Decisions

TATC File No. MP-0031-38
MoT File No. P20091019-501-00066

TRANSPORTATION APPEAL TRIBUNAL OF CANADA

BETWEEN:

0782855 B.C. Ltd., Applicant

- and -

Minister of Transport, Respondent

LEGISLATION:
Canada Shipping Act, 2001, S.C. 2001, c. 26, ss 57(1) , para. 106(1)(a), 106(1)(c), 106(2)(a)


Review Determination
Barrie LePitre


Decision: January 23, 2012

Citation: 0782855 B.C. Ltd. v. Canada (Minister of Transport), 2012 TATCE 4 (Review)

Heard in Vancouver, British Columbia, on October 18, 2011

Held: The Minister of Transport has not proven, on a balance of probabilities, that the Applicant, 0782855 B.C. Ltd., violated the relevant provisions of the Canada Shipping Act, 2001 as alleged in the Notice of Violation. Violation No. 1, Violation No. 2, Violation No. 3, and Violation No. 4 have not been proven and the penalty for each is dismissed.

I. BACKGROUND

[1] The Notice of Violation, which was the subject of the Hearing, is dated October 19, 2009. The Notice of Violation was addressed to 0782855 B.C. Ltd.

[2] In Schedule "A" to the Notice of Violation, the details and penalties for the violations alleged by the Minister of Transport ("Minister") were specified as follows:

No.

Violation

Penalty

1

On or about August 14, 2009 at or near the City of Vancouver, in the Province of British Columbia, 0782855 B.C. Ltd. doing business as Just Chillin' Fishing Charters Ltd. being the authorized representative of a Canadian vessel, namely, MV Just Chillin', failed to ensure that the vessel and its machinery and equipment are inspected for the purpose of obtaining all the Canadian maritime documents that are required under Part 4 of the Canada Shipping Act, 2001 thereby contravening paragraph 106(2)(a) of that Act.

In particular, the vessel MV Just Chillin' engaged on a voyage without being inspected for the purpose of obtaining an inspection certificate required by subsection 10(2) of the Vessel Certificates Regulations.

$6,000.00

2

On or about August 14, 2009, at or near the City of Vancouver, in the Province of British Columbia, 0782855 B.C. Ltd. doing business as Just Chillin' Fishing Charters Ltd., being the authorized representative of a Canadian vessel, namely, MV Just Chillin', failed to ensure that the passengers received safety training thereby contravening paragraph 106(1)(c) of the Canada Shipping Act, 2001.

In particular, the safety briefing required by subsection 110.1(3) of the Life Saving Equipment Regulations was not conducted.

$6,000.00

3

On or about August 14, 2009 at or near the City of Vancouver, in the Province of British Columbia, 0782855 B.C. Ltd. doing business as Just Chillin' Fishing Charters Ltd. being the authorized representative of a Canadian vessel, namely, MV Just Chillin', failed to ensure that the vessel and its machinery and equipment met the requirements of the regulations made under Part 4 of the Canada Shipping Act, 2001 thereby contravening paragraph 106(1)(a) of that Act.

In particular, the vessel did not carry life rafts as required by section 94 of the Life Saving Equipment Regulations.

$6,000.00

4

On or about August 14, 2009 at or near the City of Vancouver, in the Province of British Columbia, 0782855 B.C. Ltd. doing business as Just Chillin' Fishing Charters Ltd. being the authorized representative of a Canadian vessel, namely, MV Just Chillin', failed to ensure that the vessel was marked with its official number and any other information in the form and manner specified by the Chief Registrar, thereby contravening subsection 57(1) of the Canada Shipping Act, 2001.

$3000.00

In Schedule "A" to the Notice of Violation, the allegations are against "0782855 B.C. Ltd. doing business as Just Chillin' Fishing Charters Ltd." In the Notice of Hearing with respect to this matter, the style of cause named "0782855 B.C. Ltd. d.b.a. Just Chillin' Charters Ltd." as the Applicant. Seeing that the Notice of Violation was addressed to "0782855 B.C. Ltd.", the style of cause in the Review Determination and Reasons with respect to this matter names "0782855 B.C. Ltd." as the Applicant.

II. STATUTES, REGULATIONS AND POLICIES 

[3] Paragraph 44(g) of the Interpretation Act, R.S.C. 1985, c. I-21 provides as follows:

44. Where an enactment, in this section called the "former enactment", is repealed and another enactment, in this section called the "new enactment", is substituted therefore,

(g) all regulations made under the repealed enactment remain in force and are deemed to have been made under the new enactment, in so far as they are not inconsistent with the new enactment, until they are repealed or others made in their stead; …

[4] Subsections 15(1), 15(2) and 19(1) of the Transportation Appeal Tribunal of Canada Act, S.C. 2001, c. 29 (the "TATC Act") provide as follows:

15. (1) Subject to subsection (2), the Tribunal is not bound by any legal or technical rules of evidence in conducting any matter that comes before it, and all such matters shall be dealt with by it as informally and expeditiously as the circumstances and considerations of fairness and natural justice permit.

(2) The Tribunal shall not receive or accept as evidence anything that would be inadmissible in a court by reason of any privilege under the law of evidence.

19. (1) The Tribunal may award any costs, and may require the reimbursement of any expenses incurred in connection with a hearing, that it considers reasonable if

(a) it is seized of the matter for reasons that are frivolous or vexatious;

(b) a party that files a request for a review or an appeal and does not appear at the hearing does not establish that there was sufficient reason to justify their absence; or

(c) a party that is granted an adjournment of the hearing requested the adjournment without adequate notice to the Tribunal.

[5] At the time of the alleged violations, section 2 of the Canada Shipping Act, 2001 ("Act") included the following applicable definitions:

"authorized representative" means, in respect of a Canadian vessel, the person referred to in subsection 14(1) and, in respect of a foreign vessel, the master.

"bare-boat charter" means a vessel charter agreement under which the charterer has complete possession and control of the vessel, including the right to appoint its master and crew.

"Canadian maritime document" means a licence, permit, certificate or other document that is issued by the Minister of Transport under Part 1 (General), 3 (Personnel), 4 (Safety), 9 (Pollution Prevention — Department of Transport) or 11 (Enforcement — Department of Transport) to verify that the person to whom or vessel to which it is issued has met requirements under that Part.

"Canadian vessel" means a vessel registered or listed under Part 2 (Registration, Listing and Recording).

"passenger" means a person carried on a vessel by the owner or operator, other than

...

(b) a person carried on a vessel that is not a Safety Convention vessel who is

(i) the master, a member of the crew or a person employed or engaged in any capacity on board the vessel on the business of that vessel, or

(ii) a guest on board the vessel, if the vessel is used exclusively for pleasure and the guest is carried on it without remuneration or any object of profit…

"pleasure craft" means a vessel that is used for pleasure and does not carry passengers, and includes a vessel of a prescribed class.

