Wednesday, June 5, 2013

Date: 20130313 Docket: T-2038-11 Citation: 2013 FC 267 Boogaard v. Canada (Attorney General)

Source: http://decisions.fct-cf.gc.ca/en/2013/2013fc267/2013fc267.html

 
 

 
 
 
 


Date: 20130313
Docket: T-2038-11
Citation: 2013 FC 267
Ottawa, Ontario, March 13, 2013
PRESENT:   The Honourable Mr. Justice Rennie
 
 
BETWEEN:
 
STAFF SERGEANT WALTER BOOGAARD
 
 
 
Applicant
 
and
 
 
 
ATTORNEY GENERAL OF CANADA
 
 
 
Respondent
 
 
 
 
 
           REASONS FOR JUDGMENT AND JUDGMENT
 
[1]               The applicant seeks judicial review to set aside a decision of Royal Canadian Mounted Police Assistant Commissioner (A/Commissioner) McNeil dated October 31, 2011.  A/Commissioner McNeil decided that the applicant’s allegation of workplace harassment was unfounded.  For the reasons that follow this application is dismissed. 
 

Background
[2]               The applicant is a member of the Royal Canadian Mounted Police (RCMP) holding the rank of Staff Sergeant.  In 2004 he successfully competed in an officer candidate selection process and was placed on a candidate list for senior commissioned positions.
 
[3]               At the relevant time the Director for Executive/Officer Development and Resourcing (EODR) was Inspector Gaudet.  In April 2005, shortly after being placed on the list for promotion, Staff Sergeant Boogaard met with Inspector Gaudet.  As a result of that meeting, Staff Sergeant Boogaard believed that Inspector Gaudet was supportive of his promotion from the pool of eligible officers.  Staff Sergeant Boogaard recalls that Inspector Gaudet told him that he “had all the background and experience that EODR was looking for”.  Inspector Gaudet also asked Staff Sergeant Boogaard if he was interested in a position in Toronto at the rank of Inspector.
 
[4]               When Staff Sergeant Boogaard subsequently met with Inspector Gaudet in May of 2005 to follow up on the Toronto position, he felt that Inspector Gaudet’s demeanour towards him had changed.  Staff Sergeant Boogaard’s evidence is that Inspector Gaudet was curt and abrupt, and that he denied offering the Toronto position to him.
 
[5]               By 2009, Staff Sergeant Boogaard had not been appointed to the commissioned ranks.  Of the 146 candidates placed on the officer candidate list in 2004, 122 have been appointed to the rank of Inspector.  There is no information as to whether the remaining 23, excluding Staff Sergeant Boogaard, retired or otherwise left the force. 
 
[6]               Staff Sergeant Boogaard made an access to information request for information regarding his potential promotion and received disclosure in March of 2010.
 
[7]               The disclosure included the records of Rose Gallo, an RCMP lawyer who had prosecuted an internal disciplinary proceeding against Staff Sergeant Boogaard in 2001, nine years earlier.  In that proceeding, Staff Sergeant Boogaard admitted to improper storage of a firearm and was disciplined by a three member Adjudication Board in accordance with the Royal Canadian Mounted Police Act, RSC 1985, c R-10.  Superintendent John Reid was the Chairperson of that Adjudication Board.  Ms. Gallo’s records indicated that in May of 2005 Inspector Gaudet spoke to Superintendent Reid regarding the disciplinary proceedings.
 
[8]               On April 19, 2010 Staff Sergeant Boogaard filed a harassment complaint against Superintendent Reid pursuant to the RCMP’s policy on the Prevention and Resolution of Harassment in the Workplace (Harassment Policy).  Staff Sergeant Boogaard alleged that Superintendent Reid discredited and damaged his career by telling Inspector Gaudet that there may be more to the disciplinary matter than disclosed by the decision and record before the Adjudication Board.
 
Evidence
[9]               Corporal Salomao was assigned to investigate the harassment complaint in March of 2011.  To be clear, it took 11 months for a human resource officer to screen the complaint and reach the conclusion that Superintendent Reid’s comment to Inspector Gaudet that there may have been more to the case than meets the eye could constitute harassment.  Corporal Salomao then interviewed Staff Sergeant Boogaard, Superintendent Reid, Ms. Gallo and Inspector Gaudet.
 
[10]           Inspector Gaudet confirmed that at the time he was the acting Director General for EODR.  He conducted reference and background checks on potential candidates as part of his responsibilities and also attended the Officer Orientation Development Course.  During one such lecture given by Superintendent Reid, he learned of a disciplinary proceeding that closely resembled Staff Sergeant Boogaard’s case.  After the presentation he approached Superintendent Reid to ask for the details about the case.  After this conversation he contacted Ms. Gallo but she did not provide him with further information.  Inspector Gaudet told Corporal Salomao that he had previously heard rumours about the case but he could not remember who told him this information and when.
 
[11]           Superintendent Reid told Corporal Salomao that he lectured at the Officer Orientation and Development Course.  During one lecture a question was asked about a disciplinary proceeding involving an unnamed member.  The officer asked why the unnamed member had not been dismissed for his involvement with two prostitutes who were said to have stolen a service weapon and traded it for cocaine.  Superintendent Reid states that he told the candidate that the disciplinary proceeding related only to unsafe storage of a weapon.
 
[12]           Superintendent Reid remembered that sometime later Inspector Gaudet called him to ask about the disciplinary proceedings in respect of Staff Sergeant Boogaard, saying that he had heard it also involved two prostitutes and wanted further information.  Superintendent Reid recalled telling Inspector Gaudet that he could not confirm whether the information was true and directed him to speak to Ms. Gallo if he required more information.
 
[13]           Ms. Gallo made a note to file contemporaneous with the call she received from Superintendent Gaudet.  In a memorandum dated June 9, 2005, she recorded that Inspector Gaudet requested from her information regarding the applicant’s disciplinary hearing in 2001.  Inspector Gaudet explained that Superintendent Reid told him that there may be more to the disciplinary matter than was in the record before the Adjudication Board.  In response, Ms. Gallo told Inspector Gaudet that she would not provide additional information because it was not in the record before the Board and could not be considered for promotional purposes.
 
[14]           Ms. Gallo’s notes indicate:
Insp. Gaudet learned from the then Chair, on a social basis, that there may have been more to the disciplinary matter than met the eye and while it is not the Chair’s place to go beyond what was presented at the hearing proper, the Chair likely told Insp. Gaudet to contact me.  The concern specifically centers around prostitutes who were interviewed as part of the CIIS investigation but who did not form part of the particulars at the hearing proper.
 
…As an aside I recall the then Chair John Reid calling me after the hearing to say that he had heard through the grapevine that there were prostitutes involved and concerned about it [sic]. I recall advising him something to the effect that a principled approach had been followed.  […]
 
…I am not comfortable disclosing information which was not relied upon in the hearing and does not form part of the record.  You will note that the matter concerning the prostitutes was considered and discounted.  […]
 
[15]           Corporal Salomao delivered an investigation report on May 30, 2011 summarizing the relevant facts.  He reviewed the above evidence and noted that, because of the passage of time, the witnesses were unable to remember details surrounding the allegation.  Corporal Salomao concluded that Inspector Gaudet had learned about the rumours from someone other than Superintendent Reid. 
 
[16]           This report was reviewed by Superintendent Enright who determined that the allegation of harassment was unfounded.  Superintendent Enright forwarded this recommendation to the A/Commissioner McNeil for final decision.
 
Decision Under Review
[17]           In a decision dated October 31, 2011, the A/Commissioner agreed with Superintendent Enright’s recommendation.
 
[18]           The A/Commissioner considered it reasonable for Inspector Gaudet to have contacted Superintendent Reid to discuss his concerns about the rumour as part of his role as the EODR.  This is permissible under the RCMP Administration Manual.
 
[19]           The A/Commissioner also accepted the investigator’s finding that Inspector Gaudet had already heard about the rumours before speaking to Superintendent Reid and that Superintendent Reid did not tell Inspector Gaudet anything new.  Additionally, Superintendent Reid did not initiate the conversation, Inspector Gaudet approached him.
 
[20]           The A/Commissioner concluded that the mere fact that Superintendent Reid confirmed that he had also heard the rumours in not sufficient to constitute harassment.  Therefore, the A/Commissioner decided that the complaint was unfounded.
 
[21]           Staff Sergeant Boogaard commenced his application for judicial review of this decision on December 15, 2011.  He also filed an internal grievance against the decision on November 18, 2011.  The grievance process is ongoing.
 
