IN
THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20101206

Docket: S065491

Registry:
Vancouver

Between:

Linda
Lee Chadwick, Jeanne Ng and Douglas Stuart Chadwick

Plaintiffs

And

Attorney General of
Canada, Enstrom Helicopter Corporation,
Crane Co., Mountain Aircraft Sales & Maintenance Inc. also
known as A & L Aircraft Maintenance, Art Comeault,
Richard Cooper, Lycoming Engines, a division of Avco Corporation,
and Avco Corporation

Defendants

And

Richard
Cooper

Third
Party

And

Enstrom
Helicopter Corporation, Crane Co., Mountain Aircraft Sales
& Maintenance Inc. also known as A & L Aircraft Maintenance, Art
Comeault,
Lycoming Engines, A Division of Avco Corporation and Avco Corporation

Fourth
Parties

Docket: S065902

Registry:
Vancouver

Between:

Reta G. Honour on her
own behalf and as personal representative
of the Estate of Robert David Honour, Deceased

Plaintiff

And

Attorney General of
Canada, Enstrom Helicopter Corporation,
Crane Co., Mountain Aircraft Sales & Maintenance Inc. also
known as A & L Aircraft Maintenance, Art Comeault,
Richard Cooper, Lycoming Engines, a division of Avco Corporation,
and Avco Corporation

Defendants

And

Richard
Cooper, Mountain Aircraft Sales & Maintenance Inc.
also known as A & L Aircraft Maintenance, Art Comeault, and
Attorney General of Canada

Third
Parties

And

Enstrom
Helicopter Corporation, Crane Co., Mountain Aircraft Sales
& Maintenance Inc. also known as A&L Aircraft Maintenance, Art
Comeault,
Lycoming Engines, A Division of Avco Corporation and Avco Corporation

Fourth
Parties

Before:
The Honourable Mr. Justice Myers

Reasons for Judgment

I.        Introduction

[1]      The plaintiffs in these two actions apply to
amend their statements of claim.  (For ease of reference I will use the
nomenclature in place at the time the pleadings were filed.)

[2]      The motions arose from an earlier application
by the Attorney General of Canada (sued as representing the Ministry of
Transport) to have the actions dismissed on the basis that they disclosed no
cause of action.  The Attorney General’s motions were brought under Rule 19(24)
of the previous Rules of Court, B.C. Reg. 221/90, and I heard these
motions in July of this year.  The statements of claim did not specifically
allege a duty of care owed by the Crown (through Transport Canada) to the
plaintiffs.  Nevertheless, the parties argued the motions on the premise that
the pleadings could be amended in due course to allege the duties if the
motions to strike were unsuccessful.  After considering the matter, I declined
to make a decision in the absence of the alleged duties being clearly pleaded.

[3]      The Attorney General says the amendments should
not be granted because they do not disclose a cause of action.  Thus, although
the form of the motions is different, the same issue that was in front of me in
July is now before me again, but this time with a proposed pleading that does
set out the alleged duties.

[4]      The Attorney General also argues that some of
the proposed amendments should not be allowed because they plead evidence as
opposed to facts.  Further, the Attorney General says that some of the
amendments plead similar fact evidence which is inadmissible.

II.       The claims as
currently pleaded

[5]      These actions arise out of a helicopter crash
which occurred in Duncan, B.C., on September 17, 2005.  Robert Honour bought
the helicopter in June 2005.  He was piloting the aircraft at the time of the
crash.  Mr. Chadwick was a passenger.  Both Mr. Chadwick and Mr. Honour were killed
in the crash.  Mrs. Chadwick and Mrs. Honour bring these lawsuits in their
own capacity under the Family Compensation Act, R.S.B.C. 1996, c. 126,
and as the personal representatives of their deceased husbands.

[6]      The defendants include the manufacturer of the
helicopter, the manufacturer of the engine, the manufacturer of the fuel pump
and, through the Attorney General of Canada, Transport Canada.  The defendant
Art Comeault repaired the helicopter and certified it as airworthy.  He was
authorised to do so under the Canadian
Aviation Regulations (the “CAR”) having been designated as an
Approved Maintenance Engineer (“AME”) by Transport Canada under the CAR.  His
organisation, A & L Aircraft Maintenance, was designated an approved
maintenance organization (“AMO”) and Mr. Comeault was certified as the person
responsible for maintenance (“PRM”) for A & L (collectively, Mr. Comeault
and A & L will be referred to as A & L).  These designations are at the
core of the claim against Transport Canada.

[7]      The statements of claim set out the facts of
the helicopter crash, and that A & L repaired and maintained it
before the crash.  They allege that the cause of the crash was a faulty fuel
pump.

[8]      The plaintiffs allege that the crash was caused
in part by negligent maintenance performed on the helicopter by the defendants,
A & L.  This included not recording defects and using a defective fuel
pump.

[9]      The allegations against Transport Canada in the
statements of claim are as follows:

14.       As a contracting State of the International Civil
Aviation Organization (“ICAO”), the federal government of Canada through
Transport Canada has an obligation to oversee the safe and efficient operation
of all aviation activity for which it is responsible. Canada has agreed to the
application of Article 12 of the ICAO Convention, Rules of the Air, which directs
that each contracting State adopt measures to ensure that every aircraft flying
over or manoeuvring within its territory and every aircraft carrying its
nationality mark, wherever such aircraft may be, shall comply with the rules
and regulations relating to the flight. As well, Canada committed to ensuring
the prosecution of all persons violating applicable regulations.

15.       Pursuant to these obligations and section 4.2 of
the Aeronautics Act, Transport Canada was responsible for ensuring
compliance of Canadian registered aircraft and Canadian licensed operators with
the requirements of the Aeronautics
Act and the Canadian
Aviation Regulations (“CARs”), the purpose of which was to protect the public
from potentially unsafe practices and harmful situations resulting from
aviation related activities.

16.       At all material times, Transport
Canada certified and licenced A & L as an Approved Maintenance Organization
(“AMO”).  In 1999 only, Transport Canada conducted an audit and inspection as a
result of which Transport Canada knew or ought to have known that A & L was
maintaining and was continuing to maintain aircraft including the Helicopter in
circumstances that were not in compliance with the requirements of the
applicable maintenance policy manuals and other required practices of AMOs,
particulars of which are as follows:

(a)        known
defects not recorded properly;

(b)        known
accident history not recorded properly;

(c)        maintenance
service performed not recorded properly;

(d)        aircraft
released to service with outstanding defects post-maintenance;

(e)        required
inspections not performed;

(f)         maintenance
performed incorrectly;

(g)        approving
the defendant Art Comeault as a Director of Maintenance or person responsible
for maintenance when they knew or ought to have known that he was not
competent;

(h)        maintenance
conducted by unlicensed persons; and

(i)         failure
to comply with airworthiness directives as required.

17.       As a
result of what Transport Canada knew or ought to have known about the
infractions and the failures to comply with the requirements of the applicable
maintenance policy manuals and other required practices of A & L, Transport
Canada failed to take effective measures to ensure compliance or to remove AMO
certification in a timely fashion which would have prevented the Accident.

