mr. Lee was, amongst other positions, the chief pilot and maintenance coordinator of Arctic Air. The fact that Mr. Lee figured so prominently in these flights led to the 12 offences against him, recognizing that Arctic Air did not hold an AOC when the flights were conducted.

[14] Inspector Shott testified that, in his view, the penalties imposed were appropriate because these were not minor offences for which oral counselling was appropriate and Mr. Lee did not display a compliant attitude during their discussions. Inspector Shott advised that the sanction for a first offence by an individual is $1 000 as set out in the sanction schedule (exhibit M‑8).

[15] Inspector Shott also testified that providing an air transport service without an AOC demonstrated a disregard for the regulations and raised safety concerns. The Minister could not treat these offences lightly because of the precedent that could be established. Other operators such as Air Tindi were aware of this situation and were enquiring as to the disposition of the investigation. Treating all air operators in the same manner was essential to demonstrate "a level playing field".

[16] While the incident that took place on September 14, 2004 and the damage to the right float of the Cessna 185 aircraft were not investigated, they do provide an indication of what could go wrong if a person operated an aircraft without an AOC. Inspector Shott strongly believed that $1 000 per occurrence was the correct amount as each of the flights that took place during the period from September 9 to 14, 2004 was premeditated. Moreover, Inspector Shott considered it appropriate to treat each leg of the flights noted in the journey log as a separate trip resulting in 12 trips and a total monetary penalty of $12 000.

(a) Cross-examination by the Applicant

[17] The cross-examination focussed on whether the monetary penalties were imposed as a deterrent or simply as a punitive measure in view of Mr. Lee's encounters with Transport Canada. Inspector Shott reiterated his reasons for the appropriateness of the penalties and indicated they were for offences which had already taken place.

(2) Kacee Eleen MacLain

[18] In October 2004, Kacee Eleen MacLain (then Ms. Francissen) was employed by Aurora, performing accounting and reception functions. Ms. MacLain identified the invoice from Arctic Air to Aurora dated October 1, 2004 (exhibit M‑1). She also identified the facsimile letter she sent to Inspector Shott dated October 19, 2004 enclosing that invoice. Ms. MacLain indicated that the invoice was received by Aurora around October 5, 2004 but did not recall whether it was delivered or received by mail. Ms. MacLain was instructed by the president of Aurora to hold the invoice (not pay it) as there was an issue with respect to the mishap which took place near Lac du Sauvage on September 14, 2004.

(3) Michael Enns

[19] Michael Enns was employed by Aurora as an expeditor and he arranged for the flights in issue to be provided by Arctic Air. Mr. Enns testified that Arctic Air had been used for three or four flights in June and July 2004. In July, Aurora required the use of a Cessna 185 or a similar type of small aircraft for "hopping" from site to site in connection with geophysical work being performed by Aurora. Arctic Air was the only company that could provide the entire service required by Aurora. The contract was originally to commence in early August 2004 but was moved to September. Price quotes were requested and sent to Aurora's controller. The flights went ahead in September 2004.

(4) David H. Hildes

[20] David H. Hildes was employed with Aurora in August and September 2004 and confirmed the written statement he forwarded to Inspector Shott in November 2004 (exhibit M‑4). Mr. Hildes indicated he came to Yellowknife for the purpose of conducting geophysical surveys in the Lac de Gras region. These surveys were to be conducted by Mr. Hildes and one other Aurora employee.

[21] Mr. Hildes and the other employee went out on September 9, 2004 to Lac du Sauvage which would be their base for a week or so. Mr. Hildes indicated that Lac du Sauvage is next to Lac de Gras and that he was in that region from September 9 to 14, 2004 inclusive. Mr. Hildes and the other employee also travelled by aircraft to an adjacent lake (not named) from Lac du Sauvage on September 9th and returned later that day. Mr. Lee was the pilot. On each subsequent day, to and including September 14th, Mr. Hildes and the other employee travelled by aircraft to conduct surveys at various nearby locations. Mr. Lee was the pilot in all cases. After taking Mr. Hildes and the other employee to the survey site, Mr. Lee either waited at the site for the return trip at the end of the day or left the site and returned to pick up Mr. Hildes and the other employee at the end of the day. These flights were all within close proximity of the camp at Lac du Sauvage.

[22] On September 14, 2004, the aircraft operated by Mr. Lee sustained damage while attempting to take off and Mr. Hildes and the other Aurora employee returned to the camp by helicopter. One of the floats on Mr. Lee's aircraft had apparently been damaged during an aborted take-off.

B. Applicant

[23] At the outset, Mr. Lee indicated that his evidence and the evidence of his witness, Ted Yaceyko, were linked and he would prefer that it be given jointly. He introduced Mr. Yaceyko as a local businessman and as the owner, president and financial backer of Arctic Air. The Minister's representative had no objection to Messrs. Lee and Yaceyko giving evidence jointly as a panel. Messrs. Lee and Yaceyko first read written statements into the record (exhibits A‑1 and A‑2).

