Decisions

TATC File No. A-3488-41
MoT File No. Z 5504-62466

TRANSPORTATION APPEAL TRIBUNAL OF CANADA

BETWEEN:

Freefall Express, Inc., Applicant

- and -

Minister of Transport., Respondent

LEGISLATION:
Canadian Aviation Regulations, SOR/96-433, s. 700.02(1)


Review Determination
Elizabeth MacNab


Decision: March 15, 2010

Citation: Freefall Express, Inc. v. Canada (Minister of Transport), 2010 TATCE 4 (review)

Heard at Ottawa, Ontario, September 22 to 24, 2009

Held: The Minister of Transport has proved, on a balance of probabilities, that Freefall Express, Inc. operated an air transport service in contravention of subsection 700.02(1) of the Canadian Aviation Regulations. As the Minister did not take into account mitigating factors in assessing the monetary penalty, I reduce the penalty of each of the six counts from $5 000 to $2 500.

The total amount of $15 000 is payable to the Receiver General for Canada and must be received by the Transportation Appeal Tribunal of Canada within thirty-five (35) days of service of this Determination.

I. BACKGROUND

[1] The Applicant, Free Fall Express Inc. (Freefall Express, Inc.), a corporation incorporated in the United States of America (USA), agreed to provide an aircraft to the International Federation for Animal Welfare (IFAW) for aerial photography of the 2007 Seal Hunt.

[2] The Minister of Transport alleges that, on six occasions between March 23 and April 9, 2007, at different UTC times and airports in New Brunswick, Prince Edward Island and Newfoundland and Labrador, in the course of carrying out the aerial photography, the Applicant engaged in an air transport service without having the appropriate Air Operator Certificate ("AOC") required by subsection 700.02(1) of the Canadian Aviation Regulations ("CARs").

[3] On March 14, 2008, the Minister issued the Notice of Assessment of Monetary Penalty ("NAMP") against the Applicant, for a total amount of $30 000 ($5 000 for each of the six counts). The specifics of each allegation are set out in the NAMP, as follows:

Canadian Aviation Regulations s. 700.02(1) No person shall operate an air transport service unless the person holds an air operator certificate that authorizes the person to operate that service.

Aeronautics Acts, Part 1, s. 4(1) Subject to any regulations made pursuant to paragraph 4.9(w), this Part applies in respect of aeronautics to all persons and to all aeronautical products and other things in Canada, to all persons outside Canada who hold Canadian aviation documents and to all Canadian aircraft and passengers and crew members thereon outside Canada.

Count 1

On or about March 23, 2007, at approximately 16:18 Universal Time Coordinated (UTC), at or near the Saint John Airport, New Brunswick, you, FreeFall Express Inc., operated a Dehavilland DHC6 aircraft, registered as N123FX, in an air transport service when you did not hold an air operator certificate that authorized you to operate that service, thereby contravening subsection 700.02(1) of the Canadian Aviation Regulations.

Count 2

On or about March 23, 2007, at approximately 18:28 UTC, at or near the Charlottetown Airport, Prince Edward Island, you, FreeFall Express Inc., operated a Dehavilland DHC6 aircraft, registered as N123FX, in an air transport service when you did not hold an air operator certificate that authorized you to operate that service, thereby contravening subsection 700.02(1) of the Canadian Aviation Regulations.

Count 3

On or about April 03, 2007, at approximately 17:55 UTC, at or near the Deer Lake Airport, Newfoundland, you, FreeFall Express Inc., operated a Dehavilland DHC6 aircraft, registered as N123FX, in an air transport service when you did not hold an air operator certificate that authorized you to operate that service, thereby contravening subsection 700.02(1) of the Canadian Aviation Regulations.

Count 4

On or about April 07, 2007, at approximately 16:59 UTC, at or near the Charlottetown Airport, Prince Edward Island, you, FreeFall Express Inc., operated a Dehavilland DHC6 aircraft, registered as N123FX, in an air transport service when you did not hold an air operator certificate that authorized you to operate that service, thereby contravening subsection 700.02(1) of the Canadian Aviation Regulations.

Count 5

On or about April 09, 2007, at approximately 16:33 UTC, at or near Saint John Airport, New Brunswick, you, FreeFall Express Inc., operated a Dehavilland DHC6 aircraft, registered as N123FX, in an air transport service when you did not hold an air operator certificate that authorized you to operate that service, thereby contravening subsection 700.02(1) of the Canadian Aviation Regulations.

Count 6

On or about April 09, 2007, at approximately 17:25 UTC, at or near Saint John Airport, New Brunswick, you, FreeFall Express Inc., operated a Dehavilland DHC6 aircraft, registered as N123FX, in an air transport service when you did not hold an air operator certificate that authorized you to operate that service, thereby contravening subsection 700.02(1) of the Canadian Aviation Regulations.

The penalties assessed for the counts cited above are established as follows:

Count 1 - $5 000.00

Count 2 - $5 000.00

Count 3 - $5 000.00

Count 4 - $5 000.00

Count 5 - $5 000.00

Count 6 - $5 000.00

Total Monetary Penalty $30 000.00

II. STATUTES, REGULATIONS AND POLICIES

[4] Subsection 3(1) of the Aeronautics Act ("Act") provides the definitions of "commercial air service" and "hire or reward". Subsection 4(1) of the Act makes Canadian law applicable to all aeronautical operations in Canada.

3(1)

. . .

"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.

. . .

4(1) Subject to any regulations made pursuant to paragraph 4.9(w), this Part applies in respect of aeronautics to all persons and to all aeronautical products and other things in Canada, to all persons outside Canada who hold Canadian aviation documents and to all Canadian aircraft and passengers and crew members thereon outside Canada.

[5] Subsection 101(1) of the CARs defines "air transport service". Subsection 700.02(1) of the CARs makes it an offence to operate an air transport service without holding the appropriate AOC. Section 701.01 and subsection 701.02(1) establish the requirement to hold a Foreign Air Operator Certificate ("FAOC") when a foreign operator carries out business in Canada.

101(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.

. . .

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.

701.01 This Subpart applies in respect of the operation in Canada of a foreign state aircraft or an aircraft operated by a foreign operator in an air transport service.

701.02(1) Subject to subsections (2) and (3), no person shall operate an aircraft in Canada unless the person complies with the conditions in a Canadian foreign air operator certificate issued to that person by the Minister pursuant to section 701.07.

III. PRELIMINARY MOTIONS

A. Motion to Adjourn

[6] The Review Hearing commenced, as scheduled, at 9:06 a.m. on Tuesday, September 22, 2009, in the absence of William Richards, the Applicant's representative. Shortly thereafter, the Registrar of the Transportation Appeal Tribunal of Canada ("Tribunal") presented me with a faxed request from Andrew Beatty, a lawyer in New Paltz, New York, requesting an adjournment of both the Review Hearing and the Motion to Amend the NAMP (discussed below), on the basis that he had been retained the evening before and needed more time to prepare.

[7] At that point, I adjourned the Review Hearing so that the Minister could prepare representations on the Motion to Adjourn, and Mr. Beatty, Counsel for the Applicant, could respond. Upon review of their representations, I decided not to allow the Motion to Adjourn and undertook to give reasons for my decision as part of my determination on the application for review.

[8] The Notice of Hearing from the Tribunal, setting out the date and place of the Review Hearing in this matter, is dated June 10, 2009, and was delivered to Freefall Express, Inc. on June 17, 2009. Further, Mr. Richards was reminded of the date of the hearing in an email dated August 18, 2009, from the Registrar of the Tribunal. On August 28, 2009, the Minister filed a Motion to Amend the NAMP, and a copy of this motion was sent to Freefall Express, Inc. on August 31, 2009. In an affidavit in support of this motion to amend, Beverlie Caminsky, Chief, Advisory and Appeals Division, Civil Aviation Directorate, Transport Canada, stated that she would be prepared to consent to an adjournment that would not unduly delay matters if the Applicant felt such an adjournment was necessary to prepare its case, as a result of the proposed amendment. No such request for an adjournment was made until the morning of September 22, 2009, the date of the commencement of the Review Hearing.

[9] I was advised that on September 21, 2009, Mr. Richards informed the Registrar of the Tribunal that he would not attend the Review Hearing on September 22, 2009. It was explained to him that the Review Hearing would proceed in his absence. He did not request an adjournment during that conversation.

[10] In arguing against the Motion to Adjourn, the Minister pointed out:

  • that the Applicant had had plenty of time to retain counsel, if it so desired;
  • that it had had ample notice of the hearing date;
  • that the Minister had provided further disclosure to the Applicant on several occasions in August and September, thus indicating movement on the file;
  • that in his contacts with the Minister and the Tribunal on September 21, 2009, Mr. Richards did not ask for an adjournment;
  • that an adjournment would cause prejudice to the Minister, in that it had made arrangements to have nine witnesses present, and a change would involve a great deal of expense in travel already undertaken, and coordination of everyone's business and personal schedules; and
  • that on other occasions, where a request for an adjournment has been made to the Tribunal on the day the hearing started, that request has been denied.

[11] In response, Mr. Beatty stated that he had not been given adequate time to respond to the Minister, that the original NAMP had been issued in March 2008, but the error in naming Freefall Express, Inc. had not been discovered until August of 2009; and that the Motion to Amend the NAMP had been brought only three weeks previously.

[12] Rule 13 of the Transportation Appeal Tribunal of Canada Rules authorizes the Tribunal to grant adjournments on the motion of either party or on its own motion, but does not set out any circumstances on which a decision to grant the motion should be based. The Tribunal's Guide for Applicants (June 2009), however, states as follows:

In the interest of fairness and natural justice to all parties and in an effort to conduct its hearings expeditiously, the Tribunal expects all parties to respect scheduled hearing dates. The Tribunal will not accede to all requests for postponements, even where the parties themselves come to an agreed date for a new hearing.

Occasionally, the Tribunal will direct that a hearing be postponed when absolutely necessary. In the absence of good cause, and unless a party would be prejudiced if a postponement were not granted, the Tribunal will direct that hearings take place at the date and time referred to in the notice previously served on the parties.

[13] In this case, the Applicant's representative had indicated the day before the Review Hearing that he would not be attending the next day. However, he did not state at that point that he would ask for an adjournment. The actual request was received after the time scheduled for the Review Hearing. It was partly based on Counsel for the Applicant's position that he had only been hired on September 21, 2009, and had not had time to prepare. In Dykstra v. Canada (Minister of Transport), 1997 CAT file no. W‑0213‑04 (review), the Applicant sought an adjournment because his lawyer, who had been hired the day previous to the date of the hearing, had not had time to prepare. In that case, his request was refused.

[14] Counsel for the Applicant also pointed out that the Motion to Amend the NAMP had only been brought three weeks earlier. The Affidavit in support of that motion stated that the Minister was willing to agree to a postponement if the Applicant felt that more time was needed to prepare to address it. There seems to have been no request to the Minister to agree to an adjournment and, as pointed out earlier, there was no suggestion that there would be such a request when the Applicant's representative called the day before the Review Hearing to say that he would not be present on the first scheduled day.