III.       The Proposed
Amendments

A.       Factual
amendments

[10]    The proposed amendments allege various prior
acts by Mr. Comeault with respect to work done on other aircraft, including
when he was a PRM at a prior employer, Galaxie Helicopters.  This includes the
falsification of log books, for which Mr. Comeault was investigated by
Transport Canada.  The amendments allege that in 1997 Mr. Comeault pled
guilty to making false entries in a journey log required to be kept under Part
I of the Aeronautics Act, R.S.C. 1985, c. A-2 [Act], with intent to
mislead, contrary to s. 7.3(1)(c) of that Act.

[11]    With respect to another aircraft, the
proposed amended notices of civil claim allege that Transport Canada was
notified by the Transportation Safety Board that:

(a) the Schweizer helicopter had been pieced together from the remains
of three separate helicopters and was certified by Comeault as airworthy;

(b)        when
the TSB attended at A & L, Comeault was unable to produce documentation
verifying the history of the components he had certified;

(c)        Comeault did
not have the manuals necessary to carry out the work he had performed and
certified on the Schweizer.

[12]    In relation to the subject helicopter,
the proposed amended pleadings say:

On or about
March 3, 2004, Comeault certified KEO as airworthy and sold it to Richard
Cooper.  Comeault failed to record the previous accident involving KEO and
failed to carry out mandatory inspections for damage resulting from the
rollover accident.  In addition, Comeault installed an uncertified tail rotor
gearbox on KEO that had been involved in an accident while installed on another
helicopter.

B.       Transport Canada’s alleged duties of care and its
breaches

[13]    The proposed amendments set out the following
alleged duties owed by Transport Canada:

44.       In
particular, Transport Canada owed a duty of care to:

a)              
remove Comeault from the position of PRM at
Galaxie following amendments made to CAR standards 573.03(1)(c) and
573.03(3) on June 1, 1998 which prohibited anyone with a conviction under s.
7.3 of the Aeronautics Act from acting as PRM;

b)              
conduct an interview of Comeault to ensure he
was knowledgeable about certain topics before considering him for the position
of PRM at A & L , pursuant to CAR standard 573.03(5);

c)              
refuse to approve Comeault for the position of
PRM at A & L because he was not competent to hold the position because of
his conviction under s. 7.3 of the Aeronautics Act, contrary to CAR
Standard 573.03(1)(c);

d)              
refuse to issue an AMO certificate to A & L
because A & L did not meet the requirements of CAR Part V, Subpart
73, as required by CAR 573.02(1);

e)              
pursuant to s. 6.71 of the Aeronautics Act,
refuse to issue an AMO certificate to A & L because of Comeault’s aviation
record;

f)                
pursuant to published policies and manuals,
identify A & L as a high-risk AMO due to Comeault’s aviation record and
history of unsafe maintenance practices;

g)              
pursuant to CAR standard 573.09(4) and
(5), require A & L to assign quality assurance functions to external
agents;

h)              
pursuant to published policies and manuals, set
audits for A & L more frequently than once every three years as a
result of the high risk of Comeault breaching the required standards of
maintenance  and causing another accident;

i)                
pursuant to published policies and manuals,
conduct audits and mandatory inspections of A & L on schedule;

j)                
pursuant to published policies and manuals,
audit A & L and take enforcement action against Comeault and A & L
following the Victoria Accident;

k)              
pursuant to ss. 6.9(1), 7.(1) or 7.1(1) of the Aeronautics
Act, suspend or cancel Comeault’s AME licence following his
conviction, the Baker Accident, and/or the Victoria Accident;

l)                
pursuant to ss. 6.9(1), 7(1), or 7.1(1) of the Aeronautics
Act, suspend or cancel A & L’s AMO certificate following the Victoria
Accident;

m)            
issue Airworthiness Directives warning the
aviation community that parts certified by or maintenance performed by
Comeault, A & L, or Galaxie were suspect and that aircraft should be grounded
until certified as airworthy by another AME or AMO, as required by CAR
593.02;

[14]    These preceding paragraphs do not specify to
whom the alleged duties are owed, but the proposed amended notices of civil claim
sets out the alleged breaches of duty to the plaintiffs:

Transport Canada breached its duty of care
to Mr. Honour [and Mr. Chadwick] by:

a)              
failing to remove Comeault from the position of
PRM at Galaxie when it knew that the CARs prohibited Comeault from
holding the position due to his conviction for falsifying aircraft records;

b)              
approving Comeault for the position of PRM at A
& L in bad faith when it knew that the CARs prohibited Comeault from
holding the position due to his conviction for falsifying aircraft records;

c)              
failing to conduct an interview of Comeault
prior to approving him for the position of PRM at A & L;

d)              
issuing an AMO certificate to A & L when it
knew that A & L did not meet the applicable regulations and standards;

e)              
failing to identify A & L as a high risk AMO
and set a corresponding audit schedule in accordance with published policies
and manuals;

f)                
failing to audit Galaxie and A & L following
Comeault’s conviction, the Baker Accident, the Victoria Accident, and complaints
made to Transport Canada about Galaxie, A & L, Comeault, and Gary Parsons;

g)              
failing to audit or inspect A & L at any
time between the date of its approval and the date of the Accident;

h)              
failing to suspend or cancel Comeault’s AME
licence and A & L’s AMO certificate in light of an extensive history of
breaches of regulations, unsafe maintenance practices, and accidents;

i)                
failing to issue Airworthiness Directives with
respect to parts certified by or maintenance performed by Comeault, A & L,
or Galaxie; and,

j)                
wrongfully protecting the interests of Comeault and A
& L over the protection of the flying public in general and Mr. Honour in
particular, leaving the flying public and Mr. Honour vulnerable to harm caused
by Comeault’s unsafe maintenance practices.

IV.      Do the alleged
duties disclose a cause of action?

[15]    In order to deny an amendment on the basis that
it does not disclose a cause of action, I must be convinced that it is plain
and obvious that the alleged duties of care do not exist.  The facts in the
pleadings are to be taken as established.  This is the same test as used in a
motion to strike a pleading as disclosing no cause of action.  The motions to
strike the current statements of claim are still extant and there is therefore no
point in parsing what was alleged in them from what is proposed to be added in
the amendments:  the overriding question is whether the alleged duties in the
proposed amended pleadings disclose a cause of action.

[16]    For the purposes of this application, I think
the following summarises the main thrust of the claims against Transport Canada
as they are sought to be pleaded:

·                
Prior to his work which is alleged to have caused the subject
crash, Mr. Comeault, in his capacity as an AME and a PRM, performed maintenance
work incompetently and dishonestly.  He had pleaded guilty to making false log
book entries.  His corporate alter-ego, A & L, was directly and indirectly tainted
by the same factors.

·                
At the relevant times, Transport Canada had actual knowledge of
this.

·                
Mr. Comeault’s work on the helicopter was negligent.  A & L ought
not to have certified the helicopter as airworthy.  His negligence caused or
contributed to the crash.

·                
Transport Canada owed a duty to people in the position of Mr.
Honour and Mr. Chadwick (aircraft owners, pilots and passengers) not to approve
AMOs, AMEs and PRMs who are dishonest and incompetent and who have been convicted
of the offence of falsifying aviation records.

