Licence Tribunal
Appeal d'appel en
Tribunal matière de permis
2013-07-09
FILE:
7956, 7957/CVOR
CASE NAME:
7956, 7957 v. Registrar of Motor Vehicles
Appeal under Section 50(1) of the Highway Traffic Act, R.S.O. 1990, c. H.8, from a Decision of the Registrar of Motor Vehicles Pursuant to Section 17 to Refuse to Issue a Commercial Vehicle Operators’ Registration Certificate and an Order of the Registrar of Motor Vehicles Pursuant to Section 47(10) to Seize Permits or Number Plates
C.C.S. Express Inc.
Applicant
-and-
Registrar of Motor Vehicles
Respondent
REASONS FOR DECISION AND ORDER
ADJUDICATOR:
Mary Ann Spencer, Member
APPEARANCES:
For the Applicant:
Mark Klaiman, Counsel
For the Respondent:
Patrick Moore, Counsel
Heard in Toronto:
June 19, 2013
DECISION AND ORDER
The Applicant appeals to this Tribunal under section 50(1) of the Highway Traffic Act, R.S.O. 1990, c. H.8 (the “Act”), from a decision of the Registrar of Motor Vehicles (the “Registrar”) issued March 6, 2013 pursuant to section 17of the Act to refuse to issue a Commercial Vehicle Operators Registration (“CVOR”) certificate and from an order dated March 6, 2013 pursuant to section 47(10) to seize permits or plates.
The Refusal to Issue a CVOR certificate is based on the fact that the Registrar, having considered the safety record of Sweet Melissa Trucking Inc., outstanding fines owed by Sweet Melissa Trucking Inc., and the Cancellation and Seizure of Sweet Melissa Trucking Inc. has reason to believe the Applicant will not operate safely and in accordance with the Act. The Seizure Order is based on the Applicant’s safety record, the Registrar’s decision to refuse to issue the CVOR certificate, and the Cancellation and Seizure Order issued to Sweet Melissa Trucking Inc.
EVIDENCE AND FACTS
Registrar’s Evidence
The evidence of the Registrar comprised a book of documents entered into evidence as Exhibit 4 and the testimony of former Ministry of Transportation employee Daniel Ramer and Ministry of Transportation employee Janice Merkley.
Daniel Ramer was formerly employed as a Carrier Safety Rating Administrator with the Ministry of Transportation. His responsibilities included monitoring the safety records of CVOR certificate holders, conducting interviews with certificate holders to address safety records and preparing action plans for the consideration of the Deputy Registrar.
Mr. Ramer explained the responsibilities of a CVOR certificate holder which are set out in the Public Guideline issued by the Ministry of Transportation (Exhibit 4, Tab 25). A carrier’s performance is based on points assigned for collisions, convictions and inspections which are weighted to determine an overall safety violation rate which is expressed as a percentage. Collisions and convictions each form 40% of the record with inspection findings comprising 20%. To determine the safety violation percentage, information provided by the carrier, such as fleet size and kilometers travelled, is used to establish threshold levels against which performance is assessed.
At pre-determined percentage levels, the Ministry intervenes or considers sanctions which can include suspension, cancellation or fleet limitation. Warning letters are issued at 35%, a request for a facility audit is triggered at 50%, at 85% an interview is requested, and at 100%, a sanction analysis is conducted. As at March 31, 2013, only .8% of carriers or 383 of 54,699 had violation rates exceeding 70% (Exhibit 4, Tab 26), and only .2% of carriers, or 109, had safety violation rates exceeding 100%.
Mr. Ramer testified that in both 2011 and 2012, while he was employed by the Ministry of Transportation, he analyzed the safety records of Sweet Melissa Trucking Inc. (“Sweet Melissa”), attended Show Cause meetings held by the Ministry and testified at the hearing before this Tribunal of its appeal of the Registrar’s CVOR Cancellation Order. When the Applicant’s application for a CVOR certificate (Exhibit 4, Tab 10) was received on January 3, 2013, Mr. Ramer noted that its corporate officer, Cecelia Scot, had also been a corporate officer of Sweet Melissa and he proposed to the Registrar that the Applicant’s application for a CVOR certificate be refused. On cross-examination, Mr. Ramer agreed that Ms Scot’s name does not appear on the articles of incorporation of Sweet Melissa and that the incorporators of Sweet Melissa similarly do not appear on the Applicant’s articles (Exhibit 4, Tab 1).