[15] The Minister's representative argued that she would be calling nine witnesses and most, if not all of them, had had to make travel and accommodation arrangements and organize their business affairs to attend at the scheduled time. In Canada (Minister of Transport) v. Desrochers, 2001 CAT file no. Q-2151-33 (review), a similar request for an adjournment was made late in the day when the Minister had made arrangements for eight witnesses to attend the hearing. The request for the adjournment was refused because of the unjustified reasons given for the request, the brief notice, the many witnesses assigned to appear, and the fact that the Respondent knew the date of the hearing three weeks in advance of the adjournment request.

[16] In terms of the Tribunal's Guide for Applicants, it might be argued that the Applicant was "prejudiced" by not having an opportunity to cross-examine the witnesses who testified in its absence. In Pizzardi v. Canada (Minister of Transport), 1996 CAT file no. O‑0494‑37 (appeal), an appeal panel of the Tribunal upheld the Member's review determination. Where there was an unexplained failure of the Applicant to appear and where the Minister had arranged for a number of witnesses to be present on the day of the hearing, the balance of fairness was that the hearing should proceed even though the witnesses would not be available for cross-examination.

[17] I based the decision to proceed in the absence of the Applicant on the late request for an adjournment:

  • on the fact that the adjournment was not requested when the Applicant's representative first indicated on the day before the hearing that he would not be present;
  • that the grounds for the adjournment were raised for the first time when the Motion to Adjourn was presented, although there had been ample time to make such a request earlier;
  • that the Minister had witnesses present who had travelled to Ottawa to testify, and who had organized their other responsibilities to allow them to do so; and
  • on the principle set out in the Guide for Applicants that an adjournment should not be granted, especially late in the proceedings without good cause.

B. Motion to Amend

[18] As pointed out above, on August 28, 2009, the Minister filed a Notice of Motion to Amend the NAMP. The Applicant received a copy of the Notice of Motion to Amend the NAMP on August 31, 2009. The proposed amendments were to change the name of the Applicant from Free Fall Express Inc. to Freefall Express, Inc. I postponed arguments on this Motion until the second day of the Review Hearing, so that the Applicant would have an opportunity to make representations on the matter and, after hearing argument, I indicated that I would rule on the matter, as part of my final determination.

[19] In arguing for the Motion, the Minister's representative stated that the amendment was administrative in nature, and that she did not believe it would cause any prejudice to the Applicant. She pointed out that the Applicant knew that it was being investigated, and that well before the time of the Review Hearing, it had received a copy of the Motion supported by an Affidavit that stated that the Minister would consent to an adjournment in order to give reasonable time to prepare an answer to the Motion. Finally, she offered a factum with cases supporting the position that in an administrative matter a Motion for an Amendment should be granted, unless to do so would cause prejudice that could not be remedied by an adjournment.

[20] For the Applicant, Mr. Beatty's letter suggested that the misnaming of the Applicant was jurisdictional; that, having just been hired, he needed more time to prepare; and that as a result of one of the cases in the Minister's factum, he was concerned about participating in the hearing before the Motion to Amend had been decided. On September 23, 2009, Ms. Bartels, on behalf of the Applicant, argued that the Notice of Motion to Amend the NAMP was only recently delivered, and that there were many entities in the USA called Free Fall Express Inc. that could have been the subject of the investigation. Other than that statement, however, the Applicant provided no evidence that any such entity existed.

[21] The basis for allowing a Motion to Amend the name of the Applicant was considered by the Federal Court of Canada in Canada (Attorney General) v. Yukon, [2006] F.C.J. No. 1671. This case reviewed a decision of an appeal panel of the Tribunal that had found that a motion to amend the name of an applicant from Whitehorse International Airport to include that of its owner and operator, the Yukon Government, should not have been allowed. This decision was made on the basis that, a NAMP that improperly named the offender was a nullity, and there had been a breach of natural justice in continuing the hearing before deciding on the Motion to Amend, thus requiring the Yukon Government to participate in the action before it knew whether or not it was a party.

[22] The Federal Court, however, took the position previously held by the Tribunal in Canada (Minister of Transport) v. Fosberg, 1988 CAT file no. C-0067-33 (appeal), and Matiushyk v. Canada (Minister of Transport), 1994 CAT file no. W-0204-02 (review), that, in administrative law matters, motions should be determined on whether the affected party knows the case it has to meet, as opposed to a stricter standard that may apply in criminal matters that of reading only the wording of the charge.

[23] The Court also held that there was no breach of natural justice in proceeding with the hearing before ruling on the Motion. In fact, it pointed out that such procedural determinations may be aided by evidence adduced during the hearing on the merits.

[24] In the matter under consideration, I find that there would be no prejudice to be suffered by the Applicant in not allowing the Motion. It is clear that the Applicant knew that it was under investigation. Evidence adduced during the Review Hearing shows that early communications were, in fact, with Freefall Express, Inc. (Exhibit M-3). The aircraft described in the NAMP is registered to Freefall Express, Inc. in the Federal Aviation Administration (FAA) Registry in the USA. In addition, Transport Canada officials had several conversations with Mr. Richards.

[25] Consequently, I have decided to allow the Motion to Amend.

IV. EVIDENCE

A. Minister of Transport

(1) Terrill Blaine Thompson

[26] Terrill Blaine Thompson, retired Civil Aviation Inspector with Transport Canada, Atlantic Region, was assigned to investigate the activities of aircraft N123FX. During his testimony, he referred to the notes he had entered in the Transport Canada's Enforcement Management System (EMS) database. (Exhibit M-1).

[27] Inspector Thompson was informed by the Canada Border Services Agency that, on entry in Canada, it was stated that the aircraft had entered Canada for personal use only and would be in the country for seven days. He determined that the aircraft was registered in the USA Registry, as being owned by Freefall Express, Inc. (Exhibit M-2). By consulting officials at the FAA, he determined that, in the USA, the Company was authorized under FAR 91 to operate specialty services, such as aerial photography so long as only persons essential to the operation were on board, but that it would not be allowed to carry passengers. It was also confirmed by the FAA that the Company was not authorized to carry out an air carrier operation (Exhibit M-33). Inspector Thompson also confirmed with appropriate colleagues within Transport Canada that no FAOC had been issued to Freefall Express, Inc.

[28] Inspector Thompson also obtained from Nav Canada, records of the aircraft's flights within Canada between March 22 and April 9, 2007 (Exhibit M-7). These records show that there had been numerous flights undertaken by the aircraft during this period, including the six flights listed in the counts in the NAMP.

[29] Inspector Thompson testified that he had several telephone conversations with Mr. Richards. During the first conversation, Mr. Richards said that he had an authorization under the North American Free Trade Agreement ("NAFTA") to film in Canada with one of his helicopters. Later, he left a message with Inspector Thompson, saying that aircraft N123FX had been "dry-leased" to the IFAW which was the operator; that IFAW was responsible for the fuel, insurance and providing the pilot, although Mr. Richards had recommended the pilot. In answer to specific questions, Mr. Richards indicated that IFAW had custody and control of the aircraft and that there was no specific lease document but rather a quote of a charge per hour use. He also said that he understood "essential crew" to mean only those persons necessary to complete the mission, and that he had told IFAW that it could not carry any other person. Later in a letter of October 25, 2007, addressed to Inspector Thompson, Mr. Richards referred to the arrangement as a "wet lease" (Exhibit M-10).

[30] According to Inspector Thompson's notes, Mr. Richards said, during one conversation with him, that he was aware he might need some Canadian documents but did not bother to get them because of the cost of $600. He felt it was ridiculous to have to pay that kind of money.

[31] Inspector Thompson also spoke to the woman whose firm provided accounting services to Freefall Express, Inc. She said that she was not aware of any written contract with IFAW, and that the pilot was not employed by Freefall Express, Inc. at the time of the flights, although he had since been hired by the Company and had been advanced $7 000. Mr. Richards called this payment a retainer.

[32] Inspector Thompson also noted a brief conversation with the pilot, Mr. Norregaard, who said that he had donated his time for the flights and that the payment was for other things.

[33] Inspector Thompson also spoke to Cheryl Jacobson of IFAW, who explained her understanding of the arrangement with Freefall Express, Inc., and to Christopher Chanda, the aerial photographer hired by IFAW. Finally, he identified a series of emails (Exhibits M-11 to M-28) and three invoices provided by IFAW's Canadian lawyer (Exhibits M-29 to M-31), that dealt with arrangements between IFAW and Mr. Richards or his companies for aircraft to be used in observing and filming the seal hunt in 2006 and 2007.

(2) Tom Armstrong

[34] Tom Armstrong, Airworthiness Inspector, Foreign Inspection Division, Transport Canada, was qualified as an expert witness with regard to FAOCs. He explained that a foreign air operator carrying passengers or equipment to and from Canada is required to have a FAOC issued by Canada. Under NAFTA, USA operators are entitled to carry out certain specialty operations within Canada but they must obtain a FAOC − Free Trade Agreement (FTA). An operator under a FAOC-FTA may carry on board only the personnel essential to carry out the operation. He stated that each certificate costs $500 and that information about these certificates was available in Canadian and USA government information circulars and on both government Websites.

[35] He explained that Transport Canada maintains a database, namely the National Air Carrier Identification System (NACIS) that includes information concerning all past and present holders of FAOC and FAOC-FTA.

(3) Johanne Goulet

[36] Johanne Goulet, Certification Program Officer, Transport Canada, testified that in 2007, her duties included the issuance and amendment of FAOCs to foreign air operators. She identified an email of May 30, 2007, addressed to Inspector Thompson, reporting that Freefall Express, Inc. did not have a FAOC and had not applied for one (Exhibit M-32). She explained that she reached this conclusion by searching the NACIS database, and that she had recently repeated the search with the same result. She also stated that the search had included similar names and different spellings.

(4) Bob Lavers

[37] Bob Lavers, Regional Superintendent of Aircraft Registration and Leasing and Personnel Licensing, Atlantic Region, Transport Canada, was qualified as an expert witness in aircraft leasing. He explained that, under Canadian law, a lease is defined as a written document that transfers legal custody and control of the aircraft to the lessee for a defined period of time. Legal custody and control means that the lessee has the exclusive possession and use of the aircraft, and is responsible for providing the crew and for the airworthiness and maintenance of the aircraft. Standard 222.16(2) of the CARs sets out the requirements for the terms that must be included in a lease, including the conditions for an early termination.

[38] Mr. Lavers briefly discussed the concepts of "dry" and "wet" leases. A dry lease is a lease as described above. Wet leases are not allowed in Canada. It is Mr. Laver's understanding that it would involve the lessor providing the flight crew to the lessee.

[39] Finally, Mr. Laver said that, where there was no transfer of legal custody and control, there could be no lease. He would characterize that situation as a charter.

(5) Gilbert Betts

[40] Gilbert Betts, Supervisor, Flight Information Centre in Halifax, Nav Canada, testified that one of his responsibilities is to respond to requests from Transport Canada regarding aircraft activities. He responded to such a request regarding aircraft N123FX (Exhibit M-6), after reviewing the logs and tapes kept in Nav Canada's systems. He compiled the results and sent them to Transport Canada (Exhibits M-7 and M-37). In reviewing flight plans and flight information for aircraft N123FX (Exhibit M-7), he identified the following amongst other information:

  • on March 23, 2007, an arrival message from Saint John, New Brunswick, with the pilot and one other person on board;
  • on March 23, 2007, a departure message from Saint John and an arrival message from Charlottetown, Prince Edward Island, with the pilot and another person on board;
  • on April 3, 2007, a departure message from Charlottetown and an arrival message from Deer Lake, Newfoundland and Labrador, with the pilot and two other persons on board;
  • on April 7, 2007, an arrival message from Charlottetown, with the pilot and five other persons on board;
  • on April 9, 2007 a departure message from Charlottetown, and an arrival message from Saint John, with the pilot and one other person on board;
  • on April 9, 2007 a departure message from Saint John, showing Portland, Maine, as the destination, with the pilot and one other person on board.

