Canada 3000 Inc., Re; Inter-Canadian (1991) Inc. (Trustee of)

Canada 3000 Inc., Re; Inter-Canadian (1991) Inc. (Trustee of)
Collection
Supreme Court Judgments
Date
2006-06-09
Neutral citation
2006 SCC 24
Report
[2006] 1 SCR 865
Case number
30214, 30729, 30730, 30731, 30732, 30738, 30740, 30742, 30743, 30745, 30749, 30750, 30751
Judges
McLachlin, Beverley; Bastarache, Michel; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Fish, Morris J.; Charron, Louise
On appeal from
Ontario
Subjects
Statutes
Transportation
Notes
SCC Case Information: 30743, 30742, 30729, 30749, 30730, 30738, 30745, 30731, 30751, 30214, 30750, 30732, 30740
Decision Content
SUPREME COURT OF CANADA
Citation: Canada 3000 Inc., Re; Inter‑Canadian (1991) Inc. (Trustee of), [2006] 1 S.C.R. 865, 2006 SCC 24
Date: 20060609
Dockets: 30214, 30729, 30730, 30731, 30732, 30738, 30740, 30742, 30743, 30745, 30749, 30750, 30751
Between:
NAV Canada et al.
Appellants / Respondents on cross‑appeals
and
International Lease Finance Corporation et al.
Respondents / Appellants on cross‑appeals
Between:
NAV Canada
Appellant
and
Wilmington Trust Company et al.
Respondents
Between:
NAV Canada
Appellant
and
G.I.E. Avions de transport régional et al.
Respondents
Between:
NAV Canada
Appellant
and
Inter‑Canadian (1991) Inc. et al.
Respondents
and between:
Aéroports de Montréal
Appellant
and
Wilmington Trust Company et al.
Respondents
and between:
Greater Toronto Airports Authority
Appellant
and
Ottawa Macdonald‑Cartier International Airport Authority et al.
Respondents
and between:
Ottawa Macdonald‑Cartier International Airport Authority
Appellant
and
Wilmington Trust Company et al.
Respondents
Between:
NAV Canada
Appellant
and
Inter‑Canadian (1991) Inc. et al.
Respondents
and between:
Aéroports de Montréal
Appellant
and
Renaissance Leasing Corporation et al.
Respondents
and between:
Greater Toronto Airports Authority
Appellant
and
Ottawa Macdonald‑Cartier International Airport Authority et al.
Respondents
and between:
Ottawa Macdonald‑Cartier International Airport Authority
Appellant
and
Renaissance Leasing Corporation et al.
Respondents
Between:
Aéroports de Montréal
Appellant
and
Wilmington Trust Company et al.
Respondents
Between:
Aéroports de Montréal
Appellant
and
Newcourt Credit Group (Alberta) Inc. et al.
Respondents
Between:
Aéroports de Montréal
Appellant
and
Newcourt Credit Group (Alberta) Inc. et al.
Respondents
and between:
St. John’s International Airport Authority et al.
Appellants
and
Newcourt Credit Group (Alberta) Inc. et al.
Respondents
and between:
Greater Toronto Airports Authority
Appellant
and
Greater London International Airport Authority et al.
Respondents
Between:
Greater Toronto Airports Authority
Appellant
and
Renaissance Leasing Corporation et al.
Respondents
Between:
Greater Toronto Airports Authority
Appellant
and
Newcourt Credit Group (Alberta) Inc. et al.
Respondents
Between:
Ottawa Macdonald‑Cartier International Airport Authority
Appellant
and
Wilmington Trust Company et al.
Respondents
Between:
St. John’s International Airport Authority
Appellant
and
Newcourt Credit Group (Alberta) Inc. et al.
Respondents
Between:
Charlottetown Airport Authority Inc.
Appellant
and
CCG Trust Corporation et al.
Respondents
Coram: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish and Charron JJ.
Reasons for Judgment:
(paras. 1 to 98)
Binnie J. (McLachlin C.J. and Bastarache, LeBel, Deschamps, Fish and Charron JJ. concurring)
______________________________
Canada 3000 Inc. (Re); Inter‑Canadian (1991) Inc. (Trustee of), [2006] 1 S.C.R. 865, 2006 SCC 24
NAV Canada, Greater Toronto Airports
Authority, Winnipeg Airports Authority Inc.,
Halifax International Airport Authority, Edmonton
Regional Airports Authority, Calgary Airport Authority,
Aéroports de Montréal, Ottawa Macdonald‑Cartier
International Airport Authority, Vancouver International
Airport Authority and St. John’s International
Airport Authority Appellants/Respondents on cross‑appeals
v.
