SCC Rules on Aviation Seizure Powers in Canada 3000 Appeal

Prior to its bankruptcy in 2001, Canada 3000 owed approximately $30 million in unpaid fees and charges to Canada's airport authorities and NAV Canada. To try to obtain payment of those outstanding fees and charges, the airport authorities and NAV Canada sought to seize aircraft leased by Canada 3000. A similar issue arose in Quebec in respect of the bankruptcy of Inter-Canadien. The motions to seize the leased aircraft were opposed by approximately 15 different international aircraft lessors, including International Lease Finance Corporation, GE Capital Aviation Services and Ansett Worldwide Aviation.

An appeal to the Supreme Court of Canada was launched following the decision of the majority of the Ontario Court of Appeal, the decision of Justice Ground at first instance in Ontario and the decision of the majority of the Quebec Court of Appeal. The appeal was heard in January 2006 and the Supreme Court reserved its decision until June 9, 2006.

In Canada 3000 Inc., the Supreme Court upheld the provincial appellate decisions that the aircraft lessors have no direct liability for navigation charges (the airports themselves did not assert any such direct liability for airport user fees). However, it also held that if navigation and airport fees and charges are not paid by the airline using the services and facilities, NAV Canada and airports are permitted, under the federal Civil Air Navigation Services Commercialization Act and Airport Transfer (Miscellaneous Matters) Act respectively, to apply for a discretionary order permitting seizure and detention of the defaulting airline's aircraft, even if they are leased. The Supreme Court awarded no costs in the Canada 3000 proceedings.

A lessor or third-party owner of the seized aircraft cannot obtain the release of the aircraft unless the outstanding fees and charges are paid, a bond is posted or the court orders otherwise. This unusual seizure power was found to fall short of being a lien and was not found to confer any power to sell any aircraft so seized.

In the Canada 3000 situation, the planes were released through an elaborate protocol and bonding procedure long ago and the Supreme Court remitted the matter of what should happen next back to the lower courts.

In Ontario, the Greater Toronto Airports Authority was represented by Lyndon Barnes and Jean-Marc Leclerc of Osler, Hoskin & Harcourt LLP, with the remaining airport authorities represented by John Porter and Alan Merskey of Ogilvy Renault LLP in Toronto. NAV Canada was represented on the appeal by Clifton Prophet and Eric Wredenhagen of Gowling Lafleur Henderson LLP in Toronto.

In Ontario, multiple firms represented the aircraft lessors, with the argument led by Torys LLP on the seizure point and Cassels Brock & Blackwell LLP on the direct liability point. Richard Conway and Linda M. Plumpton of Torys LLP represented International Lease Finance Corporation, Hyr Här I Sverige Kommanditbolag, IAI X Inc., Triton Aviation International LLC, Sierra Leasing Limited, ACG Acquisition XXV LLC and ILFC International Lease Finance Canada Ltd. David Chernos and Jana Stettner of Torys LLP represented U.S. Airways Inc. GE Capital Aviation Services, Inc. and Pegasus Aviation, Inc. were represented by Christopher Besant and Joseph Bellissimo of Cassels Brock & Blackwell LLP. Ansett Worldwide Aviation, USA was represented by Barbara Grossman and Christopher Woodbury, both of Fraser Milner Casgrain LLP. CIT Leasing Corp. and NBB-Royal Lease Partnership One were represented by Pamela Huff and Jill Lawrie of Blake, Cassels & Graydon LLP. GATX/CL Air Leasing Cooperative Association was represented by Craig Hill and Roger Jaipargas of Borden Ladner Gervais LLP. RRPF Engine Leasing Ltd. was represented by Kenneth Kraft of Heenan Blaikie LLP. Flight Logistics Inc. was represented by V. Ross Morrison of Morrison Brown Sosnovitch LLP.

In Quebec, the Greater Toronto Airports Authority was represented by Sandra Abitan, David Tardif Latourelle and Allon Pollak of Osler, Hoskin & Harcourt LLP in Montreal, with Ottawa MacDonald Cartier International Airport Authority, St. John's International Airport Authority and Charlottetown Airport Authority Inc. represented by Richard L. Desgagnés and Véronique E. Marquis of Ogilvy Renault LLP, Aéroports de Montréal represented by Gerald N. Apostolatos of Langlois Kronström Desjardins LLP, Montreal and NAV Canada represented by Michel G. Ménard of Lapointe Rosenstein, Montreal.

For the air finance community in the Quebec case, Wilmington Trust Company, Wilmington Trust Corporation, Renaissance Leasing Corporation, Heather Leasing Corporation, G.I.E. Avions de transport régional and ATR Marketing Inc. were represented by Bertrand Giroux, Markus Koehnen, Jeff Gollob, Jason Murphy, Jean Yves Fortin and Geneviève Bergeron of Brouillette Charpentier Fortin in Montreal. Pierre Bourque, Q.C., and Eugene Czolij of Desjardins Ducharme LLP in Montreal represented Newcourt Credit Group (Alberta) Inc., Canada Life Assurance Company and CCG Trust Corporation.