Case information

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Statutes - Interpretation - Canada’s civil aviation system - Bankrupt airline using leased aircraft and engines incurred fees prior to bankruptcy for services from Nav Canada and airport authorities - Right of airport authorities and Nav Canada to seize aircraft and engines and demand payment from owners/lessors - Rights and obligations arising under the Civil Air Navigation Services Commercialization Act, S.C. 1996, c. 20 and the Airport Transfer (Miscellaneous Matters) Act, S.C. 1992, c. 5.

In 2001, under their parent corporation, Canada 3000 Inc., Canada 3000 Airlines Limited (“Canada 3000”) and Royal Aviation Inc. used 38 leased aircraft worth $1.1 billion (U.S.). All but two of the Respondents owned aircraft leased to Canada 3000. The Respondents RRPF Engine Leasing Limited and Flight Logistics each leased Canada 3000 an engine attached to an aircraft. Under the leases, the Respondents retained legal title to their aircraft and engines and a right of repossession in the event of discontinued operations or bankruptcy. In November 2001, Canada 3000 Inc., Canada 3000 and Royal were in financial trouble. They were significantly in arrears under the leases. They owed the Appellant airport authorities and NAV Canada for air navigation services.
On November 8, 2001, the companies obtained protection from their creditors and ceased operations that same day. Deloitte Touche was appointed as monitor. On November 9, 2001, NAV Canada applied under s. 56(1) of the Civil Air Navigation Services Commercialization Act, S.C. 1996, c. 20 (“CANSCA”), for authority to seize and detain the aircraft. Ground J. of the Superior Court of Justice ordered all aircraft in Canada should not be flown pending a further order of the Court and all aircraft abroad should be returned to Canada and similarly grounded.

On November 10, all directors and officers of the companies resigned en masse. Deloitte Touche filed assignments in bankruptcy on behalf of the companies under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“the BIA”) and was appointed trustee-in-bankruptcy of the companies’ estates. It commenced taking possession of the aircraft and the Respondents began filing claims under the BIA seeking the return of their aircraft. On November 12, the Greater Toronto Airport Authority applied under s. 9(1) of the Airport Transfer (Miscellaneous Matters) Act, S.C. 1992, c. 5 (“the Airports Act”) for an order allowing it to seize the aircraft and, on November 23, the other airports filed a similar application.

In December, 2001, Ground J. began hearing the various motions. On December 3, he issued interim protocols allowing the release of the aircraft to the Respondents after they posted security. On May 7, 2002, Ground J. dismissed the motions by the authorities and granted declaratory relief to the Respondents. He ordered the authorities to reimburse the Respondents for costs associated with the detention of their aircraft. Appeals and cross-appeals were filed before the Court of Appeal from this decision and from Ground J.’s protocol for interim release of the aircraft. The majority of the Court of Appeal dismissed the appeal of NAV Canada; allowed in part the appeal of the Airport Authorities; and dismissed the cross-appeal of the Lessors.