[24] Mr. Lee was very upset with Inspector William Robert Hanson during the ramp inspection of Arctic Air's Cessna 185 aircraft, which took place on July 10, 2004, and with Inspector Hanson's insistence that the aircraft had a broken vee brace that prevented it from being used until it was examined by a mechanic from Salzman Aviation Limited. This resulted in down time of approximately one week because the mechanic could not be in Yellowknife earlier. Both Messrs. Yaceyko and Lee considered this to be an inappropriate penalty because upon examination it was determined that the vee brace was not broken.

[25] Mr. Lee indicated that he and Inspector Hanson "locked horns" and formed a negative opinion of each other. He believed this was the reason for the penalties which were imposed by Transport Canada and for the loss of income to Arctic Air resulting from the aircraft being placed out of service for a week during their short summer season. He indicated that as a result of his encounter with Inspector Hanson, he decided that enough was enough and he sent the AOC back to Transport Canada on August 20, 2004.

[26] Mr. Lee indicated that the original arrangements with Aurora were made with Lou Covello who was a senior official of that company. When Mr. Enns of Aurora subsequently approached him to see if he was ready to do the job for them at Lac de Gras, Mr. Lee discussed it with Mr. Yaceyko who was very supportive of having the Arctic Air business continued. Mr. Lee testified that he was informed by Mr. Yaceyko that the insurance and AOC were in his files and that Arctic Air could therefore provide the air service required by Aurora.

[27] Mr. Lee acknowledged that he provided the air service to Aurora between September 9 and 14, 2004 as outlined by Mr. Hildes. He indicated that the bookkeeper of Arctic Air sent Aurora an invoice for the services performed but it was not paid because Transport Canada was conducting an investigation. Mr. Lee decided not to initiate any discussions with Transport Canada because of their unsympathetic attitude but to request a review by this Tribunal if penalties were assessed.

[28] Mr. Yaceyko testified that he was not aware that Mr. Lee had obtained aviation insurance for private flying privileges and added that the insurance policy for those privileges came to his mailbox. This led Mr. Yaceyko to believe that Mr. Lee had reactivated the commercial insurance. While filing this policy, Mr. Yaceyko saw that there was an AOC in the file which led him to believe that Mr. Lee had retrieved it from Transport Canada. Mr. Yaceyko advised Mr. Lee that he had the insurance and AOC so that Mr. Lee could proceed with the Aurora flights. Mr. Yaceyko testified that it was not until mid-November that either he or Mr. Lee determined that neither of them had activated the commercial insurance and that the AOC on file was the second one that was held by Arctic Air.

[29] Mr. Yaceyko characterized these events as an honest mistake and stated that no payment was ever collected nor sought from Aurora after the discovery of the mistake.

[30] Mr. Lee testified that he was of the belief that he had a valid AOC when he provided the air service to Aurora in September 2004 and that satisfactory insurance was in place. He tendered the AOC which was in Mr. Yaceyko's file (exhibit A‑4) and a copy of the AOC which had been returned to Transport Canada on August 20, 2004 (exhibit A‑5). Both of these AOCs are issued to Arctic Air and have the same AOC no. 9453. They appear to be identical in all respects, save and except for part III where the main base in exhibit A‑4 is shown as "CEN9‑YELLOWKNIFE (WATER)", while in exhibit A‑5 it is "EN9‑YELLOWKNIFE WA". It also appears that part III of each exhibit has a different signature at the bottom of the page.

[31] Mr. Lee filed the cover page of the aviation insurance policy relating to his private coverage (exhibit A‑6). He filed a document containing particulars of the types of liability, liability limits and the effective date of that insurance (exhibit A‑7) and the notice of insurance for the period July 20, 2004 to January 1, 2005 (exhibit A‑8), showing that the purposes for which the aircraft will be used is private business and pleasure only.

[32] Mr. Lee suggested in his evidence that the AOC filed as exhibit A‑4 may have applied to the back bay and east bay which are licensed aerodromes, while the AOC filed as exhibit A‑5 may have applied to the Yellowknife Airport, that is to say that they were different AOCs. When Mr. Enns asked him to proceed with the Aurora air flights and Mr. Yaceyko confirmed that all was in order, there was no reason to doubt Mr. Yaceyko who was his boss. The trips were made accordingly. It was only after the trips were made that the confusion with the insurance policies and the status of the AOC were discovered as a result of discussions with a representative of the Canadian Transportation Agency.

[33] Mr. Lee confirmed that he was the operations manager of Arctic Air and that when he was advised by Mr. Yaceyko that everything was in order to provide the air transport service to Aurora, he took no further steps to determine whether a valid AOC was in effect. He assumed that Mr. Yaceyko had got it back and had placed commercial insurance. He had no reason to doubt Mr. Yaceyko.