In all these flights, the pilot was listed as Jon Norregaard.

[41] In cross-examination, Mr. Betts agreed with the Applicant's representative that most VFR flight plans were filed and closed by telephone. In re-examination, Mr. Betts confirmed that he had not personally been involved in the filing of the flight plans relating to aircraft N123FX.

(6) Patricia Zaat

[42] Patricia Zaat, Financial Officer for IFAW, is responsible for contracts and payments within Canada. She said that in 2006, IFAW had an agreement with New York Film Flyers for the use of its helicopter in filming the seal hunt. The cost was based on an hourly rate. Ms. Zaat stated that Mr. Richards was the pilot and that he did not charge for pilot services. As well, IFAW paid for hangar space.

[43] Ms. Zaat indicated that in 2007, IFAW, through Mr. Richards, hired Freefall Express, Inc. to provide fixed wing services. She said that there was no written contract with Freefall Express, Inc.; that Freefall Express, Inc. had been paid for these services; and that, as far as she was aware, no separate payment had been made to the pilot other than a per diem to cover his expenses. She explained that it was IFAW's expectation that, when contracting with a company to provide flight services, they would be provided with an aircraft, a pilot and, usually, fuel. She was not aware of the difference between leasing and chartering an aircraft.

[44] In cross-examination, Ms. Zaat said that she did not know the difference between Freefall Express, Inc., New York Film Flyers and Mr. Richards, nor did she understand the differences among various types of air services. She assumed that the cost of pilot services would be included in the hourly rate.

(7) Cheryl Jacobson

[45] In 2007, Ms. Jacobson was, at IFAW, the Program Officer responsible for the hunt watch and seal watch activities, including arrangements for aircraft and camera equipment. One of these activities would be to document the hunt from the air, using a high definition camera. In 2007, the initial discussions and email exchanges with Mr. Richards explored the use of both, aircraft N123FX and the helicopter that had been used in 2006. At one point in these discussions, Ms. Jacobson asked Mr. Richards if he had an air taxi certificate. He responded that he did (Exhibit M-15). Ms. Jacobson understood this to mean that he had all the authorizations necessary to carry out the proposed agreement.

[46] There were also email discussions concerning costs for the aircraft. On January 14, 2007, Mr. Richards quoted $1 200 per hour for the aircraft (Exhibit M-14). On March 22, 2007, he quoted $1 250 per hour for the aircraft and $350 per day for the pilot (Exhibit M-22). Ms. Jacobson testified that the latter amount was changed to $150 per day. The actual invoices set out an amount of $1 350 per hour for the aircraft with no amount for the pilot. Three invoices were filed in evidence (Exhibits M-29 to M-31), all of which had been prepared by Ms. Jacobson to expedite matters. The first invoice was a draft for format and an estimate of cost. The second was a draft based on the actual hours flown and the third was the final invoice, based on the actual hours flown. Some fuel costs, already paid by IFAW, had been deducted. Ms. Jacobson said that the hourly rate included the cost of the aircraft and the hourly pilot's fee.

[47] Ms. Jacobson was told by Mr. Richards that Freefall Express, Inc. was not authorized to carry passengers.

[48] Ms. Jacobson's understanding of the agreement was that, after the camera operator, Mr. Chanda, had helped to install the camera, the aircraft with the pilot would be used to document the seal hunt. Freefall Express, Inc. would be responsible for the airworthiness and maintenance of the aircraft and any necessary legal documentation. She did not discuss the terms "rental", "lease" or "charter" with Mr. Richards and did not know their meaning in an aviation context.

[49] During the surveillance flights, Ms. Jacobson's role was to direct the camera operator, as to which boats and activities should be filmed. She was a necessary part of the operation, since, without her, the camera operator would not know what to film for IFAW's purpose.

[50] With regard to the specific flights that are the subject of the NAMP, Ms. Jacobson testified that she was not on board the two flights on March 23, 2007. She was, with Mr. Chanda, on board the flight from Charlottetown to Deer Lake on April 3, 2007. She was on board the flight to Charlottetown on April 7, 2007, with Mr. Chanda and two other people, who were working on documenting the hunt. She had asked the pilot if it would be possible to include these two since an imminent storm could have left them stranded. There was no filming on this flight and its purpose was to move back the operations to Charlottetown. She was on the flights on April 9, 2007, from Charlottetown to Saint John and from Saint John to the USA. The purpose of these flights was to return home after the seal watch operation had been concluded.

[51] On cross-examination, Ms. Jacobson agreed that she was aware that the aircraft was not supposed to carry passengers. However, she thought, at that time, that anyone involved in filming was not considered a passenger. She would characterize these people as necessary crew, even those on the flight to Charlottetown on April 5, 2007, who were working on the film project. She had never asked Mr. Richards whether the persons could be carried on the flights but she had asked the pilot. She regarded the pilot as being in charge of all matters relating to the operation of the flight. She repeated that the invoice amount of $1 350 per hour reflected a charge of $1 250 per hour plus a fee of $100 for the pilot, based on the quote in the email of March 22, 2007 (Exhibit M-22) and a telephone conversation regarding the pilot. She admitted that there was no written evidence of the pilot fee.

[52] Ms. Jacobson agreed that the original negotiations were for a helicopter to be provided by New York Film Flyers and an aircraft from Freefall Express, Inc. and that she was dealing with Mr. Richards who was representing both entities. She said that the pilot told her that he had been paid, and she believed that he had been paid by Freefall Express, Inc.

[53] During re-examination, Ms. Jacobson indicated that she did not know who was considered crew under Canadian law and that she relied on the pilot for that knowledge. She also agreed that she used the terms "lease", "rent" and "charter" interchangeably.

(8) Christopher Charles Chanda

[54] Mr. Chanda is a cameraman who filmed the seal hunt under a contract with IFAW. He was on the flight of March 23, 2007, from the USA to Saint John and from Saint John to Charlottetown. The purpose of these flights was to move himself and the camera gear into position for filming. He was on the flight from Charlottetown to Deer Lake on April 3, 2007, but could not remember if anyone else other than the pilot was on board. He was also on the flight of April 7, 2007, returning to Charlottetown, with the pilot and four other people on board the aircraft. No filming took place on any of these flights. He was not on the flights of April 9, 2007, from Charlottetown to Saint John and Saint John to the USA. He doubted that any filming could take place on those flights because the camera equipment was not assembled or configured for filming in flight.

(9) Michael Ivany

[55] Michael Ivany has been a Civil Aviation Inspector at the Moncton Regional Office, Transport Canada for about two and a half years. He assisted Inspector Thompson in organizing the file on this matter. After Inspector Thompson's retirement, he calculated the monetary penalty and prepared the appropriate NAMP. He based his calculation on the suggested sanctions in the table in the Aviation Enforcement Procedures Manual, at page 119 ("AEPM", Fourth Edition February 2006, Exhibit M-38). In relation to a corporation, this document suggests a penalty of $5 000 for a first offence, $12 500 for a second offence and $25 000 for a third and subsequent offences. Inspector Ivany testified that, bearing in mind the principle of rehabilitation and the size of the company, he decided to treat the flights as a cluster of first offences rather than a series of separate offences which would have led to a much higher penalty. He considered that there were no mitigating factors, but he found an aggravating factor. He indicated that Mr. Richards' statement, as recorded by Inspector Thompson, that he knew there was a fee to obtain a document each time he came to Canada, and that he did not bother with it.

[56] On cross-examination, Inspector Ivany said that he was not aware of any notification of an alleged offence to the Applicant after the first two occurrences, nor between any of the other occurrences. He reviewed the table in the AEPM (Exhibit M-38) and explained that the maximum penalty for a contravention of subsection 700.02(1) of the CARs is $25 000, and the minimum penalty for a first offence is $5 000.

[57] In answer to a question from Ms. Bartels, Inspector Ivany said that he reached his conclusions regarding the amount of the penalty after reading the material in the file, and that he had not spoken to anyone involved other than Inspector Thompson.

[58] On re-examination, Inspector Ivany confirmed that his assessment was reviewed and approved by both his manager and that manager's superior.

B. Applicant

(1) William Richards

[59] Mr. Richards has been a pilot for 38 years, and currently holds an airline pilot transport licence, a rotorcraft licence, an instrument licence, a glider licence and a seaplane licence. He operates several aviation companies and owns three private general aviation airports. He is the sole proprietor and employee of New York Film Flyers and a shareholder in Freefall Express, Inc. He has filmed many times in Canada and has always obtained the permits that he thought were required, including a NAFTA permit in 2005.

[60] As New York Film Flyers, he had done work for IFAW in 2006 and was contacted in 2007 to discuss providing services for that year. These discussions related to both the use of the helicopter operated by New York Film Flyers and aircraft N123FX, operated by Freefall Express, Inc. The subject of various emails is not very clear. He was clear, however, that the aircraft could not carry passengers for hire.

[61] He considered that he had leased the aircraft to IFAW. He described a "wet" lease as meaning an agreement where the cost of fuel and oil which are "wet" are included in the rent. He proposed a pilot to be approved by the insurance company. Essentially, the agreement was to pick up the aircraft and later return it and be charged for the hours flown.

V. MINISTER'S POSITION

[62] After reviewing oral and written evidence presented, the Minister's representative argues that Freefall Express, Inc. had operated an air transport service without having the relevant AOC required by subsection 700.02(1) of the CARs.

[63] The Minister's representative argues that Mr. Richards, the CEO of Freefall Express, Inc., was dismissive of Canadian requirements in discussions with Inspector Thompson, using the word "ridiculous", and that he had been inconsistent in his responses to the Inspector, first saying that the agreement with Freefall Express, Inc. had been a dry lease and later saying that it was a wet lease. She suggested that his evidence be given little weight. She also pointed out that, however the agreement was characterized by its parties, it could not be a valid lease under Canadian law.

[64] The Minister's representative argues that the penalty amount was reasonable and in line with those upheld by the Tribunal in other cases where there had been a contravention of subsection 700.02(1) of the CARs. In Canada (Minister of Transport) v. Sky King Inc., 2002 CAT file no. H-2316-41 (review), the Tribunal found that there were mitigating factors and reduced the penalty to $4 000 per count. In the other two cases, Canada (Minister of Transport v. North American Airlines Ltd., 2002 CAT file no. W‑2288-41 (review) and 3098343 Nova Scotia Ltd. v. Canada (Minister of Transport), [2008] TATCE 6 (review), TATC file no. A‑3345‑41, there were no mitigating or aggravating factors, and the penalties of $5 000 per count were upheld.