International Lease Finance Corporation, Hyr Här I Sverige
Kommanditbolag, IAI X, Inc., Triton Aviation International
LLC, Sierra Leasing Limited, ACG Acquisition XXV LLC,
ILFC International Lease Finance Canada Ltd., U.S. Airways
Inc., G.E. Capital Aviation Services Inc., as Agent and Manager
for Polaris Holding Company and AFT Trust‑Sub I, Pegasus
Aviation Inc., PALS I, Inc., Ansett Worldwide Aviation, U.S.A.,
MSA V, RRPF Engine Leasing Limited, Canadian Imperial Bank
of Commerce, Flight Logistics Inc., C.I.T. Leasing Corporation,
NBB‑Royal Lease Partnership One and GATX/CL Air Leasing
Cooperative Association Respondents/Appellants on cross‑appeals
___________
NAV Canada Appellant
v.
Wilmington Trust Company and Wilmington Trust Corporation Respondents
____________
NAV Canada Appellant
v.
G.I.E. Avions de transport régional, ATR Marketing Inc.,
Heather Leasing Corporation, Renaissance Leasing Corporation,
Inter‑Canadian (1991) Inc. and Ernst & Young Inc., in its capacity
as trustee for the bankruptcy of Inter‑Canadian (1991) Inc. Respondents
____________
NAV Canada Appellant
v.
Inter‑Canadian (1991) Inc., Wilmington Trust Company,
Wilmington Trust Corporation, Aéroports de Montréal, Greater
Toronto Airports Authority, Ottawa Macdonald‑Cartier
International Airport Authority and Ernst & Young Inc.,
in its capacity as trustee for the bankruptcy of Inter‑Canadian
(1991) Inc. Respondents
- and -
Aéroports de Montréal Appellant
v.
Wilmington Trust Company, Wilmington Trust Corporation,
NAV Canada, Greater Toronto Airports Authority, Ottawa
Macdonald‑Cartier International Airport Authority and Ernst &
Young Inc., in its capacity as trustee for the bankruptcy of
Inter‑Canadian (1991) Inc. Respondents
- and -
Greater Toronto Airports Authority Appellant
v.
Ottawa Macdonald‑Cartier International Airport Authority,
Wilmington Trust Company, Wilmington Trust Corporation,
Aéroports de Montréal, NAV Canada, Ernst & Young Inc., in its
capacity as trustee for the bankruptcy of Inter‑Canadian (1991)
Inc. and Inter‑Canadian (1991) Inc. Respondents
- and -
Ottawa Macdonald‑Cartier International Airport Authority Appellant
v.
Wilmington Trust Company, Wilmington Trust Corporation and
Ernst & Young Inc., in its capacity as trustee for the bankruptcy
of Inter‑Canadian (1991) Inc. Respondents
_____________
NAV Canada Appellant
v.
Inter‑Canadian (1991) Inc., Renaissance Leasing Corporation,
Heather Leasing Corporation, G.I.E. Avions de transport
régional, ATR Marketing Inc., Ernst & Young Inc., in its capacity
as trustee for the bankruptcy of Inter‑Canadian (1991) Inc.,
Aéroports de Montréal, Greater Toronto Airports Authority and
Ottawa Macdonald‑Cartier International Airport Authority Respondents
- and -
Aéroports de Montréal Appellant
v.
Renaissance Leasing Corporation, Heather Leasing Corporation,
G.I.E. Avions de transport régional, ATR Marketing Inc.,
Ernst & Young Inc., in its capacity as trustee for the bankruptcy
of Inter‑Canadian (1991) Inc., NAV Canada, Greater Toronto
Airports Authority and Ottawa Macdonald‑Cartier International
Airport Authority Respondents
- and -
Greater Toronto Airports Authority Appellant
v.
Ottawa Macdonald‑Cartier International Airport Authority,
Renaissance Leasing Corporation, Heather Leasing Corporation,
G.I.E. Avions de transport régional, ATR Marketing Inc.,
Aéroports de Montréal, NAV Canada, Ernst & Young Inc., in its
capacity as trustee for the bankruptcy of Inter‑Canadian (1991)
Inc. and Inter‑Canadian (1991) Inc. Respondents
- and -
Ottawa Macdonald‑Cartier International Airport Authority Appellant
v.
Renaissance Leasing Corporation, Heather Leasing Corporation,
G.I.E. Avions de transport régional, ATR Marketing Inc. and
Ernst & Young Inc., in its capacity as trustee for the bankruptcy
of Inter‑Canadian (1991) Inc. Respondents
_____________
Aéroports de Montréal Appellant
v.
Wilmington Trust Company, Wilmington Trust Corporation and
Ernst & Young Inc., in its capacity as trustee for the bankruptcy
of Inter‑Canadian (1991) Inc. Respondents
____________
Aéroports de Montréal Appellant
v.
Newcourt Credit Group (Alberta) Inc., Canada Life Assurance
Company, Ernst & Young Inc., in its capacity as trustee for the
bankruptcy of Inter‑Canadian (1991) Inc. and Renaissance
Leasing Corporation Respondents
_____________
Aéroports de Montréal Appellant
v.