"Safety Convention vessel" means a vessel in respect of which the International Convention for the Safety of Life at Sea, listed in Schedule 1, applies.

[6] Section 210 of the Act provides the applicable definition for "relevant provision":

"relevant provision" means a provision of this Act or the regulations that the Minister is responsible for administering ….

[7] Subsection 57(1), paragraphs 106(1)(a), 106(1)(c) and 106(2)(a), subparagraph 229(1)(b)(i), subsection 232(1), section 232.1 and paragraphs 244(f) and (h) of the Act provide as follows:

57.(1) The authorized representative of a Canadian vessel shall, in the form and manner specified by the Chief Registrar, mark the vessel with its official number and any other information that the Chief Registrar specifies.

106.(1) The authorized representative of a Canadian vessel shall

(a) ensure that the vessel and its machinery and equipment meet the requirements of the regulations made under this Part;

(c) ensure that the crew and passengers receive safety training.

(2) The authorized representative of a Canadian vessel shall ensure that

(a) the vessel and its machinery and equipment are inspected for the purpose of obtaining all of the Canadian maritime documents that are required under this Part…

229.(1) If the Minister has reasonable grounds to believe that a person or vessel has committed a violation, the Minister may

(b) issue, and cause to be served on the person or vessel, a notice of violation that names the person or vessel, identifies the violation and sets out

(i) the penalty, fixed by or within the range fixed by the regulations made under this Part, for the violation that the person or vessel is liable to pay,

232.(1) A person or vessel served with a notice of violation under paragraph 229(1)(b) must

(a) pay the amount of the penalty; or

(b) within thirty days after being served or any further time that the Tribunal on application allows, file with the Tribunal a written request for a review of the facts of the violation or the amount of the penalty.

232.1(1) On receipt of a request filed under paragraph 232(1)(b), the Tribunal must appoint a time and place for the review and must notify the Minister and the person who, or vessel that, filed the request of the time and place in writing.

(2) The member of the Tribunal assigned to conduct the review must provide the Minister and the person or vessel with an opportunity consistent with procedural fairness and natural justice to present evidence and make representations.

(3) The burden is on the Minister to establish that the person or vessel committed the violation referred to in the notice. The person is not required, and must not be compelled, to give any evidence or testimony in the matter.

(4) The member may confirm the Minister's decision or, subject to any regulations made under paragraph 244(h), substitute his or her own determination.

244. The Governor in Council may, on the recommendation of the Minister, make regulations for carrying out the purposes and provisions of this Part, including regulations

(f) designating as a violation that may be proceeded with in accordance with sections 229 to 242 the contravention of a relevant provision that is an offence under this Act;

(h) designating violations that may be proceeded with by issuing notices of violation and fixing a penalty or a range of penalties in respect of each such violation, up to a maximum of $25,000 but in any event not greater than the maximum fine if the violation were proceeded with by way of summary conviction;

[8] Paragraphs 9(1)(b) and 9(2)(a) and section 10 of the Vessel Certificates Regulations, SOR/2007-31, ("VCRs"), provide as follows:

9.(1) Sections 10 and 11 apply in respect of the following Canadian vessels if they are not Safety Convention vessels:

(b) vessels of more than 15 gross tonnage;

(2) Sections 10 and 11 do not apply in respect of

(a) pleasure craft…

10. (1) No vessel shall engage on a voyage unless it holds a certificate issued under subsection (2).

(2) On application by the authorized representative of a vessel, the Minister shall issue an inspection certificate to the vessel if the requirements under the Act that apply in respect of the vessel when engaged in its intended service are met.

[9] The portion of subsection 2(1), that relates to the definition of "complement", paragraphs 3(b) and 5(j), section 94 and subsections 110.1(3) and 110.1(4) of the Life Saving Equipment Regulations, C.R.C. c. 1436, ("LSERs") provide as follows:

2. (1) The definitions in this subsection apply in these Regulations.

"complement" means

(a) in respect of a ship, the number of persons authorized to be carried under the inspection certificate issued for the ship…

3. These Regulations do not apply in respect of

(b) pleasure craft;

5. For the purposes of these Regulations, ships are divided into the following classes:

(j) Class X consists of ships that are over 15 tons gross tonnage, are not Safety Convention ships and are not certified to carry passengers, or are certified to carry 12 or fewer passengers, on home-trade voyages, Class II, home-trade voyages, Class III, home- trade voyages, Class IV, inland voyages, Class I, inland voyages, Class II, minor waters voyages, Class I, or minor waters voyages, Class II…

94. A Class X ship that is not a tanker shall carry, on each side of the ship, enough life rafts to accommodate the complement.

110.1(3) Every passenger ship shall make an announcement for the information of passengers before the ship leaves any place where passengers embark.

(4) The announcement shall

(a) specify the location of lifejackets;

(b) in each area of the ship, inform the passengers in that area of the location of lifejackets that are closest to them;

(c) specify the location of survival craft and muster stations; and

(d) in each area of the ship, inform the passengers in that area of the location of survival craft that are closest to them.

[10] Subsections 2(1) and (2) of the Administrative Monetary Penalties Regulations, SOR/2008-97 ("AMPRs"), provide as follows:

2.(1) The contravention of a provision of the Act set out in column 1 of the schedule is designated as a violation that may be proceeded with in accordance with sections 229 to 242 of the Act and by the issuance of a notice of violation.

(2) The range of penalties set out in column 2 of the schedule is the range of penalties in respect of a violation set out in column 1.

[11] The Schedule to the AMPRs sets out the penalty ranges for the following applicable provisions of the Act:

(1) For subsection 57(1), the range of penalties is from $600 to $10 000;

(2) For paragraphs 106(1)(a), 106(1)(c) and 106(2)(a), the range of penalties is from $1 250 to $25 000.

III. EVIDENCE

[12] During the Hearing, the Applicant's Representative and Minister's Representative raised a number of objections (as noted below) regarding the admissibility or reliability of portions of the evidence. Subsections 15(1) and (2) of the TATC Act provide that the Tribunal is not bound by any legal or technical rules of evidence in conducting any matter that comes before it and that all matters that come before it are to be dealt with by it as informally and expeditiously as the circumstances and considerations of fairness and natural justice permit, subject to the proviso that the Tribunal shall not receive or accept as evidence anything that would be inadmissible in a court by reason of any privilege under the law of evidence. None of the objections were on the grounds of privilege. The Member has considered the objections in determining the weight to be given to the evidence over which objections were raised.

A. Minister

(1) Captain Khushru Irani

[13] Captain Khushru Irani is a Senior Marine Inspector, with Compliance and Enforcement, Transport Canada, in Vancouver. He authorized the Vancouver Police Department's Marine Unit ("VPDMU") to conduct an undercover operation involving the vessel Just Chillin' on August 14, 2009.