[17]    The Ontario Court of Appeal in Attis v.
Canada (Minister of Health), 2008 ONCA 660, referred to cases such as the
one at bar as cases of government liability for regulatory negligence.  As
observed recently by Cromwell J., writing for the Supreme Court of Canada in Fullowka
v. Pinkerton’s of Canada Ltd., 2010 SCC 5, at para. 18, the question
of whether a duty of care exists:

… must be resolved by an
analysis of the applicable legal duties, following the approach set down by the
Court in a number of cases, including Cooper v. Hobart, 2001 SCC 79,
[2001] 3 S.C.R. 537; Edwards v. Law Society of Upper Canada, 2001 SCC
80, [2001] 3 S.C.R. 562; Odhavji Estate v. Woodhouse, 2003 SCC 69,
[2003] 3 S.C.R. 263; Childs v. Desormeaux, 2006 SCC 18, [2006] 1 S.C.R.
643; and Hill v. Hamilton-Wentworth Regional Police Services Board, 2007
SCC 41, [2007] 3 S.C.R. 129. The analysis turns on whether the relationship
between the appellants and the defendants discloses sufficient foreseeability
and proximity to establish a prima facie duty of care and, if so,
whether there are any residual policy considerations which ought to negate or
limit that duty of care: see, e.g., Hill, at para. 20. The analysis must
focus specifically on the relationships in issue, as there are particular
considerations relating to foreseeability, proximity and policy in each: see,
e.g., Hill, at para. 27.

[18]    The cases referred to by Cromwell J. have – with
some modification – applied the analysis of the House of Lords in Anns v.
Merton London Borough Council, [1978] A.C. 728 (H.L.).  In Cooper v.
Hobart, 2001 SCC 79, the Supreme Court of Canada described the approach as
follows:

30 In brief compass, we suggest
that at this stage in the evolution of the law, both in Canada and abroad, the
Anns analysis is best understood as follows. At the first stage of the Anns
test, two questions arise: (1) was the harm that occurred the reasonably
foreseeable consequence of the defendant’s act? and (2) are there reasons,
notwithstanding the proximity between the parties established in the first part
of this test, that tort liability should not be recognized here? The proximity
analysis involved at the first stage of the Anns test focuses on factors
arising from the relationship between the plaintiff and the defendant. These
factors include questions of policy, in the broad sense of that word. If
foreseeability and proximity are established at the first stage, a prima facie
duty of care arises. At the second stage of the Anns test, the question still
remains whether there are residual policy considerations outside the
relationship of the parties that may negative the imposition of a duty of care.
It may be, as the Privy Council suggests in Yuen Kun Yeu, that such
considerations will not often prevail. However, we think it useful expressly to
ask, before imposing a new duty of care, whether despite foreseeability and
proximity of relationship, there are other policy reasons why the duty should
not be imposed.

[19]    The plaintiff bears the burden of showing a prima
facie duty of care at the first stage of the analysis.  If there is a prima
facie duty, it is up to the defendant to establish that it should be negated
due to policy considerations (see, Childs v. Desormeaux, 2006 SCC 18, at
para. 13).

[20] Anns placed great emphasis on whether the
alleged negligence occurred in the policy or operational sphere.  It was made
clear in Cooper that that part of the analysis is to be dealt with at
the second stage of the Anns analysis, as it is applied in Canada.  Both
Anns and Cooper stand for the proposition that no liability is to
be imposed for negligence at the policy level.

[21]    Lastly, in Cooper the court stated:

39        The second step of Anns
generally arises only in cases where the duty of care asserted does not fall
within a recognized category of recovery. Where it does, we may be satisfied
that there are no overriding policy considerations that would negative the duty
of care.

As will be seen, this is of significance to the case at bar
because the parties disagree as to whether a decision of the Federal Court of
Appeal in Swanson Estate v. Canada, 80 D.L.R. (4th) 741, [1991] F.C.J.
No. 452 affirming 32 F.T.R. 129, [1990] F.C.J. No. 195, established the
duty of care required for the plaintiffs to succeed. Swanson Estate was
decided before the Supreme Court of Canada re-visited Anns in Hobart.

A.       Does
Swanson Estate establish a category applicable to this case?

[22]    In Swanson Estate the plaintiff’s husband was
killed in an airplane crash.  The plane was operated by a small carrier, who,
the plaintiff argued, should not have been approved by Transport Canada due to,
amongst other things, its prior and serious breaches of the regulations made
under the Aeronautics Act.  In the trial decision, Walsh J. quoted from Anns,
Kamloops and Just.  The focus of his reasoning was that the duties
alleged to be owed by Transport Canada were in the operational and not the
policy sphere.  He concluded that there was no meaningful distinction between
the case before him and that in Just and that the alleged duty of care
existed.  The Federal Court of Appeal affirmed the decision, for the most part
adopting Walsh J.’s analysis.

[23]    In two companion cases dealing with non-aviation matters, the Ontario Court of Appeal declined to regard
Swanson Estate as having established a duty of care category which
should be followed. Attis v. Canada (Minister of Health), 2008 ONCA 660,
was a class action brought on behalf of recipients of breast implants.  The
action alleged that the Minister of Health owed a duty of care to patients who
received breast implants with respect to the regulation of those devices. Drady
v. Canada (Minister of Health), 2008 ONCA 659, asserted a similar duty of
care to recipients of devices used in temporomandibular joints.

[24]    Apart from the obvious fact that Drady and Attis
involved different regulatory regimes, the Ontario Court of Appeal declined to
follow Swanson Estate because, as stated in Attis at para. 44:

[44]      Importantly, Swanson
pre-dates the Cooper and Edwards decisions that changed the
analysis, both by emphasizing the importance of proximity at the first stage
and by directing that the operational/policy distinction is properly considered
at the second stage of the analysis. Swanson was decided on the basis of
the policy/operational distinction without a preliminary consideration of the
question of proximity. Cooper and Edwards make it clear that a
finding of proximity is a required element of a duty of care. Operational negligence,
in the absence of a proximate relationship, is not sufficient to give rise to a
duty of care. As such, Swanson does not assist the appellants’ argument.

The court made a similar comment in Drady, at para. 43.

[25]    There is a risk of focusing too much – as was
done by the plaintiffs in the case at bar – on whether a particular case
establishes a “category” for the purposes of the Anns/Cooper
analysis.  Ultimately the issue is a matter of following precedent.  This was
made clear by the Supreme Court of Canada in Childs (a case not involving a governmental authority) where McLachlin
C.J. stated:

15        A preliminary point
arises from a nuance on the Anns test developed in Cooper v. Hobart,
[2001] 3 S.C.R. 537, 2001 SCC 79. The Court in Cooper introduced the
idea that as the case law develops, categories of relationships giving rise to
a duty of care may be recognized, making it unnecessary to go through the Anns
analysis. The reference to categories simply captures the basic notion
of precedent: where a case is like another case where a duty has been
recognized, one may usually infer that sufficient proximity is present and that
if the risk of injury was foreseeable, a prima facie duty of care will
arise. On the other hand, if a case does not clearly fall within a relationship
previously recognized as giving rise to a duty of care, it is necessary to
carefully consider whether proximity is established. … [Emphasis added.]

[26]    Turning to Swanson Estate, the plaintiffs
argue that Walsh J. did, in fact, analyse proximity, but this is not apparent
to me.  Furthermore, although both Swanson Estate and the case at bar
deal with approvals granted by Transport Canada in the aviation industry, they
are approvals for quite different things and given under different parts of the
Regulation.  Finally, the nexus between the plaintiffs and the Ministry is
different.  In the end result, since there is no other case directly on point, the
regulatory regime which, at least in part, sets out and determines the
relationships between the parties must be looked at in order to determine
whether the alleged duty of care can withstand a motion to strike.