Newcourt Credit Group (Alberta) Inc., Canada Life Assurance
Company, CCG Trust Corporation, Greater London
International Airport Authority, Greater Toronto Airports
Authority, Saint John Airport Inc., St. John’s International
Airport Authority, Charlottetown Airport Authority Inc.,
Renaissance Leasing Corporation, Heather Leasing Corporation
and Ernst & Young Inc., in its capacity as trustee for the
bankruptcy of Inter‑Canadian (1991) Inc. Respondents
- and -
St. John’s International Airport Authority and Charlottetown
Airport Authority Inc. Appellants
v.
Newcourt Credit Group (Alberta) Inc., Canada Life Assurance
Company, CCG Trust Corporation, Renaissance Leasing
Corporation, Heather Leasing Corporation, Canadian Regional
Airlines Ltd., Canadian Regional (1998) Ltd. and Ernst & Young
Inc., in its capacity as trustee for the bankruptcy of
Inter‑Canadian (1991) Inc. Respondents
- and -
Greater Toronto Airports Authority Appellant
v.
Greater London International Airport Authority, Saint John
Airport Inc., St. John’s International Airport Authority,
Charlottetown Airport Authority Inc., Newcourt Credit Group
(Alberta) Inc., Canada Life Assurance Company, CCG Trust
Corporation, Aéroports de Montréal, Renaissance Leasing
Corporation, Heather Leasing Corporation, Canadian Regional
Airlines Ltd., Canadian Regional (1998) Ltd. and Ernst & Young
Inc., in its capacity as trustee for the bankruptcy of
Inter‑Canadian (1991) Inc. Respondents
____________
Greater Toronto Airports Authority Appellant
v.
Renaissance Leasing Corporation, Inter‑Canadian (1991) Inc.
and Ernst & Young Inc., in its capacity as trustee for the
bankruptcy of Inter‑Canadian (1991) Inc. Respondents
____________
Greater Toronto Airports Authority Appellant
v.
Newcourt Credit Group (Alberta) Inc., Canada Life Assurance
Company, CCG Trust Corporation, Inter‑Canadian (1991) Inc.,
Ernst & Young Inc., in its capacity as trustee for the bankruptcy of
Inter‑Canadian (1991) Inc. and Renaissance Leasing Corporation Respondents
____________
Ottawa Macdonald‑Cartier International Airport Authority Appellant
v.
Wilmington Trust Company and Ernst & Young Inc., in its capacity
as trustee for the bankruptcy of Inter‑Canadian (1991) Inc. Respondents
___________
St. John’s International Airport Authority Appellant
v.
Newcourt Credit Group (Alberta) Inc., Canada Life Assurance
Company, CCG Trust Corporation, Ernst & Young Inc., in its
capacity as trustee for the bankruptcy of Inter‑Canadian (1991)
Inc. and Renaissance Leasing Corporation Respondents
____________
Charlottetown Airport Authority Inc. Appellant
v.
CCG Trust Corporation and Ernst & Young Inc., in its capacity
as trustee for the bankruptcy of Inter‑Canadian (1991) Inc. Respondents
Indexed as: Canada 3000 Inc. (Re); Inter‑Canadian (1991) Inc. (Trustee of)
Neutral citation: 2006 SCC 24.
File Nos.: 30214, 30729, 30730, 30731, 30732, 30738, 30740, 30742, 30743, 30745, 30749, 30750, 30751.
2006: January 16, 17; 2006: June 9.
Present: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish and Charron JJ.
on appeal from the court of appeal for ontario
on appeal from the court of appeal for quebec
Transportation law — Airports — Seizure and detention of aircraft — Airlines operating fleets of aircraft under leasing agreements with legal titleholders — Airlines, registered owners of aircraft, incurring charges for civil air navigation and airport services — Service providers applying to superior court judge for authorization, pursuant to s. 9 of Airport Transfer (Miscellaneous Matters) Act and s. 56 of Civil Air Navigation Services Commercialization Act , to seize and detain aircraft operated by airlines for unpaid charges incurred prior to airlines’ bankruptcies — Whether titleholders’ right to repossess leased aircraft should take priority over service providers’ seize and detain orders — Whether titleholders liable to service providers for unpaid charges — Whether seize and detain orders can be exercised against security posted by titleholders in substitution for aircraft — Whether lessors of engines attached to detained aircraft entitled to repossess engines — Airport Transfer (Miscellaneous Matters) Act, S.C. 1992, c. 5, s. 9 — Civil Air Navigation Services Commercialization Act, S.C. 1996, c. 20, ss. 55 , 56 .
Legislation — Interpretation — Contextual interpretation — Owner of aircraft — Whether word “owner” in s. 55 of Civil Air Navigation Services Commercialization Act includes legal titleholders of aircraft — Civil Air Navigation Services Commercialization Act, S.C. 1996, c. 20, s. 55 .
An airline in the modern era may consist of little more than a name, with its aircraft leased, its suppliers on week to week contracts and even its reservation and yield management systems outsourced to one of the global service providers such as Sabre or Galileo. Start‑ups are relatively easy, balance sheets are often thin, and failure can be quick and (to outsiders) unexpected. Yet privatized Canadian airports and NAV Canada (the privatized civil air navigation service) are obliged by statute to provide service even to financially troubled airline operators. When an operator collapses leaving unpaid bills for airport charges and air navigation services, the question becomes: who takes the financial loss, the people who ultimately own the leased aircraft or the people who were obliged to (and did) provide the airport and navigation services?