VI. APPLICANT'S POSITION

[65] Ms. Bartels argues that Freefall Express, Inc. did not contravene subsection 700.02(1) of the CARs because it did not operate the aircraft during the flights that were the subject of the charge. It had leased the aircraft to IFAW, who had control of it, from the time it picked it up in Gardiner, New York, until it returned to that point. She pointed out that the emails introduced in evidence largely concerned the use of the helicopter operated by Mr. Richards, and any discussion of pilot fees was not in relation to aircraft N123FX. The pilot of this aircraft was not an employee, nor an agent of Freefall Express, Inc., and was not compensated by it for the flights. Neither the pilot nor Ms. Jacobson consulted Mr. Richards, as to who could be carried on the flights, although Mr. Richards had made it clear in his emails that he was not authorized to carry passengers.

[66] Ms. Bartels refers to an email dated November 23, 2007, from an official of the FAA (Exhibit M-34). USA operators, who are authorized to carry out aerial photography, may carry persons on the flight so long as the primary purpose is photography, as opposed to the carriage of passengers. She referred to New York Film Flyers as one of the largest suppliers of helicopters carrying out aerial photography. Most aerial photography operations require rigging the camera and then flying to the site, and many involve a series of repositioning flights.

[67] Ms. Bartels suggests that Mr. Thompson's notes be regarded as informal and loose, especially with regard to his account of Mr. Richards' statement concerning Canadian requirements as being "ridiculous". Mr. Richards has no recollection of making such a statement and it should be regarded as hearsay.

VII. MINISTER IN REPLY

[68] The Minister's representative points out that arguments based on USA law were of little relevance, and that Ms. Jacobson's interpretation of the word "passenger" was not based on any knowledge of Canadian aviation law. Finally, the Minister's representative points out that the Applicant tried to present evidence as part of its argument.

VIII. EVIDENCE, LEGISLATION AND POLICY ANALYSIS

[69] It is alleged that Freefall Express, Inc. contravened subsection 700.02(1) of the CARs. On six occasions, while operating for hire or reward, the Applicant carried passengers on flights without holding the required FAOC. Subsection 7.9(4) of the Act provides that the burden of proof that a person has contravened a designated provision is on the Minister. Subsection15(5) of the Transportation Appeal Tribunal of Canada Act provides that the burden of proof is discharged by proof on a balance of probabilities.

[70] Freefall Express, Inc. is a USA corporation but its operations in Canada must be carried out in accordance with Canadian law, made clear by subsection 4(1) of the Act.

[71] Therefore, the Minister must show that Freefall Express, Inc. operated an air transport service and that it did not have the appropriate AOC.

[72] The Minister's witness, Inspector Tom Armstrong, explained how the NACIS database is used to record the issuance and status of AOCs issued in Canada. Ms. Goulet stated that she had searched this database and found no record of a certificate being issued to Freefall Express, Inc. or to any entity with a similar name. While this matter could have been proven by a secretary's certificate issued under subsection 27(2) of the Act, I find, on a balance of probabilities, that the Minister has proven that Freefall Express, Inc. did not have an AOC authorizing it to operate an air transport service.

[73] A major issue to be determined is whether Freefall Express, Inc. was the operator of the flights that are the subject of the monetary penalty. Section 101.01 of the CARs defines "operator" as "the person who has legal custody and control of the aircraft as owner, lessee or otherwise". It is not disputed that Freefall Express, Inc. was the owner of aircraft N123FX. Freefall Express, Inc., however, alleges that the agreement it had with IFAW was a lease so that IFAW would be considered the operator, whereas the Minister maintains that the agreement was in the nature of a charter and that Freefall Express, Inc. remained the operator.

[74] It is clear, throughout the evidence, that the arrangements between Mr. Richards and IFAW were informal and fluid, with little distinction being made in their discussions between Mr. Richards acting on his own behalf as New York Film Flyers and as an Officer of Freefall Express, Inc. For example, in her email dated March 2, 2007, Ms. Jacobson referred to the New York Film Flyer Twin Otter (Exhibit M-20). In early January 2007, Mr. Richards quoted rates for the helicopter and the Twin Otter (N123FX) without indicating that he was not the owner of both (Exhibit M-14). Mses. Jacobson and Zaat testified that they did not know the difference between Freefall Express, Inc., New York Film Flyers and Mr. Richards.

[75] The meaning of "lease" in the Canadian aviation law involves a transfer of legal custody and control and, usually, a change of registration of the aircraft ownership. Subpart 203 of the CARs establishes requirements for situations where a leased aircraft may be operated without the lessee becoming the registered owner. The agreement between Freefall Express, Inc. and the IFAW does not meet these requirements. First of all, the agreement does not come within the definition of "lease" in section 203.01 of the CARs:

"lease" means an agreement in respect of the operation of an aircraft that

(a) specifies a commencement and a termination date,

(b) gives the lessee legal custody and control, and the right to exclusive possession and use, of the aircraft during its term; and

. . .

[76] Subsection 202.35(3) of the CARs provides that for the purposes of aircraft registration, a person, who has legal custody and control of an aircraft, has complete responsibility for the operation and maintenance of the aircraft. There was no evidence of any responsibility for maintenance being transferred to IFAW. Indeed, the testimony of Ms. Jacobson was directly to the contrary, nor in my opinion, was IFAW responsible for the operation of the aircraft. While it is true that IFAW directed the specific movement of the aircraft, it was at the discretion of the pilot, as to whether the aircraft could fly and who could be carried on board.

[77] There was some discussion as to whether the pilot was an employee of Freefall Express, Inc. or was acting under a separate contract with Freefall Express, Inc. In his testimony, Mr. Richards indicated that the pilot was not an employee of Freefall Express, Inc. at the time. Among the names of other acceptable pilots, he had provided his name to IFAW. On the other hand, Ms. Jacobson said that Mr. Richards had chosen the pilot. There was also conflicting evidence, as to whether the pilot was paid for his services by Freefall Express, Inc., and that his remuneration was included in the hourly charge for the aircraft. Mr. Richards testified that the invoiced amount was purely for the use of the aircraft, and that the pilot had donated his services to IFAW. All of the evidence with regard to payment of the pilot is hearsay, and I give it very little weight. Nevertheless, I find that whether or not the pilot was an employee of Freefall Express, Inc., he was acting on its behalf in carrying out his activities as pilot. He was, at the very least, named to IFAW by Mr. Richards, and he was authorized to use the Freefall Express, Inc.'s credit card to purchase fuel for the aircraft.

[78] I find, on a balance of probabilities, that the agreement between IFAW and Freefall Express, Inc. was in the nature of a charter and was not a lease within the meaning of Canadian aviation law.

[79] The next question is whether the operations were an air transport service, that is a service for the carriage of persons or goods between two points carried out for hire or reward.

[80] There is no dispute that Freefall Express, Inc. was paid by IFAW. Therefore, I find that Freefall Express, Inc. provided an air service for hire or reward.

[81] To provide an air transport service, the flights must have been performed for the purpose of transporting passengers or goods between points. Again, there is no dispute that the primary purpose of the agreement between IFAW and Freefall Express, Inc. was for aerial photography to document the seal hunt. There were, however, six flights during the period of the agreement where no filming took place, and persons other than the flight crew (pilot) were on board the aircraft. This is proven by the information on the flight plans introduced as evidence during the testimony of Mr. Betts and by the testimonies of Mr. Chanda and Ms. Jacobson, who were passengers aboard these flights.

[82] The carriage of persons other than flight crew members in aerial work operations, such as aerial photography, is regulated by section 702.16 of the CARs. Paragraph 702.16(a) authorizes the carriage of such passengers where they are essential to the flight.

[83] Ms. Bartels argues that the purpose of all flights during the period of the agreement was aerial photography, and that aerial photography necessarily involved flights to get to the site where the photographs or films would be taken. While this may be an arguable position, if there is no other means of getting to the site, this is not the case in the flights that are the subject of the alleged contraventions. Mr. Chanda testified that he was on board the aircraft on the flights from New York State to Saint John and from Saint John to Charlottetown on March 23, 2007. Although Mr. Chanda had travelled to the airport at Gardiner, New York, to attach the camera equipment to the aircraft, there was no suggestion that his presence was essential to the transport of that equipment, nor was there any evidence that alternative commercial transportation was not available. The same holds true for the flight on April 3, 2007, between Charlottetown and Deer Lake, the subject of count 3, when both, he and Ms. Jacobson, were on board.

[84] On the flight of April 7, 2007, between Deer Lake and Charlottetown, the subject of count 4, there were two other passengers on board, in addition to Mr. Chanda and Ms. Jacobson. The evidence shows that they were on board because it was feared that an approaching storm might strand them in Newfoundland and Labrador. While these two people may have been part of the IFAW team, they were clearly passengers, and they were carried in an air transport service.

[85] The flights on April 9, 2007, between Charlottetown and Saint John and Saint John and the USA, the subject of counts 5 and 6, were clearly not part of the IFAW operation. Mr. Chanda testified that the camera equipment was not configured for filming, and Ms. Jacobson, who was the passenger, said that the aircraft was returning home and dropping her off on the way.

[86] I find that all these flights come within the definition of an air transport service, and they were in contravention of subsection 700.02(1) of the CARs. I note that section 7.31 of the Act provides that:

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.

[87] Consequently, while it might be argued that the flights which were the subject of counts 2 and 6 were merely continuations of the flights which were the subject of counts 1 and 5, they were quite properly determined to be separate offences under the Act.

[88] I also note that these are strict liability offences, as defined in R. v. Sault Ste. Marie (City), [1978] 2 S.C.R. 1299. Proof that the alleged events took place proves the offence without showing any mental element. However, a defence of due diligence applies.

[89] Section 8.5 of the Act provides that no person shall be found to have committed an offence "if the person exercised all due diligence to prevent the contravention". In this matter, Mr. Richards informed IFAW that he was not authorized to carry passengers. He may have been making this statement on his own behalf or that of Freefall Express, Inc. but, since IFAW personnel did not distinguish between the two, it seems clear that he made them aware of this prohibition. I find, however, that his statement does not amount to due diligence. There is no evidence that he informed the pilot of the prohibition, nor did he make any effort to explain what constituted a passenger in Canadian law. Consequently, there is no defence of due diligence.

[90] The penalty assessed is $5 000 in respect of each count. Inspector Ivany justified this amount based on the guidelines set out in the AEPM for the recommended penalty for a first offence by a corporation (Exhibit M-38). In recommending this penalty, Inspector Ivany was influenced by the size of the company and the principles of deterrence and rehabilitation. He thought there were no mitigating factors, but that there was a possible aggravating factor in the conversation reported by Inspector Thompson where Mr. Richards said that he knew that some document was necessary, but that he did not bother to get it, since the requirement was ridiculous. Inspector Ivany, however, said that he did not take this into account.

[91] The amount of penalty is established by the Minister pursuant to paragraph 7.7(2)(b) of the Act, which provides that the penalty should be determined "in accordance with any guidelines that the Minister may make for the purpose". These guidelines are set out in the AEPM; unfortunately, the only section put in front of the Tribunal was the page setting out the recommended sanctions for the breach of subsection 700.02(1) of the CARs.

