Order No. 2006-A-88

February 21, 2006

File No. M4110/K14-10

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BACKGROUND

[1] On April 22, 2005, Kelowna Flightcraft Air Charter Ltd. (hereinafter Kelowna) filed with the Canadian Transportation Agency (hereinafter the Agency) Charter Tariff CTA(A) No. 7, applicable to international transportation, for effect June 6, 2005. Included in this tariff are provisions respecting limitations of liability for the carriage of baggage.

[2] In its Decision No. LET-A-172-2005 dated June 3, 2005, the Agency advised Kelowna that upon a preliminary review of the tariff's provisions setting out the carrier's limits of liability regarding the carriage of baggage, the Agency was of the opinion that some provisions may be contrary to international conventions and protocols, and to the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR). As such, and pending completion of its investigation into this matter, the Agency suspended Rules 10(a), 10(b)(ii), 10(c)(vii), 10(c)(ix) and 10(c)(xii) of Kelowna's Charter Tariff CTA(A) No. 7, as provisions therein appeared to be unjust and unreasonable, thereby contrary to subsection 111(1) of the ATR.

[3] In its Decision No. LET-A-195-2005 dated July 7, 2005, the Agency provided Kelowna with the reasons why the above-noted rules appeared to be contrary to the ATR, and gave Kelowna an opportunity to show cause why the Agency should not disallow the aforementioned rules as being inconsistent with subsection 111(1) of the ATR. Kelowna was also provided with the opportunity to show cause why the Agency should not order the carrier to clarify Rules 10(c)(iii) and 10(c)(vii) so as to respect subparagraph 122(c)(x) of the ATR. On August 11, 2005, Kelowna filed a response to Decision No. LET-A-195-2005.

[4] In its Decision No. LET-A-254-2005 dated September 14, 2005, the Agency advised Kelowna that it failed to demonstrate why the Agency should not reach the conclusions set out in Decision No. LET-A-195-2005. The Agency granted Kelowna an additional 10 days to provide an answer to the issues raised in Decision No. LET-A-195-2005. On September 24, 2005, Kelowna filed another response to Decision No. LET-A-195-2005.

ISSUE

[5] The issue to be addressed is whether Rules 10(a), 10(b)(ii), 10(c)(vii), 10(c)(ix) and 10(c)(xii) of Kelowna's Charter Tariff CTA(A) No. 7 are unjust and unreasonable and, if so, what corrective measures should be taken.

ANALYSIS AND FINDINGS

[6] The Agency's jurisdiction in matters respecting international tariffs is set out, in part, in Division II (International), Part V (Tariffs), of the ATR.

[7] Section 110 of the ATR provides, in part, that:

110.(1) Except as provided in an international agreement, convention or arrangement respecting civil aviation, before commencing the operation of an international service, an air carrier or its agent shall file with the Agency a tariff for that service, including the terms and conditions of free and reduced rate transportation for that service, in the style, and containing the information, required by this Division.

(2) Acceptance by the Agency of a tariff or an amendment to a tariff does not constitute approval of any of its provisions, unless the tariff has been filed pursuant to an order of the Agency.

(3) No air carrier shall advertise, offer or charge any toll where

(a) the toll is in a tariff that has been rejected by the Agency; or

(b)the toll has been disallowed or suspended by the Agency.

[8] Section 111 of the ATR provides, in part, that:

111.(1) All tolls and terms and conditions of carriage, including free and reduced rate transportation, that are established by an air carrier shall be just and reasonable and shall, under substantially similar circumstances and conditions and with respect to all traffic of the same description, be applied equally to all that traffic.

[...]

(3) The Agency may determine whether traffic is to be, is or has been carried under substantially similar circumstances and conditions and whether, in any case, there is or has been unjust discrimination or undue or unreasonable preference or advantage, or prejudice or disadvantage, within the meaning of this section, or whether in any case the air carrier has complied with the provisions of this section or section 110.

[9] Section 113 of the ATR provides that the Agency may:

(a) suspend any tariff or portion of a tariff that appears not to conform with subsections 110(3) to (5) or section 111 or 112, or disallow any tariff or portion of a tariff that does not conform with any of those provisions; and

(b) establish and substitute another tariff or portion thereof for any tariff or portion thereof disallowed under paragraph (a).