Before going bankrupt, the airline companies Canada 3000 and Inter‑Canadian operated their fleets of aircraft under leasing agreements with the respondent legal titleholders and were the registered owners of the aircraft under the Aeronautics Act . These airlines incurred approximately $33.75 million in charges for civil air navigation and airport services provided by NAV Canada and the airport authorities pursuant to the Airport Transfer (Miscellaneous Matters) Act (“Airports Act”) and the Civil Air Navigation Services Commercialization Act (“CANSCA ”).
The Collapse of Canada 3000
In November 2001, Canada 3000 applied for protection under the Companies’ Creditors Arrangement Act (“CCAA ”). NAV Canada and the airport authorities applied to a judge of the Ontario Superior Court of Justice, under s. 56 of CANSCA and s. 9 of the Airports Act, for authorization to seize and detain certain aircraft operated by the airline. The judge released the aircraft on the posting of security by the legal titleholders and later dismissed the seizure and detention motions, holding that the provisions in question of CANSCA and the Airports Act did not give the authorities priority over the rights of the legal titleholders to repossess the aircraft. He also held that the titleholders were not jointly and severally liable for the charges owed to NAV Canada under s. 55 of CANSCA , since they were not “owners” within the meaning of the Act. The majority of the Court of Appeal upheld the motions judge’s decision.
The Collapse of Inter‑Canadian
In December 1999, the airport authorities and NAV Canada obtained, pursuant to s. 56 of CANSCA and s. 9 of the Airports Act, an order of the Quebec Superior Court to seize and detain a number of aircraft operated by Inter‑Canadian. The airline was subsequently deemed to have made an assignment in bankruptcy. Faced with the legal titleholders’ claims that they were entitled to repossess the aircraft, the trustee in bankruptcy applied to the Superior Court for directions. The judge allowed a motion to release the aircraft in exchange for security. He later held that the legal titleholders were jointly and severally liable for the amounts owing. The majority of the Court of Appeal overturned the motions judge’s ruling, concluding that the lessors’ right to repossession took priority and that the legal titleholders were entitled to the return of their aircraft free and clear of the unpaid charges.
Held: The appeals and cross-appeals should be allowed in part.
This case is from first to last an exercise in statutory interpretation, and the issues of interpretation are closely tied to context. Prior to CANSCA and the Airports Act, civil air navigation and airport services were provided by the federal government. Under the current legislative scheme, the privatized NAV Canada and airport authorities operate as self‑funded corporations that provide services on the basis of a cost‑based tariff fixed by government regulation. They cannot withhold airport or navigation services even from an obviously failing airline. At the time the measures in question here were enacted, airline insolvencies and bankruptcies had become a fact of life throughout the airline industry. The legislative scheme shows that Parliament fully appreciated that in dealing with aircraft flown in and out of jurisdictions under complex leasing arrangements, the only effective collection scheme would be to render the aircraft themselves available for seizure, and thereafter to let those interested in them resolve their dispute about where the money should come from to pay the debts due to the service providers. [36‑39]
No Joint and Several Liability for Charges for Air Navigation Services
The appeals are dismissed with respect to NAV Canada’s claim that the legal titleholders are jointly and severally liable for outstanding civil air navigation charges incurred by the registered owners and operators of the failed airlines, since the legal titleholders are not “owners” within the meaning of s. 55 of CANSCA . It is clear from the statutory scheme and the legislative record that Parliament intended to create a “user-pay” system for civil air navigation services, and that the only “users” of those services within the contemplation of the Act are the airlines. While in some contexts the meaning of “owner” could include legal titleholders, a purposive interpretation of s. 55 excludes them. The definition of “owner” in s. 55(2) lists only persons in possession or legal custody and control of the aircraft. Section 55(1) should be similarly construed. Interpreting the list in s. 55(2) as exhaustive of ownership for the purposes of s. 55(1) is consistent with the rest of the statutory scheme governing aeronautics, the legislative history, and conforms with common sense. If NAV Canada’s interpretation of s. 55 were correct, it would mean that a seizure and detention order issued in respect of Canada 3000’s unpaid user charges could in theory attach not only to a legal titleholder’s aircraft leased to Canada 3000, but also to any other aircraft to which that lessor holds title, including aircraft leased to other airlines. Moreover, to interpret “owner” as argued by NAV Canada would give preference to the ambiguous English text of s. 55 over the relatively clear French provision. A restrictive interpretation of “owner” is consistent with the policy and practice throughout the federal aeronautics scheme where the term “owner” is used to refer to the person in legal custody and control of the aircraft, not the legal titleholder. In enacting CANSCA , Parliament intended not to replace or override the existing regulatory framework but rather to fit cohesively within it. [41‑61]
The Seizure and Detention Remedy