B.       Is there a prima facie duty of care?

[27]    The first phase of the Anns analysis
mandated by the Supreme Court of Canada is to determine whether there is a prima
facie duty of care; this requires both foreseeability and proximity.

1.       Foreseeability

[28]    The plaintiffs allege that Transport Canada
should not have designated Mr. Comeault as an AME or a PRM, nor his
company as an AMO because it knew that Mr. Comeault was both fraudulent in his
log-book keeping and incompetent.  It would be foreseeable that someone in that
position could cause an aircraft crash which would injure or kill the
passengers in it.  The foreseeability requirement is therefore met.

2.       Proximity

[29]    The proximity analysis is more difficult.  Most
of the cases in which a duty of care has not been established have foundered on
this element.

[30]    In Fullowka, the plaintiffs’ family
members were killed by a bomb set in a mine by a striking mineworker.  The
plaintiffs alleged that the government of the Northwest Territories acted
negligently in enforcing mining safety regulations by allowing the mine to
operate when it knew of the potential for violence.  The Supreme Court of
Canada held in favour of the plaintiffs.

[31]    Cromwell J. reiterated some relevant factors and
legal principles which had been set out by the Supreme Court of Canada in prior
cases.  He first referred to Childs, noting that it was – as is the case
at bar and as was Fullowka – a case where the defendants’ conduct did
not directly cause the foreseeable harm to the plaintiff; rather, the direct
cause of the harm was the action of third parties whom, it was argued, the
defendant had a duty to control or regulate.  Cromwell J. noted that the court
in Childs set out three possible relevant factors in determining whether
the proximity between the parties was sufficient to establish a duty of care:

27        … The first is that
the defendant is materially implicated in the creation of the risk or has
control of the risk to which others have been invited. The second is the
concern for the autonomy of the persons affected by the positive action
proposed. As the Chief Justice put it: "The law … accepts that competent
people have the right to engage in risky activities … [and] permits third
parties witnessing risk to decide not to become rescuers or otherwise
intervene" (para. 39). The third is whether the plaintiff reasonably relied
on the defendant to avoid and minimize risk and whether the defendant, in turn,
would reasonably expect such reliance.

[32]    At para. 39 Cromwell
J. noted the following principles from Syl Apps Secure Treatment Centre v.
B.D., 2007 SCC 38:

o       The
statute is the foundation of the proximity analysis and policy considerations
arising from the particular relationship between the plaintiff and the
defendant must be considered.

o      
The fact that an alleged duty of care is found to conflict with
an overarching statutory or public duty may provide a policy reason for
refusing to find proximity. Both Cooper and Edwards are examples.
In Cooper, a duty to individual investors on the part of the Registrar
of Mortgage Brokers potentially conflicted with the Registrar’s overarching
public duty; in Edwards, the proposed private law duty to the victim of
a dishonest lawyer potentially conflicted with the Law Society’s obligation to
exercise its discretion to meet a myriad of objectives.

o       A
statutory immunity provision may also, as in Edwards, indicate the
Legislature’s intention to preclude or limit private law duties.

[33]    Finally, at para. 40 Cromwell J. referred to Hill
v. Hamilton-Wentworth Regional Police Services Board, 2007 SCC
41, and noted:

… The most basic factor
relevant to proximity is whether there is a relationship between the alleged
wrongdoer and the victim, usually described as "close and direct"
(para. 29). The focus is on whether the actions of the alleged wrongdoer have a
close and direct effect on the victim. Other considerations include
expectations, representations, reliance and the nature of the interests engaged
by the relationship. …

[34]    With those principles in mind, I now turn to the
case at bar.

(i) The Regulatory Regime

[35] The regulation of aviation
safety in Canada is achieved through a system of certification, licensing, surveillance
and enforcement, under the authority of the Minister of Transport (Transport
Canada).  The system includes certification and licensing of aircraft, pilots
and maintenance personnel.

[36]    In the Appendix, I
set out a description of the regime, which, at its highest level, involves
commitments by Canada pursuant to the 1944 Convention on
International Civil Aviation (the “Chicago Convention”).  The Appendix
is largely taken from the plaintiffs’ arguments.

[37]    With respect to policy manuals, the plaintiffs have pleaded the following:

Transport Canada developed policies, procedures,
and manuals which defined the duties of Transport Canada employees with respect
to oversight of the aviation industry.  Among other things, these duties
required Transport Canada to:

a)    
consider an applicant’s and its principals’
aviation record when approving an AMO application and setting the audit
frequency for the AMO;

b)    
audit AMOs at least once every three years, and
audit high-risk AMOs more frequently;

c)    
carry out mandatory inspections on AMOs that
were not audited in a given year;

d)    
suspend or cancel the licence of an AME who
demonstrated incompetence; and,

e)    
observe TSB accident investigations for the
purposes of:

                                              
i.         
obtaining information relevant to Transport
Canada’s responsibilities for safety; and,

                                             
ii.         
identifying hazards that should be addressed
through regulatory or enforcement action.

[38]    As will be seen from the Appendix, all aircraft
in Canada must be certified as airworthy by an AMO or AME.  All repair work
must be similarly certified.  An AMO’s procedures are governed by a detailed
maintenance policy manual, which must be approved by Transport Canada.

[39]    Transport Canada keeps records of every
aircraft, aircraft owner, AME and AMO.  Transport Canada notifies aircraft
owners when there is a concern with respect to an aircraft’s airworthiness.

[40]    There are strict criteria for the certification
of AMEs, AMOs and PRMs.  Of particular significance to the case at bar is that
Transport Canada should not have approved Mr. Comeault’s appointment as the PRM
of A & L in December 1999; he was not qualified to hold that position
because of his prior conviction.

[41]    One of the criteria the courts have looked at is
whether the legislation in question contains an immunity provision which
protects employees of Transport Canada from being held liable for negligent
actions done in good faith.  There is no such provision in the Act or Regulations
(see, Edwards v. Law Society of Upper Canada, 2001 SCC 80; McClelland v. Dr. Stewart, 2003 BCSC 1292).

(ii) Cases dealing with harm caused
by someone the defendant regulated or controlled

[42]    This case is one where the harm was directly
caused by someone whom, it is alleged, a defendant (Transport Canada) had a
duty to regulate (Mr. Comeault).  There are a number of cases where sufficient
proximity has been found to exist in those circumstances. Fullowka was,
as I have indicated, such a case.  It is instructive to review other such cases.

[43]    In D.N. v. Oak Bay, 2005 BCSC 1412,
Silverman J. held that a parole officer owed a duty of care to youths on a
hockey team, and their parents, to warn them that an assistant coach was a
convicted sex offender.  The parole officer did not do so and the coach
sexually abused the plaintiff team member.

[44]    In McClelland, the plaintiffs were abused
by a physician, Dr. Stewart.  In addition to suing him, they claimed that the
College of Physicians and Surgeons of British Columbia was negligent in
allowing Dr. Stewart to practice medicine when it ought to have been aware of his
similar past conduct.  L. Smith J. refused to strike the claim finding that it
was arguable that there was sufficient proximity to found a prima facie
duty of care.