Issue
 
[22]           There are three issues for this judicial review:
(1)               Should the Court exercise its discretion to decline jurisdiction;
(2)               Whether the applicant was denied procedural fairness; and
(3)               Whether the decision was unreasonable.
 
Alternative Remedy
 
[23]           While Staff Sergeant Boogaard has the right to seek judicial review, it remains a discretionary remedy.  Section 18.1 of the Federal Courts Act, RSC, 1985, c F-7 preserves that discretion as it contains permissive, as opposed to mandatory, language: Canadian Pacific Ltd v Matsqui Indian Bank, [1995] 1 SCR 3, paras 30-31.
 
[24]           As an element of that discretion, absent exceptional circumstances, courts will not interfere with an ongoing administrative process when it may provide an adequate alternative remedy.  This prevents fragmentation of administrative processes and piecemeal litigation: Canada (Border Services Agency) v CB Powell Ltd, 2010 FCA 61, paras 31-32.
 
[25]           The grievance process is set out in Part III of the Royal Canadian Mounted Police Act.  Subsection 31(1) of that Act provides that a member may grieve:
[…] any decision, act or omission in the administration of the affairs of the Force in respect of which no other process for redress is provided by this Act, the regulations or the Commissioner’s standing orders […]
 
[Emphasis added]
[…] une décision, un acte ou une omission liés à la gestion des affaires de la Gendarmerie causent un préjudice peut présenter son grief par écrit à chacun des niveaux que prévoit la procédure applicable aux griefs prévue à la présente partie dans le cas où la présente loi, ses règlements ou les consignes du commissaire ne prévoient aucune autre procédure pour corriger ce préjudice.
 
[Je souligne]
 
 
[26]           Staff Sergeant Boogaard was entitled to file a grievance from the negative decision regarding his harassment complaint.  He did so, with similar arguments as those put forward on judicial review.  The grievance process is ongoing and the Court will decline to grant a remedy if satisfied that the grievance process provides an adequate alternative remedy.
 
[27]           In this case, the crux of Staff Sergeant Boogaard’s complaint in that he has been denied an important promotional opportunity on the basis of unfounded rumours and that those rumours were fuelled by Superintendent Reid’s suggestion that there was more to the case than would appear as a matter of first impression.  The remedy for this is appointment to the position or rank.  This is a remedy which the Court cannot grant.  The respondent concedes that appointment to the rank could be the result of the grievance.  In this regard, and in respect of the interests of greatest importance to Staff Sergeant Boogaard, the grievance procedure is an adequate remedy.
 
[28]           The adequacy of an alternate remedy depends, not only on the substance of the relief available, but also on its timeliness.  In so far as the harassment complaint is concerned, the chronology paints a very dim picture of what is to be an effective and quick process for the resolution of workplace disputes.  The harassment complaint was filed in April 2010, the final decision was rendered by A/Commissioner McNeil on October 31, 2011, eighteen months later.
 
[29]           This was not a complex matter.  Far from it.  Three witnesses were identified and all of their material evidence has been recounted in three pages of these reasons for judgment.  I do not accept the respondent’s effort to attribute responsibility for the delay to the applicant.  The applicant was posted overseas, as part of his ongoing responsibilities, and presumably it was in the furtherance of the better administration of the RCMP that that posting occurred.  The posting was neither an excuse for nor implied consent to delay in processing.  Indeed, it is surprising for the RCMP to point to difficulties and delays in communications with an overseas officer, with whom presumably it would be important to remain in contact.
 
[30]           With respect to the November 18, 2011 grievance of the harassment decision, it is now some fourteen months outstanding.  The facts that underlie this are straightforward which makes it very difficult to understand why it took four months to transfer the file to the Level I adjudicator, and why it has now been with the adjudicator for decision for a year.
 
[31]           Grievance and harassment procedures are intended to be expeditious.  The Harassment Policy notes that the objective of that policy is that complaints are to be resolved in a timely manner.  Their summary nature supports the objective of a harmonious and effective workplace.  Grievance decisions left outstanding allow issues to fester, bring uncertainty to the workplace together with ineffectiveness and inefficiency.
 
[32]           The delays in question stretch the tolerance for the harassment and grievance procedures to be considered an adequate alternate remedy to judicial review.  To be an adequate remedy it must be timely.  Timeliness, in turn, depends on the objectives of the process and interests at stake.  It is important to remember that the grievance of the harassment decision was filed on November 18, 2011.  It is now 2013 and no decision is on the horizon.
 
[33]           Complex judicial review proceedings and trials are routinely commenced and disposed of in this Court in far less time than this compliant has languished in the system.  This gives rise to serious questions as to whether the objectives of the harassment and grievance procedures are being met.  These observations apply with particular force in the context of this case where what is in issue is promotion from a pool to a senior position.  Officers may have only a limited number of years of eligibility in the pool before they retire.
 
[34]           The question whether an alternate adequate remedy exists is informed by the context.  That context includes the substance of the complaint and the consequences of the behaviour in question for the complainant.  In this case, given that what is in issue is injury to promotional opportunity late in a career, the grievance procedure can be perceived as no remedy whatsoever. 
 
[35]           While I find that the delays in question in both the harassment and grievance procedures stretch the boundaries of tolerance, the singular fact remains that this Court cannot give a remedy which advances resolution of the issues.  It is important to note as well, in this context, that there is a parallel grievance arising from failure to appoint to a specific position (April 19, 2010).  Again, however, it would appear that it too has been forgotten in the system.
 
Procedural Fairness
[36]           Were this Court in a position to provide an effective remedy, it would exercise its discretion in favour of the applicant.
 
[37]           The respondent justifies the constraints on disclosure during the harassment process as being in furtherance of the expeditious disposition of complaints.  However, it would seem, at least on the facts of this case, that that objective is not met.  The RCMP and its members have the worst of both worlds: a procedure that truncates procedural fairness in the name of efficiency and workplace harmony, but provides neither.
 
[38]           This Court has emphasised that “decisions on an allegation of harassment or abuse of authority may have significant consequences for everyone involved, and this raises the level of procedural fairness required”: Potvin v Canada (Attorney General), 2005 FC 391, para 19.  In Potvin, Justice Tremblay-Lamer concluded that procedural fairness requires disclosure of the preliminary report to both the complainant and the respondent.  In that case, the policy involved was that of a different department with different procedures.
 
[39]           Here, Staff Sergeant Boogaard challenges not only the reasonableness and merits of the underlying decision to reject the harassment complaint, but also the fairness of the process by which that decision was reached.  Necessarily, this involves challenging the procedure provided by the Harassment Policy itself.
 
[40]           The Harassment Policy does not, by its terms, provide for disclosure of the evidence collected by the investigator.  Staff Sergeant Boogaard had requested the opportunity to review that evidence and the investigative report.  In accordance with the policy his request was denied.  The RCMP is free, within reason, to determine its own procedures.  Those procedures may vary with the nature of the inquiry and the circumstances of the case:  Kane v University of British Columbia [1980] 1 SCR 1105, p 1112.  I note however, that the RCMP Policy is inconsistent with the guidance contained in the Treasury Board Policy on Harassment Prevention and Resolution, section 2.1, which provides:
2.1 This policy applies to the core public administration which includes the organizations named in Schedule I and the other portions of the federal public administration named in Schedule IV of the Financial Administration Act unless excluded by specific acts, regulations or Orders in Council.
2.1 La présente politique s'applique à l'administration publique centrale, dont les organismes nommés à l'annexe I et aux autres secteurs de l'administration publique fédérale nommés à l'annexe IV de la Loi sur la gestion des finances publiques, sauf s'ils en sont exclus en vertu d'une loi, d'un règlement ou d'un décret particulier.
 
[41]           If the complaint gets to the investigation stage, the Treasury Board’s guidelines dealing with the complaint process provide:
Complainants and respondents must also be provided with the opportunity to review the draft investigator's report to confirm its accuracy, subject to the requirements of the Access to Information Act and the Privacy Act. You should involve your human resources specialist or coordinator responsible for harassment issues in reviewing the report, to ensure that it meets the test of procedural fairness and to examine the quality of the report. You can return the report to the investigator for further work if you are not satisfied. The investigator then provides you with the final report concluding whether the complaint is founded or not. Before providing the parties with the report you should also involve your Access to Information and Privacy (ATIP) coordinator to ensure that ATIP requirements are respected.
Les plaignants, les mis en cause et les témoins doivent avoir l'occasion de revoir leurs déclarations, et les plaignants et les mis en cause, de revoir l'ébauche du rapport de l'enquêteur pour en confirmer l'exactitude, sous réserve des dispositions de la Loi sur l'accès à l'information et de la Loi sur la protection des renseignements personnels. Vous devriez aussi demander à votre spécialiste des ressources humaines ou au coordonnateur responsable des questions de harcèlement d'examiner le rapport, de manière à vous assurer que ce dernier soit conforme aux principes d'équité procédurale ainsi que pour en contrôler la qualité. Si vous n'êtes pas satisfait du rapport, vous pouvez le renvoyer à l'enquêteur pour qu'il l'améliore. L'enquêteur vous remet ensuite son rapport final indiquant si la plainte est fondée ou non. Avant de remettre le rapport aux parties, vous devriez aussi faire appel au coordonnateur de l'Accès à l'information et protection des renseignements personnels (AIPRP) qui vérifiera que les exigences de l'AIPRP ont été respectées.
 