Although the legal titleholders are not directly liable for the charges due to the service providers, NAV Canada and the airport authorities were entitled to orders seizing and detaining the aircraft pursuant to s. 56 of CANSCA and s. 9 of the Airports Act, and are entitled now to have their claims (as assessed by the motions judges) satisfied out of the security posted in substitution for the aircraft. Whereas s. 55 of CANSCA identifies a group of persons who are made legally liable for the amounts owing, the detention remedy set out in s. 9 of the Airports Act and s. 56 of CANSCA has a different focus. This court‑granted remedy entitles the authorities to possess the aircraft until the debt is paid or security furnished. It does not confer any interest in the beneficial ownership of the aircraft, and it cannot be circumvented by a leasing arrangement made between an airline and an aircraft lessor. Since ss. 9(1) and 56(1) do not distinguish between the unpaid charges accumulated by specific aircraft operated by a defaulting owner or operator, the amount in respect of which the seizure of each aircraft is made is the entire amount owed by that registered owner or operator. There is no limitation of debts on an aircraft by aircraft basis. [9‑10] [62‑75] [85-86]
Much of the potential unfairness complained of by the legal titleholders in the operation of the detention remedy can adequately be addressed by the motions judge. The right to seize and detain is not automatic. It requires a prior court authorization which may be subject to such terms as the court considers necessary. The court also has a discretion to limit the duration of the remedy by requiring the applicable authority to release a detained aircraft from detention prior to payment of the amount with respect to which the seizure was made. In any event, an authority that obtains an order is required to release a detained aircraft upon payment of the outstanding charges, or upon the provision of acceptable security therefor. Parliament has thus left the door open for the motions judge to work out an arrangement that is fair and reasonable to all concerned provided that the object and purpose of the remedy (to ensure the unpaid user fees are paid) is fulfilled. [73] [92]
The legal titleholders are sophisticated corporate players and are well versed in the industry in which they have chosen to invest. Since they can select which airlines they are prepared to deal with and negotiate appropriate security arrangements as part of their lease transactions, they are in a better position to protect themselves against this type of loss than are the airport authorities and NAV Canada. [71-72]
The intervention of bankruptcy proceedings in both Quebec and Ontario created procedural complications. In the case of Inter-Canadian, the detention remedies were applied for well before the assignment in bankruptcy. In the case of Canada 3000, the detention remedies were applied for while the CCAA stay was in effect and Canada 3000 remained the registered owner of the aircraft in question. In neither case did the aircraft become part of the bankrupt estate (because ultimate ownership was in the legal titleholder). The aircraft were legitimate targets of the detention remedies as they were still sitting on a Canadian airport tarmac and were still “owned or operated” (within the meaning of the relevant statutes) by the airlines at the relevant date. Given the authority to charge interest, the interest continues to run to the first of the date of payment, the posting of security or the bankruptcy. [77] [96]
In the proceedings involving Inter‑Canadian it was not necessary for the Quebec Superior Court judge to resort to provincial law or, more specifically, to the Civil Code of Québec. The Aeronautics Act , the Airports Act, and CANSCA are federal statutes that create a unified aeronautics regime. Parliament endeavoured to create a comprehensive remedy that would be applicable across the country and would not vary from one province to another. This uniformity is especially vital since aircraft are highly mobile and move easily across jurisdictions. [78-79]
Two of the respondents leased to Canada 3000 the engines attached to two of the aircraft which, when seized, were airworthy. For the present purposes, the engines are part of the aircraft in respect of which charges were incurred and that are the subject of the detention. The Aeronautics Act does not envisage the dismantling of the aircraft (and thus of its value as security) on the tarmac. [87-89]
Cases Cited
Applied: Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42; distinguished: Royal Bank of Canada v. Sparrow Electric Corp., [1997] 1 S.C.R. 411; referred to: Pan American World Airways Inc. v. The Queen, [1981] 2 S.C.R. 565; Heydon’s Case (1584), 3 Co. Rep. 7a, 76 E.R. 637; Grand Trunk Railway Co. of Canada v. Hepworth Silica Pressed Brick Co. (1915), 51 S.C.R. 81; Bristol‑Myers Squibb Co. v. Canada (Attorney General), [2005] 1 S.C.R. 533, 2005 SCC 26; Dilworth v. Commissioner of Stamps, [1899] A.C. 99; R. v. Loblaw Groceteria Co. (Manitoba) Ltd., [1961] S.C.R. 138; Slaight Communications Inc. v. Davidson, [1989] 1 S.C.R. 1038; Schreiber v. Canada (Attorney General), [2002] 3 S.C.R. 269, 2002 SCC 62; R. v. Dubois, [1935] S.C.R. 378; R. v. Ulybel Enterprises Ltd., [2001] 2 S.C.R. 867, 2001 SCC 56; Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27; R. v. Morgentaler, [1993] 3 S.C.R. 463; Aetna Financial Services Ltd. v. Feigelman, [1985] 1 S.C.R. 2; The Emilie Millon, [1905] 2 K.B. 817; Channel Airways Ltd. v. Manchester Corp., [1974] 1 Lloyd’s Rep. 456; Peoples Department Stores Inc. (Trustee of) v. Wise, [2004] 3 S.C.R. 461, 2004 SCC 68; Firestone Tire & Rubber Co. of Canada v. Industrial Acceptance Corp., [1971] S.C.R. 357; Bank of America Canada v. Mutual Trust Co., [2002] 2 S.C.R. 601, 2002 SCC 43.