[45]    In coming to her conclusion, Smith J. relied on two
things which are particularly germane to the case at bar.  The first was that
the case involved physical harm as opposed to economic loss.  Smith J. analysed
previous cases dealing with the issue of proximity in which that distinction
was drawn.

[46]    The second factor was the specific knowledge the
college was alleged to have of the doctor’s conduct.  Smith J. noted, at para.
100, that:

… The allegations relate to
specific circumstances and a specific doctor, whose misconduct was allegedly
known to the College. …

[47]    The case at bar involves physical damage and it
is alleged that Transport Canada had actual knowledge of Mr. Comeault’s incompetence,
dishonest keeping of records and prior conviction.

[48]    In the recent case of More v. Bauer Nike
Hockey Inc., 2010 BCSC 1395, the plaintiff suffered a head injury in a
hockey game while wearing a helmet manufactured by Bauer and certified by the
Canadian Standards Association.  It claimed that the Association, which was a
federal Crown corporation, was negligent in granting the certification.

[49]    Macaulay J. determined that a duty of care was
owed by the CSA to the plaintiff.  In determining proximity, he also drew a
distinction between physical injury and a claim for economic loss.  After analysing
the statutory regime, Macaulay J. posed and answered the following question:

[212]    … On the question of
proximity, I extrapolate from Cooper at paras. 32-34. Is the player, who
must obtain and wear a certified helmet in order to participate in organized
hockey, so closely and directly affected by the CSA decision respecting the adequacy
of the certification standard that the latter ought reasonably to have the
player’s legitimate interest in safety in mind? In my respectful view, the
answer must be yes.

[50]    The comment of Macaulay J. in the following
paragraph is apt – with suitable transpositions – to aircraft certification insofar
as pilots, passengers and purchasers of aircraft are concerned:

[213]  By legislative
definition, any hockey helmet that is not certified is a hazardous product and
cannot be sold in Canada. No matter how well designed the helmet may, in fact,
be, no manufacturer can offer it for sale unless it is certified. The consumer
hockey player has no choice and buys, or otherwise obtains, the helmet for the
purpose of self-protection in a game that has inherent dangers. Nonetheless,
there is some reliance by the consumer on the fact of certification and an
expectation that the risk of at least some injuries is reasonably reduced.
Otherwise, there would be no need for any helmet at all.

[51]    Transport Canada relies on several cases in
support of their position that there is insufficient proximity on which to
found a duty of care.  I now turn to some of those cases.

[52]    In Edwards, the plaintiffs were defrauded
in a gold purchase scheme.  As instructed by the vendor, they deposited the
purchase funds into a lawyer’s trust account, but the gold was never delivered.
The plaintiffs sued the Law Society for being negligent in failing to ensure
that the lawyer operated his trust account in the appropriate manner.  The Law
Society applied to strike the claim.  The Supreme Court of Canada held there
was insufficient proximity to establish a duty of care.

[53]    As noted by Smith J. in McLelland, one of
the factors which influenced the court in Edwards was that the
plaintiffs were not clients of the lawyers.  That is not paralleled in the case
at bar.  Further, the case was one of economic harm and not physical harm and
the legislation in Edwards contained an immunity provision.

[54]    Transport Canada also relies heavily on Drady
and Attis.  In Attis the court stated:

57        The regulations in
force during the time frame defined by the appellants simply particularized and
provided mechanisms to enforce compliance with the legislation’s objective. A
reading of the legislative history of the regulations discloses that there was
no obligation on Health Canada to undertake safety and efficacy testing, or to
engage any other compliance or enforcement mechanism. The regulations simply
authorized Health Canada to enforce the various aspects of the compliance
requirements if it chose to do so. Thus, Health Canada was akin to an overseer
or watchdog, able to employ discretionary, but not mandatory, enforcement of
the legislative scheme. Having the means to enforce compliance does not
translate into an obligation to do so: see Street v. Ontario Racing
Commission, (2008), 88 O.R. (3d) 563 at para. 18 (C.A.). Like the FDA,
the regulations mandate that the medical devices industry is responsible for
product safety, a responsibility that has become increasingly rigorous over
time. The government, like the consumer, depends on the manufacturer to ensure
product safety.

A similar comment was made in Drady, at para. 38.

[55]    That passage highlights two major distinctions
between Attis and Drady and the case at bar.  First, the
allegations in this case concern the AMO, AME and PRM designations given by
Transport Canada.  The granting of that designation is not something over which
the industry maintained control nor was responsibility for the designation
shared.  Second, in the present case, Transport Canada did not have the
discretion to approve Mr. Comeault as a PRM given his criminal conviction.

[56]    There is a third distinction between this case
and Drady and Attis. In Drady, at para. 54, it was noted
that no representations from Health Canada to the plaintiff were pleaded.  In
the case at bar, the plaintiffs allege:

At all material times, Transport Canada made
the following representations to the public and its employees:

a)              
Transport Canada and its employees may be held
civilly liable for injuries caused or contributed to by negligent oversight of
regulated entities;

b)              
Transport Canada’s primary objective is aviation
safety, and therefore decisions made by Transport Canada inspectors should
always reflect this objective;

c)              
Transport Canada inspectors have an inherent
legal responsibility within their Delegation of Authority to act in the
interest of public safety;

d)              
Enforcement of regulations is not an option, but
a commitment to aviation safety;

e)              
Transport Canada is working for individual
members of the flying public;

f)                
The Aeronautics Act was created to
protect the public from potentially unsafe aviation practices and activities;

g)              
Members of the flying public are indirect
clients of Transport Canada;

h)              
The provision of oversight services by Transport
Canada is intended to provide a level of positive assurance to the travelling
public, which is receiving the benefits of rights exercised by regulated
entities;

i)                
Transport Canada has an obligation to the flying
public to ensure that maintenance personnel working on aircraft are properly
trained; and,

Comeault and A & L met the regulations
and standards required of AMEs and AMOs and were approved to perform maintenance
on Enstrom piston-powered helicopters.

Reliance on these representations by the plaintiffs is
also pleaded.

[57]    Finally, Health Canada had no information about
individual users of medical devices.  However, as is pointed out in Appendix
dealing with the regulatory framework, Transport Canada maintained the names
and current addresses of all aircraft owners so that, amongst other things,
airworthiness directives could be sent to them.

(iii) Conclusion on Proximity

[58]    The negligence alleged against Transport Canada
is with respect to something over which it had direct control:  the designation
of maintenance personnel and organisations who are authorised to perform work
on and certify aircraft.

[59]    Further, part of the case against Transport
Canada is that it breached the stark restriction from approving Mr. Comeault as
a PRM because of his prior criminal conviction. This
claim does not seek to make Transport Canada a guarantor for the safety of
aircraft; rather, it is directed to something far more limited and specific –
the duty to exercise care in enforcing its own regulations with respect to whom
it designates as competent to work on aircraft.

[60]    This case is closer to those that have found
proximity to exist than those cases which have not.

[61]    I conclude that there is a case to be argued
that there was a close and direct relationship between the Ministry of
Transport and the plaintiffs (an aircraft owner/pilot and passenger,
respectively) and that there is therefore sufficient proximity to found the
alleged duties.

3.       Do
policy considerations negate the prima facie duty

[62]    The allegations do not involve activities in the
legislative or policy sphere; rather, they are activities occurring exclusively
at the operational level.