[42]           Staff Sergeant Boogaard received and did in this case, through an Access to Information request obtain a copy of the final investigation report.  This was, however, only after the investigation was concluded.  While the applicant understandably would prefer greater disclosure, earlier, the requirements of procedural fairness do not apply with full force in all circumstances.  Harassment policies are intended to be efficacious and non-adversarial.  They are meant to resolve workplace issues on a fair and principled basis, but this does not mean that they are to assume the trappings of a court or of an adversarial process.  Provided minimal requirements are met the respondent has to be accorded some latitude in tailoring the process.
 
[43]           It cannot be said, therefore, that the principles of procedural fairness are breached.
 
The Decision Itself
[44]           The applicant further contends that the decision under review is unreasonable.  It is noteworthy that Ms. Gallo recognized the inappropriate nature of the inquiries of her by Inspector Gaudet.  The marked and sudden change in Inspector Gaudet’s attitude toward promotion and that this change was contemporaneous with his inquiries of Ms. Gallo were not taken into account in the harassment decision.  The harassment decision makes no effort to explore or understand the readily apparent causation between Inspector Gaudet’s query of Superintendent Reid, Superintendent Reid’s reply, the call to Ms. Gallo and the consequences for Staff Sergeant Boogaard.  In sum, the decision did not address the issue.
 
[45]           The decision dismisses the complaint on irrelevant considerations.  The A/Commissioner determined that because Inspector Gaudet had heard the rumour previously it somehow negated or rectified Superintendent Reid’s conduct in telling Inspector Gaudet that he might be on to something and to call Ms. Gallo.  Inspector Gaudet may have indeed heard a rumour previously, although, it is to be recalled “he could not remember when or from whom he heard it.”  That is not the issue; Inspector Gaudet’s knowledge is not the subject of the complaint, it is Superintendent Reid’s conduct.  As Chair of the Adjudication Board, Superintendent Reid held a special role and it was reasonable for Inspector Gaudet to conclude that if Superintendent Reid thought there was smoke, there was probably fire. 
 
[46]           Many questions arise, including why, if Inspector Gaudet had heard the rumour previously, he did not act upon it earlier and why, according to the investigation report, Inspector Gaudet only made the link during Superintendent Reid’s talk.
 
[47]           Insofar as relevancy is concerned, the existence of the prior rumour is an irrelevant distraction to the central issue, namely whether Staff Sergeant Boogaard’s interests had been affected, a point which is never addressed.  Superintendent Reid told Inspector Gaudet that there may be more to the case than meets the eye and to contact Ms. Gallo.  Within a month Ms. Gallo was contacted by Inspector Gaudet and Staff Sergeant Boogaard noticed the chilly reception by Inspector Gaudet.
 
[48]           Ms. Gallo’s evidence, which would appear to be the only documented evidence of the critical events, is dismissed as it contains elements of hearsay.  Ms. Gallo’s evidence is, in effect, contemporaneous objective evidence which establishes the material conversations.  To dismiss it as hearsay in the conduct of informal harassment procedure under the decision is unreasonable.  This is particularly so given the uncertainty and vagueness that characterized much of the evidence gathered during the investigation.  Secondly, the analysis is incorrect.  It insulates Superintendent Reid’s conduct by saying that it was Inspector Gaudet who approached Superintendent Reid.  Again, this is an irrelevant consideration.  At issue is what Superintendent Reid said and what, as Chair of an Adjudication Board, he did.  It may have been entirely innocuous for Superintendent Reid to say that he had heard a similar rumour; but that comment cannot be disassociated, as it was, from the fact that Superintendent Reid held an important position as Chair.  His acknowledgment of the rumour, his role as Chair and his suggestion that Inspector Gaudet follow up with Ms. Gallo needed to be assessed globally, and not parsed into issues or viewed through the lens of Inspector Gaudet’s role in asking the questions.
 
[49]           To conclude, the harassment decision fails to meet the criteria of intelligibility, justification and transparency: Dunsmuir v New Brunswick, 2008 SCC 9, [2008] 1 SCR 190.  The substance of the complaint is not addressed; it is disposed of on irrelevant considerations and material facts are not considered.  The delays are close to rendering the alternative remedy ineffective.  On the other hand, the grievance procedure does provide a highly effective remedy which is not available on judicial review; appointment of Staff Sergeant Boogaard to a rank.  This is conceded by the respondent.
 
[50]           I conclude, on balance, that the Court should decline to grant a remedy which would otherwise be forthcoming.  Setting aside the decision would do little, other than to delay matters further.

JUDGMENT
THIS COURT’S JUDGMENT is that the application for judicial review is dismissed. 
 
 
"Donald J. Rennie"
Judge


FEDERAL COURT
 
SOLICITORS OF RECORD
 
 
DOCKET:                                         T-2038-11
 
STYLE OF CAUSE:                        STAFF SERGEANT WALTER BOOGAARD v ATTORNEY GENERAL OF CANADA
 
 
PLACE OF HEARING:                  Ottawa, ON
 
DATE OF HEARING:                    December 19, 2012
 
REASONS FOR JUDGMENT:      RENNIE J.
 
DATED:                                            March 13, 2013
 
 
 
APPEARANCES:
 
Mr. Paul Champ
 
FOR THE APPLICANT
 
Ms. Tatiana Sandler
FOR THE RESPONDENT
 
 
SOLICITORS OF RECORD:
 
Champ & Associates
Barristers & Solicitors
Ottawa, Ontario
 
FOR THE APPLICANT
William F. Pentney,
Deputy Attorney General of Canada
Ottawa, Ontario
FOR THE RESPONDENT
 
 
 
 
 
 
 
 
 
 

Monday, June 3, 2013

Decision No. 204-C-A-2013 COMPLAINT by Gábor Lukács against Air Canada. File No.: Canadian Transportation Agency.

1] On December 12, 2011, Gábor Lukács filed a complaint with the Canadian Transportation Agency (Agency) alleging that Air Canada’s current practice of overselling domestic flights and certain domestic tariff provisions governing denied boarding compensation appearing in Air Canada’s Canadian Domestic General Rules Tariff No. CDGR-1 (Tariff) are unreasonable. He requests that the Agency:
  • direct Air Canada to cease and desist from overselling domestic flights;
  • pursuant to subsection 67.2(1) of the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA), disallow Rule 245(E)(1)(b)(iv) of the Tariff. This provision relieves Air Canada from compensating a passenger if, for operational and safety reasons, the aircraft on which the passenger had a confirmed reservation has been substituted with an aircraft of lesser capacity, thereby preventing Air Canada from accommodating the passenger on that aircraft; and,
  • pursuant to subsection 67.2(1) of the CTA, disallow Rule 245(E)(2) of the Tariff, which governs the amount of denied boarding compensation tendered to affected passengers. Rule 245(E)(2) provides that, subject to certain conditions, and at the passenger’s option, Air Canada will tender liquidated damages in the amount of $100, or will offer a travel voucher in the amount of $200 for travel within Canada, the United States of America or Mexico.
[2] Air Canada’s answer of January 16, 2012 was combined with a preliminary motion to dismiss. Mr. Lukács responded to the motion, characterizing it as an abuse of process, and he requested an award of costs against Air Canada. The Agency denied the preliminary motion in Decision No. LET-C-A-47-2012. The Agency also stated in that Decision that the issue of costs would be determined at the conclusion of its investigation of Mr. Lukács’ complaint.

ISSUES

  1. Is Air Canada’s practice of overselling domestic flights unreasonable?
  2. Is Air Canada’s Rule 245(E)(1)(b)(iv) unreasonable?
  3. Is Air Canada’s Rule 245(E)(2) unreasonable?
  4. Should costs be awarded against Air Canada respecting its preliminary motion, which was included in Air Canada’s answer dated January 16, 2012?

RELEVANT STATUTORY AND TARIFF EXTRACTS

[3] The extracts relevant to this Decision are set out in the Appendix.

