Decision No. 371-C-A-2005

June 15, 2005

File No. M4370/04-50054

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COMPLAINT

[1] On February 5, 2004, Paul Pedneault on behalf of himself and his wife, Ivona Rusek, filed with the Air Travel Complaints Commissioner (hereinafter the ATCC) the complaint set out in the title.

[2] Given that the parties were unable to reach a satisfactory agreement despite the intervention of the ATCC, the matter was referred to the Canadian Transportation Agency (hereinafter the Agency) for its consideration on September 20, 2004, as the complaint raised a tariff issue that falls within the jurisdiction of the Agency.

[3] In a letter dated November 24, 2004, Mr. Pedneault and Kelowna Flightcraft Air Charter Ltd. (hereinafter Kelowna) were advised of the Agency's jurisdiction in this matter. Mr. Pedneault was requested to confirm, within 10 days of receipt of the letter, whether he wished to pursue this matter formally before the Agency. The parties were also requested to advise if their comments filed with the ATCC could be considered as pleadings before the Agency.

[4] On December 20, 2004, Mr. Pedneault advised the Agency that he wished to pursue this matter formally before the Agency and that he agreed to have the comments he had filed with the ATCC considered as pleadings before the Agency.

[5] A copy of Mr. Pedneault's letter of December 20, 2004 was forwarded to Kelowna on January 4, 2005 and the carrier was asked to advise, within ten days, whether it agreed to have the comments it had filed with the ATCC considered as pleadings before the Agency. In response, on January 10, 2005, Kelowna advised the Agency that, in addition to the pleadings already on file with the ATCC, it would like the opportunity to provide further pleadings in the matter of the complaint by Mr. Pedneault. In Decision No. LET-C-A-43-2005, dated February 2, 2005, the Agency granted Kelowna's request and the carrier was required to file with the Agency, and concurrently serve on Mr. Pedneault, its further pleadings on or before February 18, 2005. Kelowna did not file a further submission.

[6] On February 28, 2005, Kelowna requested a further extension of 90 days to file comments with the Agency concerning this complaint. In its Decision No. LET-C-A-86-2005, dated March 17, 2005, the Agency granted Kelowna an extension until April 13, 2005 to file with the Agency, and concurrently serve on Mr. Pedneault its further pleadings with respect to this matter. However, Kelowna did not file a submission with the Agency within the specified additional time period.

PRELIMINARY MATTER

[7] Although Mr. Pedneault and Kelowna filed submissions after their respective prescribed deadlines, the Agency, pursuant to section 5 of the Canadian Transportation Agency General Rules, SOR/2005-35, accepts the submissions as relevant and necessary to its consideration of this matter.

ISSUE

[8] The issue to be addressed is whether Kelowna applied the terms and conditions of carriage relating to the limitations of liability for checked baggage specified in its International Charter Tariff CTA (A) No. 6 (hereinafter the tariff) in effect at the time of the incident, as required by subsection 110(4) of the Air Transportation Regulations, as amended, SOR/88-58 (hereinafter the ATR).

POSITIONS OF THE PARTIES

[9] Mr. Pedneault and his wife, Ms. Rusek, purchased their honeymoon package through the tour operator Red Seal Vacations doing business as Sunwing Vacations (hereinafter Sunwing). They were provided with air transportation by charter on Kelowna Flight No. KFA101 from Toronto to Acapulco on Monday, January 5, 2004. Upon arrival in Acapulco, they discovered that their checked bags were missing and filed a Baggage Irregularity Report.

[10] Mr. Pedneault states that they checked the status of their missing bags daily with the Sunwing representative in Acapulco. He adds that although they had already purchased some essential clothing articles, it was not suggested by a Sunwing representative until Wednesday, January 7, 2004, that they retain receipts for any necessary items they purchased. Mr. Pedneault submitted receipts to the Agency, amounting to MXP $424.90 (Mexican pesos) for essential items he and Ms. Rusek had purchased because their bags were missing. He also provided a list of expenses with a total value of CAD$130, for which he did not have receipts. Based on the information submitted by Mr. Pedneault, it would appear that the expenses were shared jointly by him and his wife.

[11] Mr. Pedneault's missing bag was returned to him on Thursday, January 8, 2004, but Ms. Rusek's bag was not returned to her until Monday, January 12, 2004, the date of her return flight to Toronto. Mr. Pedneault claims that when she finally received the bag, Ms. Rusek discovered that the lock was broken and that several items were missing. Mr. Pedneault provided a list of these missing items. The missing clothing articles were valued at CAD$425 and the missing cologne was valued at US$100.