Sweet Melissa Trucking Inc., based in Michigan, originally applied for registration as a commercial vehicle operator on May 13, 2010. On that application (Exhibit 4, Tab 1), Melissa Schwab is listed as President and Cecelia Scot is listed as “Corporation Secretary/Managing Owner”. Ms Scot paid the application fee, signed the insurance declaration and was listed as the contact person for purposes of the application. Mr. Ramer testified that he requested a search of the State of Michigan’s corporate database on April 9, 2013. That search revealed that on the 2009 and 2010 corporate “Information Updates” filed with the Department of Energy, Labor and Economic Growth (Exhibit 4, Tab 2), both of which Ms Scot signed, she is listed as “Logistics Manager” and “Resident Agent” respectively. The information filed on both forms indicates Ms Scot is the Corporate Secretary.
Mr. Ramer completed a Safety Record Review of Sweet Melissa in July, 2011 (Exhibit 4, Tab 3) which shows that its safety violation rate for the period April 4, 2010 to June 19, 2011, was 206.03%. Following issuance of a Notice of Cancellation and Seizure by the Registrar, a Show Cause meeting was held on August 10, 2011 (Exhibit 4, Tab 4). Ms Scot, with driver/safety officer M.C., attended on behalf of Sweet Melissa. The minutes of that meeting indicate that Ms Scot advised the Ministry about a number of changes that had been implemented on June 1, 2011, including training initiatives and improved maintenance. The Ministry was advised that the company had a new shop, which employed two licensed mechanics and her husband, which would address maintenance issues.
Following the Show Cause Meeting, the Notice of Cancellation and Seizure was set aside. Two conditions were put in place: that the safety violation rate not exceed 50% going forward and that all outstanding fines be paid by September 21, 2011. The conditions were not met and Mr. Ramer completed a further Safety Record Review in July, 2012 (Exhibit 4, Tab 5). The safety violation rate for the period August 10, 2011 to June 19, 2012 was 152.86% and outstanding fines had increased to $4,467.54 from $1,540.00. A further Show Cause meeting was held on August 29, 2012, again attended by Mr. Ramer and by Ms Scot as the company’s representative. The minutes of that meeting (Exhibit 4, Tab 6) indicate that Ms Scot reported that she and her husband had taken control of the business in February, 2012 and had been making changes over the last months.
Following the Show Cause Meeting, the Registrar decided to cancel the CVOR certificate. Sweet Melissa appealed the decision to this Tribunal which ordered the Registrar to carry out the cancellation (Exhibit 4, Tab 7). The Cancellation and Seizure Order was issued on January 3, 2013 (Exhibit 4, Tab 8).
As of February 5, 2013, Sweet Melissa owed $25,117.80 in outstanding fines (Exhibit 4, Tab 9). The amount owing comprised two fines of $12,500 levied under sections 84(1) and 107.3 of the Act. The fines are still outstanding.
Mr. Ramer requested safety profiles for both Sweet Melissa and the Applicant from the Federal Motor Carrier Safety Administration in the United States (Exhibit 4, Tabs 12, 13) with the purpose of identifying if the two companies had drivers in common. He testified that the information revealed that Ms Scot’s husband, Carl Scot, drove for both companies as did two other drivers. On cross-examination, Mr. Ramer noted that he did not print the safety rating page for the Applicant and that it was possible that it had a satisfactory rating in the United States. He further agreed that a number of drivers who work for the Applicant did not work for Sweet Melissa. Asked about facility audits, Mr. Ramer testified that the Ministry of Transportation does not have jurisdiction to conduct facility audits on companies based in the United States.