C. Reply Evidence by the Minister

[34] Inspector Shott was recalled to give reply evidence, with respect to the AOCs (exhibits A‑4 and A‑5). Inspector Shott testified that the AOC numbers were the same and that under part III of each, the designation was for Yellowknife. Inspector Shott testified that Arctic Air only had one AOC and that the AOCs filed as exhibits A‑4 and A‑5 were different versions of the same document issued at different times. He was satisfied that the AOC was suspended and there was no record on the file to show otherwise.

IV. ARGUMENTS

A. Minister of Transport

[35] The Minister's representative submits that all elements of section 700.02(1) of the CARs have been established. The applicant has operated an air transport service being a commercial air service that is operated for the purpose of transporting persons in an aircraft between two points. "Commercial air service" is defined in section 3(1) of the Act as "any use of aircraft for hire or reward". "Hire or reward" is defined as "any payment, consideration, gratuity or benefit, directly or indirectly charged, demanded, received or collected by any person for the use of an aircraft". The Minister's representative submits that by virtue of this definition it is irrelevant whether or not an invoice was paid.

[36] Reference is also made to section 35(1) of the Interpretation Act, R.S.C. 1985, c. I‑21, which defines "person" to include a corporation.

[37] The Minister's representative submits that Mr. Enns of Aurora had contracted with Mr. Lee to provide the air transport service in question and that Ms. MacLain had identified the invoice (exhibit M‑1) in the amount of $5 000 which had been submitted to Aurora by Arctic Air.

[38] The Minister's representative also refers to the certificate from Transport Canada (exhibit M‑2) confirming that the AOC no. 9453 issued on behalf of the Minister of Transport to 3584674 Canada Inc., carrying on business as Arctic Air, was suspended during the period between August 26, 2004 and August 25, 2005. The evidence of Mr. Hildes and the aircraft journey log (exhibit M‑3) confirm that the flights for Aurora took place between September 9 and 14, 2004. The applicant, Mr. Lee, was the pilot on each occasion. Based on the evidence of Mr. Hildes, Inspector Shott had concluded that there were in fact two flights each day, namely, a positioning flight in the morning and a return flight in the afternoon.

[39] The Minister's representative refers to section 8.4 of the Act, and particularly to subsection (3) which, in effect, allows proceedings to be commenced against the pilot‑in‑command even though the AOC is in the name of Arctic Air. The Minister's representative submits that proceeding in this manner is appropriate because Mr. Lee is the controlling mind of Arctic Air.

[40] The Minister's representative submits that a monetary penalty of $1 000 for each leg of the flights that took place from September 9 to 14, 2004 is appropriate, having regard for public safety and in recognition of the higher commercial requirements expected from operators holding an AOC. The Minister's representative submits that the flights were planned and premeditated and that during the investigation, Mr. Lee was not cooperative with Transport Canada inspectors. It is necessary in the public interest that all AOC holders be dealt with on an equal basis, particularly when other operators of air transport services are aware of the investigation.

[41] The Minister's representative argues that there was only one AOC even though two physical documents were issued and that Mr. Lee was fully aware that he had cancelled that AOC. It was incumbent on Mr. Lee to exercise due diligence to ascertain the status of the AOC and the commercial insurance before commencing the air transport service for Aurora.

[42] The Minister's representative indicates that even though the wording of offence no. 1 and offence no. 12 is different than the wording of the other offences in the notice of assessment of monetary penalty, Mr. Lee was not prejudiced in knowing the charges he was faced with.

B. Applicant

[43] Mr. Lee submits that the AOC was voluntarily surrendered and could have been reinstated at his request. Safety considerations do not play any part in this proceeding. Mr. Lee indicates that he has all of the qualifications to operate the Cessna 185 and that the issues giving rise to the offences are simply administrative in nature.

[44] Mr. Lee testified that he has known Mr. Yaceyko for 40 years and they are the only two persons involved in Arctic Air. Mr. Yaceyko was the person who provided the funding to Arctic Air and Mr. Lee had no reason whatsoever to disbelieve him when he was advised that the insurance and AOC were in place. He refers to Mr. Yaceyko as the owner of the company. Mr. Lee was accordingly satisfied that Mr. Yaceyko's belief that the AOC and insurance policy were in place was sufficient to enable the service to Aurora to be provided. It was an honest mistake. In the circumstances, Mr. Lee submits that his conduct was reasonable and does not justify the penalties imposed by Transport Canada.

V. CONSIDERATION OF EVIDENCE AND ARGUMENTS

[45] Pursuant to section 8 of the Act, I am required to determine whether a person has contravened the designated provision, in this case, section 700.02(1) of the CARs. The burden of establishing that the designated provision has been contravened is on the Minister and that burden is discharged by proof on the balance of probabilities. There is, however, a due diligence defence, as set out in section 8.5 of the Act.