[14] The Minister's Representative and Applicant's Representative agreed that a copy of a Transcript of Registry from Transport Canada's Ship Registration Computer System in respect of the vessel Just Chillin', dated October 19, 2009, be admitted into evidence and the Applicant's Representative assented to its correctness except for dated mortgage information and missing information about the year when the vessel was built (Exhibit M-1). It shows information about the vessel as follows: name – Just Chillin'; port of registry – Vancouver; type – Pleasure Craft; gross tonnage – 37.97 tons; owner – 0782855 B.C. Ltd.; and authorized representative – 0782855 B.C. Ltd.

[15] Captain Irani also identified a copy of a B.C. Company Summary for 0782855 B.C. Ltd., dated October 7, 2009 and showing a currency date of September 18, 2009. The Applicant agreed that the copy of the Summary be admitted into evidence for the truth of its contents (Exhibit M-2). The Summary shows information about 0782855 B.C. Ltd. as follows: Directors – Albert Scott Dore and Hilary Dore; President – Albert Scott Dore; and Secretary – Hilary Dore.

[16] Captain Irani also identified a copy of a Transport Canada Candidate Status Report for Albert Scott Dore. The Applicant agreed that the copy of the Report be admitted into evidence for the truth of its contents (Exhibit M-3). The Report shows that, on August 14, 2009, the Candidate held a "Master, Limited for a Vessel of less than 60 Gross Tonnage" certificate.

[17] Captain Irani identified a three-page printout of vessel specifications and pictures in respect of the vessel Just Chillin' which he found on two websites through an internet search for the vessel (Exhibit M-4). He conducted the search to see what kind of vessel it was, what it looked like, whether there were any markings on the vessel, how it was being operated and what sort of services were being provided by its owner. The Applicant objected to the evidence concerning the vessel as hearsay from an unknown source, as the witness was not the author of the websites, nor were they the Applicant's websites.

[18] Captain Irani testified that for almost a year before the undercover operation occurred, Transport Canada had been receiving complaints about vessels registered as pleasure crafts being operated with "passengers" on board, which raised safety concerns. He indicated that reports had been received about close quarter situations involving pleasure craft operating in the British Columbia ("B.C.") harbour area and B.C. waters. He indicated that two companies involved were investigated and administrative penalties were given to them. The Applicant's Representative objected on the basis that this evidence was hearsay; that the Minister's Representative had not disclosed the reports; and that there was insufficient information about which companies were involved. The Minister's Representative replied that, in R. v. Jarvis, [2002] 3 S.C.R. 757, 2002 SCC 73 and R. v. Ling, [2002] 3 S.C.R. 814, 2002 SCC 74, the Supreme Court confirmed that anonymous tips can be used for administrative or penal violations and that it is not necessary to disclose the identity of the person giving the tip.

[19] Captain Irani received a report from the Vancouver Police Department regarding the undercover operation (Exhibit M-6), as well as an email clarification regarding items not mentioned in the report (Exhibit M-5). He indicated that the report details how the Vancouver Police Department booked a charter on the vessel Just Chillin' for August 14, 2009 and that the booking was made through Cadence Luxury Yacht Charters Inc. ("Cadence"), which was doing bookings on behalf of vessel owners. The Applicant's Representative objected that these materials were only admissible to prove that they were received by Captain Irani from the Vancouver Police Department and not for the truth of their contents.

[20] A copy of an agreement, numbered 081409-001 (the "Charter Agreement"), between 0782855 B.C. Ltd., doing business as "Just Chillin' Fishing Charters Ltd.", and Steven James Glasser (the fictitious name of an undercover police officer), together with a copy of a partially redacted version of a trail of email with which the Charter Agreement was forwarded (Exhibit M-7), was also produced by Captain Irani. The Applicant's Representative agreed that the Charter Agreement be admitted for the truth of its contents, but objected to the use of a redacted version of the email.

[21] During cross-examination, Captain Irani indicated that when a vessel has been hired out on a bare-boat charter with a supplied crew, it is not viewed as a pleasure craft operation by Transport Canada. He also indicated that another factor Transport Canada considers when determining whether a vessel is being operated commercially or as a pleasure craft is whether remuneration has been paid to the operator of the vessel by any fare-payers who come aboard.

[22] Captain Irani did not go to the vessel Just Chillin' to determine whether it had the required markings. Furthermore, he did not enquire as to the expertise of the undercover police officers regarding maritime matters, but he felt that they would be knowledgeable about boats as they work in the VPDMU. The Applicant's Representative gave Captain Irani a letter dated March 10, 2009 from the Regional Director of Marine Safety, James Lawson, to Jane McIvor, who was then Executive Director of the BC Marine Trades Association ("Association"), clarifying Transport Canada's position with respect to the bare-boat chartering of pleasure craft, and which was entered into evidence (Exhibit A-1).

[23] Captain Irani indicated that he did not know the police officers were consuming alcohol while on board the vessel. Other than the report (Exhibit M-6) and the follow-up email (Exhibit M-5), he did not know what the police officers were doing while on board the vessel. The Applicant's Representative referred Captain Irani to several passages in the Charter Agreement (Exhibit M-7) regarding the rights and responsibilities of the parties to the Charter Agreement.

(2) Jane McIvor

[24] Jane McIvor indicated that her current occupation is "Principal of McIvor Communications and Publisher of B.C. Shipping News". She confirmed that she received a letter dated March 10, 2009 from Mr. Lawson (Exhibit A-1) relating to Transport Canada's position with respect to bare-boat charters and how Transport Canada distinguishes between commercial vessels and pleasure craft. She explained that the Association is an association of suppliers for recreational boating.

[25] The Minister's Representative referred to several passages in the letter that describes Transport Canada's position (Exhibit A-1) and asked Captain Irani whether he agreed with the passages. The letter describes the conditions that must be satisfied for a chartered vessel to be considered a pleasure craft as opposed to a passenger vessel. The letter indicates that the vessel must be used exclusively for pleasure; complete control of the vessel must be handed over to the charterer; and, to ensure that the charterer is not deriving a profit from the charter, the people on board the vessel must not pay any sort of fee to the charterer. The letter also states that Transport Canada considers the presence of an owner (as master or crew) on board their vessel, when it is chartered to a second party, as a strong indication that it is a passenger vessel. The Applicant's Representative objected on two grounds: that Ms. McIvor had not been qualified to give expert opinions; and that her opinion concerning Transport Canada's position is irrelevant. Ms. McIvor also indicated that after receiving the letter, the Association advised its members to write two separate contracts – one between the charterer and the charter operator, and the other between the charterer and the master – and to choose a master from a list satisfactory to the charter operator.

[26] During cross-examination, Ms. McIvor indicated that it did not matter to the Association if the second contract (between the charterer and the master) was with a master who was holding an ownership interest in the vessel.

(3) A Sergeant with the VPDMU

[27] A Sergeant with the VPDMU testified that he went aboard the vessel Just Chillin' on August 14, 2009 as part of an undercover operation requested by Transport Canada. The cover story used by the police officer (a Detective with the VPDMU) who arranged the charter boat tour was that he wanted to book it as an activity for participants in a conference. The Sergeant indicated that the fee was paid by credit card and included the master and crew.