[12] On February 3, 2004, Sunwing, the tour operator, offered US$150 to Ms. Rusek as a gesture of goodwill in compensation for the delayed delivery of her bag, and in a letter dated February 5, 2004, Kelowna offered Mr. Pedneault US$150 as compensation for the mishandling of his bag, which he accepted. However, in that same letter, Kelowna advised Mr. Pedneault that Sunwing's US$150 gesture of goodwill to Ms. Rusek was rescinded.

[13] Kelowna submits that Ms. Rusek's bag was not lost, but rather taken off of the carousel, apparently by another passenger. The carrier maintains that it fulfilled its obligation in bringing the baggage to the passenger at the airport. Therefore, as Ms. Rusek's bag was out of its "Custody, Care and Control", it is not responsible for her claim as any alleged loss is the result of theft by the party who removed her bag from the airport. Kelowna further states that Ms. Rusek's bag was returned to the Acapulco airport on Thursday, January 8, 2004, three days after it was taken by another passenger. It was, however, kept in a secure office on the airport premises by the local ground handling agent and thus any damage or pilferage could only have occurred while the bag was in the possession of the third party who removed her bag from the airport. In light of this, Kelowna submits that Ms. Rusek's claim should be pursued through the courts against that party.

[14] Kelowna advises that it contracts Aerocharter Mexico to represent it in Acapulco, which in turn contracts SEAT as the passenger processing and ground-handling agent.

[15] The carrier submits that in the event that the Agency finds Kelowna liable for Ms. Rusek's loss, compensation will be calculated based on the weight of the items lost pursuant to the conditions of carriage set out in its tariff. The conditions of carriage set its liability for baggage lost, damaged or delayed at the lesser of the value of the items lost or the maximum liability prescribed by the Convention for the Unification of Certain Rules for International Carriage by Air, signed at Montréal on May 28, 1999 (hereinafter the Montréal Convention). Kelowna further notes that the IATA Recommended Standard Practice will be used to determine the weight of the missing items on the list provided to the Agency and thus the value of Ms. Rusek's claim.

ANALYSIS AND FINDINGS

[16] In making its findings, the Agency has carefully considered all of the evidence submitted by the parties during the pleadings. The Agency has also examined Kelowna's limitations of liability applicable to the carriage of baggage between points in Canada and points outside of Canada, as set out in paragraphs (a) and (b) of Rule 10 (Limitation of Liability for Baggage or Goods and Excess Valuation Charges) of the carrier's tariff, in effect at the time of Mr. Pedneault's travel as well as the Montréal Convention. Rule 10 of the carrier's tariff provides, in part, that:

(a) The liability, for the loss of, damage to, or delay in the delivery of any personal property, including baggage or goods is limited to an amount equal to the value of such baggage or goods, which shall not exceed CAN $25.00 per kilogram for checked baggage and CAN $ 500.00 per passenger for unchecked baggage or other property, unless the passenger or the charterer, at the time of presenting such baggage or goods for transportation has declared a higher value and paid an additional charge of CAN $0.10 cents for each CAN $100.00 or fraction thereof by which such higher declared value exceeds these amounts mentioned above, in which event the carrier's liability will not exceed such higher declared value.

(b) In no cases shall the carrier's liability exceed the actual loss suffered by the passenger. All claims are subject to proof of amount of loss.

Applicable legislative and regulatory provisions

[17] The Agency's jurisdiction over the present complaint is set out in subsection 110(4) and section 113.1 of the ATR.

[18] Subsection 110(4) of the ATR provides that:

110(4) Where a tariff is filed containing the date of publication and the effective date and is consistent with these Regulations and any orders of the Agency, the tolls and terms and conditions of carriage in the tariff shall, unless they are rejected, disallowed or suspended by the Agency or unless they are replaced by a new tariff, take effect on the date stated in the tariff, and the air carrier shall on and after that date charge the tolls and apply the terms and conditions of carriage specified in the tariff.

[19] Section 113.1 of the ATR states that:

113.1 Where a licensee fails to apply the fares, rates, charges, terms or conditions of carriage applicable to the international service it offers that were set out in its tariffs, the Agency may

(a) direct the licensee to take corrective measures that the Agency considers appropriate; and

(b) direct the licensee to pay compensation for any expense incurred by a person adversely affected by the licensee's failure to apply the fares, rates, charges, terms or conditions of carriage applicable to the international service it offers that were set out in its tariffs.