[63]    In several cases, a prima facie duty of
care has been negated at this stage of the analysis because an alleged duty
would conflict with the defendant’s larger responsibilities.  For example, in Cooper
the court stated at para. 52:

In our view, even if a prima
facie duty of care had been established under the first branch of the Anns
test, it would have been negated at the second stage for overriding policy
reasons. The decision of whether to suspend a broker involves both policy and
quasi-judicial elements. The decision requires the Registrar to balance the
public and private interests. The Registrar is not simply carrying out a
predetermined government policy, but deciding, as an agent of the executive
branch of government, what that policy should be. Moreover, the decision is
quasi-judicial. The Registrar must act fairly or judicially in removing a
broker’s licence. These requirements are inconsistent with a duty of care to
investors. Such a duty would undermine these obligations, imposed by the
Legislature on the Registrar. Thus even if a prima facie duty of care could be
posited, it would be negated by other overriding policy considerations.

[64]    Transport Canada says that the Minister of
Transport has a wide-ranging mandate and to impose the duty of care alleged
here would conflict with that.  But that is a conclusion without an argument to
support it.  There is no doubt that the Minister of Transport has a wide array
of responsibilities, even within the area of air transport.  However, in and of
itself, that is not sufficient to allow me to draw the conclusion that the
imposition of the duty would be inconsistent with the Minister’s wider responsibilities.
As I have said, the alleged duty is very narrow.  It is hard to conceive how a
duty of care to designate AMEs, PRMs and AMOs who are competent and who have
not been convicted of offences under the Act can result in inconsistent
obligations.  The Attorney General did not provide one example under the
legislative scheme of a possible conflict.

[65]    The possibility of the duty of care imposing
indeterminate liability is also a consideration.  There is no possibility of
that here.

[66]    I therefore do not think it is plain and obvious
that the pleadings, as sought to be amended, do not disclose a cause of action.

4.       Other arguments made by
Transport Canada

[67]    Transport Canada argues that the proposed
amendments plead evidence.  I do not agree.  The amendments do not set out how
facts are to be proved; they set out the alleged facts.

[68]    Transport Canada also argues that the proposed
amendments which deal with Mr. Comeault’s work on other aircraft refer to
similar fact evidence which is not admissible.  I take that objection to stand
whether the paragraphs are considered to be factual allegations or, as per the
argument that I have rejected, the pleading of evidence.

[69]    I do not accept this submission, which
misunderstands the purpose for the allegations.  The thrust of the plaintiffs’
claims is that Transport Canada knew that Mr. Comeault had been involved
in questionable work on other aircraft and therefore should not have approved
his PRM and AME designations.  That is the purpose of the reference to the
other aircraft incidents.  That is not similar fact evidence – it is a pleading
of Transport Canada’s prior knowledge of matters that go to Mr. Comeault’s
qualification to be an AME and PRM.

V.       Conclusion

[70]    I conclude that the amendments are permitted.

“E.M. MYERS, J.”

Appendix – The legislative scheme

[1]      The regulation of aviation safety in Canada is achieved through
a comprehensive system of certification, licensing, surveillance and
enforcement, all under the authority of the Minister of Transport (Transport
Canada).  The system includes certification and licensing of aircraft, pilots,
and maintenance personnel.

[2]      The regulatory regime is set out in:

(a)      Canada’s
commitments at the international level under the Convention on International
Civil Aviation (at the international level);

(b)      the
Aeronautics Act, R.S.C. 1985, c. A-2 (the “Act”);

(c)      the
regulations and standards promulgated under the Act;

(d)      the
directives and policies issued to support Transport Canada’s implementation of
its responsibilities.

International Commitments

[3]      Canada was a Contracting State to the Convention
on International Civil Aviation (the “Chicago Convention”) on
December 7, 1944.  The Chicago Convention came into force on March 5,
1947.  The purposes of the Chicago Convention included forming the
International Civil Aviation Organization (“ICAO”) and creating a framework of
aviation standards and practices that all parties would adhere to.

[4]      A number of amendments have been made to the Chicago
Convention since it came into force.  Most relevant to this case is the
Seventh Edition of the Chicago Convention, which contains all amendments
which were in force as of June 30, 1997.

Convention
on International Civil Aviation, Seventh Edition, 1997

[5]      Article 12 reads
in part:

Each
contracting State undertakes to adopt measures to insure that every aircraft
flying over or maneuvering within its territory and that every aircraft carrying its nationality mark,
wherever such aircraft may be, shall comply with the rules and regulations
relating to the flight and maneuver of aircraft there in force.  Each
contracting State undertakes to keep its own regulations in these respects
uniform, to the greatest possible extent, with those established from time to
time under this Convention. …Each contracting State undertakes to insure the
prosecution of all persons violating the regulations applicable.

[6]      Article 54 requires the ICAO Council to adopt
Annexes to the Convention which set out international standards and recommended
practices.  Relevant Annexes that have been adopted are:

(a)      Annex 1 – Personnel
Licensing

(b)      Annex 6 – Operation of
Aircraft

(c)      Annex 8 –
Airworthiness of Aircraft

Annex 1 – Personnel Licensing

[7]      Annex 1 contains requirements that Contracting
States must enforce with respect to licensing individuals involved in the
aviation industry, including aircraft mechanics.  The following section imposes
a duty on a Contracting State, including Canada, to take action if a licence
holder is not competent:

1.2.5.1
A Contracting State, having issued a licence, shall ensure that the privileges
granted by that licence, or by related ratings, are not exercised unless the
holder maintains competency and meets the requirements for recent experience
established by that State.

Annex 6 – Operation of Aircraft

[8]      Annex 6 contains requirements for the
international operation of aircraft, including oversight of aircraft operated
by private owners.  Although targeted at international operations, its
provisions necessarily impact on domestic operations because, in practice, it
is impossible to separate maintenance that is performed on aircraft that will
only be operated in Canada from those that will be operated internationally.

[9]      Section 6.1 of Part III prohibits the operation
of helicopters unless they are maintained and released to service by an
approved organisation, or under an equivalent system where the person signing
the maintenance release is licensed in accordance with Annex 1.

[10]    Appendix 1 to Annex 6 imposes duties on a
Contracting State to conduct safety oversight of operators in its
jurisdiction.  Section 8.1 of the Appendix requires a Contracting State to “use
a documented process to take appropriate corrective actions, up to and
including enforcement measures, to resolve identified safety issues”.

Annex 8 – Airworthiness of Aircraft

[11]    Annex 8 contains requirements that are intended
to ensure the airworthiness of aircraft.  Section 4.1 provides that Chapter 4
applies to “all aircraft”, not just aircraft that are operated
internationally.  Section 4.2.1 requires a Contracting State to ensure that
aircraft are “maintained in an airworthy condition and in compliance with the
maintenance requirements of Annex 6.”

Aeronautics Act

[12]    The Aeronautics Act is the primary
governing legislation for Transport Canada and the aviation industry.  Among
other things, the Act creates the legislative framework that is
necessary for Canada to meet the obligations it has committed to under the Chicago
Convention.

[13]    The Act defines responsibilities for
Transport Canada, creates powers that can be used in making regulations and
overseeing the aviation industry, and sets out certain offences that go to the
heart of aviation safety.