Mr. Ramer also requested an Ontario profile for CCS Express Inc. (Exhibit 4, Tab 14). He explained that the profile would not necessarily be complete because the Applicant is not registered in Ontario. Records of inspections and convictions would be reflected but kilometers travelled and fleet size, both of which are used to create an overall safety violation rate, would not have been reported. The overall safety violation rate as of April 10, 2013 was 69% based on recorded convictions.
Mr. Ramer testified that inspection reports for the Applicant (Exhibit 4, Tabs 15 to 20) indicate a number of issues. For example, documentation was a problem at the February 1, 2013 inspection with a number of different companies listed on required documents. “E.L. Hollingsworth” was shown as the carrier on the driver’s log and an independent contractor agreement was executed between the Applicant and Ronald Darlow, Palm Coast. The bill of lading was issued to Sweet Melissa, as was the registration cab card and insurance certificate. At a March 3, 2013 inspection, the documentation was issued to CSS Express Inc. At this inspection, the speed limiter test failed. On March 6, 2013, the documentation was also issued to CSS Express Inc., the speed limiter test again failed and there were issues with tires. On cross-examination, Mr. Ramer agreed that there were no issues with log books or the speed limiter at the inspections on January 24 and February 1, 2013 and no issues with log books or brakes at the inspections on March 3 and March 6, 2013.
On February 7, 2013, the Registrar issued the Notice of Refusal to Issue a CVOR certificate (Exhibit 4, Tab 20). Submissions from the Applicant were sent on March 5, 2013 (Exhibit 4, Tab 23) in which the Applicant’s accountant indicated that the Applicant was solely owned by the Scots who had not been final decision makers at Sweet Melissa, the Applicant’s safety record was improving, and a number of safety measures were in place. The Registrar issued the Cancellation and Seizure Orders on March 6, 2013 (Exhibits 1 and 2).
Janice Merkley has been an officer with the Ministry of Transportation since 1998. She conducted the February 1, 2013 inspection and explained that part of her responsibility is to determine who is responsible for the vehicle. To make this determination, she reviewed all of the documentation provided. In this case, she noted that the names on the independent contractor agreement between Palm Coast and the Applicant were different from that on the registration. The side of the vehicle, however, had the Applicant’s name on it as did the insurance and the bill of lading. She therefore concluded that the operator was the Applicant and seized the Michigan plate in accordance with the March 6, 2013 Seizure Order. She testified that the driver could not produce a pre-trip inspection report and that the logbook was missing some information, including the address of the operator. On cross-examination, she agreed that she had no findings from her walk-around inspection of the vehicle.
Applicant’s Evidence
The evidence of the Applicant comprised two volumes of documents entered into evidence as Exhibit 5 and the testimony of Cecelia and Carl Scot.
Cecelia Scot testified that she and her husband and their partners Richard and Melissa Schwab each owned 25% of Sweet Melissa Trucking Inc. The company was formed with one owned truck. Initially, Ms Schwab was responsible for finding loads and dispatching, Mr. Schwab was in charge of finance, and Carl Scot was the driver. Ms Scot had no role because she was employed full time elsewhere.
Ms Scot joined the company in either August or September of 2009 as Corporate Secretary but testified she had no role in its day to day affairs at that time because she was still employed elsewhere. However, early in 2010, Ms Scot left that employment to work full time for Sweet Melissa. At that time, Sweet Melissa still owned only one truck. In 2010, the Scots purchased five trucks through their company CC Express LLP. These trucks were leased to Sweet Melissa through a contractor agreement.
Ms Scot testified that when she joined Sweet Melissa, she knew nothing about trucking but she assumed responsibility for finding loads, dispatching, invoicing and payroll. Banking remained in Mr. Schwab’s control until 2010 when Ms Scot acquired signing authority. She did not complete Sweet Melissa’s CVOR application but signed it because she was the only owner available to do so. Ms Scot did not acquire control of the corporate chequebook until 2012.