TEST FOR UNREASONABLENESS

[4] To assess whether a term or condition of carriage is “unreasonable”, the Agency has traditionally applied a balancing test, which requires that a balance be struck between the rights of passengers to be subject to reasonable terms and conditions of carriage and the particular air carrier’s statutory, commercial and operational obligations. This test was first established in Decision No. 666-C-A-2001 (Anderson v. Air Canada), and was most recently applied in Decision No. 150-C-A-2013 (Forsythe v. Air Canada).
[5] The terms and conditions of carriage are set out by an air carrier unilaterally without any input from passengers. The air carrier sets its terms and conditions of carriage on the basis of its own interests, which may have their basis in purely commercial requirements. There is no presumption that a tariff is reasonable.
[6] When balancing the passengers’ rights against the carrier’s obligations, the Agency must consider the whole of the evidence and the submissions presented by both parties and make a determination on the reasonableness or unreasonableness of the term or condition of carriage based on which party has presented the more compelling and persuasive case.

ISSUE 1: IS AIR CANADA’S PRACTICE OF OVERSELLING DOMESTIC FLIGHTS UNREASONABLE?

Positions of the parties

Mr. Lukács

[7] Mr. Lukács submits that he is not aware of any of Air Canada’s statutory or operational obligations that would be adversely affected by Air Canada discontinuing the practice of overbooking. He claims that while overselling may have been an industry standard in the 20th Century, it is no longer so today.
[8] Mr. Lukács notes that Air Canada’s main domestic competitor, WestJet, does not oversell its flights, and that WestJet nevertheless remains profitable. Mr. Lukács adds that, to his knowledge, Air Canada is the only Canadian domestic carrier that engages in the practice of overselling flights and that, therefore, Air Canada would not be subject to any competitive disadvantage should it discontinue that practice.
[9] Mr. Lukács states that overbooking causes damage to passengers, as recognized by subparagraph 107(1)(n)(iii) of the Air Transportation Regulations, SOR/88-58, as amended (ATR), which requires carriers to include terms regarding compensation for overbooking. He maintains that overbooking flights is antithetical to Air Canada’s contractual duty to transport passengers, and that such practice renders the contract meaningless.

Air Canada

[10] Air Canada submits that overbooking is a common practice in the air transport industry. Air Canada adds that it is recognized as being reasonable in light of a carrier’s operational and commercial obligations, and that it is the counterpart of flexible fares that allow passengers to change itineraries at the last minute, resulting in “no-shows” for a flight. Air Canada maintains that it applies its overbooking practice in a reasonable manner, employing sophisticated systems to analyze “no-shows” and booking patterns. Air Canada notes that its overbooking levels are half of what they are, on average, for American carriers, and that the Agency has previously recognized the reasonableness and validity of Air Canada’s overbooking practices in Decision No. 666-C-A-2001, Decision No. 180-C-A-2005 (B.J. Simcock v. Air Canada) and Decision No. 181-C-A-2005 (Kathleen Simcock v. Air Canada).
[11] Air Canada claims that the Agency also recognized the reasonableness of overbooking in the Agency’s Fly Smart publication, and cites U.S. Supreme Court case law which states that overbooking is a “common industry practice” (ref: Nader v. Allegheny Airlines Inc., US 290 [1976]). Air Canada further notes that the U.S. Department of Transportation (DoT) has acknowledged the legitimacy of a well-controlled oversale system.
[12] Air Canada indicates that, unlike WestJet, whose fares are non-refundable, Air Canada offers certain fares that are fully refundable, and that the different business models of Air Canada and WestJet do not allow for their respective oversale practices to be compared. Air Canada asserts that airline customers place a high value on refundable tickets and flexibility, and that, given its fare practices, Air Canada is exposed to additional risk that certain passengers will not show up for travel. Air Canada also notes that, as an international carrier involved in a global alliance, it has much more connecting traffic, and is therefore exposed to misconnections, which result in additional “no-shows”. Air Canada submits that it engages in overbooking to absorb some of the risk and, in turn, to benefit customers.

Mr. Lukács

[13] Mr. Lukács argues that Air Canada’s reference to Decision Nos. 180-C-A-2005 and 181‑C‑A‑2005 does not assist Air Canada’s position that overselling flights is not unreasonable because those Decisions, in fact, did not address the issue of the reasonableness of overselling, and concerned international itineraries.
[14] Mr. Lukács maintains that the relevance of the U.S. DoT’s comments regarding overselling is diminished given the uniqueness of the Canadian market, where Air Canada’s main competitor, WestJet, does not oversell its flights.
[15] Mr. Lukács asserts that the Agency’s Fly Smart publication is not an authority, as the Agency has stated, in Decision No. LET-C-A-29-2011 (Lukács v. Air Canada), that material appearing on the Agency’s Web site is provided solely for information purposes.
[16] Mr. Lukács maintains that Air Canada has failed to provide evidence to demonstrate how the discontinuation of overselling domestic flights would impact Air Canada’s ability to meet its statutory, commercial and operational obligations.
[17] Mr. Lukács submits that Air Canada’s claim that all of WestJet’s fares are non-refundable is misleading given that WestJet’s tariff provides for the application of unused transportation credits. He maintains that Air Canada’s submission fails to substantiate claims that Air Canada’s overbooking levels are half of those, on average, for American carriers, and that Air Canada engages in overbooking to absorb some of the risk and, in turn, to benefit customers.

Analysis and findings

[18] Mr. Lukács asserts that WestJet, Air Canada’s main domestic competitor, does not overbook its flights and that, nevertheless, WestJet remains profitable. He adds that, to his knowledge, Air Canada is unique among carriers operating in Canada to engage in overbooking. He argues that Air Canada’s overbooking of flights conflicts with its contractual duty to transport passengers.
[19] Air Canada notes that overbooking is common throughout the air transport industry, and that it is the counterpart to flexible fares that allow passengers to change itineraries at the last moment, resulting in “no-shows”. Air Canada maintains that it applies the practice in a reasonable manner. Air Canada also submits that the different business models followed by Air Canada and WestJet do not allow the carriers’ practices to be compared.
[20] The Agency notes, as it did previously in Decision Nos. 180-C-A-2005 and 181-C-A-2005, that overbooking is commonplace among air carriers. The Agency is of the opinion that, in general, the practice serves the interests of both the carriers and the travelling public because carriers are able to operate at maximum capacity, which should result in reduced fares. The systems employed by carriers to forecast the number of reservations for particular flights, and the potential number of “no-shows” for those flights, allow carriers to maximize the use of aircraft, and also allow passengers to utilize a booking regime with the flexibility to alter or cancel reservations without notice and possibly without charge depending on the type of air fare purchased.
[21] The Agency is also of the opinion, as correctly pointed out by Air Canada, that it is inappropriate to compare the overbooking practices of carriers, for example, those of Air Canada and WestJet, given the different business models that those carriers employ.
[22] The Agency therefore finds that Air Canada’s submissions respecting the matter of overselling flights are more compelling than those made by Mr. Lukács. The Agency finds that the practice of overselling domestic flights strikes a reasonable balance between Air Canada’s statutory, commercial and operational obligations and the passengers’ rights to be subject to reasonable terms and conditions of carriage.

ISSUE 2: IS AIR CANADA’S RULE 245(E)(1)(B)(IV) UNREASONABLE?

Positions of the parties

Mr. Lukács

[23] Mr. Lukács argues that Rule 245(E)(1)(b)(iv) is effectively a blanket exclusion from liability. He asserts that the tariff provision exonerates Air Canada from compensating passengers who are denied boarding because of Air Canada’s poor planning and/or inadequate maintenance of its equipment. Mr. Lukács acknowledges that Air Canada should not imperil the safety of passengers; however, he submits that the phrase “operational and safety reasons”, appearing in the tariff provision, can be “arbitrarily stretched”, only reflects Air Canada’s interests, and fails to strike a balance between Air Canada’s statutory, commercial and operational obligations and the passengers’ rights to be subject to reasonable terms and conditions of carriage.

