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Print Page Case Comment: Seizure of Zoom Airlines B767

Published in the March 2010 issue of Transportation Notes - View Article

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On March 18, 2010, the Supreme Court of Canada dismissed an application for leave to appeal an Alberta case involving the seizure of a Boeing 767 just prior to the bankruptcy of Zoom Airlines.

The underlying facts of the appeal were such that Zoom Airlines had been leasing the aircraft in question from AerCap Group Services Inc. (“AerCap”). Ownership of the aircraft was registered to Zoom with Transport Canada, in accordance with the Aeronatics Act, R.S.C. 1985, c. A-2 and the Canadian Aviation Regulations SOR 96/433.

Just prior to its bankruptcy, Zoom owed airport fees to the Calgary Airport Authority (“CAA”) to the tune of some $350,000. Zoom was also in default on its lease payments to AerCap for approximately $830,000. Under the terms of the lease agreement, AerCap was entitled to take possession of the aircraft upon termination of the lease and, further, could require Zoom to leave the aircraft parked in its location at the time of the lease’s termination. Accordingly, AerCap delivered a notice of termination on August 26, 2008.

The next day, Zoom returned the aircraft from Paris to Calgary. Unbeknownst to the CAA, AerCap had arranged for an agent to repossess the aircraft (with Zoom’s cooperation) on arrival. This occurred around 2:30 pm, when AerCap’s agent collected the aircraft’s certificate of airworthiness, certificate of registration and logbooks.

Unaware of AerCap’s repossession of the aircraft, and just 1½ hours later (at 4:00 pm), the CAA obtained an ex parte order as against Zoom, seizing the aircraft and detaining it for unpaid airport fees, pursuant to s. 9 of the Airport Transfer (Miscellaneous Matters) Act, S.C. 1992, c. 5.

By 4:30 pm, AerCap’s agent had surrendered the certificate of registration to Transport Canada, advising that the lease to Zoom had been terminated. Thirty minutes later, Zoom filed for bankruptcy.

A dispute then arose between AerCap and the CAA over which seizure of the aircraft took priority. AerCap took the position that it was the “owner” upon taking physical possession of the aircraft at 2:30 pm — so, by the time the CAA obtained its ex parte order as against Zoom, the aircraft was no longer the property of Zoom. The CAA, on the other hand, argued that title couldn't transfer until (at least) 4:30 pm when the aircraft’s certificate of registration was surrendered to Transport Canada.

In deciding the dispute, the Alberta Court of Appeal found, primarily for policy reasons, that AerCap did not, in fact, take legal title of the aircraft prior to the CAA obtaining its ex parte order. It based its finding on the following facts:

  • while the aircraft was in-flight from Paris, it was still under the “custody and control” of Zoom;
  • when it landed, insofar as the CAA was concerned, there had been no change in control;
  • AerCap took “great pains” to hide its repossession efforts from the CAA;
  • after repossession, AerCap’s agent took no steps to advise the CAA of what it had done, although there was ample opportunity to do so;
  • air-side handlers servicing the aircraft after landing did not know that the repossession by AerCap had occurred — in fact, the aircraft was moved on the tarmac on the basis that Zoomwas still in “custody and control”; and
  • AerCap’s agent complied with the CAA’s direction on landing to move the aircraft from the terminal to a parking site. This, in particular, amounted to a surrender of the aircraft in favour of the CAA, according to the Alberta Court of Appeal.

In concluding its decision, the Alberta Court of Appeal noted “… the practicalities also mitigate in favour of [the CAA’s] position. Were it otherwise, private acts and contractual arrangements entered into by a lessor without the knowledge of airport authorities, would have the effect of removing aircraft from the reach of the detention remedy and would erode the legislative choice to allow for detention pursuant to s. 9. Airport authorities across the country would be obliged to discount the efficacy of registration and would be bound to engage in never-ending inquiries to determine whether a lessor had terminated the lease of an aircraft in transit from one city to another so as to facilitate a precipitous repossession of the aircraft without notice to the authority.”

Calgary Airport Authority v. AerCap Group Services Inc.
[2009] SCCA No. 464