[46] In Canada (Minister of Transport) v. Boklaschuk, [1990], appeal determination, CAT file no. C‑0141‑33, [1990] C.A.T.D. no. 65 (QL), reference is made by the Civil Aviation Tribunal to the due diligence defence as follows:

At the Hearing, a defence of Due Diligence was raised. Section 8.5 of the Aeronautics Act provides:

"No person shall be found to have contravened a provision of this Part or of any regulation or order made under this Part if the person exercised all due diligence to prevent the contravention."

Section 8.5 is a statutory recognition that offences under the Aeronautics Act and the Regulations are not "Strict Liability Offences".

Due diligence is defined in Black's Law Dictionary, Fifth Edition, as follows:

"Such a measure of prudence, activity or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent man under the particular circumstances; not measured by an absolute standard, but depending on the relative facts of the special case."

[47] I must accordingly look at the prudence of Mr. Lee's conduct based on the facts of this particular case. Before doing so, I refer to the decision Canadian Airlines International Ltd. v. Canada (Minister of Transport), [1993], appeal determination, TATC file no. P‑0168‑50, [1993] C.A.T.D. no. 55 (QL). In that decision, the Civil Aviation Tribunal indicates that section 8.5 provides that "all due diligence must have been exercised" and that "it is necessary to give meaning to the word ‘all' because it quantifies the behaviour expected from [the person charged] in order to benefit from the defence provided in section 8.5". The Tribunal further states that "the onus is on [the person charged] to lead evidence that forms the basis from which the Tribunal can conclude, on a balance of probabilities, that [the person charged] exercised all due diligence to prevent the contravention in question".

[48] Based on the facts and circumstances of this case, I find that the Minister has established, on a balance of probabilities, that Mr. Lee operated an air transport service between September 9 and 14, 2004 when the AOC of Arctic Air was suspended.

[49] The invoice submitted to Aurora by Arctic Air constitutes a payment demand for the use of the aircraft and is sufficient, in my view, to establish that the air service was of a commercial nature. I am also satisfied that each of the 12 offences adequately sets out the nature of the air transport service operated by Mr. Lee and that he was able to respond to each of those services. In other words, Mr. Lee was not prejudiced by the different terminology used in offence no. 1 and offence no. 12 relative to the other offences when considered individually and collectively. The charges refer to a departure and return each day from September 9 to 14th inclusive and I have concluded that with respect to offence no. 12, a flight did take place even though the planned service was not completed. The evidence adduced during these proceedings is to the effect that Lac du Sauvage is a short distance from Yellowknife by air. In this context, offence no. 1 accurately depicts the air transport service as taking place at or near Yellowknife and departing from Lac du Sauvage.

[50] I must also determine whether Mr. Lee exercised all due diligence to prevent the contraventions under review. Messrs. Lee and Yaceyko have characterized the circumstances giving rise to the air service to Aurora as an honest mistake. Mr. Yaceyko received an insurance policy which he erroneously believed to be the reinstatement of the policy for commercial operations. He also located in his files an original AOC (exhibit A‑4). He accordingly believed that Arctic Air was able to provide the air transport service requested by Aurora and advised Mr. Lee that it could be undertaken as requested.

[51] Mr. Lee testified that he relied upon that assurance and had no reason to doubt Mr. Yaceyko who was the owner of Arctic Air and funded its operations. Mr. Lee, however, had voluntarily surrendered the AOC just a few weeks earlier. He was also aware that the insurance policy authorizing commercial operations had lapsed. While it may have been convenient for Mr. Lee to rely upon Mr. Yaceyko's assurances, I find that it was not prudent to do so in the circumstances. It was incumbent upon Mr. Lee to inquire how the AOC was reinstated and how the commercial operations insurance was renewed. Prudence also required an examination of those documents by Mr. Lee to satisfy himself that Mr. Yaceyko had properly reinstated them. A reasonable and prudent person would ensure that all requirements relating to the AOC and insurance had been met.

[52] As stated in Canadian Airlines International Ltd., cited above in ¶ [47], the onus is on Mr. Lee to lead evidence from which I can conclude, on a balance of probabilities, that he exercised all due diligence to prevent the contraventions in question. Such evidence was not adduced. In fact, there was no due diligence performed by Mr. Lee.

[53] I am satisfied that Arctic Air only had one AOC and the document in Mr. Yaceyko's file was another version of the AOC which had been voluntarily surrendered by Mr. Lee. No other explanation is reasonable.

[54] Based on the facts and circumstances of this case, I conclude that Mr. Lee, the pilot‑in‑command, provided air transport services between September 9 and 14, 2004 without a valid and subsisting AOC and has contravened the requirements of section 700.02(1) of the CARs for the 12 flights undertaken on those dates.

[55] I agree with the submissions of the Minister's representative that the monetary penalty imposed for each offence is reasonable in the circumstance.

VI. DETERMINATION

[56] I confirm the Minister's decision to assess a monetary penalty of $1 000 for each of the 12 offences against the applicant, Raymond Jerry Lee, for a total of $12 000.