Air Canada

[24] Air Canada points out that the U.S. DoT does not require carriers to tender compensation to passengers who are denied boarding when, for operational and safety reasons, the passenger’s aircraft has been substituted by an aircraft of lesser capacity, otherwise referred to as a “downgauge”. Air Canada maintains that it is of utmost importance that Air Canada be able to decide, for operational and safety reasons, when an aircraft should be substituted, and that such a decision should not have negative commercial repercussions on Air Canada nor entail payment of compensation.
[25] Air Canada submits that a downgauge due to safety reasons may be associated with, among other reasons, weather conditions; for example, in the absence of Instrument Landing Systems for specific runways at certain airports, an aircraft not equipped with a Global Positioning System (GPS) may be unable to safely land in certain weather conditions. Air Canada also notes that a downgauge due to safety reasons may be linked to an unplanned mechanical issue with the aircraft scheduled to operate the flight. Air Canada indicates that unplanned mechanical issues usually occur within 48 hours of the departure time; for example, if a bird strikes an Air Canada aircraft on landing, the aircraft will be subject to unplanned maintenance procedures and may not be able to operate a subsequent flight, which may require substitution of the aircraft. Air Canada maintains that it is not possible to take into account such unplanned problems or to consistently have a same-capacity aircraft available to operate a flight. Air Canada adds that given the extensiveness of its network, when planning aircraft movements, it cannot foresee such considerations as it does not have sufficient aircraft to have back-up aircraft available at each airport from which it operates.
[26] Air Canada states that a downgauge due to purely operational reasons may be associated with, for example, noise curfews, such as the one in Montréal between midnight and 7 a.m., which would require the use of an aircraft that can be operated 24 hours a day due to its weight and noise profiles. Air Canada notes that a downgauge due to operational reasons is commonly related to and a consequence of an upline safety reason; for example, substitution may occur because of a delayed inbound flight, which may also be caused by an upline safety‑related reason such as an unplanned mechanical or weather issue. Air Canada notes that a downgauge associated with uniquely commercial concerns would not be included in this exception. Air Canada submits that commercially-driven downgauges only occur in exceptional circumstances where flight capacity is at a low for reasons beyond Air Canada’s control, such as during the 2003 SARS epidemic in Toronto. Air Canada further submits that commercially‑driven downgauges may also happen in limited circumstances where a route requires an aircraft of greater capacity which, in turn, would require that the larger aircraft be taken from another route that will consequently be subject to a downgauge. Air Canada points out that in such circumstances, the exchange will not occur if it creates a situation of denied boarding on the downgauged route.

Mr. Lukács

[27] Mr. Lukács states that Air Canada has merely declared that its tariff provision is preferable, which is not sufficient to support its reasonableness. He submits that the phrase “operational and safety reasons” is vague, may be used as a “catch-all excuse” not to pay any denied boarding compensation, and mixes two reasons that may be substantially different, namely, operational reasons and safety reasons. He asserts that Air Canada should assume the financial consequences associated with the substitution of aircraft for safety reasons because Air Canada can reasonably be expected to maintain its fleet, and take into consideration the possibility of mechanical failures. Mr. Lukács states that his position is consistent with the judgments rendered in Quesnel v. Voyages Bernard Gendron inc. [1997] J.Q. No. 5555, D’Onofrio v. Air Transat A.T. inc. [2000] J.Q. No. 2332, and Lukacs v. United Airlines, 2009 MBQB 29. Mr. Lukács maintains that the term “operational reasons” creates a “back door” for the overselling of flights, namely, by advertising and selling tickets for a flight on a particular aircraft, and then substituting that aircraft with a smaller one.
[28] According to Mr. Lukács, the denied boarding regime adopted by the U.S. DoT includes language created and promoted by the International Air Transport Association (IATA), which represents the interests of carriers, and that the Canadian jurisprudence (e.g. Lukács v. United Airlines) is more onerous for carriers than the American one.
[29] Mr. Lukács states that he is aware of the presence in the U.S. legislation of the phrase “operational or safety reasons” in a provision governing exceptions to eligibility for denied boarding compensation. He submits that there is no evidence before the Agency concerning the interpretation of this phrase by American courts or the U.S. DoT, and that it is therefore not possible to conclude that the U.S. legislation supports Air Canada’s position.
[30] Mr. Lukács contends that the very narrow and strict manner in which the European Court of Justice interpreted Article 5(3) of Regulation (EC) 261/2004 concerning “extraordinary circumstances” relieving an air carrier from payment of denied boarding compensation, in Wallentin-Hermann v. Alitalia, Case C-549/07, is consistent with his position in this matter.
[31] In response to Air Canada’s submission that downgauging due to the inability of an aircraft lacking GPS to land in adverse weather conditions is an event outside of Air Canada’s control, Mr. Lukács argues that while Air Canada has no control over the weather, it does have full control over its fleet and the equipment it chooses to install in its aircraft. He submits that operating aircraft that are not equipped with GPS and/or failing to upgrade an aircraft’s avionic systems is Air Canada’s choice, and that this choice apparently has an impact on its passengers, who may consequently be denied boarding. Mr. Lukács therefore argues that Air Canada should bear the costs of the consequences of such choices.
[32] With respect to Air Canada’s submission relating to an “unplanned mechanical issue”, Mr. Lukács submits that the approach of the European Court of Justice in Wallentin-Hermann v. Alitalia represents an adequate balance between the rights of passengers for performance of the contract of carriage in a timely manner and the operational needs of air carriers. This approach holds that while technical or mechanical problems, on their own, are not extraordinary circumstances that relieve the carrier from the obligation of paying denied boarding compensation, if such problems arise from causes that are entirely outside of the carrier’s control, such as sabotage, acts of terrorism, or a hidden manufacturing defect (which affects all aircraft of a particular model), then the carrier should not be required to pay denied boarding compensation.
[33] Mr. Lukács asserts that the approach of the European Court of Justice is consistent with the Canadian jurisprudence (i.e., Quesnel v. Voyages Bernard Gendron inc., Lukács v. United Airlines [leave to appeal denied; 2009 MBCA 111], Lambert v. Minerve Canada, 1998 CanLII 12973 (QC C.A.), and Elharradji v. Compagnie nationale Royal Air Maroc, 2012 QCCQ 11). He submits that it is therefore unreasonable for Air Canada to relieve itself from the obligation of paying denied boarding compensation in situations where the downgauging is necessitated by mechanical problems, unless the problems themselves were caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.
[34] As to the matter of noise curfews, Mr. Lukács states that he disagrees with Air Canada’s submission that those curfews are unexpected events that justify not paying denied boarding compensation in the case of downgauging of equipment. He maintains that, with respect to the case of the Montréal Pierre Elliott Trudeau International Airport to which Air Canada refers, the curfew is part of the standard airport information periodically published together with the various procedural charts related to the airport, and that this information is publicly available on the Internet. Mr. Lukács submits that he fails to see how a restriction that is widely known and published months in advance of the flight can be considered by Air Canada as an operational reason that warrants depriving passengers of denied boarding compensation.
[35] Concerning Air Canada’s submission regarding delayed inbound flights, Mr. Lukács states that the common consequence of a delayed inbound flight is that the outbound flight is also delayed. He argues that a delay of the inbound flight does not exempt a carrier from compensating passengers for the delay under the principles of Article 19 of the Convention for the Unification of Certain Rules for International Carriage by Air – Montreal Convention (Montreal Convention). Mr. Lukács maintains that downgauging an aircraft to resolve the problem of a delayed inbound flight is a deliberate operational decision, and that although the downgauging may save the carrier the cost of compensating all passengers for the delay, it is done at the cost of denied boarding of some of the passengers due to the smaller capacity of the substitute aircraft.
[36] Mr. Lukács submits that the mere fact that an inbound flight is delayed does not mean that it is not possible for the carrier, with some effort, and perhaps cost, to arrange for another aircraft of the same or higher capacity to transport the passengers. Mr. Lukács contends that downgauging is an “airline-centred approach”, which fails to strike a balance between the passengers’ rights to be subject to reasonable terms and conditions of carriage and Air Canada’s statutory, commercial and operational obligations.
[37] Mr. Lukács asserts that Air Canada’s submission regarding the 2003 SARS epidemic is not relevant to this case.
[38] Mr. Lukács claims that the decision rendered by the European Court of Justice in Finnair Oyj v. Timy Lassooy, Case C-22/11, is relevant to this matter. He explains that this case concerned the obligation of a carrier to pay compensation in cases where a passenger is denied boarding for operational reasons. Mr. Lukács adds that the Court noted that under Regulation (EC) No. 261/2004, a carrier cannot rely on “extraordinary circumstances” to relieve itself from the obligation to pay denied boarding compensation.