Statutes and Regulations Cited
Aeronautics Act, R.S.C. 1985, c. A‑2, ss. 3(1) “aeronautical product”, “registered owner”, 4.4(5), 4.5.
Airport Transfer (Miscellaneous Matters) Act, S.C. 1992, c. 5, ss. 9 , 10 .
Bankruptcy and Insolvency Act, R.S.C. 1985, c. B‑3, ss. 121 , 122 .
Canadian Aviation Regulations, SOR/96‑433, ss. 101.01(1) “operator”, “owner”, 202.15 to 202.17.
Civil Air Navigation Services Commercialization Act, S.C. 1996, c. 20, ss. 2(1) “user”, (2), 7, 8, 9, Part III, 32 to 35, 36(3)(a)(i), 37(4), 44, 55, 56, 57(1).
Civil Code of Québec, S.Q. 1991, c. 64, arts. 1592, 1593.
Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C‑36, s. 11.31 .
Interpretation Act, R.S.C. 1985, c. I‑21, ss. 8.1 , 8.2 , 12 .
Treaties and Other International Instruments
Air Transport Agreement Between the Government of Canada and the Government of the United States of America (1995), Annex I, s. 1.
Convention on International Civil Aviation, Can. T.S. 1944 No. 36, art. 19.
Authors Cited
Bunker, Donald H. Canadian Aviation Finance Legislation. Montreal: Institute and Centre of Air and Space Law, McGill University, 1989.
Canada. House of Commons. House of Commons Debates, vol. IV, 1st Sess., 33rd Parl., June 20, 1985, pp. 6065‑66.
Canada. House of Commons. House of Commons Debates, vol. 133, 2nd Sess., 35th Parl., March 25, 1996, pp. 1152‑54.
Canada. House of Commons. House of Commons Debates, vol. 134, 2nd Sess., 35th Parl., May 15, 1996, pp. 2821, 2834, May 29, 1996, p. 3144, June 4, 1996, pp. 3394, 3410.
Canada. Senate. Debates of the Senate, vol. 135, 2nd Sess., 35th Parl., June 10, 1996, pp. 588‑89.
“Clause by Clause Analysis for the Civil Air Navigation Services Commercialization Act ”, as presented to the Senate Committee on Transport and Communications.
Driedger, Elmer A. Construction of Statutes, 2nd ed. Toronto: Butterworths, 1983.
Sullivan, Ruth. Sullivan and Driedger on the Construction of Statutes, 4th ed. Toronto: Butterworths, 2002.
Uniform Law Conference of Canada. Drafting Conventions for the Uniform Law Conference of Canada, s. 21(4) (online: http://www.ulcc.ca/en/us/index.cfm?sec=5).
APPEALS and CROSS‑APPEALS from a judgment of the Ontario Court of Appeal (Abella and Cronk JJ.A. and Juriansz J. (ad hoc)) (2004), 69 O.R. (3d) 1, 235 D.L.R. (4th) 618, 183 O.A.C. 201, 3 C.B.R. (5th) 207, [2004] O.J. No. 141 (QL), affirming in part a decision of Ground J. (2002), 33 C.B.R. (4th) 184, 5 P.P.S.A.C. (3d) 272, [2002] O.J. No. 1775 (QL). Appeals and cross-appeals allowed in part.
APPEALS from judgments of the Quebec Court of Appeal (Nuss, Pelletier and Morissette JJ.A.), [2004] R.J.Q. 2966, 247 D.L.R. (4th) 503, [2004] Q.J. No. 11921 (QL), [2004] Q.J. No. 11922 (QL), [2004] Q.J. No. 11923 (QL), [2004] Q.J. No. 11924 (QL), [2004] Q.J. No. 11925 (QL), [2004] Q.J. No. 11926 (QL), [2004] Q.J. No. 11927 (QL), [2004] Q.J. No. 11928 (QL), [2004] Q.J. No. 11930 (QL), [2004] Q.J. No. 11932 (QL), [2004] Q.J. No. 11933 (QL), [2004] Q.J. No. 11961 (QL), reversing, in whole or in part, decisions of Tremblay J., [2000] R.J.Q. 2935, [2000] Q.J. No. 7330 (QL), [2000] Q.J. No. 4959 (QL), [2000] Q.J. No. 4996 (QL), [2000] Q.J. No. 5004 (QL), [2000] Q.J. No. 5005 (QL), [2000] Q.J. No. 5007 (QL), [2000] Q.J. No. 5009 (QL). Appeals allowed in part.
Clifton P. Prophet and Eric Wredenhagen, for NAV Canada (30214).