Responsibilities

The Act defines responsibilities for Transport
Canada, including the following:

4.2 The Minister is responsible for the
development and regulation of aeronautics and the supervision of all matters
connected with aeronautics and, in the discharge of those responsibilities, the
Minister may

(n)        investigate
matters concerning aviation safety; and

(o)        undertake
such other activities in relation to aeronautics as the Minister considers
appropriate or as the Governor in Council may direct.

Powers

[14]    Relevant areas over which Transport Canada may
regulate include:  the licensing of pilots and maintenance engineers,
maintenance of aircraft, inspection of maintenance facilities, the prohibition
of certain acts and enforcement of laws for safety reasons, and investigations
of aviation incidents and contraventions of regulations:

4.9 The Governor in Council may make
regulations respecting aeronautics and, without restricting the generality of
the foregoing, may make regulations respecting

(a)        the accreditation or licensing of

(i)         flight crew members, air traffic
controllers, operators of equipment used to provide services relating to
aeronautics and other persons providing services relating to aeronautics, and

(ii)        persons engaged in the design,
manufacture, distribution, maintenance, approval, certification or installation
of aeronautical products and the installation, maintenance, approval and
certification of equipment used to provide services relating to aeronautics;

(b)        the design, manufacture,
distribution, maintenance, approval, installation, inspection, registration,
licensing, identification and certification of aeronautical products;

(c)        the design, installation,
inspection, maintenance, approval and certification of equipment and facilities
used to provide services relating to aeronautics;

(h)        the conditions under which
aircraft may be used or operated or under which any act may be performed in or
from aircraft;

(m)       the prohibition of the doing of any
other act or thing in respect of which regulations under this Part may be made;

(n)        the enforcement of such laws as
may be deemed necessary for the safe and proper operation of aircraft;

(q)        the investigation of any accident
involving an aircraft, any alleged contravention under this Part or any
incident involving an aircraft that, in the opinion of the Minister, endangered
the safety of persons;

(r)        the taking of statements by
investigators for the purpose of an investigation referred to in paragraph (q);

(s)        the keeping and preservation of
records and documents relating to aerodromes, to activities, with respect to
aeronautics, of persons who hold Canadian aviation documents and to
aeronautical products and equipment and facilities used to provide services
relating to aeronautics;

[15]    The Act also gives Transport Canada the
authority to cancel or refuse to issue or amend Canadian aviation documents on
grounds related to public safety:

6.71 (1) The Minister may refuse to issue a
Canadian aviation document, where the Minister is of the opinion that the
public interest and, in particular, the record in relation to aviation of the
applicant or of any principal of the applicant warrant it.

6.8 In addition to any ground of
suspension, cancellation or refusal of renewal referred to in sections 6.9 to
7.1, the Minister may suspend, cancel or refuse to renew a Canadian aviation
document in such circumstances and on such grounds as the Governor in Council
may by regulation prescribe.

6.9 (1) Where the Minister decides to suspend or
cancel a Canadian aviation document on the grounds that the holder of the
document … has contravened any provision of this Part or any regulation or
order made under this Part, the Minister shall by personal service or by
registered or certified mail sent to the holder … at his latest known address
notify the holder … of that decision and of the effective date of the
suspension or cancellation, but no suspension or cancellation shall take effect
earlier than the date that is thirty days after the notice under this
subsection is served or sent.

7. (1) Where the Minister decides to suspend a
Canadian aviation document on the grounds that an immediate threat to aviation
safety exists or is likely to occur as a result of an act or thing having been,
being or proposed to be done under the authority of the document, the Minister
shall forthwith by personal service or by registered or certified mail sent to
the holder of the document … at his latest known address notify the holder … of
his decision.

7.1 (1) Where the Minister decides

(b)        to suspend or cancel a Canadian
aviation document on the grounds that the holder of the document is incompetent
or the holder or any aircraft, airport or other facility in respect of which
the document was issued ceases to have the qualifications necessary for the
issuance of the document or to meet or comply with the conditions subject to
which the document was issued, or

(c)        to suspend or cancel a Canadian aviation
document because the Minister is of the opinion that the public interest and,
in particular, the record in relation to aviation of the holder of the Canadian
aviation document or of any principal of the holder, as defined in regulations
made under subsection 6.71(2), warrant it,

the Minister shall, by personal service or by
registered mail sent to the holder or to the owner or operator of the aircraft,
airport or facility, as the case may be, at the latest known address of the
holder, owner or operator, notify the holder, owner or operator of the
Minister’s decision.

[16]    The Act gives Transport Canada
significant audit and inspection powers to enable it to detect breaches of the
regulations and safety standards:

8.7 (1) … the Minister may

(a)        enter any aircraft, aerodrome,
facility relating to aeronautics or any premises used for the design,
manufacture, distribution, maintenance or installation of aeronautical products
for the purposes of making inspections relating to the enforcement of this
Part;

(b)        enter any place for the purposes
of an investigation of matters concerning aviation safety;

(c)        seize anything found in any place
referred to in paragraph (a) or (b) that the Minister believes on reasonable grounds
will afford evidence with respect to an offence under this Part or the causes
or contributing factors pertaining to an investigation referred to in paragraph
(b); and

(d)        detain any aircraft that the
Minister believes on reasonable grounds is unsafe or is likely to be operated
in an unsafe manner and take reasonable steps to ensure its continued
detention.

Offences

[17]    The Act defines a number of offences
which go to the heart of aviation safety:

7.3 (1) No person shall

(a) knowingly make any false representation
for the purpose of obtaining a Canadian aviation document or any privilege
accorded thereby;

(c) make or cause to be made any false entry
in a record required under this Part to be kept with intent to mislead or
wilfully omit to make any entry in any such record;

These offences may be pursued as summary or indictable
offences.

Aeronautics
Act, s. 7.3(2), 7.3(3)

CARs

[18]    The Canadian Aviation Regulations,
S.O.R./96-433 (“CARs”) came into effect on September 10, 1996.  The CARs
are the source of most of the regulations that govern the Canadian aviation
industry.  The CARs frequently incorporate by reference standards which
are contained in other publications.

[19]    The CARs are divided into eight parts. 
The following parts are relevant to this motion:

Part II:     Identification, Registration and Leasing of
Aircraft

Part IV:    Personnel Licensing and Training

Part V:     Airworthiness

Part VI:    General Operating and Flight Rules

Part
II:         Identification, Registration and Leasing of Aircraft

[20]    Part II prohibits the operation of an aircraft
in Canada unless it has been registered with Transport Canada or with the civil
aviation authority of another state.  If Transport Canada receives an
application in accordance with the requirements of the Standards, then it must
register the aircraft.  When Transport Canada registers an aircraft, it issues
a Certificate of Registration to the owner.  As a result, Transport Canada has
a record of all aircraft that are lawfully registered and operated in Canada.

CAR
202.13(2), 202.16, 202.25

[21]    When the address of an owner changes, the owner
must notify Transport Canada within 7 days of the change.  Transport Canada has
the right to demand that an owner inform it of the location of an aircraft and
whether the aircraft is currently serviceable.  As a result, Transport Canada
has contact information for all owners of registered aircraft, and the ability
to determine the location of the aircraft.  One of the purposes of this
information is to ensure prompt delivery of Airworthiness Directives by
Transport Canada to aircraft owners:

[22]    It is incumbent upon owners of Canadian
registered aircraft to ensure that Transport Canada (TC) has their correct
address to ensure prompt delivery of ADs applicable to their aircraft.