Ms Scot testified that the Schwabs controlled the maintenance of Sweet Melissa’s vehicles, including the five vehicles leased from the Scots. She stated that maintenance was not taken care of immediately; rather it was scheduled, resulting in delays. Sweet Melissa also primarily used owner/operators rather than owned vehicles and this made it difficult to enforce the completion of repairs. Ms Scot stated that Sweet Melissa preferred to deal with owner/operators because it did not have to fix anything but simply received a percentage of their earnings.
Ms Scot testified that the company-owned truck was sold in November, 2011 and the proceeds were put towards paying off the business debts of Sweet Melissa. The Scots assumed control of the company in early 2012 when the Schwabs left. At that time, they paid off a number of bills, including those which had been placed on their personal credit cards, putting over $26,000 of their personal funds into the business. They then decided to dissolve the corporation. Asked why, Ms Scot stated that the leased vehicles belonged to them and Sweet Melissa did not own anything.
The Applicant was incorporated in January, 2012 because the Scots intended to break away from Sweet Melissa, take their equipment and run the business themselves. The Schwabs have no involvement with the Applicant. Ms Scot testified that the December 2011 date on the dissolution documents is incorrect and that the dissolution is still being finalized.
In cross-examination, Ms Scot was questioned regarding the degree of control she and her husband had over the operations of Sweet Melissa given they had a 50% ownership interest. Ms Scot stated that she and her husband did not make any initial investment in the company and consequently had no control. Asked if the fact that they had brought five trucks into the business in 2010 did not increase their control, she stated that she leased the trucks to the company. She also indicated that while, in theory, the Scots were entitled to receive 50% of the company’s profits, they were told there were none. She and her husband both received salaries and payments from the lease of their vehicles. Ms Scot was then asked why the Scots chose to stay with Sweet Melissa. She indicated that they had made the decision that they were going to leave and noted that when she began to work full time for the company, she was able to obtain better customers, a key factor in the trucking business. However, she stated that it took a long time to break apart from Sweet Melissa and to set up their new corporation. She summarized that at Sweet Melissa “we were in control of juggling bills” and determining “what we could pay next”.
Asked why Sweet Melissa did not pay the $25,000 in outstanding Ontario fines, Ms Scot responded “don’t you think that’s excessive”? She then explained that they intended to contest the fines but they were not notified of a changed court date and added that she believed the Ministry of Transportation had been targeting Sweet Melissa trucks. She stated she is not involved in the dissolution of Sweet Melissa and that everything was sent to her accountant. There is no money left to pay the Ontario fines although monies are still owed to Sweet Melissa and she is “sure” the fines will be paid. She herself can pay no more. Asked how she had enough money to start a new company, she stated that she took her trucks back.
Ms Scot testified that the Applicant has moved into a repair facility where maintenance and repair work can be done. The facility was acquired two years ago through the Scots’ company CC Repair but they did not start to use it until approximately February, 2012. There are three licensed mechanics who check trucks and trailers once a week. She testified that there were no licenced mechanics on staff with Sweet Melissa and that even though they owned the repair facility, the Schwabs controlled maintenance of their five leased vehicles.
There is also a training program in place now which includes training on how to conduct pre-trip inspections. The Applicant has thirteen trucks and employs only three or four drivers who worked for Sweet Melissa. On cross examination, Ms Scot stated that she has had three licensed mechanics since the fall of 2012 and agreed that she had indicated this at Sweet Melissa’s Show Cause meetings with the Ministry, but noted that the previous mechanics were not very good.
Ms Scot testified that the Applicant is doing regular vehicle maintenance and referred to the company maintenance forms (Exhibit 5, Tab 6) which are used as both a checklist and a record of daily maintenance checks. An in-house summary repair record is kept for each truck (Exhibit 5, Tabs 6 through 18). Similarly, maintenance checks are performed daily on each trailer and records are maintained (Exhibit 5, Tabs 19 through 32). These forms were not used at Sweet Melissa because the Schwabs did not want to spend the money on repairs.