[28] The Sergeant indicated that a safety briefing was not given to him or to the other police officers with him on the boat. He did not recall whether the vessel was marked as licensed but he referred to his notes for the operation which did not indicate the vessel was marked as licensed. The Applicant's Representative objected to the witness referring to his notes before exhausting his memory. The Sergeant then indicated that his memory had been exhausted. He was referred to his email to Captain Irani dated October 26, 2009 (Exhibit M-5) which indicates that the vessel Just Chillin' did not display any licensing markings. The Sergeant further indicated that there were not any life rafts on the vessel.

[29] During cross-examination, the Sergeant indicated that he was not involved in discussions with Cadence about the chartering of the vessel. He understood that his trip on the vessel was to be a pleasure cruise. He did not pay anyone to be on board the vessel nor did he see anyone exchanging money. He did see an envelope being passed, but he does not have any idea what was in it. The other police officers with him on board the vessel were both with the VPDMU.

[30] The Sergeant was shown a photograph of a vessel bearing the name Just Chillin', which he identified as the vessel that he boarded (Exhibit A-2). The Minister's Representative objected to the introduction of the photograph on the grounds that it had not been established by whom or when the photograph had been taken. The Sergeant confirmed that the name on the vessel he boarded was as shown in the photograph and that the vessel was configured as shown in the photograph. However, he indicated that he did not go to the engine room to look for names or markings on the vessel.

[31] The Sergeant testified that when he boarded the vessel, he indicated he was there to take part in the charter as a guest. His group brought beer and a cooler aboard it and consumed alcohol. He believes that one of the other police officers on board asked if they could fish, which the master agreed to. They also had a camera and took some pictures, which Transport Canada subsequently asked for. Some of the pictures were printed from the camera but others could not be found. The Sergeant agreed that they were pictures of three guys out on a fishing trip, having fun and drinking a few beers.

[32] During re-examination, the Sergeant indicated that he is familiar with the proper location for licensing markings on a vessel. Lastly, he was not instructed by the master as to where the life-saving equipment was located.

B. Applicant

(1) Scott Dore

[33] Scott Dore, the Master for the vessel Just Chillin' on August 14, 2009, indicated that he and his wife are equal shareholders in a numbered company, which owns the vessel Just Chillin', and that the company does not have any employees. (Mr. Dore's surname was spelled "Dores" in the Transcript of the Hearing as it was the spelling heard, but the surname "Dore" appears in Exhibits M-2 and M-3, which are government documents.)

[34] Mr. Dore indicated that the vessel had twenty-one adult and three child or infant life jackets on board on August 14, 2009. He was shown three photographs which he indicated as depicting life jackets on board the vessel on August 14, 2009 (Exhibits A-3[1], A-3[2] and A-3[3]).

[35] Mr. Dore was shown two photographs which he described as depicting two of four cameras on the vessel that monitor activities on board (Exhibits A-4[1] and A-4[2]). He indicated that the readout for the cameras is at the helm of the vessel and that, on the day in question, he was able to observe the activities of the guests on the readout. He indicated that the guests spent most of their time in the cockpit area where they drank beer and fished and that they came up to the bridge to snap a couple of pictures. He did not see them in the engine room where one of the four cameras is located. He indicated that the vessel is marked with its official number and tonnage figures in the engine room, indicating that it was marked as such on August 14, 2009.

[36] Mr. Dore was shown two photographs which he described as showing a bulkhead in the engine room (Exhibits A-5[1] and A-5[2]). He indicated that he believes the markings in the photographs are in accordance with Transport Canada requirements. He indicated that when he registered the vessel, a man on the fourth floor of the Registry told him to epoxy brass letters to the hull. The Minister's Representative objected to that evidence as hearsay and the Applicant's Representative replied that it is first-hand evidence of what Mr. Dore was told by a representative of Transport Canada. Mr. Dore stated that the letters shown in the photographs are affixed by epoxy to the bulkhead of the vessel's hull.

[37] Mr. Dore indicated that the vessel Just Chillin' had been chartered on other occasions prior to August 14, 2009, and that he had not always been on board or operated the vessel as master on those occasions. He indicated that the master is determined at the request of the charterer. He further indicated that Cadence had contacted him on August 13, 2009, asking if the vessel was available for the next day and telling him that the charterer was requesting a master. Mr. Dore indicated that when a charterer wants to operate the vessel, there is a process of about five hours to determine if they are qualified to operate the vessel and, when a charterer does not want to operate the vessel, the charterer provides a master unless the charterer requests that a master be provided. When a charterer requests that a master be provided and when he is the master, as on August 14, 2009, he is paid for his individual services as master. Mr. Dore indicated that as of August 14, 2009, his occupation included operating several pleasure craft and commercial vessels.

[38] Mr. Dore indicated that he had been advised that the charterer wanted to take a harbour tour on August 14, 2009. When the three individuals came aboard, one of them asked if they could go fishing. Mr. Dore indicated that this did not pose a problem because the charterer provides the direction as long as it is safe. Mr. Dore indicated that the three individuals asked to return to the dock after less than four hours on board.

[39] During cross-examination, Mr. Dore confirmed that he was the master and his son the crew on August 14, 2009. He indicated that he received information for the outing of August 14, 2009 from Cadence. He stated that a safety briefing is not required on a pleasure craft. He further testified that he is aware of the regime that applies to commercial vessels, under which a safety briefing is required. He does not know the name of the person at the Transport Canada Registry who told him about the licensing markings when he registered the vessel in 2007. Mr. Dore stated that it was explained to him at Transport Canada that the only visible markings required for a pleasure craft are a certain-sized letter font showing the name of the vessel on the transom of the hull; and another identifying the port of call. Other than that, the name, official number and gross and net tonnage had to be indicated somewhere on the hull. He stated that he took the photograph showing the markings in the engine room (Exhibit A-5) a few weeks before the Hearing.

[40] The Applicant's Representative, with the agreement of the Minister's Representative, introduced a three-page document containing notes from a Detective of the VPDMU, dated August 14, 2009 (Exhibit A-6). The notes describe discussions between the Detective and Cesare Verrelli from Cadence to arrange for a charter vessel and master for a four-hour harbour cruise.

IV. ARGUMENTS

A. Minister

[41] The Minister's Representative provided a binder of written submissions along with her oral arguments. The Minister's Representative submitted that 0782855 B.C. Ltd., doing business as Just Chillin' Fishing Charters Ltd., is the authorized representative of the vessel Just Chillin'. The vessel is a registered Canadian vessel and is registered as a pleasure craft. Prior to the undercover operation, Transport Canada had received complaints concerning pleasure craft being used as passenger vessels to circumvent the tougher regime applicable to the latter. Transport Canada launched the undercover operation with the Vancouver Police Department in response to these complaints and allegations.