CAR
202.51, 202.46, Standard 593.03(1)(ii)

Part
IV:        Personnel Licensing and Training

[23]    Part IV prohibits individuals from carrying out
aviation activities without a licence issued by Transport Canada.  Most importantly,
CAR 403.02 prohibits a person from exercising the privileges of an aircraft
maintenance engineer (“AME”) unless the person:

(a)      holds an AME licence
issued pursuant to [Subpart 3 – Aircraft Maintenance Engineer Licences and
Ratings];

(b)      exercises the
privileges in accordance with the ratings and any limitations endorsed on the
licence; and

(c)      exercises the
privileges in accordance with Part V [Airworthiness]

CAR
403.02(1)

[24]    To obtain an AME licence, an applicant must
demonstrate to Transport Canada that he or she is 21 years or older, and has
the requisite training, knowledge, experience, and skill.

CAR
403.03

Part
V:         Airworthiness and Part VI:  General Operating and Flight Rules

[25]    Part V deals generally with the airworthiness of
aircraft, including maintenance requirements.  “Airworthy”, in respect of an
aircraft, means “in a fit and safe state for flight and in conformity with its
type design [i.e. in conformity with the manufacturer’s specifications and
instructions for continued airworthiness]”.  Transport Canada has an explicit
duty to ensure the airworthiness of aircraft used in Canada:

The responsibility for monitoring the overall airworthiness
of aeronautical products used in Canada rests with the Director of
Airworthiness, Transport Canada.

CAR
101.01, CAR Standard 593.03(1)

[26]    Part VI sets out the rules of flight that all
owners and pilots must obey.  The operation of an aircraft is prohibited unless
a flight authority is in effect.  The relevant flight authority in this case is
referred to as a certificate of airworthiness.

CAR
605.03(1), 101.01

Certificate of Airworthiness

[27] CAR 507.02 provides that on application
by an owner, Transport Canada shall issue a certificate of airworthiness if the
aircraft conforms to its certified type design and the aircraft is safe for
flight.  The application must include a declaration from an AME attesting that
these conditions have been met.  Transport Canada has the authority to inspect
any aircraft for which an application is submitted to ensure that it is
airworthy.

CAR 507.02(c), 507.06(3), 507.10

[28]    Once a certificate of airworthiness has been
issued, an owner must submit annual reports to Transport Canada to maintain the
validity of the certificate.  Among other things, the annual report must
include:

(a)      the
total hours the aircraft has been flown since new, and the number of hours the
aircraft was flown in the last calendar year;

(b)      the
date of the most recent annual or equivalent inspection;

(c)      the
name and licence number of the AME who conducted and certified the inspection;

(d)      where
an AMO conducted the inspection, the name and approval number of the AMO;

(e)      whether
the aircraft was significantly damaged since the last annual report, and if
applicable, the date of repair certification.

CAR
501.01, 501.02, Standard 501.02(1)

[29]    As a result of these requirements, an aircraft
owner has no choice but to have his aircraft inspected annually by a Transport
Canada licensed AME or AMO.  In granting a certificate of airworthiness,
Transport Canada relies on the declaration of an AME that the aircraft has been
maintained properly and is safe for flight.

Ongoing Maintenance

[30]    After a certificate of airworthiness has been
issued for an aircraft, an owner continues to depend on licensed AMEs to
perform ongoing maintenance.  A pilot is prohibited from conducting a take-off
in an aircraft that has undergone maintenance unless a maintenance release has
been signed by a licensed AME.  The purpose of a maintenance release is to
assure users of the aircraft that “the standards of airworthiness applicable to
the maintenance performed … has been complied with”.

CAR
605.85(1), 571.10(1), 571.11

[31]    Owners of aircraft may choose to have
maintenance performed at an AMO.  As suggested by its name, an AMO is an
organization that is approved by Transport Canada to perform maintenance on
aircraft.  AMOs must meet more stringent regulatory requirements than individual
AMEs.  Generally speaking, commercial operators are required to have
maintenance performed by AMOs.  Private operators may choose to have maintenance
performed by an AMO.

CAR
573

[32]    The following relevant regulatory requirements
are imposed on AMOs:

(a)           
An AMO must have a
maintenance policy manual that sets out the policies and procedures that will
be in place at the AMO to ensure maintenance is performed safely and in
accordance with the CARs.  Transport Canada checks and approves every
single page of a maintenance policy manual, and may instruct AMOs to amend
particular sections of the manual.  A maintenance policy manual is required to
include, among other things:

(i)             
the names of
individuals appointed to management positions, including the Person Responsible
for Maintenance;

(ii)            
procedures to
ensure that regulatory information and technical data appropriate to the work
performed are used;

(iii)           
a detailed
description of the AMO’s quality assurance program; and,

(iv)          
procedures used
for incoming inspection and storage of parts.

CAR
573.10(1),(5),(6), Standard 573.10

(b)           
An AMO must
establish and maintain a quality assurance program that is described in its
maintenance policy manual, and is therefore approved by Transport Canada.  Quality
assurance duties that relate to specific tasks are to be carried out by
individuals who are not responsible for those tasks in the AMO’s normal
operation.

CAR
Standard 573.09

(c)           
An AMO may only
perform work on aeronautical products that it is authorized by Transport Canada
to maintain, such as piston-powered Enstrom helicopters.

CAR
573.02(2)

(d)           
An AMO must
appoint an individual to the position of Person Responsible for Maintenance,
who is then approved by Transport Canada.  Before approving an appointee,
Transport Canada must:

(i)             
verify that the
appointee has no convictions under Section 7.3 of the Aeronautics Act.

(ii)            
interview the
appointee to ensure he or she has the relevant knowledge, including quality
assurance, record keeping, and parts control and traceability requirements.

CAR
Standards 573.03(1)(c), 573.03(3), 573.03(5)

Airworthiness Directives

[33]    Aircraft owners also rely on Transport Canada to
notify them of serious safety issues through Airworthiness Directives. 
Transport Canada has an explicit duty to issue an Airworthiness Directive when
it becomes aware of an unsafe condition:

Unless the Minister considers that an
alternative action to an airworthiness directive will ensure an equivalent
level of safety, the Minister shall issue … an airworthiness directive in
respect of an aeronautical product for which a type certificate has been
issued, or accepted, by the Minister where

(a)        an unsafe condition exists in the
aeronautical product and the condition is likely to exist or develop in other
aeronautical products.

CAR
593.02(a)

[34]    There is one exception to the duty:  If
Transport Canada considers that an alternative action to an Airworthiness
Directive will ensure an equivalent level of safety, then it need not issue an
Airworthiness Directive.  Of course, the exception requires Transport Canada to
take some action and turn its mind to the question of the level of
safety that is provided by the alternative action.

[35]    When Transport Canada becomes aware of an unsafe
condition in an aeronautical product that is caused by unsafe maintenance
practices, it has a duty to take action to warn users of those products. 
Transport Canada maintains a database of aircraft and their owners in part for
the purpose of notifying them when unsafe conditions exist.

CAR
Standard 593.03(1)

Directives and Policies

[36]    The directives and policies are not legislative
in nature.  The allegations in the pleadings with respect to these are set out
in the main body of this judgment at para. 37.