February 12, 2008

James E. Foran

Member


Appeal decision
Herbert Lee, Sandra Lloyd, J. Richard W. Hall


Decision: November 17, 2008

Citation: Lee v. Canada (Minister of Transport), 2008 TATCE 33 (appeal)

Heard at Yellowknife, Northwest Territories, on July 31, 2008

Held: The appeal is dismissed. The appeal panel finds that the appellant, Raymond Jerry Lee, contravened section 700.02(1) of the Canadian Aviation Regulations. However, the penalty is reduced from $1000 to $500 per offence for each of the 12 offences. The total amount of $6000 is to be made payable to the Receiver General for Canada and must be received by the Transportation Appeal Tribunal of Canada within 35 days of service of this decision.

I. INTRODUCTION

[1] By letter dated March 7, 2008, the appellant, Raymond Jerry Lee, appealed two review determinations dated February 12, 2008.

[2] In file no. W-3286-33, the member upheld the Minister's decision to assess a monetary penalty against the appellant for three offences, but reduced the total penalty for those offences from $1200 to $300.

[3] In file no. W-3287-33, the member confirmed the Minister's decision to assess a monetary penalty of $1000 for each of 12 breaches of section 700.02(1) of the Canadian Aviation Regulations (CARs). That provision prohibits the operation of an air transport service without an appropriate air operator certificate (AOC).

[4] At the outset of the appeal hearing, the appellant voluntarily abandoned his appeal of file no. W‑3286‑33, and stipulated that he would pay the assessed $300 monetary penalty to the Minister. Therefore, this appeal decision relates only to file no. W-3287-33.

II. BACKGROUND

[5] Mr. Lee is a licensed airplane pilot who at the relevant times was based in Yellowknife flying for Arctic Air. Mr. Lee voluntarily surrendered Arctic Air's AOC no. 9453 to the Minister in August 2004, apparently out of frustration with his dealings with William Robert Hanson, a civil aviation inspector with Transport Canada. By registered letter dated August 26, 2004, Transport Canada advised Mr. Lee that Arctic Air's AOC was suspended on the grounds that Arctic Air had voluntarily surrendered the AOC.

[6] In the early part of October 2004, Transport Canada initiated an investigation to determine whether 3584674 Canada Inc., carrying on business as Arctic Air, had operated an air transport service during the previous month without having an AOC authorizing it to do so. Transport Canada civil aviation inspector, Kevin John Shott, was assigned to investigate the allegations.

[7] Following that investigation, the Minister of Transport issued, on September 1, 2005, a notice of assessment of monetary penalty to the appellant. The notice alleged 12 breaches of section 700.02(1) of the CARs against Mr. Lee, one for each of 12 flights flown by him for Arctic Air in September 2004.

III. REVIEW DETERMINATION W-3287-33

[8] The member found that the Minister had established on a balance of probabilities that:

· Mr. Lee operated an air transport service between September 9 and 14, 2004, when the AOC of Arctic Air was suspended;

· Mr. Lee flew 12 commercial flights during that period of time. The member also found that in the circumstances, Mr. Lee's conduct did not fulfill the requirements of a due diligence defence; and

· the monetary penalty for each of the offences was reasonable in the circumstances.

IV. GROUNDS FOR APPEAL

[9] The appellant's letter of appeal states the following grounds of appeal:

· Arctic Air is the business name for 3584674 Canada Inc., a limited company. Arctic Air was the person who was the air transport service provider. The member erroneously determined that Arctic Air was a business name for Mr. Lee, when in fact he was only the pilot for the flights in issue.

· There was an AOC and insurance on file with Arctic Air. The principal of Arctic Air, Ted Yaceyko, believed and advised Mr. Lee that charging a fee for the flights would not constitute an offence. No fee was actually paid for the flights. The pilot, Mr. Lee, could not be found to have consented to the offence in the circumstances.

· The pilot did not consent to the offence; therefore, under section 8.4(3) of the Aeronautics Act (Act), that is a sufficient defence. The pilot does not need to prove due diligence; that defence would only apply to Arctic Air.

  • The penalty is excessive in that:

1. it treats each take-off and landing as a separate flight, which is incorrect; and

2. its form is inappropriate given the circumstances of the offence and the circumstances of the appellant.

V. LAW

[10] Sections 7.31, 8.1(3) and (4), 8.4(3) and 8.5 of the Act read as follows:

7.31 Where an offence under this Part is committed or continued on more than one flight or segment of a flight, it shall be deemed to be a separate offence for each flight or segment of a flight on which the offence is committed or continued.

8.1(3) The appeal panel of the Tribunal assigned to hear the appeal may dispose of the appeal by dismissing it or allowing it and, in allowing the appeal, the panel may substitute its decision for the determination appealed against.