Ms Scot stated that the Applicant’s record in the United States is satisfactory. She referred to the Company Snapshot produced by the U.S. Federal Motor Carrier Safety Administration (Exhibit 5, Tab 2) which indicates that as of March 5, 2013, there had been 6 inspections with only one out of service finding. She then testified that in the third week of May 2013, an audit by the U.S. Department of Transportation had been conducted which the Applicant had passed. No documentation of the audit was provided.
Ms Scot indicated that two to four of the Applicant’s vehicles are in Ontario seven days a week transporting fresh produce. The Applicant does freight forwarding. Trucks that are not allowed to enter Canada drive to Michigan and loads are changed to a company-owned trailer and driven to Canada. She explained this is the reason why bills of lading show different company names.
With respect to the independent contractor agreement signed by Palm Coast/Ronald Darlow and the Applicant, Ms Scot testified that the purpose of the agreement was to lease the Applicant’s vehicles to an operator with a CVOR licence to enable the Applicant to continue to drive in Canada. Mr. Darlow himself drives and also occasionally works as a mechanic at the Applicant’s facility where the trucks are maintained. He helps with obtaining customers and loads. Ms Scot dispatches the trucks. Depending on the arrangement in place, customers may pay the Applicant or Mr. Darlow. In the cases where Mr. Darlow drives the Applicant’s vehicles, he is paid a percentage.
Carl Scot is Cecelia Scot’s husband and the co-owner of the CCS Express where his responsibilities include driving a truck, overseeing the mechanics and working in the warehouse. At Sweet Melissa, Mr. Scot was an owner and a truck driver.
Mr. Scot testified that because of previous problems and to avoid their repetition in the future, trucks and trailers are brought into the Applicant’s garage each day for a maintenance check. There are three mechanics employed, one of whom does the daily maintenance checks using the company checklist form, another of whom handles more technical issues. Mr. Scot provided the example of electrical or computer issues, stating that the latter need fixing because Canada has substandard reading devices. Mr. Scot’s role is to ensure everyone is doing their jobs or to order parts.
A record of maintenance and repair orders and invoices was also entered into evidence. (Exhibit 5, Tabs 33 to 45). Mr. Moore questioned why some of the invoices dated after January, 2013 were addressed to Sweet Melissa. Mr. Scot explained that because the vehicles were previously registered to Sweet Melissa, the suppliers would have its name recorded when they cross referenced the vehicle. He further explained that it would be impossible for him to call each supplier to have the records updated because there are too many suppliers given repairs take place across the United States.
With respect to the training program, Mr. Scot stated that training is conducted once a month with all drivers and includes how to complete log books, adjust brakes and conduct pre-trip inspections. This type of training did not take place at Sweet Melissa because they did not have the facility and it was not feasible to do it in the parking lot. Questioned by Mr. Moore as to why pre-trip inspection training could not be done by Sweet Melissa in a parking lot, for example, Mr. Scot added that most of the drivers working for Sweet Melissa were older and knew what they were doing. At the Applicant’s facility, one of the mechanics does the training with respect to pre-trip inspections. Mr. Scot does the training on Canadian log book requirements, having taught himself using Internet resources.
Mr. Scot explained that with respect to the documentation conducted at the inspection on February 1, 2012, that the Applicant purchased its trailers from Big M, the company named on the Registration Cab Card. They were registered to Sweet Melissa because “that’s who we were running under”. Their equipment has subsequently been registered under the Applicant’s name.
Mr. Scot also testified that the speed limiters on their trucks are turned down to 65 mph. He stated that the devices used at Ontario inspection stations to check the computers are substandard and are burning them out. Referring to the March 3, 2013 inspection, he stated that after the inspection, the truck was taken to Freightliner and Freightliner indicated there was no issue with the speed limiter. He has replaced six computers at the cost of $3,000 each because they were shorted out by ungrounded Ministry of Transportation instruments. He said he had complained to Mr. Ramer who had referred him to someone else who asked him if he could prove his allegation. Mr. Scot commented “But the only way you can prove it is to have God come down and say that they did it”. In cross-examination, Mr. Scot said he did not know what device the Ministry uses but repeated that it is after-market and substandard. Asked if he believed Sweet Melissa had a problem with speed limiters he said “no and I proved it”.