Lyndon A. J. Barnes and Jean‑Marc Leclerc, for Greater Toronto Airports Authority (30214).
John T. Porter and Alan B. Merskey, for Winnipeg Airports Authority Inc., Halifax International Airport Authority, Edmonton Regional Airports Authority, Calgary Airport Authority, Aéroports de Montréal, Ottawa Macdonald‑Cartier International Airport Authority, Vancouver International Airport Authority and St. John’s International Airport Authority (30214).
Richard A. Conway, David P. Chernos, Linda M. Plumpton and Jana N. Stettner, for International Lease Finance Corporation, Hyr Här I Sverige Kommanditbolag, IAI X, Inc., Triton Aviation International LLC, Sierra Leasing Limited, ACG Acquisition XXV LLC, ILFC International Lease Finance Canada Ltd. and U.S. Airways Inc. (30214).
Christopher W. Besant and Joseph J. Bellissimo, for G.E. Capital Aviation Services Inc., as Agent and Manager for Polaris Holding Company and AFT Trust‑Sub I, Pegasus Aviation Inc., and PALS I, Inc. (30214).
Barbara L. Grossman and Christopher D. Woodbury, for Ansett Worldwide Aviation, U.S.A., and MSA V (30214).
Kenneth D. Kraft, for RRPF Engine Leasing Limited and Flight Logistics Inc. (30214).
Pamela L. J. Huff and Jill Lawrie, for C.I.T. Leasing Corporation and NBB‑Royal Lease Partnership One (30214).
Written submissions only by Craig J. Hill and Roger Jaipargas, for GATX/CL Air Leasing Cooperative Association (30214).
Michel G. Ménard, for NAV Canada (30729, 30730, 30731, 30732).
Richard L. Desgagnés and Véronique E. Marquis, for Ottawa Macdonald‑Cartier International Airport Authority, St‑John’s International Airport Authority and Charlottetown Airport Authority Inc. (30731, 30732, 30742, 30749, 30750, 30751).
Gerald N. Apostolatos, for Aéroports de Montréal (30731, 30732, 30738, 30740, 30742).
Sandra Abitan, David Tardif‑Latourelle and Allon Pollack, for Greater Toronto Airports Authority (30731, 30732, 30742, 30743, 30745).
Bertrand Giroux, Markus Koehnen, Jeff Gollob, Jason Murphy, Jean‑Yves Fortin and Geneviève Bergeron, for Wilmington Trust Company, Wilmington Trust Corporation, Renaissance Leasing Corporation, Heather Leasing Corporation, G.I.E. Avions de transport régional and ATR Marketing Inc. (30729, 30730, 30731, 30732, 30738, 30740, 30742, 30743, 30745, 30749, 30750).
Pierre Bourque and Eugene Czolij, for Newcourt Credit Group (Alberta) Inc., Canada Life Assurance Company and CCG Trust Corporation (30740, 30742, 30745, 30750, 30751).
No one appeared for Canadian Imperial Bank of Commerce, Inter‑Canadian (1991) Inc., Ernst & Young Inc., in its capacity as trustee for the bankruptcy of Inter‑Canadian (1991) Inc., Greater London International Airport Authority, Saint John Airport Inc., Canadian Regional Airlines Ltd. and Canadian Regional (1998) Ltd.
The judgment of the Court was delivered by
1 Binnie J. _ When an airline collapses leaving unpaid bills for airport charges and air navigation services, the question becomes who takes the financial loss (or, as it is sometimes said, “the haircut”), the people who ultimately own the aircraft or the people who were obliged to (and did) provide the airport and navigation services?
2 The question lands before the Court because of the collapse of “Inter-Canadian (1991) Inc. Airline” in 1999 and, in 2001, of Canada 3000 Airlines Ltd. and Royal Aviation Inc. (collectively “Canada 3000”). The answer depends on the statutory interpretation to be given to provisions of the Airport Transfer (Miscellaneous Matters) Act, S.C. 1992, c. 5 (“Airports Act”), and the Civil Air Navigation Services Commercialization Act, S.C. 1996, c. 20 (“CANSCA ”). The important context for this interpretation is the unusual nature of the modern airline business.
3 After decades of financial turbulence, an airline in the modern era may consist of little more than a name, with its aircraft leased, its suppliers on week to week contracts and even its reservation and yield management systems outsourced to one of the global service providers such as Sabre or Galileo. Start-ups are relatively easy, balance sheets are often thin, and failure can be quick and (to outsiders) unexpected, as the history of Canada 3000 illustrates. When a financial collapse occurs (and these have been frequent in Canada and elsewhere in the past decade), there is little meat on the corporate bones for unsecured creditors. Doing business with such airline operators carries significant financial risks, yet the appellant Canadian airports operating under government supervision are obliged by statute to allow financially troubled airlines to make use of their services (and sometimes the airport will not know if an airline is in financial trouble or not). Airport costs are largely recovered through landing fees. If these and other fees go unpaid, the airport is out of pocket for the cost of the service it was obliged by law to provide.