[42] The Minister's Representative submitted that the charter coordinator, Cadence, entered into the Charter Agreement (Exhibit M-7) with the undercover officer for the charter of the vessel. The Minister's Representative also submitted that the master of the vessel at the time in question was also the owner of the vessel. Under the Charter Agreement, the base charter fee included a master for a four-hour harbour cruise. The terms of the Charter Agreement required the Charterer to engage the services of Cadence for the selection of a crew and to engage a qualified master through Cadence. The Minister's Representative submitted that this contradicts the principle that a charterer must have the right to appoint the master and crew.

[43] The Minister's Representative submitted that pleasure craft do not carry passengers. When people come aboard in exchange for remuneration and profit they are passengers unless the payment is for the rental of the vessel by bare-boat charter. A bare-boat charter requires the charterer to be in complete possession and command of the vessel. Transport Canada's position on what constitutes a commercial vessel and who constitutes a passenger appears on its website.

[44] The Minister's Representative submitted that the owner of the vessel was the operator of the vessel on August 14, 2009, the crew was appointed by Cadence and the charter fee paid included the master for a four-hour harbour cruise. She submitted that, as such, on August 14, 2009, the vessel Just Chillin' was engaged in a passenger vessel operation disguised as a bare-boat charter business. Included in the Minister's Representative's binder of written submissions (at Tabs 5, 6 and 7) was material which the Minister's Representative submitted as showing the position of Transport Canada on the issue of bare-boat charters and pleasure craft. (That material was not introduced as evidence and can only be treated as argument adopted by the Minister's Representative as part of her submissions.) For example, at Tab 5 there is a printout on Frequently Asked Questions from a Transport Canada website. One of the questions deals with determining whether persons carried on a vessel are passengers or guests, particularly when a charter party is in existence. It indicates that if any of the people on board are paying money for their carriage on the vessel, then they are deemed to be passengers. It goes on to state that if the owner of the vessel receives any form of remuneration for the use of the vessel, even if not directly from the persons carried, then the persons carried are passengers; however, if the persons are guests, there is no form of remuneration and the vessel is being used exclusively for pleasure, then the persons carried are not passengers. The material at Tabs 6 and 7 is not so helpful as it is somewhat out of date.

[45] The Minister's Representative submitted that an inspection certificate under Part IV of the Act was required for the vessel because it was carrying passengers on August 14, 2009. Furthermore, a safety briefing must be given to passengers on a passenger ship, but one was not given on August 14, 2009. Additionally, the vessel was not carrying life rafts on August 14, 2009. Lastly, on the back of a registry certificate, it is specified that the licensing markings must be visible.

B. Applicant

[46] The Applicant's Representative provided written submissions in addition to oral argument. The Applicant's Representative submitted that what is relevant is not Transport Canada's position concerning pleasure craft and bare-boat charters, but rather the application of the law to the facts.

[47] He submitted that the Minister has to prove that the officers were passengers, yet the officers did not pay to go aboard the vessel, so there is no remuneration or object of profit regarding them. Even the letter of March 10, 2009 from Mr. Lawson (Exhibit A-1) concedes that one may bare-boat charter a pleasure craft. The relevant question is whether the charterer is collecting money or making a profit, and in this case the end-use of the vessel was pleasure.

[48] The Applicant's Representative argued that the Charter Agreement (Exhibit M-7) provided that Just Chillin' Fishing Charters Ltd. pass full possession, command and navigation of the vessel Just Chillin' to the Charterer for the term of the Charter Agreement. It also provided that the Charterer was responsible for choosing, hiring, placing or inviting aboard any master, crew or guest, whether paid or not paid. The provision that required the Charterer to engage the services of Cadence for the selection of the crew did not require that Cadence select the crew, but that the Charterer use Cadence to assist with the selection of the crew. The provision requiring the Charterer to engage a qualified master through Cadence if the Charterer is not qualified to handle and operate the vessel, does not mean that Cadence was to choose the master, but that the Charterer was to engage the master through Cadence. In response to a question from the Member, the Applicant's Representative submitted that Cadence would be like any crewing agency used to assist a charterer to interview and select a crew. Furthermore, the Applicant's Representative submitted that Cadence is not the owner of the vessel.

[49] The Applicant's Representative submitted that not calling the person who chartered the vessel as a witness was a glaring omission in the Minister's Representative's case. However, the Charterer's notes were introduced into the evidence (Exhibit A-6). Those notes show that Cadence indicated that the vessel was available, as well as a master if required, though supplying of the master was not mandatory. He further argued that maintaining some measure of approval over the quality of the master that a charterer chooses does not take away the charterer's right to choose. The Applicant's Representative submitted that if it is not a passenger-carrying vessel, which it cannot be with the bare-boat charter party in place, the first three violations do not stand.

[50] The Applicant's Representative submitted that the Charterer was not on board the vessel and that there was no requirement for him to be on board. The police officers on board were there as guests of the Charterer and, in his place, had the ability to direct the master, which they exercised by changing from a harbour tour to a fishing tour and by shortening the length of the tour. The end use of the vessel was that of a pleasure craft – there was nothing commercial about it. The Charter Agreement required that the Charterer use the vessel only for recreational and pleasure purposes. The law does not preclude a person who has an interest in the company that owns the vessel from operating the vessel without compromising its status as a pleasure craft. Just because Mr. Dore is a 50 percent shareholder in the company that owns the vessel does not mean that he cannot hire out his personal services to a bare-boat charterer. There is no requirement in the law for there to be an agreement between a charterer and a master separate from a charter agreement. The Charterer's notes (Exhibit A-6) show that the Master was offered by Cadence after the Charterer indicated that he would not be on the vessel and that none of his friends were capable of operating it.

[51] He argued that the evidence of Mr. Dore was that the vessel's licensing was marked in the engine room. There is no evidence to the contrary and there is no rule or evidence that the markings cannot be there.

[52] Finally, he argued that there was no evidence of complaints to Transport Canada concerning the vessel Just Chillin'.

V. ANALYSIS

A. Violation No. 1

[53] Paragraph 106(2)(a) of the Act provides that the authorized representative of a Canadian vessel shall ensure that the vessel and its machinery and equipment are inspected for the purpose of obtaining all of the Canadian maritime documents required under Part 4 of the Act. The VCRs are made under Parts 1 and 4 of the Act. Subsection 10(1) of the VCRs provides that no vessel shall engage on a voyage unless it holds a certificate issued under subsection 10(2) of the VCRs. As a result, the elements of the alleged Violation No. 1 that the Minister must prove, on a balance of probabilities, are that on or about August 14, 2009, at or near the city of Vancouver, in the province of British Columbia:

  1. section 10 of the VCRs applied to the vessel Just Chillin'; and
  2. 0782855 B.C. Ltd., doing business as Just Chillin' Fishing Charters Ltd., was the authorized representative of a Canadian vessel named Just Chillin' and failed to ensure that the vessel and its machinery and equipment were inspected for the purpose of obtaining the inspection certificate required under section 10 of the VCRs.