Analysis and findings

[39] Air Canada argues that it is of utmost importance that it be allowed to determine when an aircraft should be substituted for operational and safety reasons, and that Air Canada should not be financially penalized for that determination. Air Canada submits that downgauges for safety reasons may be related, for example, to weather conditions, under which an aircraft not equipped with a GPS may not be able to land safely, or to unplanned mechanical issues. Air Canada maintains that it is not possible to foresee unplanned problems or, on a consistent basis, to have available same-capacity aircraft for a flight. Air Canada points out that downgauges for operational reasons may be the result of noise curfews applied by airports, or the consequence of upline safety reasons. Air Canada also points out that commercially-driven downgauges are exceptional.
[40] Mr. Lukács submits that Rule 245(E)(1)(b)(iv) represents a blanket exclusion from liability, exonerating Air Canada from compensating passengers who are denied boarding due to Air Canada’s poor planning and/or inadequate maintenance of its fleet. He asserts that the phrase “operational and safety reasons” may be used as a “catch-all excuse”. Mr. Lukács maintains that “operational reasons” may allow Air Canada to advertise and sell tickets for a flight, the aircraft for which is then substituted with a smaller one. With respect to downgauges because of delayed inbound flights, Mr. Lukács contends that those downgauges represent a deliberate operational decision, and that it is possible for Air Canada to arrange for another aircraft of a similar or higher capacity to carry the passengers affected by the substitution of aircraft.
[41] The Agency is of the opinion that Air Canada should have the flexibility to control its fleet and determine when an aircraft should be substituted for operational and safety reasons, provided that Air Canada is able to demonstrate that the events prompting the substitution were beyond Air Canada’s control.
[42] The determination as to what may be within or outside a carrier’s control is made on a case‑by‑case basis. In this regard, the Agency refers to Decision No. 250-C-A-2012 (Lukács v. Air Canada), in which the Agency, in addressing liability under the Montreal Convention in situations of overbooking or flight cancellation, stated:
[31] In the Show Cause Decision, the Agency recognized that there may be limited situations where overbooking and cancellation do not constitute delay but, in fact, constitute non-performance of the contract and thus would not be subject to the limits of liability set out in the Convention. The Agency at paragraph 42 of the Show Cause Decision recognized that as further complaints, with different fact situations, are brought before the Agency, the Agency will be able to clarify the conditions that constitute non-performance. The Agency adds that there may be situations in which overbooking or cancellation will not cause a passenger any delay at all, for example where the passenger arrives at their destination within the intended timeframe.
[32] Air Canada emphasizes the fact that the drafters of the Convention were aware of the difficulty of defining what constitutes delay and that the courts themselves have had difficulties drawing the line between delay and non-performance of a contract of carriage. This points to the fact that cases where delay might be at issue must be assessed on a case-by-case basis and are dependent on the facts. Accordingly, Air Canada argues that it would be inconsistent for the Agency to assume that situations of overbooking and cancellation are presumed to be a delay and cause damages under the Convention. It is important to note that the Agency did not preliminarily find that Air Canada’s Tariff must always assume that overbooking and cancellation constitute delay. However, the Agency is of the opinion that situations of overbooking or cancellation may fall within the definition of delay in Article 19 of the Convention, and that in many cases such situations will constitute delay. Accordingly, Air Canada’s Tariff should allow for this where appropriate.
[33] The Agency is also of the opinion that there may be situations where, for example, overbooking does not necessarily constitute delay, such as when no delay occurs or when an event is characterized by non-performance.
[43] The Agency’s position in this matter corresponds to that taken by the European Court of Justice in Wallentin-Hermann v. Alitalia, in which the Court concluded that, with reference to European Union Regulation (EC) No. 261/2004, the responsibility rests with the carrier to establish whether events were beyond its control, and ultimately with the court to determine whether those events existed.
[44] The Agency is also of the opinion that the burden must rest with Air Canada to establish that the events prompting the substitution were beyond Air Canada’s control and that it took all reasonable measures to avoid the substitution or that it was impossible for Air Canada to take such measures. Air Canada should not be expected to tender compensation when it has demonstrated that substitution occurred for operational and safety reasons beyond its control, and that it took all reasonable measures to avoid the substitution or that it was impossible for Air Canada to take such measures. In the event that Air Canada fails to so demonstrate, compensation should be due to the affected passengers.
[45] In light of the foregoing, the Agency finds that, in the absence of specific language that establishes context or qualifies Air Canada’s exemption from paying compensation, Rule 245(E)(1)(b)(iv) is unreasonable.

ISSUE 3: IS AIR CANADA’S RULE 245(E)(2) UNREASONABLE?

Positions of the parties

Mr. Lukács

[46] Mr. Lukács argues that the amount of Air Canada’s denied boarding compensation has never been updated to reflect inflation and/or an increase in the consumer price index. He points out that the compensation of $100 tendered by Air Canada for denied boarding is significantly lower than the regime mandated by the United States of America, which provides for compensation up to a maximum amount of $1,300 under certain circumstances, and by the European Union, which requires compensation up to a maximum amount of 600 euros under certain circumstances. Mr. Lukács maintains that the American and European standards represent reasonable compensation for denied boarding without being punitive to carriers. He further argues that those standards adequately consider the lengths of the delay and trip that are affected by the denied boarding.

Air Canada

[47] Air Canada argues that in Decision No. 666-C-A-2001, the Agency recognized the reasonable nature of Rule 245(E)(2).
[48] Air Canada indicates that, contrary to the American environment, Air Canada’s overbooking practice is applied in a reasonable and well-controlled manner. Air Canada points out that only 0.09 percent of its domestic passengers are subject to denied boarding, including passengers who volunteer to surrender their seats. Air Canada argues that denied boarding amounts were increased in the United States of America for reasons not considered related to Air Canada’s denied boarding policies.
[49] As for the denied boarding regime applied by the European Union, Air Canada submits that it is subject to that regime for the applicable flights and that, as such, it is not at a competitive disadvantage given that other carriers are also so subject. Air Canada argues that if it were required to apply the same regime to its domestic flights, it would be at a significant competitive disadvantage relative to other domestic carriers that are not subject to that regime. Air Canada also points out that the compensation levels required by the European Union are based on distance of flights in a geography where the countries are small and in close proximity, and are also based on the particular imperatives of the European economy and political framework.
[50] Air Canada submits that its level of denied boarding compensation was determined by various factors, one of which is the benchmark to the average Air Canada domestic economy cabin fare, the amount of which remains fairly stable and within the range of the compensation offered. Air Canada calculated the average fares by dividing the total passenger revenue for domestic segments by the number of total revenue passengers on those segments. These calculations produced the following yearly averages:
  • 2004: $159
  • 2005: $173
  • 2006: $176
  • 2007: $182
  • 2008: $189
  • 2009: $175
  • 2010: $181
  • 2011: $181
  • 2012: $189
[51] Air Canada states that another factor in determining the level of compensation is the benchmark against Air Canada’s competitors. Air Canada identifies some of those competitors and specified the compensation they tender. Air Canada argues that its denied boarding compensation amounts are in line with those competitors.
[52] Air Canada submits that its extensive domestic network allows for the fast reprotection of passengers on subsequent flights, and, as a result of the principles set out in Decision No. 251-C-A-2012 (Lukács v. Air Canada), more reprotection options are now available. According to Air Canada, it is often able to reprotect passengers within narrow time frames, and both the United States of America and the European Union’s denied boarding legislation waives or reduces the requirement to pay denied boarding compensation when reprotection occurs within a certain timeline. Air Canada contends that its domestic competitors do not have such an extensive network, and that the more limited reprotection options available for those competitors would necessarily entail a higher compensation level due to passenger inconvenience.
[53] Air Canada points out that in the event that a customer is denied boarding, Air Canada not only provides an alternate flight to the customer, but is also responsible for providing hotel accommodation, meal vouchers and compensation for other incidental costs (transportation for the customer, phone calls, reasonable costs claimed, etc.) Air Canada maintains that, as a result, its denied boarding compensation is above and beyond the actual damage caused to the passenger due to the denied boarding.