(4) Where the appeal panel finds on an appeal that a person has contravened the designated provision, the panel shall without delay inform the person of the finding and, subject to any regulations made under paragraph 7.6(1)(b), of the amount determined by the panel to be payable by the person in respect of the contravention and, where the amount is not paid to the Tribunal by or on behalf of the person within the time allowed by the Tribunal, the Tribunal shall issue to the Minister a certificate in a form prescribed by regulation of the Governor in Council, setting out the amount required to be paid by the person

8.4 (3) The pilot-in-command of an aircraft may be proceeded against in respect of and found to have committed an offence under this Part in relation to the aircraft for which another person is subject to be proceeded against unless the offence was committed without the consent of the pilot-in-command and, where found to have committed the offence, the pilot-in-command is liable to the penalty provided as punishment therefor.

8.5 No person shall be found to have contravened a provision of this Part or any regulation, notice, order, security measure or emergency direction made under this Part if the person exercised all due diligence to prevent the contravention.

[11] Section 14 of the Transportation Appeal Tribunal of Canada Act, S.C. 2001, c. 29 reads as follows:

14. An appeal shall be on the merits based on the record of the proceedings before the member from whose determination the appeal is taken, but the appeal panel shall allow oral argument and, if it considers it necessary for the purposes of the appeal, shall hear evidence not previously available.

[12] Section 101.01(1) of the CARs provides the following definitions of "air transport service" and "flight time", and section 700.02(1) reads as follows:

101.01(1)

"air transport service" - means a commercial air service that is operated for the purpose of transporting persons, personal belongings, baggage, goods or cargo in an aircraft between two points;

"flight time" - means the time from the moment an aircraft first moves under its own power for the purpose of taking off until the moment it comes to rest at the end of the flight.

700.02 (1) No person shall operate an air transport service unless the person holds and complies with the provisions of an air operator certificate that authorizes the person to operate that service.

VI. DISCUSSION

[13] Section 8.1(3) of the Act provides that the appeal panel of the Transportation Appeal Tribunal of Canada (Tribunal) may dispose of the appeal by dismissing it or allowing it and, in allowing the appeal, may substitute its decision for the determination appealed against.

[14] As pointed out by the Minister's representative, the Federal Court of Canada recently discussed, in Billings Family Enterprises v. Canada (Minister of Transport) [2008] F.C.J. no. 17, the appropriate standard of review for an appeal panel of the Tribunal to undertake. Harrington J. held that an appeal panel of the Tribunal must give considerable deference to findings of fact or credibility made by a member in a review determination. However, he also said that an appeal panel is entitled to its own view of the law. Further, in his view, an appeal panel of the Tribunal is explicitly authorized by section 8.1(3) of the Act to advance its own opinion as to the amount of a penalty.

A. Issues on Appeal

(1) Did the member err in finding that Arctic Air was a business name for Mr. Lee or that Mr. Lee, rather than Arctic Air, operated a commercial air service?

[15] Nowhere in the review determination does the member say that Arctic Air was a business name for Mr. Lee. The member states in paragraph [48] that Mr. Lee operated an air transport service when the AOC of Arctic Air was suspended. At paragraph [54], he concludes that Mr. Lee provided air transport services without an AOC and that he had contravened the requirements of section 700.02.(1) of the CARs.

[16] In retrospect, it may have been inaccurate for the member to state that Mr. Lee operated or provided an air transport service. Arctic Air's operations manual states that Mr. Yaceyko is the owner of Arctic Air, while Mr. Lee is the manager. Arctic Air submitted the invoice to the customer for the flights in question and owned the aircraft involved.

[17] However, Mr. Lee was proceeded against pursuant to section 8.4(3) of the Act. That section provides that the Minister may proceed against the pilot-in-command in relation to the aircraft for which another may be proceeded against, unless the offence was committed without the consent of the pilot-in-command. The notice of assessment of monetary penalty states that the procedure was by way of that provision. There is no doubt that Mr. Lee was the pilot‑in‑command of the flights in question. Since section 8.4(3) of the Act allows the Minister the option of charging the pilot-in-command instead of the operating company, the appeal panel finds that the conclusions of the member that Mr. Lee himself operated or provided an air transport service are not material to the outcome of this appeal.

(2) Did Mr. Lee consent to the offence?

[18] Mr. Lee does not deny that the flights were made or that he was the pilot‑in‑command. The appeal panel agrees with the member that the invoice submitted by Arctic Air is sufficient to establish that the air service was of a commercial nature.

[19] Mr. Lee's position is that because he believed that an AOC was in place when he undertook the flights, he did not consent to the commission of the offence as contemplated by section 8.4(3) of the Act. He submitted that consent to an offence requires that he had knowledge of the offence being committed, and that he could not be found to consent to an offence when he did not have accurate knowledge of the facts. He submitted that when section 8.4(3) of the Act requires consent of the pilot, the matter is no longer a strict liability or due diligence type of offence but requires mens rea.

[20] The Minister's representative submitted that the fact that the appellant was, in addition to being the pilot-in-command, the operations manager, chief pilot and maintenance coordinator for Arctic Air, the individual who undertook the voluntary surrender of the AOC completely undermines any claim to the effect that there was no consent to commit the offence. Mr. Lee clearly consented to undertake commercial flights when he knew or ought to have known that no valid AOC was in existence. Further, the Minister's representative submitted that it need not be shown that the pilot‑in-command knew that the impugned act would result in the commission of the offence; it suffices that the act was undertaken voluntarily.