[10] Finally, subparagraph 122(c)(x) of the ATR provides that:

122. Every tariff shall contain

(c) the terms and conditions of carriage, clearly stating the air carrier's policy in respect of at least the following matters, namely,

(x) limits of liability respecting passengers and goods,

[11] In addition to the provisions of the ATR, the Agency, in fulfilling its legislative and regulatory functions with respect to the provisions of a carrier's international tariff setting out the carrier's liability for the loss, damage, destruction or delay in the delivery of baggage, must have regard to the Carriage by Air Act, R.S.C., 1985, c. C-26. This domestic legislation gives force of law in Canada to the various international conventions and protocols for the unification of certain rules for international carriage by air, including rules respecting a carrier's limits of liability in respect of the carriage of baggage. It is with this legislative and regulatory perspective in mind that the Agency undertook its review of Kelowna's international tariff.

1) Rule 10(a) – IATA Table of Weight

[12] Rule 10(a) of Kelowna's Charter Tariff CTA(A) No. 7 pertains to the carrier's limitation of liability for baggage and/or goods, and excess valuation charges, applicable to carriage governed by the Montreal Convention. This Rule provides, in part, as follows:

When determining weight, the IATA Table of Weight (Recommended Practice 1751 Attachment "A") shall be used.

[13] The Agency notes that Article 22(2) of the Montreal Convention has replaced the weight-based liability limitation set out in the Warsaw Convention (as amended by various international protocols),which limited a carrier's liability to a sum of two hundred and fifty French Gold Francs per kilogram, with a per passenger maximum limitation which is independent of the number or weight of a passenger's checked bags.

[14] Therefore, the Agency is of the opinion that the reference by Kelowna to a weight-based system to determine the limit of liability for carriage governed by the Montreal Convention is not consistent with the Montreal Convention and, accordingly, triggers the application of Article 26 of the Convention, which states that:

Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in this Convention shall be null and void, but the nullity of any such provision does not involve the nullity of the whole contract, which shall remain subject to the provisions of this Convention.

[15] In light of the foregoing, the portion of Rule 10(a) that recommends the use of the IATA Table of Weight when determining weight is not only unjust and unreasonable within the meaning of section 111 of the ATR, but it is also null and void by virtue of Article 26 of the Montreal Convention.

[16] The Agency notes that Kelowna, in its submission dated September 20, 2005, acknowledged that the subject provision of Rule 10(a) is inconsistent with the Carriage by Air Act and the ATR, and proposed alternative wording to be included in lieu of the wording used in the original Rule 10(a). The Agency has examined the proposed new wording and finds it acceptable and in line with the Carriage by Air Act and the ATR.

2) Rule 10(b)(ii) – Weight of the property lost, damaged or delayed

[17] Rule 10(b)(ii) of Charter Tariff CTA(A) No. 7 sets out the carrier's limitation of liability for baggage and/or goods, and excess valuation charges, applicable to carriage governed by the Warsaw Convention. This Rule reads, in part, as follows:

In the case of loss, damage or delay of part of property carried as checked baggage, the weight to be taken into consideration in determining the amount to which the carrier's liability is limited shall be only the total weight of the property lost, damaged or delayed.

[18] Article 22(2)(a) of the Warsaw Convention provides that:

In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of two hundred and fifty francs per kilogramme, unless the passenger or consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that that sum is greater than the passenger's or consignor's actual interest in delivery at destination.

[19] Article 22(2)(c) of the Warsaw Convention provides that:

In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained therein, the weight to be taken into consideration in determining the amount to which the carrier's liability is limited shall be only the total weight of the package or packages concerned. Nevertheless, when the loss, damage or delay of a part of the registered baggage or cargo, or of an object contained therein, affects the value of other packages covered by the same baggage check or the same air waybill, the total weight of such package or packages shall also be taken into consideration in determining the limit of liability.

[20] Article 23 of the Warsaw Convention provides that:

Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in this Convention shall be null and void, but the nullity of any such provision does not involve the nullity of the whole contract, which shall remain subject to the provisions of this Convention.