[92] In Canada (Minister of Transport) v. Wyer, 1988 CAT file no. O-0075-33 (appeal) the purposes and determination of penalties are exhaustively discussed. In terms of purposes, it refers to (a) denunciation or a "retrospective public repudiation of the wrongful conduct, (b) deterrence for the particular offender and others in the aviation community, and (c) rehabilitation of the offender. Bearing these purposes in mind, the decision maker should take into account aggravating and mitigating factors. Without reproducing the entire list set out in Canada (Minister of Transport) v. Wyer, I find that there are several mitigating factors that were not taken into consideration. The first relates to the conduct (involvement) of the victims. Certainly, in the case of counts 3 to 6, the offences were initiated by the victims. Ms. Jacobson stated who she wished to be on board, subject to the pilot's consent. In relation to counts 1 and 2, the passenger, Mr. Chanda, had installed the camera equipment to be used in the operation and had an interest in travelling with it. In all cases, the passengers were willing participants in the flights. This is different from the situation in Canada (Minister of Transport) v. Sky King Inc. cited by the Minister (paragraph [64] above), where the passengers were a sports team that had little choice in their transportation.

[93] The appeal determination, Canada (Minister of Transport) v. Wyer, also suggests that a mitigating factor might be "special factual circumstances". One such circumstance is that the entire operation was initiated by IFAW, and there was no indication that Freefall Express, Inc. held itself out to the public as operating an air transport service, as was the situation in the other cases cited by the Minister. In fact, IFAW was specifically instructed that the aircraft was not authorized to carry passengers and the fault involved was that neither party made an adequate effort to understand what defined a passenger in Canadian terms. In paragraph [40] of Lee v. Canada (Minister of Transport), 2008 TATCE 33 (appeal), file no. W‑3287-33 the Appeal Panel found that "while the offences occurred as the result of an unacceptable careless mistake by [the Appellant] . . . they were not premeditated or committed with unlawful intent". I find that, while Freefall Express, Inc. may have been somewhat cavalier in its attitude towards some requirements for a Canadian aviation document, it had no intention of operating an air transportation service. Its actions in that regard could be characterized as an "unacceptable careless mistake".

[94] I note that in cross-examination, Inspector Ivany stated that the penalties listed in the AEPM were the minimum that could be assessed. The Minister took the same position in Canada (Minister of Transport) v. Sky King Inc. cited above in paragraphs [64] and [92]. This is, of course, not correct as it was implicitly recognized by Inspector Ivany, when he said that he chose to treat the six flights as part of a first offence rather than as a sequence of escalating offences. While the guideline amounts form a useful starting point, they may be reduced in accordance with mitigating circumstances, in the same way as they may be increased where there are aggravating circumstances taken into consideration. I find that mitigating circumstances were not taken into account in assessing the penalty. I have considered that the penalty should be significant enough to act as a deterrent but not so high as to make it impossible for the Company to continue to operate. There was little or no evidence presented regarding the financial status of Freefall Express, Inc., but as Inspector Ivany recognized, it is a small company, and I feel that a substantial reduction in the amount of the penalty will not reduce its deterrent effect and may well promote its rehabilitation.

IX. DETERMINATION

[95] The Minister has proved, on a balance of probabilities, that Freefall Express, Inc. operated an air transport service in contravention of subsection 700.02(1) of the CARs. As the Minister did not take into account mitigating factors in assessing the monetary penalty, I reduce the penalty of each of the six counts from $5 000 to $2 500.

March 15, 2010

Elizabeth MacNab

Member


Appeal decision
Caroline Desbiens, Suzanne Racine, J. Richard W. Hall


Decision: June 28, 2011

Citation: Canada (Minister of Transport) v. Freefall Express, Inc., 2011 TATCE 17 (appeal)

Heard at Ottawa, Ontario, September 15, 2010

Held: The Minister's appeal is allowed, and the monetary penalty of $5 000 for each contravention totalling $30 000 assessed by the Minister is upheld. Freefall's cross-appeal is dismissed.

The total amount of $30 000 is payable to the Receiver General for Canada and must be received by the Transportation Appeal Tribunal of Canada within thirty-five (35) days of service of this Decision.

I. BACKGROUND

[1] Freefall Express, Inc. ("Freefall"), is an American corporation based out of the State of New York. The present dispute arises out of Freefall's agreement to provide an aircraft to the International Federation for Animal Welfare ("IFAW") for the aerial filming of the 2007 Seal Hunt.

[2] The Minister of Transport alleged that, on six occasions between March 23 and April 9, 2007, at various airports in New Brunswick, Prince Edward Island and Newfoundland and Labrador, Freefall engaged in an air transport service without having the appropriate Air Operator Certificate ("AOC") required by subsection 700.02(1) of the Canadian Aviation Regulations ("CARs").

[3] On March 14, 2008, the Minister issued the Notice of Assessment of Monetary Penalty ("NAMP") against Freefall for $5 000 for each of the six counts totalling $30 000.

[4] On March 15, 2010, the Review Member, Elizabeth MacNab, determined that Freefall did operate an air transport service contrary to subsection 700.02(1) of the CARs. However, she reduced the monetary penalty for each count from $5 000 to $2 500, totalling $15 000.

[5] On April 16, 2010, the Minister appealed the Review Determination of the Transportation Appeal Tribunal of Canada ("Tribunal"). On April 21, 2010, Freefall filed a cross-appeal with the Tribunal.


II. GROUNDS FOR APPEAL

[6] The Minister appealed on the issue of the monetary penalty based on the following grounds:

  1. The Review Member erred in law with regard to what are appropriate mitigating factors. In particular, the Review Member erred in determining that the following facts were mitigating factors:

    a) The willingness or unwillingness of passengers is an irrelevant factor. Whether the passengers were on the flight of their own free will or not is not to be considered.

b)The fact that IFAW contacted Freefall for its services as opposed to Freefall holding itself out as operating an air transport service should not be a mitigating factor.

[7] Freefall crossed-appealed and the grounds for appeal are set out in a letter to the Tribunal dated April 21, 2010. They can be summarized as follows:

1. The Review Member erred in her Determination that the agreement between IFAW and Freefall constituted a charter as opposed to a lease because:

a. IFAW did have legal custody and control of the aircraft, and the agreement did in fact specify a start and termination date within the meaning of section 203.01 of the CARs.

b. The pilot was not acting on behalf of Freefall, nor was he an employee that was being paid by Freefall. The pilot had donated his services.

2. The Review Member erred in finding that Freefall violated subsection 700.02(1) because:

a. Freefall was not operating an air transport service within the meaning of the provision.

b. There was no evidence indicating Freefall was paid for the purpose of transporting passengers.

c. She erred in her application of the definition of what constituted a passenger within the aerial cinematography context.

3. The Review Member erred in placing the burden of proof on Freefall in various instances.

4. The Review Member erred in finding that there was no defence of due diligence despite the fact that Mr. Richards clearly warned IFAW that no passengers should be on board.

5. The penalty amount determined failed to consider appropriate mitigating factors.

III. ARGUMENTS

A. Freefall Express, Inc.

[8] Freefall submits that the Minister did not prove on a balance of probabilities that Freefall operated an air transport service within the meaning of subsection 101(1) of the CARs.

[9] First, Freefall argues that the nature of the relationship between it and IFAW was that of a lease. Consequently, it was IFAW and not Freefall that was in legal control and custody of the aircraft. As the entity with legal control and custody of the aircraft, IFAW was the operator of the aircraft to which subsection 700.02(1) should apply.

[10] Freefall argues that the definition of a lease agreement in section 203 of the CARs does not state that a lease agreement must be in writing. Section 203 only requires that the lease states a commencement and termination date, that it gives the lessee legal custody and control of the aircraft and may include provisions respecting the operation of the aircraft for hire or reward.

[11] Freefall submits that although it does not have a formal written lease in evidence, the series of emails between it and IFAW should constitute a lease. An email between Cheryl Jacobson and William Richards (Exhibit M-13) sets out the dates that the Twin Star helicopter and the Twin Otter aircraft would be required by IFAW. In another email to Ms. Jacobson, Mr. Richards adjusts and confirms the relevant dates. Exhibits M-29, M-30, and M-31 are all invoices which include the commencement and termination date of the lease.

[12] Freefall further submits that section 222.16 of the standards of the CARs does not apply to foreign aircraft registered in foreign states. In his testimony, Bob Lavers relied on section 222.16 as containing further requirements for leases. Section 222.16 pertains to the requirements for registration of an aircraft in Canada. According to Freefall, section 222.16 is irrelevant to the present matter since Freefall is not attempting to register its aircraft in Canada. More importantly, section 203 does not apply to a foreign air operator that leases a foreign aircraft to another foreign operator.

[13] Freefall submits that its lease agreement is governed by the law of the country in which the lease was entered into – the United States of America ("USA"). Canadian law does not apply to the lease agreement concluded in the USA. Therefore, the Review Member erred when she considered subsection 202.35(3) of the CARs which states that an owner of an aircraft has legal custody and control of a Canadian aircraft when the owner has complete responsibility for the operation and maintenance of the aircraft. Section 202.35 of the CARs deals with the transfer of registration of an aircraft when the legal custody and control of an aircraft is transferred. According to Freefall, this section clearly applies only to Canadian aircraft. A valid lease in the USA does not require the transfer of maintenance responsibility to be deemed valid.

[14] The lease between Freefall and IFAW was valid in accordance to Federal Aviation Administration ("FAA") Regulations as evidenced by an email correspondence between the Transport Canada Investigator, Terrill Blaine Thompson, and Christopher Poreda of the FAA (Exhibit M-34). In this email, Mr. Poreda indicated that it is common for air operators to dry lease an aircraft to another entity, while still operating the aircraft themselves. Freefall submits that the Review Member erred in her Determination that the agreement between IFAW and Freefall constituted a charter agreement. Freefall is not in the business of chartering planes, as evidenced by the rates quoted to IFAW being well-below market value for charters (Exhibit M-10).

[15] In any event, Freefall maintains that the pilot, Jon Norregaard, was not an employee of Freefall. In the transcript of the proceedings, Mr. Thompson indicated that when he asked Mr. Norregaard whether he was being paid, Mr. Norregaard responded that he was donating his time and that any payments he received was for "other things" but not flying.

[16] Freefall submitted that the Review Member erred when she concluded that the pilot was representing Freefall. There is no evidence that Mr. Norregaard was an employee, and the fact that he used the company's credit card to purchase fuel did not render him an employee.

[17] The Review Member also erred when she held that the pilot was responsible for determining who would be a passenger. Freefall submits that the pilot is not an expert in aviation cinematography/photography, and could not determine who was "essential crew" for that purpose; only IFAW was in a position to make that determination. Furthermore, Freefall warned IFAW that only essential crew were permitted to be on board, and that no passengers for hire were allowed.

[18] Freefall also notes that it felt that the investigator, Mr. Thompson, was biased towards Freefall, given his testimony that he felt Freefall intentionally tried to mislead him. Freefall submits that the comments assigned to Mr. Richards that the fees for a Foreign Operator's Aviation Certificate (FOAC) were "ridiculous" were never uttered by him. Furthermore, Freefall suggests that Ms. Jacobson may have been influenced by conversations with the Investigator and her fear of attracting liability. On April 26, 2007, Mr. Richards sent Ms. Jacobson an invoice titled "aircraft lease". In addition, an e-mail from Ms. Jacobson to Mr. Richards (Exhibit M-25) indicates the same terminology. After speaking with Mr. Thompson, Ms. Jacobson altered the wording in invoices she prepared and removed the term lease (Exhibit M-31).