[20] With respect to Kelowna's responsibility for baggage, the Agency notes that, at the time of the incident, the liability limitations for damage, delay or loss of baggage applicable to international carriage by air were governed by the Montréal Convention, which has the force of law in Canada by virtue of the Carriage by Air Act, R.S.C., 1985, c. C-26. Articles 17, 22 and 26 of the Montréal Convention provide, in part, as follows:

17(2) The carrier is liable for damage sustained in case of destruction or loss of, or of damage to, checked baggage upon condition only that the event which caused the destruction, loss or damage took place on board the aircraft or during any period within which the checked baggage was in the charge of the carrier. However, the carrier is not liable if and to the extent that the damage resulted from the inherent defect, quality or vice of the baggage. In the case of unchecked baggage, including personal items, the carrier is liable if the damage resulted from its fault or that of its servants or agents.

22(2) In the carriage of baggage, the liability of the carrier in the case of destruction, loss, damage or delay is limited to 1,000 Special Drawing Rights for each passenger unless the passenger has made, at the time when the checked baggage 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 it proves that the sum is greater than the passenger's actual interest in delivery at destination.

26 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] Pursuant to Article 17(2), the carrier is liable for damage sustained in the event of the destruction or loss of, or damage to, any registered baggage, if the damage event has occurred "on board the aircraft or during any period within which the checked baggage was in the charge of the carrier". In contrast to the other provisions of transportation law, the beginning and ending of this period of liability are not marked by the acceptance and delivery of the baggage in question but by the duration within which the baggage was in the "charge of the carrier".

[22] In its Decision No. 211-C-A-2004 (Berni Zimmermann v. Skyservice), the Agency stated that "the mere arrival of the checked baggage at the place of destination does not constitute delivery, nor does the period of liability end with the unloading of the goods from the aircraft. Liability also extends to the period during which the carrier stores the baggage until delivery to the passenger [emphasis added]. Loss must be assumed if the carrier is not able to carry out its contractual obligation of putting the passenger in possession of his baggage. Not only does the carrier undertake to transport the baggage, it also takes charge of the baggage in order to prevent it from being damaged or lost. The Carriage by Air Act does not define the term "charge"...".

[23] In that Decision, the Agency also stated that the carrier's charge does not end just because the baggage is handed over to a third party - in this case, the ground-handling crew. The Decision goes on to say that this does not free the carrier from its obligations vis-à-vis the entitled claimant. This means that the period after the landing, during which the baggage is stored with a third party (within the airport's boundaries) until delivery to the rightful owner, is still part of the carriage by air.

[24] Thus, a carrier is responsible for the care and safekeeping of bags entrusted to it until such time as those bags are reunited with their owners. A carrier is therefore liable for any loss of bags or items contained in the bags during the period in which they are in the carrier's care, including the time that the bags are in the hands of a third party. The failure of a carrier and/or its agents to exercise due diligence in this regard can lead directly to the loss of goods, with no fault or negligence on the part of the passenger.

[25] In the case at hand, Kelowna has acknowledged that it transported Ms. Rusek's baggage on board its aircraft from Toronto to Acapulco on January 5, 2004, and that her baggage was not delivered into her custody until several days later by the local ground-handling agent. The Agency also notes that Kelowna has not contested the fact that the goods missing from Ms. Rusek's bag were stolen, nor has it challenged the damage to Ms. Rusek's bag and the value of the listed goods as declared by the claimants.

[26] The carrier has not proven to the Agency's satisfaction that Kelowna was entitled to relinquish care prior to delivering the bag into the custody of Ms. Rusek and that the loss of articles from, and damage to, Ms. Rusek's bag did not occur during the period in which Ms. Rusek's baggage was in the charge of Kelowna. Thus, the Agency is of the opinion that Kelowna cannot relieve itself of its contractual obligation of putting Ms. Rusek in possession of her checked baggage, nor of the liability accruing to Ms. Rusek on account of the loss of, and damage to, her bag while in Kelowna's care.

[27] In light of the foregoing, the Agency finds that in refusing to compensate Mr. Pedneault on behalf of Ms. Rusek for the lesser of the value of the goods claimed or the maximum amount specified in the Montréal Convention for liability in case of baggage loss, damage or delay, Kelowna has failed to apply the terms and conditions of carriage for international travel as set out in the Montréal Convention.