On cross-examination with respect to the contractual arrangement with the CVOR certificate holder Mr. Darlow, Mr. Scot stated that the Applicant insures the vehicles, not Mr. Darlow, notwithstanding the fact the agreement says Mr. Darlow is required to. Mr. Scot then indicated that Mr. Darlow does have independence because he has three or four employees. Mr. Darlow does have control; he also operates vehicles he owns. He noted that if drivers were using the Applicant’s vehicles, the Applicant paid them. If drivers were using Mr. Darlow’s vehicles, Mr. Darlow paid them. Mr. Scot agreed that the arrangement exists to enable the Applicant to work in Ontario. He then added that the Ministry had “seen fit” to take Sweet Melissa’s CVOR certificate when they should not have, that he had ‘bent over backwards’ to do everything he was supposed to do, including paying fines. He then added that Sweet Melissa’s conviction rate was high because Sweet Melissa chose to pay fines rather than contest the convictions.
Asked why many of the maintenance check list forms contained in the Applicant’s book of documents are blank or unsigned, Mr. Scot stated that if nothing is found wrong with a truck, nothing is written down and repeated that the check is done every day and that all are performed by a mechanic identified as T. He also added that the mechanics check more items than are on the list which explains why some of the forms include handwritten notes. He reiterated that items such as brakes are inspected every day, stating he does not want and cannot afford any more fines. Asked why repair orders for maintenance are not signed, Mr. Scot indicated that he believed the bottom of the page was cut off.
THE LAW
The statutory authority for the actions of the Registrar and the jurisdiction of the Tribunal are set out in the Highway Traffic Act (the Act), as follows:
Refusal to issue
17.(2) The Registrar may refuse to issue a CVOR certificate to an applicant if the Registrar has reason to believe, having regard to the applicant’s safety record and any other information that the Registrar considers relevant, that the applicant will not operate a commercial motor vehicle safely or in accordance with this Act, the regulations and other laws relating to highway safety.
(3) The Registrar may refuse to issue a CVOR certificate to an applicant if the applicant is related to,
(a) a person whose CVOR certificate has been cancelled, is or has been under suspension or is or has been subject to a fleet limitation;
(b) a person whose CVOR certificate suspension, cancellation or fleet limitation is under appeal; or
(c) a person who the Registrar has reason to believe, having regard to the person’s safety record and any other information that the Registrar considers relevant, will not operate a commercial motor vehicle safely or in accordance with this Act, the regulations and other laws relating to highway safety.
(4) An applicant is related to a person for the purpose of subsection (3) if,
(a) the applicant and the person are related individuals;
(b) either the applicant or the person is a partner of the other or was a partner of the other or they have or have had partners in common;
(c) either the applicant or the person, directly or indirectly, controls or controlled or manages or managed the other; or
(d) the applicant and the person have or have had common officers or directors or they are or have been controlled, directly or indirectly, by the same shareholders.
Power to seize out-of-province permits and plates
47 (10) The Registrar may, at any time, for misconduct or contravention of this Act or the Public Vehicles Act or of any regulation thereunder by an owner or lessee of one or more motor vehicles or trailers for which permits have been issued by a jurisdiction or jurisdictions other than the Province of Ontario, order that the permit and number plates issued for the vehicle or vehicles be seized.
Powers of Tribunal
50.(2) The Tribunal may confirm, modify or set aside the decision of the Minister or Registrar.
ANALYSIS
Counsel for the Registrar argued that the Applicant is related to Sweet Melissa, an operator whose CVOR certificate has been cancelled and therefore is not entitled to be issued a CVOR certificate in accordance with section 17(3)(a) of the Act. He submitted that the Applicant corporation represents a “blatant attempt by Mr. and Mrs. Scot to operate business as usual” and to evade the decision of the Tribunal to cancel the CVOR certificate of Sweet Melissa.