[19] Finally, Freefall agrees that the Review Member did not err in her consideration of mitigating factors. She properly considered all relevant mitigating factors that were applicable under the circumstances.

B. Minister of Transport

[20] The Minister submits that the appropriate standard of review for questions of law is correctness. The appropriate standard of review for findings of fact and credibility findings is reasonableness: Canada (Minister of Transport) v. Arctic Wings Ltd., 2006 TATC file no. W‑2838-41 (Appeal) in which the Appeal panel discussed the standard of review on appeal as follows:

Previous Tribunal jurisprudence has given guidance as to the standards of review. Our task is to assess whether the member's finding was unreasonable.1 A finding of fact should not be overturned unless there is an entire absence of evidence to support it, or notwithstanding that there is some evidence concerning the finding it is an unreasonable finding incapable of being supported by the evidence.2 Regarding credibility issues, it has been recognized that the hearing officer is in the best position to be able to determine which evidence he prefers and which evidence, when in conflict, he is prepared to accept. In the result, unless findings of credibility are patently unreasonable, not being supported by testimony under oath, we as an appeal panel should be loath to substitute our own findings for the member's.3 On questions of law the standard would still be correctness.

1 William R.T. Long v. MoT, appeal decision, [2004], O-2824-02.
2 Trent Wade Moore v. MoT, appeal determination, [1991], C-0138-33.
3 Minister of Transport v. Thomas Ritchie Phillips, appeal determination, [1987], C-0014-33.

[21] The Minister also submits that the question of what constitutes a mitigating and aggravating factor is a question of law, and that the Review Member's conclusion is incorrect. Alternatively, the Review Member's finding of fact was unreasonable. There were no "special factual circumstances" that should have been taken into account as a mitigating factor.

[22] The Minister argues that the mitigating factors taken into account by the Review Member should not have been taken into consideration, and should certainly not have lead to a 50% reduction in the monetary penalty. When determining an appropriate monetary penalty, the principles of deterrence, denunciation, rehabilitation and enforcement recommendations are to be considered: Canada (Minister of Transport) v. Wyer, 1988 CAT file no. 0-0075-33 (Appeal). In addition to considering sentencing principles and the relevant facts and circumstances in any given case, the Tribunal must also balance policy considerations: Wyer. The Minister adds that it is important that it takes action to enforce aviation safety laws, and that when found to contravene the Regulations, a company is punished accordingly; otherwise, regulatory infractions with minimal consequences will simply become the "cost of doing business" for companies willing to take a chance at bypassing Canadian aviation safety laws.

[23] It is the Minister's submission that by awarding the lowest possible amount for a corporation for a first time offence, the principles of deterrence, denunciation, and rehabilitation were met. Awarding a lower amount than what was suggested by the Minister would have minimal consequences and simply become the cost of doing business.

[24] The Minister disagreed with the Review Member's finding that the role of the passengers or "victims" was an appropriate consideration as a mitigating factor. The fact that the passengers were willing participants in the flights is irrelevant. Furthermore, Freefall, as the operator, had the responsibility of ensuring that it was compliant with the CARs.

[25] Although the Minister does not contest that the passengers acted of their own volition, their actions were made with the consent of the pilot on behalf of Freefall. There may be instances where the actions of a third party may be considered a mitigating factor, but this is not one of them.

[26] In Minister of Transport v. Sky King Inc., 2002 CAT file no. H-2316-41 (Review), the mitigating factors included remorse at having contravened the regulations, cooperation with Transport Canada's investigation, and the lack of previous offences. The Minister submitted these are appropriate considerations, and that in the present case, these mitigating factors did not all exist. Instead, Freefall did not cooperate with the investigation and gave inconsistent statements.

[27] The fact that Freefall did not hold itself out as an air transport service should not be a mitigating factor. Rather, had it advertised its service, such a fact should be taken as an aggravating factor. In addition, there was no evidence that Freefall did not hold itself out as an air transport service. The Review Member's reliance on Canada (Minister of Transport) v. Tomassini, 2003 TATC File No. Q-2520-33, was misplaced as that case did not stand for the proposition that advertising was a mitigating or aggravating circumstance. Instead, the case was submitted by the Minister for the proposition that the Tribunal has consistently endorsed minimum fines for first time offenders of subsection 700.02(1).

[28] The Minister submits that Freefall's warning to IFAW that it could not transport passengers should not be considered a mitigating factor. Freefall advised IFAW that it had permits "to do the aerial work in Canada but can't do transportation" (Exhibit M-19). This gave IFAW the impression that Freefall was aware of the applicable regulatory requirements and would inform IFAW what they could and could not do. It was unreasonable to expect IFAW to explore the proper definition of "passenger" under Canadian law. IFAW had also worked with Mr. Richards in the past without incident, and had good reason to rely on his representations.

[29] Although no aggravating factors were recommended by Transport Canada officials, there were several factors that could be considered to preclude the lowering of penalties. First, Transport Canada did not charge Freefall for all flights that were in contravention. Furthermore, Mr. Richards initially advised Mr. Thompson that Freefall had all necessary certificates, but thought the $600 fee was "ridiculous". Mr. Richards attempted to mislead the investigation by providing inconsistent stories to the investigator. Finally, Mr. Richards informed IFAW that Freefall had all the necessary certificates but in reality, it did not hold a Foreign Air Operator Certificate - Free Trade Agent ("FAOC-FTA") nor a FAOC.

[30] The Minister argues that this Tribunal has recognized that the violation of section 700.02 is a serious offence, and its contravention constitutes a threat to passenger safety: Tomassini.

[31] With regard to Freefall's grounds of appeal, the Minister submits that they should all be dismissed. The Minister has proved on a balance of probabilities that the elements of the offence were met, and that Freefall was operating an air transport service. The nature of the relationship between Freefall and IFAW was that of a charter, as Freefall failed to prove that a valid lease existed within the meaning of Canadian aviation law. There were no errors made by the Review Member regarding any transfer of burden of proof to Freefall. Through the testimonies of Mr. Thompson, Ms. Jacobson and Ms. Zaat, the Minister proved that the elements of the lease were missing from the contract that existed between Freefall and IFAW, such as the absence of a written contract, no transfer of legal custody and control, no transfer of responsibility for the maintenance of the aircraft from Freefall to IFAW and Freefall did not provide evidence to the contrary.

[32] The testimonies of Ms. Jacobson and Mr. Chanda were proof that the flights were operated for the purpose of transporting persons, personal belongings and goods between two points, and the testimony of Ms. Jacobson and Ms. Zaat were proof that Freefall was paid in full for those services. The testimonies of Ms. Jacobson, Ms. Zaat and Mr. Thompson also showed that IFAW was relying on Freefall to provide them with a service that included an aircraft, a qualified pilot, and all the elements associated with a charter. IFAW did not have a separate contract with the pilot, and IFAW believed that he would be paid by Freefall as part of the contract that it held with Freefall.

[33] The Minister also submits that it is irrelevant to the case at hand that there was no aerial cinematography taking place on any of the flights in question. The testimonies of Ms. Jacobson and Mr. Chanda showed that the flights were for the purpose of transporting passengers, their luggage and equipment for example.

[34] Additionally, Freefall failed to establish it exercised due diligence. In Lee v. Canada (Minister of Transport), 2008 TATCE 8 (Review), file no. W-3287-33, the Review Member provided details on the concept of due diligence by referring to the definition in Black's Law Dictionary:

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.

[35] Freefall did not demonstrate that it exercised prudence in avoiding the contravention. It did not demonstrate any attempts to obtain appropriate documentation from Transport Canada, nor did it contact Transport Canada to discuss the nature of its trip and what Regulations it needed to comply with.

[36] To the contrary, Freefall showed that it was aware of the regulatory requirements in Canada, and despite being questioned by IFAW as to whether or not it had the proper documentation to operate in Canada, in relation to Mr. Jacobson's testimony and documentary evidence, it proceeded with its flights without having applied for or even enquired about obtaining any type of FAOC.


IV. ANALYSIS

[37] The issues to be determined on these Appeals are as follows:

  1. What is the appropriate standard of review?

  2. Did the Review Member err in finding that on a balance of probabilities Freefall contravened subsection 700.02(1)? More particularly, did the Review Member err in her application of the burden of proof? Was her analysis of the facts with regard to the elements of the contravention unreasonable or unsupported by the evidence?

  3. Did the Review Member err in determining that Freefall failed to establish it exercised due diligence? and

  4. Did the Review Member err in reducing the monetary penalty on the basis of inappropriate mitigating factors?

1. What is the appropriate standard of review?

[38] The questions on Appeal are mostly questions of mixed fact and law. In Dunsmuir v. New Brunswick, 2008 SCC 9 at para. 57, the Supreme Court of Canada (SCC) stated that it is unnecessary to repeat a standard of review analysis if the question has already been previously determined. In Billings Family Enterprises Ltd. v. Canada (Minister of Transport), 2008 FC 17, Justice Harrington addressed the appropriate standard of review applicable to decisions of the Tribunal and the level of deference owed to a Review Member by the Tribunal Appeal Panel. In Billings, provisions of the Aeronautics Act ("Act") as well as section 700.02 of the CARs, were at issue. Justice Harrington concluded that the Tribunal Appeal Panel owed Review Members considerable deference on findings of fact and issues of credibility. In Dunsmuir, the SCC collapsed the standard of patent unreasonableness and reasonableness simpliciter into one standard: reasonableness. So long as the decision on review is within a range of reasonable outcomes based on the evidence, a reviewing body should not interfere: Dunsmuir at para. 72.

[39] The Appeal Panel would also point out that the issue of whether factual circumstances constituted a mitigating factor is an issue of mixed fact and law, and is therefore reviewable on the reasonableness standard.

[40] Finally, subsection 8.1(3) of the Act provides that on Appeal, the Appeal Panel may dispose of the appeal by dismissing it or allowing it and, in allowing the appeal, the Appeal Panel may substitute its decision for the Determination appealed against.

2. Did the Review Member err in finding that on a balance of probabilities Freefall contravened subsection 700.02(1)? More particularly, did the Review Member err in her application of the burden of proof? Furthermore, was her analysis of the facts with regards to the elements of the contravention unreasonable or unsupported by the evidence?

[41] Subsection 700.02(1) of the CARs reads as follows:

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.

[42] It is through a combination of definitions that one can discern what it means to operate an air transport service. The expression "air transport service" is defined in subsection 101(1) of the CARs as 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. A "commercial air service" is defined in subsection 3(1) of the Act as "any use of aircraft for hire or reward". Finally "hire or reward" is defined by the same subsection of the Act to mean "any payment, consideration, gratuity or benefit, directly or indirectly charged, demanded, received or collected by any person". The definition of person includes a corporation as set out in section 35 of the Interpretation Act.