[54] With respect to the first element, paragraph 9(1)(b) of the VCRs provides that section 10 of the VCRs applies to certain vessels of more than 15 gross tonnage, but subsection 9(2) of the VCRs provides that section 10 of the VCRs does not apply to pleasure craft. In the Vessel Particulars of the Transcript of Registry for the vessel Just Chillin' (Exhibit M-1), the vessel type is indicated as a pleasure craft. To prove the alleged violation, the Minister must prove that the vessel Just Chillin' was in fact not a pleasure craft at the time of the alleged violation. Under the Act, a pleasure craft is a vessel that is used for pleasure and does not carry passengers.

[55] The Act does not indicate by whom the vessel must be used for pleasure, nor does it include a definition of ‘pleasure'. By clause 8 of the Charter Agreement (Exhibit M-7), the Charterer warranted not to use or allow any other person to use the vessel for any purpose other than private pleasure and recreation. So the parties to the Charter Agreement agreed to the following: use by the Charterer or by a third party with the Charterer's permission; and use for pleasure. Regarding the type of use by the Charterer, the first page of the Charter Agreement refers to a four-hour harbour cruise. In addition, there was other evidence concerning the planned use of the vessel: by the Sergeant, that it was for a harbour tour; and by Mr. Dore, that it was for a harbour tour of approximately four hours in duration. There was also the evidence of the Sergeant and Mr. Dore that, at the beginning of the tour and on the instigation of one of the three police officers who boarded the vessel, a fishing activity was included. That the Charterer (a Detective who did not board the vessel) and the three police officers who went aboard covertly used the vessel for an undercover police operation was unknown to 0782855 B.C. Ltd and could only weigh against the Charterer, and not 0782855 B.C. Ltd., in determining whether the use of the vessel was for pleasure. In respect of the Applicant, the vessel was used for pleasure on August 14, 2009.

[56] In this matter, the relevant portions of the definition of ‘passenger' in section 2 of the Act provide that a passenger is a person carried on a vessel by the owner or operator but not including the following: the master; a member of the crew; or a guest on board the vessel, if the vessel is used exclusively for pleasure and the guest is carried on it without remuneration or any object of profit. There were five people on board the vessel at the time of the alleged violation: one was the master and another was the master's son, the crew member – clearly, they were not passengers. The two questions that remain are, first, whether the three police officers were on board a vessel used exclusively for pleasure; and second, whether they were guests carried on board the vessel by the owner or operator of the vessel without remuneration or any object of profit. The first question has been addressed in the preceding paragraph.

[57] With respect to the second question, the impact of the Charter Agreement (Exhibit M-7) must be considered. The Act defines a bare-boat charter as a vessel charter agreement under which the charterer has complete possession and control of the vessel, including the right to appoint its master and crew. Towards the bottom of the first page of the Charter Agreement, Just Chillin' Fishing Charters Ltd. agreed that it would pass full possession, command and navigation of the vessel to the Charterer for the term of the Charter Agreement. Clause 4 of the Charter Agreement provided that once the full possession, command and navigation of the vessel had been turned over to the Charterer, the Charterer was responsible for choosing, hiring, placing or inviting any master/skipper, crew or guest, whether paid or not, on board the vessel. That clause also provided that the Charterer engage the services of Cadence for the selection of crew; and, in the event that the Charterer was qualified to sail the vessel, prior written confirmation by Just Chillin' Fishing Charters Ltd. was required. Clause 7 of the Charter Agreement provided that the Charterer warranted that he would not allow the vessel to be captained by any person not qualified to sail the vessel in B.C. waters. Clause 19 of the Charter Agreement also provided that the Charterer not permit any unqualified person to operate the vessel; and, in the event the Charterer was not qualified to handle and operate the vessel, the Charterer was to engage a qualified master through Cadence. The Notes of the Detective (Exhibit A-6), who entered into the Charter Agreement as Steven James Glasser, indicate that Mr. Verrelli at Cadence offered the use of the vessel and a captain if required. These crewing agency services provided by Cadence did not invalidate the chartering of the vessel.

[58] As the vessel had been chartered, the three police officers were carried on the vessel by the Charterer. As the three officers did not pay the Charterer for their carriage on the vessel, they were guests carried on the vessel by the Charterer without remuneration to the Charterer. The three police officers brought their own beverages onto the vessel. The only fee paid was $2 400 plus tax for the chartering of the vessel, including fuel and the services of the master, which was paid by the Charterer, the fourth undercover police officer who did not board the vessel, to the numbered company that owns the vessel, doing business as Just Chillin' Fishing Charters Ltd. The object of the carriage of the three police officers on board the vessel by the Charterer was the undercover operation, not profit. That the Master was someone who owns half of the shares of the numbered company which owns the vessel, does not convert the guests that were carried on board by the Charterer into guests carried on board by the owner of the vessel; and it does not convert the $2 400 fee that was paid for the chartering of the vessel, including fuel and a master, into a fee for carriage of guests on board by the owner of the vessel. The three officers were not passengers on August 14, 2009.

[59] For the reasons indicated in paragraphs [54] to [58] above, the first element has not been proven and, therefore, the second element is inapplicable. As a result, the alleged Violation No. 1 has not been proven.

B. Violation No. 2

[60] Paragraph 106(1)(c) of the Act provides that the authorized representative of a Canadian vessel shall ensure that the crew and passengers receive safety training. Subsection 110.1(3) of the LSERs provides that every passenger ship shall make an announcement for the information of passengers before the ship leaves any place where passengers embark. As a result, the elements of the alleged Violation No. 2 that the Respondent must prove on a balance of probabilities, are that, on or about August 14, 2009, at or near the city of Vancouver, in the province of British Columbia:

  1. subsection 110.1(3) of the LSERs applied to the vessel Just Chillin'; and
  2. 0782855 B.C. Ltd., doing business as Just Chillin' Fishing Charters Ltd., was the authorized representative of a Canadian vessel named Just Chillin' and failed to ensure that the passengers of the vessel received safety training through an announcement for the information of the passengers before the vessel left a place where passengers embarked as required by subsection 110.1(3) of the LSERs.

[61] With respect to the first element, paragraph 3(b) of the LSERs provides that the LSERs do not apply to pleasure craft. To prove the alleged violation, the Respondent must prove that the vessel Just Chillin' was not a pleasure craft at the time of the alleged violation. For the reasons indicated in paragraphs [54] to [58] above, the first element has not been proven and, therefore, the second element is inapplicable. As a result, the alleged Violation No. 2 has not been proven.

