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Approved Maintenance Organizations to Comply Strictly with Self-Audit Requirement
Published in the March 2008 issue of Transportation Notes - View Article
Insight Instrument Corporation (“Insight”) manufactures specialty instruments for small aircraft. Since 1990, it has been designated by Transport Canada as an approved maintenance organization (AMO). Such a designation requires it to comply with its Quality Program Manual (QPM), which includes periodic self-audits pursuant to the Canadian Aviation Regulations (“CAR”). Inspectors from Transport Canada carry out conformance audits to ensure compliance with the QPM.
Transport Canada found that Insight had not carried out a self-audit between September 2001 and February 2004 and issued an assessment of monetary penalty to Insight pursuant to the Aeronautics Act (“the Act”). That decision was confirmed on appeal to the Transportation Appeal Tribunal of Canada (TATC) and again on appeal to the TATC Appeal Panel (“Appeal Panel”).
At its application for judicial review at the Federal Court, Insight argued that the Appeal Panel erred in finding that it had not carried out a self-audit during the relevant time period. It also argued that Transport Canada was precluded from initiating any proceedings due to the one-year limitation period in s. 26 of the Act.
Insight carried out an audit in 2003 for the benefit of the Cessna Corporation which was evaluating Insight’s operations to determine if it would be a suitable supplier to Cessna; Insight argued that this audit satisfied its obligation for the year 2003. The TATC and the Appeal Panel found that the evaluation done for Cessna, while rigorous, was not an acceptable substitute for the self-audit required under the QPM and that audits should be carried out according to a standard procedure. Otherwise, other AMOs could put forward their own version of self-audits and there would be no longer a standard reporting requirement. Insight also tried to argue that there was confusion over the definition of the “one year period” for self-assessments and that this period did not necessarily mean a calendar year; the Panel also agreed with Transport Canada that the one-year period for self-audits should be clearly interpreted as a “calendar year” unless otherwise specified in the QPM. The Panel noted that Insight had held its AMO status since 1990 and had there been any actual confusion about the requirement for yearly audits, Insight could have asked Transport Canada for clarification.
Insight was notified of the assessment of a monetary penalty in November 2004. As the alleged non-compliance with the self- audit obligation had come to light in the February 2004 inspection, the TATC found that proceedings had been properly commenced within the 12 month limitation period prescribed under the Act. Insight argued that any non-compliance must have occurred prior to February 2003 (a year before a self-audit conducted in February 2004). The Appeal Panel found that given the conclusion that self-audits must be carried out within each calendar year, the question was whether Insight had complied with its obligation in 2003 – although the February 2004 self-audit was valid for 2004, the 2003 Cessna audit was not a self-audit in compliance with the Regulations and thus, at the end of 2003, Insight was in a situation of non-compliance and proceedings could be commenced against it within the subsequent 12 months.
The Federal Court found that the Appeal Panel’s finding that Insight had contravened the Aeronautics Act was not unreasonable. It also found that the interpretation of the statutory limitation period was not incorrect. Accordingly, Insight’s application for judicial review was dismissed.
Insight Instrument Corporation and Minister of Transport, 2008 FC 109 (F.C.)