Transport Canada Duty of Care amidst NAFTA’s Specialty Air Services regime

Written on February 23, 2017.

Late last month the British Columbia Superior Court released a fascinating decision exploring the possibility that Transport Canada breached a duty of care to aviation passengers despite carefully following applicable regulatory procedures. The case, British Columbia (Workers’ Compensation Board) v Flanagan Enterprises (Nevada) Inc., 2017 BCSC 99, involved a crashed twin-engine Beech “King Air” A90 and duty of care arguments that went to the heart of Transport Canada’s private law obligations under NAFTA’s Specialty Air Services regulations for cross-border operators.

Background

The problems began when the plane in question suffered a left engine failure around 3,800 feet while ascending out of Pitt Meadows Airport for a planned skydiving jump. All seven passengers were preparing for their jump at the time and consequentially, all were unrestrained when the engine failed. The pilot attempted to follow emergency procedures and shut the engine down, but turned off the right engine by mistake and was unable to start it back up. With full loss of power the pilot was forced to attempt an emergency landing in a nearby field.

The plaintiff, a skydiving instructor on the flight, was seriously injured on impact as he was thrown about the cabin and crushed by other passengers. Furthermore, his employment precluded him from suing the pilot or skydiving company because of the restriction within the Workers Compensation Act, RSBC 1996, c 492. Instead, he brought a claim against a variety of parties including Transport Canada.

The NAFTA Speciality Air Services Regulations

The history of Transport Canada’s connection to this aircraft involves the highly technical interaction of different federal aviation regulatory regimes, but the basic facts are as follows:

Transport Canada involvement began when it inspected a different aircraft owned by the skydiving company in question as part of a routine audit. In doing so the inspector discovered two major concerns: there was an absence of an approved maintenance schedule, and the engines were both well beyond their recommended time before overhaul (“TBO”). Rather than following the TBO, the skydiving company had been following the manufacturer’s “Alternate Phase Inspection Program”, which involved inspecting the engine every 200 hours for typical signs of corrosion.

This reliance on the alternate inspection program was a major departure from the regulatory standards that would apply to a Canadian Specialty Air Services (“SAS”) operator under Canadian Air Regulations. Although these concerns were not about the aircraft in question, the plaintiff argued that this should have been the first warning to Transport Canada that there ought to have been greater oversight over all of the company’s aircraft, which were likely to have similar maintenance routines.

The catch was that Canadian Air Regulations did not apply for this aircraft.

Shortly after the ratification of NAFTA, a new set of aviation regulations were drafted as an attempt to create an “equivalent standard of safety” across the three nations’ aviation regimes. The idea was that this collaborative unification of standards would act as a baseline for safety and each nation’s federal aviation agency could then decide for themselves whether or not they would hold specific foreign-based operators to a higher standard through control over the issuance of Air Operating Certificates (permits to fly in the host country).

Since the skydiving company was based in the United States, NAFTA SAS regulations could apply instead of the standard Canadian Aviation Regulations. The effect was this: under Canadian Aviation Regulations the alternative phase inspection program would be a deficient maintenance standard. Under NAFTA’s baseline, it was adequate.

Nevertheless, the concerns were enough for Transport Canada to suspend the aircraft’s Air Operating Certificate (thereby suspending the company’s operations in Canada) and defer to the US Federal Aviation Authority (“FAA”) to ensure the baseline NAFTA standards were being met for the entire aircraft. Upon being advised of the situation by Transport Canada, the FAA also suspended the plane’s Certificate of Authorization (the US equivalent to Canada’s Air Operating Certificate) and conducted its own inspections.

Ultimately the FAA satisfied itself that the NAFTA baseline was being met and reinstated the aircraft’s Certificate of Authorization on that basis. When the aircraft returned to Canada, Transport Canada reinstated it as well.

No higher standard was imposed regarding the TBO and no assessments were made of the company’s other aircraft, including the aircraft at issue in this case.

The Core Legal Issue

The plaintiff’s allegations were that Transport Canada knew the skydiving company was actively ignoring the TBO recommendations for its aircrafts’ engines but chose to do nothing. In their view, this was a breach of Transport Canada’s duty of care to the flying public.

The key legal question revolved around the potential existence of this duty. But the underlying question is clearly implied: Can Transport Canada rely on the NAFTA SAS baseline, or is doing so a breach of their obligations to aviation passengers in Canada?

Duty of Care Analysis

In assessing the duty of care argument, the court began by invoking Imperial Tobacco and addressing whether the facts pleaded brought the claim within a settled category that gives rise to a duty of care. It quickly came to the conclusion that no such settled category existed. The only case that found that Transport Canada owed a duty of care to the flying public, Swanson Estate v Canada (Minister of Transport), 1991 CanLII 8226 (FCA), was decided before proximity became an essential aspect of the duty of care analysis and involved specific complaints to Transport Canada prior to the accident.

Having determined that no settled category existed, the court proceeded to assess whether the relationship between the parties disclosed sufficient foreseeability and proximity to establish a prima facie duty of care. Foreseeability was conceded by Transport Canada; if it knew that aircraft were being operated unsafely it is foreseeable that an accident was likely to occur. Instead, the case turned on proximity.

The court determined that Transport Canada simply didn’t possess the kind of close and direct relationship that was seen in the likes of Fullowka v Pinterton’s of Canada Ltd., 2010 SCC 5. Its duties were owed to the public at large, not an identifiable group like the miners of Giant Mine. And unlike the Law Society in Edwards v Law Society of Upper Canada, 2001 SCC 80 (CanLII) or the Registrar in Cooper v Hobart, 2001 SCC 79 (CanLII), Transport Canada did not have any direct regulatory authority over the plaintiff.

In the end, it was the reasonableness of the NAFTA regime’s lower standards, and the complete lack of a proximate relationship with the plaintiff, that drove the court’s reasoning:

[146]     It is true that concerns were raised about the safety of N256TA, and about Mr. Dause as an operator, in 2000.  Unlike the situation in Fullowka, Transport Canada acted on those concerns in a manner that was entirely appropriate, resulting in the suspension of the aircraft by the FAA.  In short, Transport Canada did intervene, by directly engaging the FAA in relation to the specific aircraft and operator, ultimately securing the suspension of the certificate of authorization.  In the context of the applicable regulatory scheme, there was no basis for any continuing concerns given the FAA’s direct response (hardly ineffectual) and its annual inspection and certification thereafter of both N256TA and N17SA, establishing an acceptable level of safety; nor were there “triggers” such as complaints or CADORS reports.

[147]     There was accordingly no “well-substantiated belief” that the aircraft or the operation was unsafe, and nothing that gave rise to a specific relationship of proximity with the flying public in general or Mr. Forest in particular.

[148]     Consequently, while the applicable regulatory framework imposes public duties on Transport Canada, I can find no basis for concluding that they give rise to a private law duty of care.

Conclusion

This case is a clear example of a maintenance procedure that fell below Canadian Aviation Regulation standards and was known by Transport Canada, and yet still failed to trigger liability under a duty of care analysis. No doubt the prudence of Transport Canada in initially revoking the aircraft’s Air Operating Certificate as well as their lack of knowledge of any imminent danger to passengers did a lot of the heavy lifting in the court’s analysis.

Absent the kind of proximate relationship seen in cases such as Fullowka, Transport Canada’s ability to rely on the NAFTA regime underscores the importance of understanding the precise standard a regulator will be held to before adding them on as a party.