C. Violation No. 3

[62] Paragraph 106(1)(a) of the Act provides that the authorized representative of a Canadian vessel shall ensure that the vessel and its machinery and equipment meet the requirements of the regulations made under Part 4 of the Act. Section 94 of the LSERs was made under a former enactment but may be regarded as made under the Act (including Part 4) pursuant to the deemed continuation provisions of paragraph 44(g) of the Interpretation Act. Section 94 of the LSERs provides that a Class X ship that is not a tanker shall carry, on each side of the ship, enough life rafts to accommodate the complement. As a result, the elements of the alleged Violation No. 3 that the Respondent must prove, on a balance of probabilities, are that, on or about August 14, 2009, at or near the city of Vancouver, in the province of British Columbia:

  1. section 94 of the LSERs applied to the vessel Just Chillin'; and
  2. 0782855 B.C. Ltd., doing business as Just Chillin' Fishing Charters Ltd., was the authorized representative of a Canadian vessel named Just Chillin' and failed to ensure that the vessel carried, on each side of the vessel, enough life rafts to accommodate the complement as required by section 94 of the LSERs.

[63] With respect to the first element, paragraph 3(b) of the LSERs provides that the LSERs do not apply to pleasure craft. To prove the alleged violation, the Respondent must prove that the vessel Just Chillin' was not a pleasure craft at the time of the alleged violation. For the reasons indicated in paragraphs [54] to [58] above, the first element has not been proven and, therefore, the second element is inapplicable. As a result, the alleged Violation No. 3 has not been proven.

D. Violation No. 4

[64] Subsection 57(1) of the Act provides that the authorized representative of a Canadian vessel shall, in the form and manner specified by the Chief Registrar, mark the vessel with its official number and any other information that the Chief Registrar specifies. As a result, the elements of the alleged Violation No. 4 that the Respondent must prove, on a balance of probabilities, are that, on or about August 14, 2009, at or near the city of Vancouver, in the province of British Columbia:

  1. subsection 57(1) of the Act applied to the vessel Just Chillin'; and
  2. 0782855 B.C. Ltd., doing business as Just Chillin' Fishing Charters Ltd., was the authorized representative of a Canadian vessel named Just Chillin' and failed to mark the vessel with its official number or any other information specified by the Chief Registrar in the form and manner specified by the Chief Registrar, as required by subsection 57(1) of the Act.

[65] With respect to the first element, paragraph 47(a) of the Act allows for the registration of certain pleasure craft under Part 2 of the Act. Subsection 57(1) of the Act would be applicable to a Canadian vessel, including a pleasure craft, registered under Part 2 of the Act. Section 204 of the Act provides that one must mark the licence number on a pleasure craft for which a licence has been issued under Part 10 of the Act. The vessel Just Chillin' was registered as shown by the Transcript of Registry (Exhibit M-1) and there was no evidence that the vessel was licensed under Part 10 of the Act. The first element has been proven.

[66] With respect to the second element, the Minister's Representative submitted that, on the back of the "registry certificate", it is specified that the markings must be visible. There was no submission that the registry certificate requires the markings to be visible from outside the vessel. Furthermore, a registry certificate in respect of the vessel Just Chillin' was not introduced as evidence. Therefore, the second element has not been proven. As a result, the alleged Violation No. 4 has not been proven.

E. Costs

[67] At the end of the Hearing, the Applicant's Representative expressed his desire to reserve the issue of costs. The Member does not regard this matter as one where costs would be allowable under subsection 19(1) of the TATC Act.

VI. DETERMINATION

[68] The Minister of Transport has not proven, on a balance of probabilities, that the Applicant, 0782855 B.C. Ltd., violated the relevant provisions of the Canada Shipping Act, 2001 as alleged in the Notice of Violation. Violation No. 1, Violation No. 2, Violation No. 3, and Violation No. 4 have not been proven and the penalty for each is dismissed.

January 23, 2012

Barrie LePitre

Member


Appeal decision
J. Richard W. Hall, David G. Henley, Mark A.M. Gauthier


Decision: December 20, 2012

Citation: 0782855 B.C. Ltd. v. Canada (Minister of Transport), 2012 TATCE 44 (Appeal)

Appeal conducted by written submissions

Held: The Appellant has not demonstrated that an award of costs is appropriate in this instance. As such, the Appeal is dismissed.

BACKGROUND

[1] The Minister of Transport (Minister) sent the Appellant, 0782855 B.C. Ltd., d.b.a. Just Chillin' Charters Ltd. (Just Chillin'), a Notice of Violation (Notice) dated October 19, 2009, alleging that the Appellant had commited several violations of the Canada Shipping Act, 2001, S.C. 2001, c. 26. 

[2] The Appellant requested a Review Hearing with the Transportation Appeal Tribunal of Canada (Tribunal), which occurred on October 18, 2011, in Vancouver, B.C. In a Determination dated January 23, 2012, the Review Member determined that the Minister had not proven the violations on a balance of probabilities, and dismissed the penalty for each alleged violation.

[3] Nevertheless, the Appellant wishes to appeal the Determination with regard to the matter of costs. The Appellant requested the Appeal by way of a letter dated January 25, 2012.

I. STATUTE

Sub-section 19(1) of the Transportation Appeal Tribunal of Canada Act (TATC Act) reads as follows:

19. (1) The Tribunal may award any costs, and may require the reimbursement of any expenses incurred in connection with a hearing, that it considers reasonable if

(a) it is seized of the matter for reasons that are frivolous or vexatious;

(b) a party that files a request for a review or an appeal and does not appear at the hearing does not establish that there was sufficient reason to justify their absence; or

(c) a party that is granted an adjournment of the hearing requested the adjournment without adequate notice to the Tribunal.

II. REVIEW DETERMINATION

A. Costs

[4] As the only matter at issue is that of costs, we will only summarize the Review Member's findings on this issue, which is as follows:

At the end of the Hearing, the Applicant's Representative expressed his desire to reserve the issue of costs. The Member does not regard this matter as one where costs would be allowable under subsection 19(1) of the TATC Act.

III. ARGUMENTS

A. Appellant

(1) Justification for Costs

[5] The Appellant submits that section 19 of the TATC Act allows for the Tribunal to grant costs, and that it is a breach of the rules of natural justice and procedural fairness for a    decision-maker to render a decision on costs without first hearing submissions from the party entitled to argue for costs.

[6] In requesting costs on this matter, the Appellant relies on paragraph 19(1)(a) of the TATC Act and submits that the actions of Transport Canada were frivolous and vexatious. In support of this argument, the Appellant submits that:

1) The issue considered at the Review Hearing was a longstanding one of interest to Transport Canada, and that Transport Canada was simply looking for a test case;

2) The Notice of Violation was a result of a "sting operation" directed towards this specific operator in order to put it through a test case;

3) The Appellant had previously notified the Minister of his intention to request costs if the Minister chose to put the Appellant through a test case rather than requesting a legal opinion on this matter;

4) Transport Canada's own witness, Jane McIvor, provided evidence that Transport Canada's position was without foundation in this case.

(2) Frivolous and Vexatious

[7] The Appellant considers the definitions of frivolous and vexatious as found in the Oxford English Dictionary and submits that the dictionary defines vexatious, in part, as "law not having sufficient grounds for action" while frivolous is defined, in part, as "futile".