[21] In his review determination, the member did not discuss the issue of whether or not Mr. Lee had consented to the offence.  Once he found that the Minister had established that the offence of operating an air service without an AOC had taken place, he discussed only whether Mr. Lee had exercised due diligence in accordance with section 8.5 of the Act.

[22] In Charron v. Canada (Minister of Transport), [1997] appeal determination, CAT file no. Q‑1277‑02, [1997] C.A.T.D. no. 18 (QL), an appeal panel of the Civil Aviation Tribunal (predecessor to the Tribunal), considered section 8.4(3) of the Act and said the following:

15 . . . . It is clear that the Minister of Transport has exercised its option to proceed vicariously by proceeding against the pilot-in-command of the aircraft and to hold the pilot-in-command responsible for the offence.

16 It is equally clear, . . . that once the Minister has established the facts of the case, the onus then shifts to the pilot to exculpate himself by proving that the offence was committed without his consent. The defence of due diligence is also available to the pilot in circumstances warranting its application as contemplated by section 8.5 of the Aeronautics Act.

[23] Our view is that this approach to section 8.4(3) is correct. A pilot proceeded against pursuant to section 8.4(3) may avoid liability for the offence by proving that he did not consent to the commission of the offence. If he is unsuccessful in that regard, he may nevertheless escape liability if he proves that he exercised all due diligence to prevent the contravention, pursuant to section 8.5 of the Act.

[24] Mr. Lee's evidence at the review hearing was that he had sent the AOC back to Transport Canada on August 20, 2004, about a month after his commercial insurance expired. He obtained private insurance covering his operation of aircraft on July 20, 2004, and received a fax to that effect from the insurance company. The address shown for him on the insurance policy was the same as Arctic Air's address in the company operations manual. Subsequently, Mr. Yaceyko and Mr. Lee " . . . had discussed revitalizing or reestablishing because (Mr. Yaceyko) knew how (Mr. Lee) wanted to go with the certificate, obtaining it back from Transport Canada."

[25] Transport Canada advised Mr. Lee by registered letter dated August 26, 2004, addressed to him as operations manager of Arctic Air, that AOC no. 9453 was suspended as of August 26, 2004.

[26] Later, after a customer approached Mr. Lee about doing some flying in September 2004, Mr. Yaceyko advised Mr. Lee that he had the insurance and air operator certificate in his files. Mr. Yaceyko was mistaken. The insurance company had mailed Mr. Lee's private insurance folder to Mr. Yaceyko's mailbox, since that was the address Mr. Lee had given. The cover of the folder was the same as the one used for the commercial insurance. Mr. Yaceyko did not check the insurance folder to confirm the insurance coverage. He assumed that Arctic Air had valid commercial insurance, when it did not.

[27] To compound matters, prior to sending the AOC back to Transport Canada, there had been two copies of Arctic Air's AOC in existence, the one which Mr. Lee sent back, and one in Mr. Yaceyko's files. Both had the same number, 9453. Transport Canada had at some point in the past issued a new copy of the AOC, apparently to change the designation given to Arctic Air's base, and had advised Arctic Air that the new AOC superseded the original. Arctic Air had not destroyed or returned the original AOC.

[28] This appeal panel adopts the following comments of the member in his determination:

[51] Mr. Lee testified that he relied upon that assurance and had no reason to doubt Mr. Yaceyko who was the owner of Arctic Air and funded its operations. Mr. Lee, however, had voluntarily surrendered the AOC just a few weeks earlier. He was also aware that the insurance policy authorizing commercial operations had lapsed. While it may have been convenient for Mr. Lee to rely upon Mr. Yaceyko's assurances, I find that it was not prudent to do so in the circumstances. It was incumbent upon Mr. Lee to inquire how the AOC was reinstated and how the commercial operations insurance was renewed. Prudence also required an examination of those documents by Mr. Lee to satisfy himself that Mr. Yaceyko had properly reinstated them. A reasonable and prudent person would ensure that all requirements relating to the AOC and insurance had been met.

[29] As noted by the Minister's representative, Mr. Lee was in a position of considerable authority with Arctic Air. He was the company's only pilot. He was shown in Arctic Air's operations manual as being not only the manager of Arctic Air, but also the operations manager, chief pilot and maintenance coordinator. Mr. Lee was fully aware of the importance of an AOC, referring to it in his evidence as being like the "holy grail". That he had taken full responsibility for Arctic Air's AOC is indicated in his letter of August 20, 2004 to Transport Canada, where he refers to the AOC as if it were his own.