Mr. Lukács

[54] Mr. Lukács maintains that Air Canada’s statements on compensation levels in the European Union and Canada are contradictory, and that Air Canada’s arguments concerning the competitive disadvantage it would face in offering higher denied boarding compensation are absurd given that Air Canada’s main domestic competitor, WestJet, does not oversell its flights.
[55] Mr. Lukács argues that Decision No. 666-C-A-2001 is distinguishable from this case as that Decision addressed the egalitarian nature of the compensation provided for under the tariff provision at issue, and not the reasonableness of the amount of compensation in relation to current industry standards. Mr. Lukács agrees with the egalitarian principle formulated in that Decision that the amount of denied boarding compensation should not depend on the fare paid by the individual passenger. He submits, however, that a single rate of compensation that is independent of the length of the delay caused by the denied boarding does not serve the purpose of encouraging air carriers to mitigate the inconvenience experienced by persons who are denied boarding.
[56] Mr. Lukács maintains that there is no evidence on record to support the contention that the air carriers cited by Air Canada in its submission, other than WestJet and Porter Airlines Inc. (Porter), are competitors of Air Canada. He submits that, as the Agency noted in Decision Nos. LET‑C‑A‑129-2011 and 251-C-A-2012, “an industry practice does not, in itself, mean that the practice is reasonable”.
[57] With respect to Air Canada’s submission regarding its extensive network, Mr. Lukács agrees that Air Canada’s new denied boarding compensation rules should include a provision similar to the European Union’s Article 7(2), Regulation (EC) 261/2004, or the DoT’s 14 CFR 250.5(a)(2), both of which allow the carrier to reduce the amount of compensation payable by 50 percent if the passengers reach their destinations within less than, for example, two hours after their originally booked arrival time. Mr. Lukács suggests that such a provision would create an incentive for Air Canada to reroute passengers as quickly as possible, which clearly benefits passengers, and would relieve Air Canada from part of the financial burden.
[58] Mr. Lukács disagrees with Air Canada’s submission that an extensive network, on its own, justifies paying less denied boarding compensation, because the size of the network does not necessarily correlate to availabilities and efficiency of its use. He argues that Air Canada should not be “rewarded” for its extensive network alone, but rather, the denied boarding compensation policy should reward Air Canada for using its network well, to the benefit of the passengers, by ensuring that they reach their final destinations within two hours of the originally booked arrival time.
[59] Mr. Lukács points out that Air Canada is not the only air carrier that has an extensive network in a particular region. He submits that although a number of American carriers have as extensive, or even larger, networks than Air Canada and, similarly, Deutsche Lufthansa Aktiengesellschaft (Lufthansa German Airlines) and Société Air France carrying on business as Air France have vast networks in Europe, authorities chose to impose on these carriers the same rules concerning denied boarding compensation as on smaller carriers.
[60] Mr. Lukács maintains that there is no evidence that Air Canada would suffer a competitive disadvantage if it increased the amount of denied boarding compensation that it pays. He submits that, based on Air Canada’s submissions, it is possible to determine with great certainty that Air Canada would not suffer such a disadvantage at all, and the impact on Air Canada would be negligible.
[61] Mr. Lukács contends that the fare dataset submitted by Air Canada, which was used for calculating the average one-way domestic economy cabin fare, is unreliable because that dataset corresponds to single domestic flight segments. He submits that this explains the low averages that Air Canada provided to the Agency. Mr. Lukács argues that Air Canada’s dataset significantly distorts statistical quantities that rely on the number of observations (data entries), because it artificially increases the number of data entries (by counting flight segments instead of one-way trips), and thus unrealistically deflates the resulting averages. While also noting that the dataset includes portions of international itineraries and certain anomalous amounts, Mr. Lukács argues that the Agency should reject the averages that were provided by Air Canada because they do not reflect the average one-way domestic economy fare between two places in Canada.
[62] Mr. Lukács submits that if the Agency were to find Air Canada’s dataset reliable, a consolidation of the segments on the same ticket and the same day into a single one-way itinerary would mitigate the problem he views as associated with the dataset. He maintains that a consolidation in this manner represents a good approximation of reality given the very limited information in the dataset. Based on his consolidation of the dataset, and on Air Canada’s own premise that reasonable compensation should be at parity with the fares purchased by passengers, Mr. Lukács submits that more than 80 percent of passengers are “shortchanged” by Air Canada’s current denied boarding compensation of $100.
[63] Mr. Lukács maintains that a reasonable denied boarding compensation policy ought to distinguish between those cases where stranded passengers are quickly rerouted and reach their final destinations within a short time (less than two hours) after the originally booked time, and those cases where the delay is more significant. He submits that, furthermore, those passengers who experience very significant delays (over six hours) in reaching their final destinations ought to be very substantially compensated.
[64] Mr. Lukács points out that, according to Air Canada’s own submissions, Air Canada has a very extensive network and is able to reroute stranded passengers rather quickly. He claims, therefore, that a delay-based compensation scheme would be favourable to Air Canada, and at the same time would provide substantial compensation to those passengers who are exceptionally affected by the denied boarding incident.
[65] Mr. Lukács submits that, based on his calculations, $400, in cash, would be a reasonable base amount for denied boarding compensation, and proposes the following regime:
  • Length of delay: Less than 2 hours
Compensation: 50% of the base amount
  • Length of delay: 2 hours or more, but less than 6 hours
Compensation: 100% of the base amount
  • Length of delay: 6 hours or more
Compensation: 200% of the base amount

Analysis and findings

[66] Air Canada asserts that its overbooking system is applied reasonably and in a well-controlled manner, noting that only 0.09 percent of its domestic passengers are affected by denied boarding, and that its compensation amounts are consistent with its domestic competitors. Air Canada submits that if it were required to apply the European Union regime to its domestic carriage, it would be at a competitive disadvantage relative to other domestic carriers that do not apply the same regime. Air Canada submits that its average domestic economy cabin fare has remained stable and within the range of its denied boarding compensation. Air Canada adds that its extensive domestic network often enables Air Canada, in a timely manner, to reprotect passengers who are denied boarding, and that the regimes applied by both the United States of America and the European Union allow for the waiving or reduction of the requirement to tender compensation when reprotection occurs within a certain period.
[67] Mr. Lukács submits that the denied boarding compensation tendered by Air Canada is significantly lower than the compensation required under the respective regimes administered by the United States of America and the European Union. He argues that there is no evidence on file to support Air Canada’s contention that the air carriers to which Air Canada refers, other than WestJet and Porter, and with which Air Canada submits that it compares favourably in respect of denied boarding compensation, are competitors of Air Canada. He adds that an extensive network does not justify paying less denied boarding compensation because the size of the network does not correspond with availabilities and efficiency of use. Mr. Lukács asserts that no evidence has been presented to indicate that Air Canada would suffer a competitive disadvantage should it introduce higher levels of denied boarding compensation. Mr. Lukács indicates that a single rate of compensation, independent of the length of delay caused by denied boarding, does not encourage air carriers to mitigate the inconveniences experienced by affected passengers. He maintains that a delay-based regime is reasonable, and proposes such a regime.
[68] The Agency has considered the submissions of the parties respecting this matter, and finds that Mr. Lukács has presented a more compelling case that Air Canada’s statutory, commercial and operational obligations fail to outweigh the rights of passengers to be subject to reasonable terms and conditions of carriage.
[69] Although it is true that the Agency determined in Decision No. 666‑C-A-2001 that Rule 245(E)(2) was reasonable, that Decision was rendered nearly 12 years ago. Today, prices of air carrier tickets, accommodation, and other incidental expenses are not the same. Air Canada has not demonstrated to the Agency’s satisfaction that Air Canada’s denied boarding compensation is still reasonable.
[70] As noted by Mr. Lukács, Air Canada’s submission that, based on the levels of compensation offered by certain competitors, Air Canada’s compensation is reasonable, is not persuasive. As pointed out in previous Agency decisions, the mere fact that a carrier’s term and condition of carriage is comparable to that applicable to other carriers does not render that term and condition reasonable.
[71] The Agency is also of the opinion that Air Canada has failed to demonstrate how a higher level of compensation would place it in a disadvantageous position relative to other domestic air carriers. Also, Air Canada’s submission that Air Canada’s extensive network allows for the timely reprotection of passengers who are denied boarding does not justify the current level of compensation tendered by Air Canada, particularly for those passengers who, because of the time or date of their scheduled flight, are inconvenienced to the extent, for example, of having to travel on another day. In this regard, Air Canada’s argument that its actions, including arranging alternate transportation or hotel accommodations, exceed the damage experienced by a passenger affected by denied boarding is not persuasive. Such actions may not, in fact, entirely or sufficiently mitigate the damages experienced by that passenger.
[72] In light of the foregoing, the Agency finds that Rule 245(E)(2) is unreasonable.
[73] Having determined that Air Canada’s current level of $100, in cash, for denied boarding compensation is unreasonable, the question now arises as to what may constitute a reasonable compensation regime. Mr. Lukács submits that the regime existing in the United States of America or the European Union is a reasonable alternative to that of Air Canada’s. He also proposes his own regime, based on the consolidation of the fare data filed by Air Canada, and his calculations relating to that consolidation.
[74] The American regime and the regime proposed by Mr. Lukács feature compensation based on the length of time an affected passenger is delayed, while the European Union regime involves compensation based on both time and the distance of the passenger’s air travel. The Agency is not convinced that an approach that includes a distance component correlates with the inconvenience that may be experienced by a passenger who is denied boarding. Rather, compensation based on the length of time by which a passenger is delayed more accurately reflects the damage which may be experienced. As such, the Agency is of the opinion that the regime applied by the United States of America and that proposed by Mr. Lukács represent reasonable options, while that applied by the European Union does not.