[8] The Appellant submits that the position of Transport Canada in this case was simply that the actions of the operator did not conform to its policy. The position of the Appellant is that the situation is properly governed by law, not policy. The Appellant contends that the actions of Transport Canada were clearly directed at the particular company in question, asserting that the department conducted a "sting operation" rather than observed violations.

[9] The Appellant notes that the issue in this case was a matter of law that could have been determined prior to the "sting operation", by receiving appropriate advice from the Minister's counsel.

[10] While the Appellant concedes that Transport Canada's actions were without malice, it notes that malice is not required to obtain costs under the Act. What is required is proof that the actions of Transport Canada were without sufficient foundation and could have been avoided by the exercise of due diligence. The Appellant asserts that Transport Canada ignored the Appellant's advice to request a legal opinion and chose instead to impose great cost on the Appellant by way of the test case.

[11] Under the circumstances, the Appellant requests that the Tribunal set costs on a lump sum basis at $15,000.

B. Minister

[12] The Minister takes no issue with the Appellant's right to argue for costs, but submits that costs are nevertheless inappropriate in this instance.

[13] The Minister contends that the circumstances surrounding the decision to pursue this case, and any discussions that occurred between legal counsel, do not detract from the fact that there was a serious legal issue to be determined by the Tribunal. At the Review Hearing, the Tribunal sought to consider under what circumstances a "bare boat charter" of a pleasure craft constitutes a sham arrangement to avoid the legal requirements applicable to commercial passenger operations.

[14] The Minister submits that the fact that these circumstances were not established in this case is irrelevant, and does not in and of itself mean that the Tribunal was "seized of the matter for reasons that are frivolous or vexatious", pursuant to the TATC Act.

[15] Finally, the Minister submits that the Review Member agreed with the Minister by stating in the Review Determination that he "does not regard this matter as one where costs would be allowable under subsection 19(1) of the TATC Act."

C. Appellant's Response

[16] The Appellant submits that the Member's opinion regarding costs not being allowable in this case can be of no relevance to the Appeal Panel, since the Review Member did not receive or consider submissions on this point.

[17] The Appellant suggests that the matter at hand is whether there was a significant legal or factual issue to be determined and whether Transport Canada had sufficient foundation to bring about the issue by way of the Notice in this case.

[18] The Appellant submits that whether a citizen's actions ought to be governed by law or by the policies of Transport Canada does not constitute a serious issue. Rather, the fact that citizens' actions are governed by law (and not policy) is a very basic legal concept on which Transport Canada should have sought advice rather than taking the Appellant through an expensive hearing process. The Appellant submits that having to undergo this process is punitive in and of itself, even where the violation again fails him.

[19] Furthermore, the Minister's submission as to whether this arrangement constituted a "sham arrangement" was not raised during the proceedings. No evidence was called by Transport Canada to demonstrate that any of the transactions involved were invalid, conducted without consideration, or functioned other than in accordance with their terms. Indeed, the Appellant submits that the "sham" referred to by the Minister refers to a sham arrangement to avoid Transport Canada's policies, rather than a sham arrangement to avoid the legal requirements applicable to commercial passenger operations.

[20] Finally, the Appellant submits that as Transport Canada called no evidence that the bare boat charter or the employment of the Master were sham arrangements, the Minister's case lacked any factual foundation and was therefore frivolous. Furthermore, the Minister's failure to obtain a legal opinion instead of pursuing a test case is worthy of rebuke.

IV. ANALYSIS

[21] The Appeal Panel agrees with the Appellant that the Review Member erred in making a decision with regard to costs without first hearing the parties' submissions on the issue. Nevertheless, after hearing the submissions of both parties, the Appeal Panel has decided that an award of costs is not appropriate in this instance.

[22] While the Appellant has cited the Oxford English Dictionary in an attempt to convince the Appeal Panel that the Minister's actions were frivolous and vexatious, the Appeal Panel finds that the definitions provided do not support the Appellant's case. Indeed, simply because the charges were unsuccessful before the Review Member does not mean that the Minister did not have sufficient grounds for action, or that the charge was futile. Such findings would suggest that every unsuccessful hearing before the Tribunal would result in costs being granted under paragraph 19(1)(a). This is not the case.

[23] Furthermore, Black's Law Dictionary, 8th ed. defines frivolous as "lacking a legal basis or legal merit; not serious, not reasonably purposeful", while vexatious is defined as conduct "without reasonable or probable cause or excuse; harassing, annoying". Meanwhile, a vexatious suit is defined as "a lawsuit instituted maliciously and without good cause".

[24] Various Tribunal decisions have considered the requirements for meeting the threshold of frivolous and vexatious. The Tribunal found in Butterfield v. Canada (Minister of Transport), 2004 TATC File No. P-2933-02 (Appeal), that under paragraph 19(1)(a) of the TATC Act, the Tribunal may award costs if:

…it becomes seized of a matter that is frivolous or vexatious… this section does not contemplate an indemnification of a successful party but rather the penalization of a party for the institution of a matter for an improper purpose…

[25] International Express Aircharter Ltd. v. Canada (Minister of Transport), 2006 TATC (Review) File No. P-3247-10, determined that paragraph 19(1)(a) "should operate only in the rarest of circumstances, where there was serious or egregious action, perhaps even malice on the part of the Minister's officials".

[26] Grande Prairie Airport Commission v. Canada (Minister of Transport), 2009 TATCE 20 File No. W-3441-15 (Review) summarized these principles well, finding that "to warrant an award under paragraph 19(1)(a) of the TATC Act, the notice in this matter must, at the outset, have been seen to have had no legal merit, or must have been instituted for an improper purpose".

[27] The nature of the investigation represents only the means to the charges and does not determine whether the charges were laid with foundation or reasonable cause. In our view, the charges are neither frivolous nor vexatious if the Minister has a reasonable belief that the actions of the Appellant meet the elements of the offence. In this case, the facts determined in the course of the investigation, as reported in the Review Determination, were not such that they would lead to the inevitable conclusion that the elements of the offence could not be proven. Moreover, the different interpretations advanced by the parties with respect to the statutory provisions provide a reasonable basis for the Minister's attempt to clarify the law on this issue.

[28] Simply because Transport Canada did not prove the allegation does not mean that the Tribunal was seized of the matter for reasons that are frivolous or vexatious. Indeed, the Appeal Panel finds that there were no actions on Transport Canada's part that require penalization, nor has the Appellant proven that this matter was instituted for an improper purpose.

[29] As such, the Appeal Panel does not believe that the Appellant has shown that the circumstances in the case at hand warrant the awarding of costs as contemplated in the TATC Act. Accordingly, the Appeal Panel finds that this Appeal should be dismissed.

V.  DECISION

[30] The Appellant has not demonstrated that an award of costs is appropriate in this instance. As such, the Appeal is dismissed.

December 20, 2012

Reasons for the Appeal Decision: J. Richard W. Hall, Chairperson

Concurred by: David G. Henley, Member

Mark A.M. Gauthier, Member