Counsel for the Applicant stated that he did not take issue with the fact the Applicant and Sweet Melissa are related. He argued that the Registrar has discretion and in order to exercise that discretion, the Registrar should consider the Applicant’s safety record. He submitted that the cancellation of Sweet Melissa had been based on its past safety record, when the Scots did not have control, and noted they have taken significant steps to rectify problems.
The evidence clearly indicates that the Applicant and Sweet Melissa are related corporations in accordance with section 17(4)(d) of the Act. Cecelia and Carl Scot, the owners and principals of the Applicant, each owned 25% of Sweet Melissa.
Ms Scot testified that it was the policies of the Scots’ partners which were responsible for the problems at Sweet Melissa and that these partners have no involvement in any way in the operations of the Applicant. However, it is the involvement of the Scots in Sweet Melissa’s operations that is relevant.
The Tribunal does not accept the submission that the Scots, with 50% ownership, were not in a position of influence and control of the operations of Sweet Melissa before they assumed full control in early 2012.
Ms Scot became Sweet Melissa’s Corporate Secretary in 2009, and, in 2010, she became a full time employee responsible for finding loads, dispatching, and payroll. She testified that the trucking business was dependent on its customers and that it was she who was responsible for obtaining better customers after she had assumed her full time role. Ms Scot was the individual who represented Sweet Melissa at both the 2011 and 2012 Show Cause meetings at the Ministry of Transportation. Five of the trucks operated by Sweet Melissa were leased to it by the Scots. Ms Scott testified that the five trucks were purchased in 2010 through CC Express LLP, a company the Scots established. The minutes of the August 10, 2011 Show Cause meeting indicate that Ms Scot advised that Sweet Melissa had a new repair facility which employed two licensed mechanics and her husband. At this hearing, she testified that the repair facility was obtained in 2011 through CC Repair, a second company the Scots established.
Obtaining customers and representing the company at key meetings with regulators are managerial functions. The establishment of separate companies to purchase vehicles and to obtain a repair facility, both of which were an integral part of Sweet Melissa’s operations, demonstrates a degree of business acumen that belies the Scots’ submission that they were essentially only employees of Sweet Melissa with no operational influence before their partners left the company in their sole control.
The CVOR registration of Sweet Melissa Trucking Inc. was cancelled on January 3, 2013 following an unsuccessful appeal to this Tribunal. The Applicant’s application for a CVOR certificate was also received by the Ministry of Transportation on January 3, 2013. Ms Scott testified that in 2011, Sweet Melissa sold the company-owned truck and the proceeds were used to pay down debt. She also testified that the Scots used over $26,000 of their personal funds to pay down company debt. The evidence indicates that there is still a current liability for over $25,000 in Ontario fines. The Tribunal’s conclusion is that the Applicant will be used as a vehicle to continue Sweet Melissa’s operations, with the same individuals in control, without the burden of Sweet Melissa’s debt.
In fact, while the Applicant’s application for a CVOR certificate is pending, the Scots have continued operations through a contractual agreement with CVOR certificate holder Ronald Darlow/Palm Coast through which the Applicant’s vehicles are leased and driven to Canada. The Tribunal is not questioning the right of the parties to enter into the agreement. However, the Tribunal does question the degree of control exercised by the Applicant corporation in the arrangement. Mr. Scot testified that the companies are in a joint venture. However, Ms Scot testified that she is dispatching all of the vehicles. Maintenance of all the vehicles is performed at the Applicant’s facility, notwithstanding the fact that the agreement states Mr. Darlow is responsible for them. The agreement also states that Mr. Darlow is responsible for making lease payments and for insuring the vehicles. However, the Scots’ testimony was that the Applicant is insuring the vehicles and is not receiving lease payments but is paying Mr. Darlow a percentage when he carries loads on their behalf.
In his reasons for ordering the Registrar to carry out the Order to Cancel the CVOR registration of Sweet Melissa, Vice-Chair Terrance Sweeney wrote:
Ms Scot seems incapable of recognizing that the Applicant has a problem, let alone a strategy to solve it. Her testimony consisted of a number of unsubstantiated statements and allegations and the Tribunal rejects it.