ISSUE 4: SHOULD COSTS BE AWARDED AGAINST AIR CANADA RESPECTING ITS PRELIMINARY MOTION, WHICH WAS INCLUDED IN AIR CANADA’S ANSWER DATED JANUARY 16, 2012?

Positions of the parties

[75] Mr. Lukács submits that a preliminary motion filed by Air Canada to dismiss his complaint on the basis of it being abstract was merely an attempt to derail and/or delay the proceedings. He maintains that the issue raised by Air Canada has already been determined by the Agency in previous decisions, and that Air Canada’s attempt to relitigate the matter constitutes abuse of process. Mr. Lukács therefore argues that the unique circumstances of this case warrant an award of costs against Air Canada with respect to the preliminary motion.

Analysis and findings

[76] In Decision No. LET-C-A-47-2012, the Agency noted that costs are generally compensatory in nature and are awarded at the end of the proceeding, and that although the Agency was not prepared to issue an interim order on costs, it would consider the issue of costs at the conclusion of its investigation of Mr. Lukács’ complaint.
[77] The Agency’s practice has been to award costs only in special or exceptional circumstances. In making such a determination, the Agency considers a combination of factors such as the nature of the application, the length and complexity of the proceeding, whether the Agency held an oral hearing, whether parties have acted efficiently and in good faith or if a party has incurred extraordinary costs to prepare and defend its application. The Agency notes that notwithstanding the preliminary motion filed by Air Canada on January 16, 2012, Air Canada also filed its answer to the complaint as it had been directed to by the Agency. In other words, Air Canada’s preliminary motion did not delay the proceedings in this case.
[78] The Agency has considered the above factors, and finds that the circumstances of the preliminary motion do not warrant an award of costs against Air Canada.

CONCLUSION

[79] The Agency makes the following final determinations:
  • Issue 1: The practice of overbooking is reasonable.
  • Issue 2: Rule 245(E)(1)(b)(iv) of the Tariff is unreasonable.
  • Issue 3: Rule 245(E)(2) of the Tariff is unreasonable.
  • Issue 4: The motion to award costs against Air Canada following a preliminary motion filed on January 16, 2012 is denied.

ORDER

[80] The Agency, pursuant to subsection 67.2(1) of the CTA, disallows the following provisions of the Tariff:
  • Rule 245(E)(1)(b)(iv); and,
  • Rule 245(E)(2).
[81] Further, the Agency provides Air Canada with an opportunity to show cause, within 30 days from the date of this Decision, why:
  1. with respect to Rule 245(E)(1)(b)(iv), the revised provision should not contain language consistent with the finding in this Decision that, in the absence of Air Canada demonstrating that all reasonable measures were taken to avoid substitution to a smaller aircraft, denied boarding compensation will be tendered to affected passengers; and,
  2. with respect to the disallowed Rule 245(E)(2), Air Canada should not apply either the denied boarding compensation regime in effect in the United States of America or the regime proposed by Mr. Lukács.
[82] Air Canada’s response must also be served on Mr. Lukács, who will have 10 days from receipt of that response to file comments, if any, with a copy to Air Canada.
[83] Pursuant to paragraph 28(1)(b) of the CTA, the disallowance of Rules 245(E)(1)(b)(iv) and 245(E)(2) shall come into force when Air Canada includes provisions in its Tariff that are determined to be reasonable by the Agency.

Appendix

Canada Transportation Act, S.C., 1996, c. 10, as amended

67.2(1) If, on complaint in writing to the Agency by any person, the Agency finds that the holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory, the Agency may suspend or disallow those terms or conditions and substitute other terms or conditions in their place.

European Union – Regulation (EC) No. 261/2004

Article 7 – Right to compensation

  1. Where reference is made to this Article, passengers shall receive compensation amounting to:
    1. EUR 250 for all flights of 1 500 kilometres or less;
    2. EUR 400 for all intra-Community flights of more than 1 500 kilometres, and for all other flights between 1 500 and 3 500 kilometres;
    3. EUR 600 for all flights not falling under (a) or (b).
      In determining the distance, the basis shall be the last destination at which the denial of boarding or cancellation will delay the passenger’s arrival after the scheduled time.
  2. When passengers are offered re-routing to their final destination on an alternative flight pursuant to Article 8, the arrival time of which does not exceed the scheduled arrival time of the flight originally booked
    1. by two hours, in respect of all flights of 1 500 kilometres or less; or
    2. by three hours, in respect of all intra-Community flights of more than 1 500 kilometres and for all other flights between 1 500 and 3 500 kilometres; or
    3. by four hours, in respect of all flights not falling under (a) or (b), the operating air carrier may reduce the compensation provided for in paragraph 1 by 50 %.
  3. The compensation referred to in paragraph 1 shall be paid in cash, by electronic bank transfer, bank orders or bank cheques or, with the signed agreement of the passenger, in travel vouchers and/or other services.
  4. The distances given in paragraphs 1 and 2 shall be measured by the great circle route method.

United States Department of Transportation

14 CFR 250.5 – Amount of denied boarding compensation for passengers denied boarding involuntarily.

[…]
  1. No compensation is required if the carrier offers alternate transportation that, at the time the arrangement is made, is planned to arrive at the airport of the passenger’s first stopover, or if none, the airport of the passenger’s final destination not later than one hour after the planned arrival time of the passenger’s original flight;
  2. Compensation shall be 200% of the fare to the passenger’s destination or first stopover, with a maximum of $650, if the carrier offers alternate transportation that, at the time the arrangement is made, is planned to arrive at the airport of the passenger’s first stopover, or if none, the airport of the passenger’s final destination more than one hour but less than two hours after the planned arrival time of the passenger’s original flight; and
  3. Compensation shall be 400% of the fare to the passenger’s destination or first stopover, with a maximum of $1,300, if the carrier does not offer alternate transportation that, at the time the arrangement is made, is planned to arrive at the airport of the passenger’s first stopover, or if none, the airport of the passenger’s final destination less than two hours after the planned arrival time of the passenger’s original flight.
[…]

14 CFR 250.6 – Exceptions to eligibility for denied boarding compensation.

A passenger denied boarding involuntarily from an oversold flight shall not be eligible for denied boarding compensation if:
  1. The passenger does not comply fully with the carrier’s contract of carriage or tariff provisions regarding ticketing, reconfirmation, check-in, and acceptability for transportation;
  2. The flight for which the passenger holds confirmed reserved space is unable to accommodate that passenger because of substitution of equipment of lesser capacity when required by operational or safety reasons; or, on an aircraft with a designed passenger capacity of 60 or fewer seats, the flight for which the passenger holds confirmed reserved space is unable to accommodate that passenger due to weight/balance restrictions when required by operational or safety reasons;
  3. The passenger is offered accommodations or is seated in a section of the aircraft other than that specified on the ticket at no extra charge, except that a passenger seated in a section for which a lower fare is charged shall be entitled to an appropriate refund; or
  4. The carrier arranges comparable air transportation, or other transportation used by the passenger at no extra cost to the passenger, that at the time such arrangements are made is planned to arrive at the airport of the passenger’s next stopover or, if none, at the airport of the final destination not later than 1 hour after the planned arrival time of the passenger’s original flight or flights.

Air Canada’s Canadian Domestic General Rules Tariff No. CDGR-1

Rule 245 Denied Boarding Compensation

[...]

(E) COMPENSATION

Unless passenger chooses option (D)(3) above, in addition to providing transportation in accordance with (D)(1) or (2), a passenger who has been denied boarding will be compensated by AC as follows:
(1) Conditions for Payment
[...]
(b) It must not have been possible to accommodate the passenger on the flight on which he held confirmed reservations and the flight must have departed without him.
EXCEPTION: The passenger will not be eligible for compensation:
[...]
(iv) if, for operational and safety reasons, his aircraft has been substituted with one having lesser capacity.
[...]
(2) Amount of Compensation
Subject to the provisions of (E)(1), AC will tender liquidated damages in the amount of $100.00 cash or a Credit Voucher or MCO (good for future travel on Air Canada) in the amount of $200.00, to the passenger’s option for travel within Canada or to the USA and Mexico. If accepted by the passenger, such tender will constitute full compensation for all actual or anticipatory damages, incurred or to be incurred.

Member(s)

  • J. Mark MacKeigan
  • Geoffrey C. Hare