[43] The definition of "commercial air service" adopts the phrase "any use of an aircraft". Such wording is rather broad and implies an intention, on behalf of the legislative drafters, to capture a myriad of potential commercial activities involving aircraft. The definition of "hire or reward" is also telling. It covers any situation where consideration was received for the "use of an aircraft". It should be noted however that both subsection 700.02(1) and the definition of "air transport service" refer to the activity of "operating" or the verb "operate" in relation to the service, namely the use of an aircraft for the purpose of transporting persons, belongings, baggage, goods or cargo between two points for hire or reward. In other words, an entity charged must be the same entity "operating" the air transport service. [emphasis added]

[44] The combined effect of these definitions exhibits a legislative intent to be inclusive and wide in scope, while at the same time targeting the operator or the persons having control over the use of the aircraft so that the safety of the passengers and crew is paramount and is assured through the adherence to both the spirit and intent of Canada's aviation regulatory regime as espoused by the Minister of Transport. If we attempt to combine all of the above definitions, section 700.02 can be understood in the following manner:

No person or corporation shall operate or use in any way an aircraft for the purpose of transporting persons, personal belongings, baggage, goods or cargo between two points for hire or reward unless the person or corporation holds and complies with the provisions of an air operator certificate that authorizes such person or corporation to operate that service.

[45] Based on the evidence before us, there is no doubt that an aircraft was used for hire or reward. In the view of the Appeal Panel, when an aircraft is leased and when passengers and/or goods are carried between two points, as in the present case, it is either the title owner (lessor) or the lessee who is using the aircraft for the purpose of transportation. In our view, once an owner leases his aircraft, has no operational control over the aircraft during any and all flights, does not provide the crew members, fuel, maintenance and airworthiness, he is then no longer accountable for the safety of the flight and transfers the operation to the lessee. Consequently, the question to be answered in the present case is who operated the air transport service, Freefall or IFAW?

[46] In her Determination, the Review Member rightfully indicated that a major issue to be determined was whether Freefall was the operator of the flights that are subject to the monetary penalty. [emphasis added] In this respect, she referred to the definition of "operator" in the CARs which defines an operator as "the person who has legal custody and control of the aircraft as owner, lessee, or otherwise." The Review Member then analysed the definition of a "lease" under section 203 of the CARs and decided that in the present case, the agreement between Freefall and IFAW was a charter agreement and did not meet the legal requirements of a lease under the CARs. Therefore, she concluded that the legal custody and control of the aircraft remained with Freefall.

[47] We believe that the Review Member did not err in referring to the definition of "operator" and thus we turn to the concept of "legal custody and control". The concepts of operating and operator are intrinsic to the meaning of subsection 700.02(1). However, the definition or the conditions for the qualification of a lease as found in section 203.01 of the CARs are provided for the purpose of registration of an aircraft and do not apply in the determination of whether an air transport service was operated or not pursuant to subsection 700.02(1) of the CARs.

[48] While the existence of a valid lease under section 203 of the CARs is not a condition for the application of subsection 700.02(1), the existence of a formal lease comprising the elements suggested in section 203 of the CARs would obviously assist the Tribunal in determining who had the custody and control of the aircraft in the circumstances for the purposes of subsection 700.02(1) of the CARs.

[49] The Review Member consequently did not have to apply the definition or the strict requirements of a "lease" as found in section 203.01 of the CARs for the purposes of subsection 700.02 of the CARs. In addition, subsection 203.02(1) clearly states that section 203 does not apply to foreign air operators leasing foreign aircraft.

[50] With that said, it is this Appeal Panel's view that the determination of whether subsection 700.02(1) is applicable involves an examination of who was in fact "operating" the air transport service. In other words, the essential issue is not whether a valid lease existed, but whether Freefall is guilty of the actus reus of the offence, namely the operation of an air transport service. To that effect, did the Minister prove that Freefall was the operator of the aircraft.

[51] The Minister was entitled to rely on public records and once the Minister proved that Freefall was the registered owner of the aircraft in the USA and had no FAOC to operate in Canada, Freefall had the burden to prove an arrangement, dry lease or otherwise, providing for the transfer of the custody or control of the aircraft to IFAW for the flights in question, but it failed to do so.

[52] This notion was recognized in Billings where three corporations owned by Mr. Billings were fined for various contraventions of the Act, including subsection 700.02(1) of the CARs. Mr. Billings argued that one of the aircraft was actually leased to another corporation, and therefore his corporation should not be held liable. In dismissing the applicant's argument, Justice Harrington concluded that the CARs presume that the registered owner has legal custody and control of the aircraft. He stated:

In aeronautics, where many aircraft are leased, the two concepts [registered owner and title holder] are quite distinct. Section 3 of the Act identifies a "registered owner" as a "person to whom a certificate of registration for the aircraft has been issued by the Minister". The registered owner may or may not have title to the aircraft, but is supposed to have legal custody and control thereof (See: CAR 202.35).

[53] The Federal Court concluded that absent any legally valid notice of a change in custody and control, there was no requirement under subsection 700.02(1) for the Minister to seek out the operator of the aircraft. Even if his interpretation was incorrect, Justice Harrington was of the view that Transport Canada discharged its burden. The Minister was entitled to rely on public records, and could not be expected to determine the nature of the contractual relationships between private corporations to determine who had legal custody and control of the aircraft. That knowledge was in the exclusive control of Mr. Billings. Had Mr. Billings properly executed a valid lease pursuant to the CARs, his argument may have succeeded; however, he did not comply. This decision of the Federal Court shows that the registered owner of an aircraft is presumed to have legal custody and control over its aircraft. Absent any evidence to the contrary, Transport Canada is entitled to rely on public records to discharge its burden of proof. We are of the opinion that even if the Federal Court in Billings was dealing with Canadian aircraft, its rationale is applicable to a foreign aircraft used in Canada.

[54] In the present case, for the purposes of enforcement, the most reliable way for Transport Canada to identify foreign aircraft is through the aircraft's registration. Indeed, in his testimony, Mr. Thompson indicated that in order to identify Freefall's aircraft, he had to conduct a computerized search and then contact the FAA to determine the registered owner of the aircraft (Transcript at 21, lines 9-16). There was no other legal indication to Transport Canada that the aircraft was in the custody or control of another entity. In addition, the Minister proved that Freefall did not have an FAOC authorizing it to operate an air transport service in Canada. As such, it is the Appeal Panel's view that the Minister of Transport discharged its duty and that then, the burden fell upon Freefall to prove otherwise.

[55] Freefall argues that the validity of their leasing arrangement should be determined by the laws of the USA. It alleges that it had a valid dry-lease. Their portrayal of American law is that they could not be held liable once an aircraft was dry-leased to another party. It should be mentioned at this juncture that no written agreement was produced by Freefall into evidence. The Review Member had found that the arrangement between Freefall and IFAW was fluid and of a casual nature taking place primarily over emails. The words "lease" and "charter" were used interchangeably in these emails.

[56] In the view of the Appeal Panel, the Review Member correctly pointed out that subsection 4(1) of the Act states that the Act applies to "all persons and to all aeronautical products and other things in Canada". Foreign legislation, and in this case, American law is not relevant for the purposes of subsection 700.02(1) since the scope of Part 1 of the Act also applies to foreign air carriers. In effect, the qualification of the true nature of the relationship is not necessary for the purpose of subsection 700.02(1) of the CARs. So as long as Freefall used its aircraft to transport passengers and/or goods in Canada, the Act and the CARs apply.

[57] The Review Member concluded that a person has legal custody and control of an aircraft if that person has complete responsibility for the operation and maintenance of the aircraft. To that effect, the Review Member referred to Division IV of Subpart 2 (transfer of legal custody and control) of the CARs and more particularly subsection 202.35(3) dealing with the cancellation of an aircraft registration when the legal custody and control is transferred. Although subsection 202.35(3) is in reference to aircraft registration, the concept of legal custody and control of an aircraft as referred to in this subsection reflects the legislator's intent to determine what are the elements constituting legal custody and control under Canadian aviation law. In order to transfer legal custody and control of an aircraft, requirements must consequently be met since the CARs put important responsibilities on the person who has the legal custody and control of the aircraft as it is a person having an important and direct involvement in the safety of the flights of such aircraft. The aviation industry is heavily regulated, so if a person or corporation wishes to rely upon an agreement to avoid the liability related to the custody and control of an aircraft, proper legal steps must be taken to ensure that legal custody and control were clearly transferred. The casual arrangement between Freefall and IFAW simply did not meet those requirements. The Review Member was correct in concluding that there was no transfer of the legal custody and control of the aircraft; her interpretation of the facts in this regard was reasonable and her conclusion was supported by the evidence and more particularly by the lack of evidence from Freefall.

[58] In effect, as explained by the Review Member, there was no evidence of any responsibility for maintenance being transferred to IFAW and no evidence was presented to the effect that IFAW was responsible for the whole operation of the aircraft.

[59] The Review Member also concluded that there was conflicting evidence as to whether the pilot was paid for his services by Freefall or whether he was an employee of Freefall. More particularly, she stated that the evidence of whether the pilot was paid or not was inconsistent and based mostly on hearsay. She assigned it very little weight, and concluded that whether or not the pilot was an employee, he was acting on Freefall's behalf. To reach this conclusion, she relied on the fact that he was introduced to IFAW by Mr. Richards and was authorized to use Freefall's credit card to purchase fuel.

[60] Freefall suggests that IFAW was providing its own pilot. It underlines that there was no evidence presented that the pilot had been paid by Freefall or was an employee, agent or representative of Freefall. To support its argument, Freefall distanced itself from the pilot, Mr. Norregaard, by stating that he was a volunteer who was not employed by them, nor their agent or representative. Evidence however shows that IFAW was relying on Freefall to provide them with a qualified pilot along with the aircraft, fuel, airworthiness and the documentation to operate in Canada. Freefall suggested Mr. Norregaard fly the aircraft and IFAW accepted. IFAW did not have a separate contract with the pilot and believed that his fees were included in the hourly rate quoted and that the pilot had been paid by Freefall as part of the agreement it concluded with IFAW. Mr. Norregaard never testified at the hearing. Despite Freefall's claims, the pilot had greater ties to Freefall than it did to IFAW. Without Freefall, IFAW would have never known who Mr. Norregaard was. It is our view that the Review Member's conclusion that Mr. Norregaard was acting on behalf of Freefall was reasonable.

[61] Freefall also suggests that it was not made aware of any movements of the aircraft. It was IFAW who determined and dictated where the aircraft would fly. IFAW had authority over the flights according to Freefall. Although IFAW dictated where the aircraft would go, that is to be expected of clients who hire private air carriers. That alone does not make IFAW the aircraft operator. In addition, although it is unusual for clients to pay airport landing fees, given the charitable nature of this entire endeavour and the reduced rates enjoyed by IFAW, it makes sense that such an arrangement was agreed upon between the parties. This fact still does not render IFAW the operator.

[62] We find that Freefall failed to discharge its burden of proving that it transferred the legal custody and control of the aircraft to IFAW. More particularly, the fact that the fuel was included in the hourly rate in the agreement between Freefall and IFAW; that IFAW had no separate agreement with the pilot; that there was no evidence that maintenance and airworthiness were transferred to IFAW; that IFAW did not apply for the registration of the aircraft; and that Freefall did not notify Transport Canada that it had transferred legal custody and control of the aircraft were all indications, in the Appeal Panel's view, that Freefall remained in custody and control of the aircraft and that IFAW was not the operator of the aircraft.

[63] With that said, it is now necessary to examine whether the other elements of subsection 700.02(1) were satisfied. In effect, there are two components to Freefall's argument that subsection 700.02(1) does not apply to it. The first component that was analyzed above relates to the doer; Freefall argues that IFAW operated the aircraft, and that argument is rejected. The second component is that the operation was not for the purpose of transporting goods or passengers.