[21] In the context of Decision No. 449-C-A-2004 dated August 13, 2004 regarding a complaint filed by Marjorie Button against Skyservice Airlines Inc. carrying on business as Skyservice (hereinafter Skyservice), the Agency had the opportunity to examine a provision of Skyservice's tariff that is similar to Rule 10(b)(ii) of Kelowna's tariff. As with Rule 10(b)(ii) of Kelowna's tariff, Rule 10(N)(a) of Skyservice's tariff purported to limit the carrier's liability for checked baggage to the weight of the property lost, damaged or delayed. In that Decision, the Agency found that:

An examination of Article 22(2)(c) shows that it refers to three distinct concepts. That is, the concepts of registered baggage, package and object. As these three concepts are found within the same provision of the same legislation, they ought to be interpreted harmoniously with each other rather than in isolation from one another. In that context, the concept of "registered baggage", interpreted harmoniously with the concepts of "package" and "object", can only refer to the group comprised of all the "packages" a passenger elects to register with a carrier for carriage. While a suitcase and a box registered for carriage by a passenger would constitute individual packages, it is the sum of these two packages that constitutes the registered baggage of the passenger. Also in this context, the concept of "object" within the registered baggage can only refer to the items (such as clothing) found in each package registered by a passenger for carriage.

[22] Inasmuch as Skyservice's tariff purported to limit the carrier's liability to "the weight of the property lost, damaged or delayed" rather than the weight of the package or packages lost, damaged, or delayed, and as the word "property" found in Rule 10(N)(a) of Skyservice's tariff was narrower in scope than the word "package" found in Article 22(2)(c) of the Warsaw Convention, the Agency concluded that Skyservice's tariff fixed a lower limit of liability than that which is applicable under the Warsaw Convention. It was therefore concluded that Rule 10(N)(a) of Skyservice's tariff was null and void by virtue of Article 23 of the Warsaw Convention.

[23] In light of the foregoing, and as Rule 10(b)(ii) of Kelowna's tariff is identical in nature and scope to Rule 10(N)(a) of Skyservice's tariff, Rule 10(b)(ii) is also contrary to Article 22(2)(c) of the Warsaw Convention. Hence, the provision of Rule 10(b)(ii) of Kelowna's tariff that purports to limit the carrier's liability for checked baggage to the weight of the property lost, damaged or delayed is both unjust and unreasonable within the meaning of section 111 of the ATR, and is null and void by virtue of Article 23 of the Warsaw Convention.

[24] The Agency notes that Kelowna, in its submission dated September 20, 2005, acknowledged that this portion of Rule 10(b)(ii) is inconsistent with the Carriage by Air Act and the ATR, and agreed to remove it from Charter Tariff CTA(A) No. 7.

3) Rule 10(b)(ii) – IATA Table of Weight

[25] Rule 10(b)(ii) of Kelowna's Charter Tariff CTA(A) No. 7 also provides that:

When determining weight, the IATA Table of Weight (Recommended Practice 1751 Attachment "A") shall be used.

[26] While the Agency recognizes that the IATA Table of Weight may be a useful tool to determine the total weight of a package or packages affected by loss, delay or damage, it does not appear to be reasonable to limit the means of determining the total weight of a package or packages to this method alone. Other methods that could assist in determining the weight of a package or packages affected by loss, damage or delay, such as actually weighing the package(s), should not automatically be excluded. By only referring to the IATA Table of Weight, Rule 10(b)(ii) creates the possibility that the estimated weight of a package or packages derived from using the IATA Table of Weight could be considered as being the de facto weight of a package or packages, even though better evidence as to the weight of a package or packages exists and is available. This, in the opinion of the Agency, is unreasonable and contrary to section 111 of the ATR.

[27] The Agency notes that Kelowna, in its submission dated September 20, 2005, acknowledged that this portion of Rule 10(b)(ii) is inconsistent with the Carriage by Air Act and agreed to remove it from Charter Tariff CTA(A) No. 7.

4) Rule 10(c)(iii)

[28] In Rule 10(c)(iii) of Kelowna's Charter Tariff CTA(A) No. 7, the sentence "such person shall furnish adequate security to indemnify Carrier" is repeated twice.

[29] The Agency notes that Kelowna, in its submission dated September 20, 2005, acknowledged the typographical error, and undertook to revise the wording of Rule 10(c)(iii).

5) Rule 10(c)(vii) – Limited release tag

[30] Rule 10(c)(vii) of Kelowna's Charter Tariff CTA(A) No. 7, which sets out the carrier's limit of liability for baggage and/or goods, and excess valuation charges, applicable to carriage governed by either the Montreal Convention or the Warsaw Convention, provides, among other things, that "In addition, Carrier shall not be liable when damage, or partial loss occurs after the completion of a limited release tag as set forth thereon and further."