The Tribunal is not satisfied that the Applicant will, in future, operate its commercial motor vehicles in accordance with the law.
At this hearing, both Mr and Ms Scot again made a number of unsubstantiated statements and allegations relating to the use of substandard equipment and targeted inspections by the Ministry of Transportation, implying that these were at least partially responsible for Sweet Melissa’s safety record. Mr. Scot specifically stated that he did not believe that Sweet Melissa had an issue with safety limiters and stated “I can prove it” but provided no such proof.
Both Mr. and Ms Scot testified that the Applicant now has a driver training program and a comprehensive maintenance program in place which differentiates its operations from those of Sweet Melissa. At the August 10, 2011 Show Cause meeting, Ms Scott indicated that Sweet Melissa had acquired a repair facility, had licensed mechanics and was undertaking training initiatives. The meeting minutes indicate that Ms Scot advised that the company began implementing the changes on June 1, 2011. However, at this hearing, in apparent contradiction, Ms Scot testified that it took almost two years for Sweet Melissa to begin to fully operate the repair facility and that formerly employed mechanics were not licensed. Mr. Scot testified that training was not conducted at Sweet Melissa because there was no facility to do so. The fact that the Scots have now qualified past statements means that the Tribunal must regard their current statements with some degree of skepticism.
With respect to the Applicant’s safety record, the Company Snapshot prepared by the U.S. Federal Motor Carrier Safety Administration dated May 3, 2013 was entered into evidence. This reports an out of service percentage of 20.72%. Under “Carrier Safety Rating” it records “none”. Ms Scot testified that the Applicant has passed an audit by the Department of Transportation in the United States but produced no documentation in this regard. The company’s safety violation rate in Ontario is 69% although the Tribunal notes the Ministry had incomplete data available for its accurate calculation. Counsel for the Applicant suggested the rate places the Applicant among the top 95% of carriers in Ontario. Ministry of Transportation statistics indicate that only 4.8% of carriers in Ontario have a safety violation rate exceeding 35%, the level at which a warning letter is issued.At the 70% level, a facility audit is triggered. The Tribunal does note that in contravention of section 68.1 of the Act, the Applicant failed speed limiter tests at inspections on March 3 and March 6, 2013.
Section 17(3)(a) of the Act states that the Registrar may refuse to issue a CVOR certificate to an applicant if the applicant is related to a person whose CVOR certificate has been cancelled, is or has been under suspension or is or has been subject to a fleet limitation.
Mr. Klaiman submitted that the Registrar has discretion and should consider the Applicant’s safety record and submitted a book of authorities for the Tribunal’s consideration. Both 2056126 Ontario Inc. (Re), [2006] O.L.A.T.D. No. 437, and 1649319 Ontario Ltd. (Re), [2007] O.L.A.T.D. No. 24 can be distinguished from the case currently before the Tribunal. In the former case, the grounds for refusal were based on the fact that the Applicant had officers in common with a CVOR certificate holder which had a conditional safety record. In the latter case, the Applicant had officers in common with corporations which had failed facility audits and had conditional safety ratings. In both cases, the CVOR certificate of the related person had not been cancelled. Therefore, section 17(3)(a) of the Act did not apply and the Registrar was required to consider safety records.
In this case, the Registrar is not required to consider the safety record of the Applicant. As noted above, the Tribunal has found that the Applicant is related to Sweet Melissa Trucking Inc., an operator whose CVOR certificate was cancelled by the Registrar on January 3, 2013. The Tribunal therefore directs the Registrar to refuse to issue a CVOR certificate and to carry out the Seizure order.
ORDER
Pursuant to the provisions of section 50(2) of the Act, the Tribunal orders the Registrar to refuse to issue a CVOR certificate to CCS Express Inc. and to carry out the Seizure Order dated March 6, 2013.
LICENCE APPEAL TRIBUNAL
Mary Ann Spencer, Member
Released on: July 9, 2013