[64] Freefall argues that the definition of an air transport service implies an element of intent. Freefall's intention was to conduct aerial cinematography, not transport goods or passengers. Freefall also argued that the proper interpretation of subsection 700.02(1) should involve a characterization of the overall purpose of the flights, not each flight separately. It argued that such an interpretation would mean that the purpose of the flight would change depending on whether the camera was rolling or not.

[65] The Review Member rejected this latter argument on the basis that when there was no aerial filming, the dominant purpose of the flight became transportation. The Review Member examined each count separately, and determined that the purposes of the contravening flights were not aerial photography, but transporting passengers and equipment.

[66] In the Appeal Panel's view, although Freefall may not have intended to operate an air transport service, that is irrelevant to subsection 700.02(1) and the definition of an air transport service. The definition clearly imports a geographical and temporal boundary for the determination of a flight's purpose. One must look at what the dominant purpose of the flight was "between two points". Thus, although Freefall may not have intended to transport goods, if the dominant purpose of the flight from the time of take-off to the time of landing was to transport passengers or items, then one of the criteria of the definition is satisfied. The intention of the parties is not essential to the definition.

[67] The Appeal Panel notes the distinction in the CARs between an "air transport service" and "aerial work". Aerial work is defined in subsection 101.01(1) of the CARs as "a commercial air service other than an air transport service or a flight training service." In the conduct of aerial work (which would include aerial photography/cinematography), subsection 702.16 permits the carriage of passengers that are "essential" to the flight. The CARs do not provide a definition of what constitutes an essential passenger. In the view of the Appeal Panel, any passenger whose presence is necessary for the completion of the aerial work constitutes an essential passenger. If no aerial work (in this case, no filming) is being conducted on any given flight, then no passengers are permitted. This narrow interpretation is harmonious with the overall scheme of the Act and the CARs. The carriage of passengers is heavily regulated and requires licenses and approvals from the Minister. The safety of the public is an obvious concern behind these Regulations.

[68] With that said, it is necessary to determine what is the dominant purpose of the flights that are alleged by the Minister to be in contravention of subsection 700.02(1).

[69] Counts 1 and 2 were flights which occurred on March 23, 2007, from New York to Saint John and then to Charlottetown. On board the flight was the pilot and Mr. Chanda, the cameraman. No filming took place. It appears that the dominant purpose of the flight was to transport the cameraman and equipment to Canada. The Appeal Panel agrees with the conclusion of the Review Member that in the absence of any filming, the dominant purpose of this flight was transportation of a passenger and equipment.

[70] Count 3 involved a flight from Charlottetown to Deer Lake on April 3, 2007. Both Mr. Chanda and Ms. Jacobson were on board. No filming took place. Again, the purpose of the flight was to transport the passengers.

[71] Count 4 involved a flight on April 7, 2007, between Charlottetown and Saint John on which Mr. Chanda, Ms. Jacobson, and two other IFAW representatives, Sheryl Fink and Darcy Callaghan, were on board. Ms. Jacobson testified that the purpose of this flight was to move the crew from Deer Lake, Newfoundland, back to Charlottetown. No filming took place. It was feared that the additional latter two passengers would be stranded due to an oncoming storm, so they were boarded onto the flight (Transcript p. 255). The Appeal Panel concludes that the purpose of this flight was to transport passengers.

[72] Counts 5 and 6 involved flights that took place on April 9, 2007, between Charlottetown and Saint John, and onwards to the USA. Ms. Jacobson testified that no filming took place on both flights and that they were shutting down operations to return home. She specifically testified that the flight for Count 6 involved dropping her off at home.

[73] It is the Appeal Panel's conclusion that the Review Member did not err in her application of section 702.16 and the definition of "air transport service". Her conclusion that the dominant purposes of the contravening flights were to transport passengers was correct and in line with the overall scheme of the Regulations.

3. Did the Review Member err in determining that Freefall failed to establish it exercised due diligence?

[74] The SCC described the defence of due diligence in the following manner in R. v. Sault Ste. Marie, [1978] 2 S.C.R. 1299:

Offences in which there is no necessity for the prosecution to prove the existence of mens rea; the doing of the prohibited act prima facie imports the offence, leaving it open to the accused to avoid liability by proving that he took all reasonable care. This involves consideration of what a reasonable man would have done in the circumstances. The defence will be available if the accused reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent, or if he took all reasonable steps to avoid the particular event. These offences may properly be called offences of strict liability. [emphasis added].

[75] Thus, in order for Freefall to succeed, it must establish that it believed in a mistaken set of facts or that it took all reasonable steps to avoid the contravention. The Appeal Panel is of the view that there were no mistaken facts in this case. Therefore, did Freefall take all reasonable steps to avoid the contravention? The Appeal Panel is of the view that it did not. A reasonable person would have enquired into the legality of his or her operations in a foreign country. Furthermore, if Freefall wished to legally avoid liability through a lease agreement, it could have contacted Canadian authorities to enquire whether such an arrangement was sufficient to address and comply with Canadian aviation law. By making such enquiries, Freefall could have known what steps it needed to take to protect its interests and avoid any contraventions of the law.

[76] Instead, Freefall engaged in a very fluid and casual leasing arrangement with IFAW. It is difficult to conceive that any corporation could legitimately expect to avoid liability on the basis of such casual dealings. At the very least, corporations should make reasonable enquiries as to the legality of their aeronautical activities, particularly if they are dealing with a foreign country. Freefall's actions fell far short of what a reasonable corporation should have done under the circumstances. All Freefall did was warn IFAW that no passengers were to be taken aboard. It failed to explain what constituted a passenger under Canadian law. If anything, this warning illustrated that Freefall did possess some knowledge of what Canadian law required, but failed to take any further steps to ensure that it was in compliance with Canadian aviation law. Furthermore, no evidence was adduced by Freefall to the effect that it had instructed the pilot that no passengers would be allowed on board when aerial filming was not being conducted.

[77] The Appeal Panel finds that the Review Member's conclusion with regard to the availability of the defence of due diligence was reasonable. Freefall did not exercise due diligence in preventing a contravention of the CARs.

4. Did the Review Member err in reducing the monetary penalty on the basis of inappropriate mitigating factors?

[78] The Minister disputes the following considerations as being mitigating factors:

    1. The conduct of the victims: the willingness of the passengers and the fact that Ms. Jacobson dictated who she wished to be on board; Mr. Chanda having an interest in flying with his camera equipment.

    2. Special factual circumstances: the fact that Freefall did not hold itself out to the public as operating an air transport service, but was instead approached by IFAW.

[79] The Appeal Panel in Wyer outlined the principles and ideas that should inform the determination of an appropriate sanction. When selecting a proper penalty amount, the principles of denunciation, deterrence, rehabilitation, and enforcement recommendations must be considered. This list is by no means exhaustive. The Appeal Panel in Wyer further recognized that depending on the context and facts of a case, there may be certain factors that may justify increasing or decreasing a penalty amount. The Appeal Panel outlined a non-exhaustive list of mitigating and aggravating factors that may be considered. Examples of aggravating factors included dishonesty, premeditated breaches, and past record of similar offences. Examples of mitigating factors included remorse, lack of previous offences, and the impact on the aviation community. Among these mitigating factors, the Appeal Panel included the conduct of victims. Presumably, such a factor would apply in situations where the "victim's" actions facilitated the commission of the offence. For example, this factor would apply hypothetically in a situation where IFAW misled Freefall by stating that a passenger was essential for filming when he or she was not.

[80] In the present case, the Review Member relied on the conduct of the "victims" as a mitigating factor. She was of the view that IFAW's role in determining who would be on board, and the cameraman's interest in travelling with his equipment should be mitigating factors. The Minister argued that although it may be appropriate to take into consideration the conduct of the "victims", this situation was not one of them. The Appeal Panel agrees with the Minister's argument. It would be contrary to public policy to imply that members of the public bear some responsibility for ensuring compliance with the CARs. Although IFAW may have been aware that no passengers were allowed, it was the responsibility of the operator to enforce those rules. IFAW was not responsible for determining which CARs provisions applied, and who constituted a passenger on any given flight.

[81] When asked by IFAW, Freefall confirmed that it had all the necessary Canadian certificates. It was then up to Freefall through the pilot to ensure that the CARs were not contravened. At all times, IFAW had the consent of the pilot when selecting passengers. There may be situations where the "victim's" conduct would be a mitigating factor, for example, had IFAW been untruthful about whether a passenger was essential for aerial work or not. However, that is not the case here. It was also rather clear that on all the relevant flights, no aerial work was being conducted. The pilot could have easily asked Ms. Jacobson prior to each flight whether any filming would be conducted. If she answered "no", then her presence and that of any other passengers would be in violation of the CARs. The Review Member's conclusion that the conduct of the victim's on these facts was a mitigating factor is contrary to the overall scheme and intent of the Act and CARs to ensure the safety of the public. In the Appeal Panel's opinion, her conclusion is unreasonable and falls outside the range of reasonable outcomes.

[82] With regard to the second mitigating factor, the Appeal Panel is of the view that it was unreasonably taken into account by the Review Member. The issue of advertising a service that constitutes a regulatory infraction should be considered an aggravating factor and not a mitigating one. The fact that Freefall did not advertise its services cannot be considered a mitigating factor. Whether a party advertised to perform illegal activities, or agreed to do illegal activities privately does not make the illegal activity any less culpable.

[83] There was also some suggestion by the Minister that some factors should preclude the lowering of the penalties. Although we find that there were no special circumstances or mitigating factors justifying the lowering of the fines, we find it necessary to answer these additional arguments suggested by the Minister. These factors include allegations about Mr. Richards being less than forthright with the investigator, and the fact there was no evidence that Freefall did not hold itself out as an air transport service. The Appeal Panel notes that these factors rely on the Review Member's findings of fact. Although the Review Member noted that Mr. Richards' attitude was somewhat cavalier, she did not find that he had deliberately misled the investigation. Her conclusion that Freefall did not intend to operate an air transport service is supported by the evidence. The Appeal Panel cannot disturb a Review Member's findings of fact, unless the Minister proves that they were erroneous and made in a perverse or capricious manner or without regard to the evidence. Such is not the case in the appeal before us.

[84] There was also some suggestion by the Minister that the fact that Transport Canada did not charge Freefall for all the flights that it performed in contravention of subsection 700.02(1) of the CARs should preclude the lowering of the penalties. In the Appeal Panel's view, such factors do not preclude the Appeal Panel from considering any existing mitigating factors and lowering fines accordingly.

V. SANCTION

[85] Since the Appeal Panel has concluded that the Review Member erred in her consideration of mitigating factors, the Appeal Panel reinstates the Minister's original monetary penalty for a first time offence.

VI. DECISION

[86] Accordingly, the Minister's appeal is allowed, and the monetary penalty of $5 000 for each contravention totalling $30 000 assessed by the Minister is upheld. Freefall's cross-appeal is dismissed.

[87] The total amount of $30 000 is payable to the Receiver General for Canada and must be received by the Transportation Appeal Tribunal of Canada within thirty-five (35) days of service of this Decision.

June 28, 2011

Reasons for Appeal Decision: Caroline Desbiens, Member

Concurred by: J. Richard W. Hall, Chairperson

Suzanne Racine, Member