[30] While most employee pilots would not be expected to investigate the validity of their employer's AOC, in our view the pilot in this case ought to have done so. In the circumstances of this case, the appeal panel cannot find that the appellant did not consent to the commission of the offence on the basis that he did not have knowledge of all the circumstances. Clearly, Mr. Lee consented to the flights, and he ought to have known that the AOC was suspended. He ought not to have relied on Mr. Yaceyko's assurances without questioning both him and Transport Canada further, to ascertain the validity of the AOC that Mr. Yaceyko had on file.

(3) Did Mr. Lee exercise all due diligence to prevent the contravention?

[31] This appeal panel agrees with the member's finding, and the reasons given, that the evidence does not support a due diligence defence.

B. Sanction

[32] The appellant's position is that the amount of the sanction assessed by the Minister is excessive and that either Arctic Air should be held responsible or the penalties against Mr. Lee should be reduced. Mr. Lee submits that:

· his conduct with respect to this offence demonstrated respect for the Regulations;

  • the contravention was made in error, not knowingly or with illegal intent;
  • he ought not be assessed a monetary penalty for each of the 12 flights.

[33] The appellant's representative referred to a number of court cases from the 1970s and 1980s in support of his contention that a lower penalty would be appropriate, although neither copies of the cases nor citations were provided. She also noted that Mr. Lee is unemployed and of no fixed address. The evidence indicates that when in Yellowknife, he lived in a trailer at the float base, sleeping on Mr. Yaceyko's sofa when it was too cold.

[34] The Minister submitted that:

  • the member's finding that there were 12 flights was not unreasonable;

· the member's finding that the penalties imposed by the Minister were appropriate was an entirely reasonable finding;

· the sanctions were determined in conformity with the established procedures and are in no way capricious;

· the quantum of $1000 per flight is fully justifiable, based on the relevant factors set out in the evidentiary record; and

· there is nothing in the evidentiary record that would justify a modification to the sanctions imposed by the member.

[35] Section 7.31 of the Act provides that where an offence is committed on more than one flight or segment of a flight, it shall be deemed to be a separate offence for each flight or segment of a flight. The appeal panel agrees with the member that the appellant flew 12 commercial flights without an AOC.

[36] At paragraph [55] of his determination, the member stated that he agreed with the submissions of the Minister's representative that the monetary penalties assessed were reasonable in the circumstances. He did not give reasons for coming to that conclusion.

[37] Inspector Shott thought that $1000 per offence was appropriate for the following reasons:

  • he thought Mr. Lee had disregard for the Regulations;
  • the need for general deterrence;
  • the concern for aviation safety;
  • precedent setting;
  • in his view, the offence was premeditated; and
  • the gravity of the offence.

[38] Inspector Shott identified an excerpt from the Aviation Enforcement database showing Transport Canada's policy that the recommended penalty for a first-time individual offender of section 700.02(1) is $1000, and $5000 for a corporate offender. The Minister's representative pointed out that the maximum penalty permitted for an individual in this instance is $5000, and $25 000 for a corporate offender.

[39] The Minister's representative noted that the Billings case confirmed that an appeal panel of the Tribunal has the authority to make a reduction in a monetary penalty, as long as it does not rely on considerations that are irrelevant or extraneous.

[40] Applying the sentencing principles outlined in Canada (Minister of Transport) v. Wyer, [1988] appeal determination, CAT File no. O-0075-33, [1988] C.A.T.D. no. 123 (QL), the appeal panel has come to the view that the penalty is excessive in the special circumstances of this case and that it ought to be reduced to $500 per offence, for a total of $6000. The factors the appeal panel has taken into account in reaching this conclusion are:

· from the evidence of the appellant's living situation and his submissions, it appears that his financial circumstances are such that this amount will constitute a significant specific deterrence to him;

· while the offences occurred as a result of an unacceptable careless mistake by Mr. Lee, the appeal panel finds they were not premeditated or committed with unlawful intent;

· Arctic Air had held a valid AOC, was qualified to hold an AOC, and would have continued to hold it, had Mr. Lee not sent it back;

· the appeal panel believes there is little likelihood of a repeat occurrence of this offence by Mr. Lee; and

· the total penalty of $6000 is sufficiently large in the circumstances of this case to send an appropriate message of general deterrence.

[41] The appeal panel notes that prior to the review hearing, the Minister was unaware that Mr. Yaceyko had an AOC document in his possession and that he had informed Mr. Lee that he had it.

[42] The appeal panel wishes to emphasize, however, that the reduction of the monetary penalty is based solely on the special circumstances that apply to this case. It is not intended to diminish our strongly held view that adherence to the CARs and the requirement for commercial operators to hold a valid AOC is a matter of the utmost importance. The public's faith in the integrity of the air transport service industry is vital.

VII. DECISION

[43] The appeal panel finds that the appellant contravened section 700.02(1) of the CARs. However, the penalty is reduced from $1000 to $500 per offence for each of the 12 offences.

November 17, 2008

Reasons for appeal decision: Sandra K. Lloyd, Member

Concurred by: Herbert Lee, Member

J. Richard W. Hall, Member