[28] Regarding the provisions in Kelowna's tariff with respect to liability for loss of, damage to or delay of baggage, the Agency notes that the Montréal Convention came into force on November 4, 2003 for international carriage involving countries that have ratified the Montréal Convention, including Canada. The Montréal Convention provides for compensation in the case of baggage lost, damaged or delayed on a per passenger basis up to a maximum of 1,000 Special Drawing Rights (hereinafter SDR), subject to proof of loss. While Rule 10(a) of the tariff provides that "The Liability, for the loss of, damage to, or delay in the delivery of any personal property, including baggage or goods is limited to an amount equal to the value of such baggage or goods, which shall not exceed CAN$25 per kilogram for checked baggage...", it fixes a limit of liability that is lower than that provided for in Article 22(2) of the Montréal Convention. Therefore, Rule 10(a) of the tariff is, by virtue of Article 26 of the Montréal Convention, null and void.

[29] The Agency therefore finds that Kelowna's liability for the missing items is the lesser of 1,000 SDR or the amount equal to the value of the lost items. In the absence of any evidence to the contrary, the Agency is of the opinion that it is reasonable to consider the value of the listed missing items as filed with the Agency. Therefore, in this case, Kelowna's liability is for the value of the goods claimed.

[30] Pursuant to subsection 2(7) of the Carriage by Air Act, SDR are to be converted into Canadian dollars as follows:

2(7) For the purpose of subsection (6), the Canadian dollar equivalents of francs or Special Drawing Rights, as defined in Article 22 of the Convention set out in Schedule 1, are determined by

(a) converting francs into Special Drawing Rights at the rate of one Special Drawing Right for 15.075 francs; and

(b) converting Special Drawing Rights into Canadian dollars at the rate established by the International Monetary Fund.

[31] Applying the above formula, as of June 13, 2005, the most recent information available indicates that the International Monetary Fund converted SDR to Canadian dollars using a rate of SDR 1 = [CAD$1.83560]. Utilising that rate, 1,000 SDR = CAD$1835.60 (SDR 1,000 x CAD$1.83560). As mentioned above, the Agency finds that pursuant to Rule 10(b) of its tariff, Kelowna's liability in the present case is limited to the actual loss suffered, that is, CAD$425 and USD$100. The amount USD$100 is converted to CAD$125.54 at the rate of USD$1 = CAD$1.2554, the exchange rate in effect as of June 14, 2005. The Agency, therefore, finds that the amount of compensation to be paid to Mr. Pedneault on behalf of Ms. Rusek by Kelowna for the items missing from her bag is CAD$550.54 (CAD$425 + CAD$125.54).

[32] With respect to Mr. Pedneault's claim concerning expenses incurred, the ATR provide that where a licensee fails to apply the fares, rates, charges, terms or conditions of carriage set out in its tariffs, the Agency may direct the licensee to pay compensation for any expense incurred. In this regard, Mr. Pedneault claimed CAD$130 for essential clothing and toiletries and MXP$424.90 for other necessities. As of June 14, 2005, the amount of MXP$424.90 is converted to CAD$49.20 at the rate of MXP$1 = CAD$0.1158. While Mr. Pedneault's claim was settled outside of this proceeding, the Agency finds that one half of the expenses incurred are attributable to Ms. Rusek. Therefore, the Agency finds that the compensation to be paid by Kelowna to Mr. Pedneault on behalf of Ms. Rusek in this regard equals CAD$89.60 (one half of CAD$130 + one half of CAD$49.20).

[33] With respect to Mr. Pedneault's claim concerning Ms. Rusek's damaged bag, reference is made to Article 22(2) of the Montréal Convention which provides up to a maximum of 1,000 SDR in the case of damage. The Agency, therefore, finds that Kelowna should compensate Mr. Pedneault for the cost of repairs to the damaged bag.

CONCLUSION

[34] Based on the foregoing, the Agency, pursuant to paragraph 113.1(b) of the ATR, hereby orders Kelowna to provide CAD$550.54 in compensation to Mr. Pedneault based on the limitations of liability as set out in the Montréal Convention, and repay CAD$89.60 in compensation for expenses incurred, within thirty (30) days from the date of this Decision.

[35] The Agency further directs Kelowna to compensate Mr. Pedneault for the repair of Ms. Rusek's bag damaged en route to Acapulco, upon receipt of satisfactory proof of the cost of the repair.