[31] The Agency is unclear as to the scope and meaning of the words "limited release tag". Consequently, and given the absence of a definition of the term in the carrier's tariff, the Agency finds that the subject provision of Rule 10(c)(vii) is unclear within the meaning of subparagraph 122(c)(x) of the ATR.

[32] The Agency notes that Kelowna, in its submission dated September 20, 2005, acknowledged the vague nature of the expression "limited release tag" contained in Rule 10(c)(vii), and submitted alternative wording for this Rule. The Agency has examined the proposed new wording, and finds that the expression "limited release tag" is now clear.

[33] However, and while Rule 10(c)(vii) has been clarified by Kelowna's new wording, the Agency is of the opinion that this Rule now appears to be unreasonable within the meaning of section 111 of the ATR, as it now states that the carrier will not be responsible for damage, loss or delay of items that are required to be tagged. These items include, but are not limited to, sporting equipment, fragile equipment, perishables, unsuitably packed items and damaged items.

[34] The Agency agrees that it is reasonable for a carrier to limit its liability for damage resulting from the inherent defect, quality or vice of baggage. In fact, Article 17(2) of the Montreal Convention provides, in part, that "[...], the carrier is not liable if and to the extent that the damage resulted from the inherent defect, quality or vice of the baggage." However, in order for such a limitation of liability to be reasonable, there must be a link between the damage, loss or delay of the baggage and its inherent defect, quality or vice.

[35] The Agency has reviewed the amended wording of Rule 10(c)(vii) as provided by Kelowna in its submission dated September 20, 2005, and is of the opinion that it does not provide for such a link between the loss, damage or delay and the inherent defect, quality or vice of a baggage. Simply put, Rule 10(c)(vii) of the tariff relieves Kelowna of any liability for the loss, damage or delay of items subject to a limited release tag, even though the damage, loss or delay of baggage or an item may have nothing to do with its inherent defect, its quality, or its vice.

[36] The Agency therefore finds that the provision of Rule 10(c)(vii) of Kelowna's tariff that purports to relieve the carrier of any liability for the loss, damage or delay of baggage or items that are required to be tagged is unreasonable, and will not allow it.

6) Rule 10(c)(vii) – Locked baggage

[37] The proposed Rule 10(c)(vii) of Kelowna's Charter Tariff CTA(A) No. 7 also provides that:

Carrier shall not be liable for any item stolen or missing from bags that were not locked with a combination or key lock.

[38] The Agency is of the opinion that such a rule appears to be an attempt to relieve the carrier of liability which is set out in both the Montreal and Warsaw Conventions, and is, therefore, in contravention of Article 26 of the former, and Article 23 of the latter.

[39] The Agency is also concerned that such a rule, by prompting persons to lock their checked bags, could obstruct the work of airport security authorities, or be contrary to security policies and recommendations of these authorities.

[40] The Agency notes that Kelowna, in its submission dated September 20, 2005, acknowledged that such a provision is inconsistent with the Carriage by Air Act and the ATR, and agreed to remove it from Charter Tariff CTA(A) No. 7.

7) Rule 10(c)(ix) – Daily compensation for delayed baggage

[41] The proposed Rule 10(c)(ix) of Kelowna's Charter Tariff CTA(A) No. 7, which also relates to the carrier's limitation of liability for baggage and/or goods, and excess valuation charges, applicable to carriage governed by either the Montreal Convention or the Warsaw Convention, provides in part that:

Notwithstanding paragraphs a) & b) of this Rule, in the case of delayed baggage upon the passenger's arrival at a point in the itinerary other than the place of origin, the Carrier's liability shall be limited to CAD50.00 per day, until the passenger receives the bag(s) or up to a maximum of CAD50.00, whichever comes first.

[42] The Agency finds that this provision of the subject Rule can not be reconciled with the provisions of either the Montreal Convention or the Warsaw Convention. As quoted above, Article 22(2) of the Montreal Convention limits the carrier's liability to a sum of 1 000 Special Drawing Rights per passenger in the case of destruction, loss, damage or delay of baggage during carriage. Article 22(2)(a) of the Warsaw Convention states that the liability of the carrier is limited to a sum of two hundred and fifty francs per kilogram in the case of loss, damage or delay of registered baggage during carriage. The limits of liability set out in both Conventions appear to take into consideration the situation intended to be covered by Rule 10(c)(ix).

