View PDF: 2018-04 (Aug 21-18)
Earlier this year, the Federal Court of Canada reviewed a 2015 Transport Canada decision to issue a Civil Aviation Safety Alert (“CASA”) against Rotor Maxx Support Ltd. (“Rotor Maxx”). A CASA is a non-mandatory notification by the regulator containing important safety information and recommended action to appropriate stakeholders.
The underlying decision was previously addressed in a May 2015 edition of Transportation Notes.
The Court had previously declined to grant an injunction preventing the issuance of the CASA.
Rotor Maxx is a certified Transport Canada Approved Maintenance Organization (“AMO”), specializing in the maintenance and repair of Sikorsky helicopters. To address the maintenance and repair of out of production aircraft, AMOs are authorized to recertify undocumented parts under the Canadian Aviation Regulations (the “CARs”).
At issue between Rotor Maxx and Transport Canada was whether Rotor Maxx was meeting the requirements for recertification of such parts. Initially, Transport Canada took issue with three impugned parts recertified by Rotor Maxx.
In response to these concerns, Rotor Maxx argued that the parts in issue were non-critical and, in any event, that it had conducted the appropriate material and dimensional analysis and comparison with a known authentic part (“KAP”).
Regardless, Transport Canada required that Rotor Maxx implement a Corrective Action Plan (“CAP”) to address its concerns. Rotor Maxx proposed three CAPs, all of which were rejected.
As a result, Transport Canada informed Rotor Maxx of its intention to issue a CASA on March 17, 2015. The issuance of a CASA, as argued by Rotor Maxx, would have a significant effect on its commercial viability.
Rotor Maxx applied for a judicial review of Transport Canada’s issuance of the CASA on March 24, 2015.
In deciding the matter, the Federal Court considered two issues, namely whether:
- Transport Canada engaged in procedural fairness when issuing the CASA; and
- the decision to issue the CASA itself was reasonable.
First Issue: Procedural Fairness
After considering the underlying facts, the Court held that procedural fairness in this case would require:
… notification to Rotor Maxx about all the parts tested; the reasons Transport Canada felt that all the criteria for a CASA were met; an opportunity to respond; and a transparent procedure to recertify parts. In other words, procedural fairness required the absence of a moving target of what was needed to have an approvable CAP, an explanation about how the criteria for a CASA were met, and an explanation about the other options available if the criteria were not met.
In the judicial review before the Federal Court, Rotor Maxx argued that the procedural history of the matter demonstrated a breakdown in its relationship with Transport Canada to the extent that Rotor Maxx’s procedural fairness rights were breached.
For example, Rotor Maxx argued that it was initially advised that only three undocumented recertified parts were impugned. However, it later learned (after commencing legal proceedings) that the decision to issue the CASA was based on an additional seventeen undocumented recertified parts.
This deprived Rotor Maxx of the opportunity to address all of Transport Canada’s concerns — especially with regards to the other seventeen parts.
Rotor Maxx further argued that its right to procedural fairness in the issuance of the CASA arose from a policy letter issued by Transport Canada, which was intended to act as an interpretive tool for Transport Canada personnel to consider certain proposed amendments to the CARs that were germane. However, the proposed amendments that the document was intended to address never came into force.
It was evident in some of the correspondence between Transport Canada and Rotor Maxx that the regulator was proceeding with its inquiry into Rotor Maxx as if the policy letter was in play and the amendments to the regulations had been given effect. In other exchanges, Transport Canada proceeded as if the policy letter was not valid or did not exist.
This created a confusing situation for Rotor Maxx, as it was unclear as to what protocols it had to comply with when recertifying undocumented parts.
As such, on the grounds of procedural fairness alone, the Federal Court found that the decision to issue the CASA should be quashed.
Second Issue: Reasonableness of the Decision
The Court then turned to the issue whether the substance of Transport Canada’s decision to issue the CASA was reasonable. It had at least three reasons justifying its ultimate ruling that it was not.
First, Transport Canada argued that the CASA was issued as a matter of urgency. However, this was not borne out by the facts. The initial investigation by Transport Canada was a lengthy affair. It was then followed by discussions between Rotor Maxx (with the involvement of a third party consultant) and Transport Canada around CAPs and then a CASA consultation process that, on its own, took approximately two months to compete. These delays caused the Court to find that Transport Canada’s assertions that the matter was urgent to be “unintelligible and unjustifiable”.
Second, in its correspondence with Rotor Maxx, Transport Canada alleged that Rotor Maxx continued to recertify undocumented parts during the CASA consultation process. However, the evidence demonstrated that Rotor Maxx had voluntarily suspended the recertification of parts well before the period that it was alleged to have engaged in this activity.
Finally, Transport Canada asserted that Rotor Maxx was labelling certified undocumented parts as “new”. The Court also found that this was not the case and that Transport Canada knew this to be incorrect prior to making the allegation.
For these three reasons, the Court held that the issuance of the CASA should also be quashed on the basis that the substance of the decision was unreasonable.
The CASA was quashed and an order was made to have it removed from any published form. Transport Canada was ordered to pay CASA’s costs in the matter.
The issuance and subsequent challenge to the CASA was a long and commercially costly ordeal for Rotor Maxx.
Apart from the adverse publicity associated with the CASA, there was a significant financial cost. Even though Rotor Maxx was awarded a little over $100,000 in legal costs, its actual legal costs were several times that amount.
This case demonstrates how difficult, time-consuming and expensive regulatory issues can be to resolve.
Rotor Maxx Support Ltd. v. Canada (Transport), 2018 FC 97