4 “NAV Canada”, the privatized successor to the former government-run civil air navigation system, is also obliged to offer its services to any aircraft flying through Canadian airspace on a cost-recovery basis. Its business is even riskier than that of the airports because quite often these aircraft do not even land in Canada, as in the case of transatlantic traffic flying the great circle route to and from the eastern seaboard of the United States: Pan American World Airways Inc. v. The Queen, [1981] 2 S.C.R. 565.
5 When Parliament adopted its policy of privatizing major airports and navigation services in the early 1990s putting such services on a commercial footing, potential investors were expected to insist on some assurance that they would in fact be financially viable serving the chronically unstable aviation business. Thus, Parliament decided to extend to the private operators of airport and navigation services a statutory power to apply to a superior court judge for an order to seize and detain aircraft until outstanding charges are paid, similar to the power Parliament had earlier conferred on the Crown in pre-privatization days under the Aeronautics Act, R.S.C. 1985, c. A-2, s. 4.5 .
6 It is worth emphasizing that no power to seize and detain as such is conferred. A superior court judge is interposed between the aircraft sought to be seized and the airports or NAV Canada. As discussed below, the role of the judge is crucial to an understanding of the statutory detention remedy.
7 The respondents are primarily entities with the ultimate ownership of the aircraft in respect of which the charges in issue were incurred (“the legal titleholders”). Their position is that under the terms of their various leases with the defaulting airlines, they did not operate the aircraft, nor did they make use of the services for which charges were levied, nor did they derive benefit therefrom. They say that they are investors, and that when the lessees failed they were entitled to repossess their aircraft free of the charges which the defaulting airlines — not the legal titleholders — incurred. They consider it unjust that they were required in these cases to post security as a condition of removing “their” aircraft from the airports in question. The appellant airport authorities and NAV Canada, on the other hand, argue that the failure of Canada 3000 and Inter-Canadian reflects the sort of air carrier instability that Parliament rightly anticipated and in light of which it created the statutory remedies in question. Parliament must be taken to appreciate, they say, that an airline may be only a corporate shell but an aircraft under detention is a good, solid and enduring hostage for payment.
8 I agree with the courts below that the respondent legal titleholders are not subject to personal or corporate liability to pay the unpaid charges under s. 55 of CANSCA . But that is not to say that the aircraft are similarly unburdened.
9 In my view, the appellants are entitled to obtain judicially authorized seize and detain orders (hereinafter sometimes collectively referred to as the detention remedy) to be exercised against the security posted in substitution for the aircraft. The matters should be remitted to the motions judges to work out the details of the orders. Considered in the context in which the detention remedy was intended by Parliament to operate, the detention remedy cannot be circumvented as suggested by the respondents by the expedient of leasing arrangements made between the airlines and the aircraft lessors. The detention remedy is purely statutory and Parliament’s intention to create an effective collection mechanism against the aircraft itself owned or operated by the person liable to pay the amount or charge must be given full effect.
10 On the other hand, the appellants’ remedy, if an order is granted, is limited to possession. Simple possession under the statutes does not confer any interest in the beneficial ownership of the aircraft. I do not think the appellants’ further claim to the airborne equivalent of a maritime lien is well founded, nor do they have any “implied” power to sell the aircraft once detained. They get what the statute says they get — a right to apply for a judicial order to seize and detain the aircraft until payment — no more, and no less.
11 For the reasons that follow, I would allow the appeals and the cross-appeals in part, and return the seizure and detention applications to the respective motions judges to be dealt with in accordance with this judgment.
I. Facts
12 In 1992, the Airports Act privatized airports formerly owned and operated by the federal government. In 1996, CANSCA implemented the same objective in relation to Canada’s civil air navigation services. Thus NAV Canada was incorporated as a non-profit corporation for the purpose of developing, operating and maintaining the civil air navigation system; see House of Commons Debates, vol. 133, 2nd Sess., 35th Parl., March 25, 1996, at p. 1153. CANSCA implemented the transfer of what was Transport Canada’s civil air navigation services to NAV Canada and established the commercial and economic regulatory arrangements for the continued operation of those services; see House of Commons Debates, vol. 134, 2nd Sess., 35th Parl., May 15, 1996, at p. 2821.
A. Canada 3000
13 On November 8, 2001, Canada 3000 applied for protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA ”). The effect of an initial court order made on the same day stayed all proceedings by creditors pending the filing of a plan of arrangement. Although the stay contemplated the continuation of operations, some five hours later the airlines’ management issued a press release declaring that the airlines had ceased operations. The next day, November 9, a further order was issued grounding the fleet and providing for the return of aircraft operated by the airlines to Canada.
14 On November 9, 2001, NAV Canada applied to the Ontario Superior Court of Justice under s. 56(1) of CANSCA for an authorization to seize and detain certain aircraft operated by Canada 3000. The Greater Toronto Airport Authority (“GTAA”) applied for relief against Canada 3000 but did not at that time seek leave of the court to seize and detain any aircraft.
15 On Nov