[43] The Agency is of the opinion that if a passenger, as a result of a delay by the carrier in the delivery of checked luggage at any point in the travel process, is able to substantiate a claim for direct out-of-pocket expenses incurred as a result of that delay, in an amount up to and including the limit allowed by the applicable Convention, the carrier is liable for payment of the claim in full.

[44] By limiting a passenger's right to recover interim expenses to a specific sum, which falls well short of the limit of liability set out in the applicable Convention, Rule 10(c)(ix) contravenes both Conventions.

[45] As such, this provision of Rule 10(c)(ix) is not only unjust and unreasonable within the meaning of section 111 of the ATR, but it is also null and void pursuant to either Article 23 of the Warsaw Convention or Article 26 of the Montreal Convention.

[46] In its submission dated September 20, 2005, Kelowna submits that "this Rule has been verified to be word for word as taken from another carrier['s] currently approved Tariff".

[47] The fact that such rule has been copied word for word from another carrier's tariff is irrelevant to the present determination. Kelowna should be aware that the Agency, pursuant to subsection 110(2) of the ATR, does not approve tariffs, except under very limited circumstances. Acceptance of prior tariffs is dependent on a great number of variables, often contextual, and this fact can not be used by a carrier as justification for submitting a proposed tariff or tariff amendment with provisions in contravention of the Carriage by Air Act, the ATR or other legislation. This standard applies to all carriers.

[48] The Agency therefore finds that the subject portion of Rule 10(c)(ix) of Kelowna's tariff is contrary to the Carriage by Air Act and the ATR, and will not allow it.

8) Rule 10(c)(xii) – Submission of receipts

[49] The proposed Rule 10(c)(xii) of Kelowna's Charter Tariff CTA(A) No. 7 also addresses the limitation of liability for baggage and/or goods, and excess valuation charges, applicable to carriage governed by either the Montreal Convention or the Warsaw Convention. This Rule reads as follows:

In the event of loss or partial loss, the passenger must submit receipts when filing a claim. The Carrier may disallow any and all claims when the passenger fails to provide proof of loss in the form of receipts of purchase.

[50] The Agency is concerned that this Rule is unduly restrictive inasmuch as it would preclude settlement of reasonable claims in the absence of an original receipt of purchase provided by a passenger affected by a loss. As in the case of the IATA Table of Weight discussed above, it does not appear to be reasonable to limit the means of determining the results of a claim solely on the absence or presence of an original receipt. Other methods that could assist in determining the validity of a claim, such as a sworn affidavit, testimony of a third party, or the inherent reasonableness of the claim itself should also be taken into account in reaching a determination. As receipts of purchase are often not retained, Rule 10(c)(xii) subjects claimants to an overly onerous and/or impossible obligation in order to obtain compensation, even in those cases where the carrier acknowledges that the loss took place while the baggage was in its care and safe-keeping. As a result, this Rule is unjust and unreasonable within the meaning of subsection 111(1) of the ATR.

[51] The Agency notes that Kelowna, in its submission dated September 20, 2005, acknowledged that Rule 10(c)(xii) may be inconsistent with the ATR, as all passengers may not be able to submit receipts for all items as proof of purchase. Kelowna therefore proposed alternative wording to be used in Rule 10(c)(xii). The Agency has examined such wording, and finds it acceptable and in line with the ATR.

CONCLUSION

[52] In light of the above, the Agency:

1. pursuant to paragraph 113(a) of the ATR, hereby disallows the provision of Rule 10(c)(vii) of Kelowna's Charter Tariff CTA(A) No. 7 that purports to relieve the carrier of any liability for the loss, damage or delay of baggage or items that are required to be tagged, as its application may be unreasonable, contrary to subsection 111(1) of the ATR;
2. pursuant to paragraph 113(a) of the ATR, hereby disallows Rule 10(c)(ix) of Charter Tariff CTA(A) No. 7 for being unjust and unreasonable as the Rule is inconsistent with the Carriage by Air Act; and
3. hereby orders Kelowna to, within seven (7) days from the date of this Order, file the revisions to Rules 10(a), 10(b)(ii), 10(c)(iii), 10(c)(vii) with respect to the locked baggage issue, and 10(c)(xii) that the carrier proposed in its submission dated September 20, 2005. Special permission number 96881 is hereby granted to file these revisions on not less than one day's notice.

[53] The disallowance of Rules 10(c)(vii) and 10(c)(ix) does not preclude Kelowna from filing substitute wording for these rules for consideration by the Agency.