2080917 Ontario Inc. and Haniya Enterprises Inc. v. Registrar of Motor Vehicles, 2014 CanLII 70029

Licence Tribunal

Appeal d'appel en Tribunal matière de permis

DATE: 2014-11-24

FILE: 8867/CVOR

CASE NAME: 8867 v. Registrar of Motor Vehicles

Appeal under Section 50(1) of the Highway Traffic Act, R.S.O. 1990, c. H.8, from an Order of the Registrar of Motor Vehicles Pursuant to Section 47(1) to Revoke a Commercial Vehicle Carriers’ Registration Certificate and to Seize the Plate Portion of all Permits Issued

2080917 Ontario Inc. and Haniya Enterprises Inc. Appellants

-and-

Registrar of Motor Vehicles Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR: D. Gregory Flude, Vice-Chair

APPEARANCES:

For the Appellant 2080917 Ontario Inc.: Anuluppa Jeganathan, Agent For the Appellant Haniya Enterprises Inc: Arjun Vishwanth, Counsel

For the Respondent: Patrick S. Moore, Counsel

Heard in Toronto: November 4 & 5, 2014

DECISION AND ORDER

1The Appellants appeal to this Tribunal under section 50(1) of the Highway Traffic Act, R.S.O. 1990, c. H.8 (the “Act”), from an order of the Registrar of Motor Vehicles (the “Registrar”) issued on December 5, 2013 pursuant to section 47(1) to revoke their Commercial Vehicle Operators Registrations (“CVOR”) and to seize the plate portion of any permits issued. At the outset of the hearing, Mr. Moore on behalf of the Registrar and Mr. Jeganathan on behalf of 2080917 Ontario Inc., advised the Tribunal that they had settled all outstanding matters between them. 2080917 Ontario Inc. withdrew its appeal and the Tribunal proceeded to hear the appeal of Haniya Enterprises Inc. (Haniya).

2The defining issue in Haniya’s appeal is its relationship with a cancelled carrier, Joyce Express. Joyce Express had its CVOR certificate revoked following a hearing before this Tribunal in November 2011. Its corporate officers were two brothers, Thamaraj and Induraj Nagularajah. Shortly after the decision in Joyce Express was released, Haniya began operations under the operating name JE Express. The Registrar asserts that Haniya is being operated by a person “related” to a cancelled carrier as that term is defined in s. 17 of the Act.

3The Tribunal heard evidence from MTO Officer Kyle Gray and Sherry Atallah on behalf of the Registrar and Induraj Nagularajah, on behalf of the Appellant.

4Officer Gray is a 17 year veteran the Ministry of Transportion of Ontario (MTO). For a number of years he has been an auditor attending the offices of transportation companies to audit their records, particularly driver logs and maintenance records. He was asked to conduct an audit on Haniya with a view to establishing the relationship between Haniya and Joyce Express. He first reviewed the MTO file. He noted that the president of Haniya was shown as Mike Mohammed and the registered address was 8940 Jane Street, Vaughan. A review of the corporate records on file with the Ministry of Consumer and Commercial Relations (MCCR) showed that Mr. Mohammed was not a corporate officer. The sole corporate officer was Indranidevi Nagularajah, the mother of Thamaraj and Induraj Nagularajah. The registered head office of the company in the MCCR records was an address in Maple, Ontario that was the same as the head office address of Joyce Express. It was conceded by Haniya that this address is also the home of the two brothers and their mother.

5When Officer Gray arrived at the business address of Haniya on March 19, 2014, he spoke with Induraj Nagularajah and asked for Mr. Mohammed. He was told that Mr. Mohammed was in Burlington repairing a company vehicle. He asked to meet Mr. Mohammed at the MTO’s Burlington office later that day. Mr. Mohammed arrived at the meeting accompanied by Mr. Nagularajah. Through questioning, Officer Gray determined that Mr. Mohammed had very little knowledge of the business and that Mr. Nagularajah was extremely knowledgeable. He asked for the Haniya’s Articles of Incorporation to be scanned and sent to him by 9:00 a.m. the next day. The Articles did not arrive the next day or ever.

6Sherry Atallah has been a Carrier Safety Rating Administrator at MTO since 2001. She oversaw the action against Joyce Express leading up to its 2011 cancellation and has had charge of this matter since inception. She prepared the documentary disclosure made by the Registrar. She attended two Show Cause meetings regarding Joyce Express and the Show Cause meeting regarding Haniya. Her role at the Show Cause meetings was to take the notes some of which were entered into evidence.

7By way of introduction to her evidence, Ms Atallah reviewed the CVOR system. Ontario carriers must hold a CVOR to operate vehicles in excess of a certain weight threshold. Based on the size of the fleet and the estimated kilometres of travel in any given year, a CVOR holder is assigned a rating, called a violation rate (VR). This is analogous to points on a personal licence. Three types of incident may cause carriers to accrue points against the violation rate: at-fault collisions, out-of-service safety defects on their trucks discovered during roadside inspections, and violations of the rules of the road. Fleet size and kilometres travelled are important since a company operating one vehicle for 100,000 km annually that has three incidents in a year is a less safe operator than one that has three incidents while operating 100 trucks and driving several million kilometres a year.

8A CVOR holder’s record is expressed as a percentage of the maximum permissible VR. There are intervention levels when the MTO may take action against a carrier. The first intervention level is at 35% VR. The Registrar will send a letter to the carrier advising of a worsening record and asking for improvement. According to statistics provided by Ms Atallah, 95.5% of carriers operate at 35% VR or below. A VR of 50% may trigger an audit by an officer such as Officer Gray. At 85%, the Registrar may call the carrier in for an interview about their record and to review steps to improve it. 0.3% of carriers reach the 85% level. At 100% VR, the Registrar will levy sanctions. 0.1% of carriers have a record in excess of 85% but below 100% and 0.2% of carriers exceed 100% VR. To put this in context, of approximately 54,000 CVOR holders in Ontario, approximately 100 exceed 100% VR. Joyce Express had a safety violation rate of 159.55% when the Registrar moved in 2011 to revoke its CVOR.

9Ms Atallah explained that the Registrar has methods in place to police avoidance of sanctions, especially revocations. The MTO computer system tracks the names, and particularly the surnames, of the officers and directors of revoked carriers. It also tracks corporate names, addresses and telephone and fax numbers. In the current case, given the MCCR records showing Indranidevi Nagularajah as the sole officer and director of Haniya at the address in Maple associated with Joyce Express, had this information been disclosed on the CVOR application, the system would have flagged the application for further investigation. As it was, Haniya applied under a different name and address and has renewed showing Mike Mohammed as president. Ms Atallah pointed out that a carrier has 15 days to update its information where there is a material change. The Registrar has never been informed that the president of Haniya is, in fact, Indranidevi Nagularajah.

10The review of Haniya’s CVOR record by Ms Atallah indicated that, until its latest renewal, the carrier has represented that it has been operating seven or eight trucks and driving in excess of 1.5 million kilometres each year. Its VR was established using these figures. Up until April 2013, the record shows a number of roadside inspections at weigh scales and inspection stations throughout the country. The record also shows offences and out-of-service defects. As a result, Haniya’s VR rate was 37%. Suddenly in April 2013 there is no more activity on the CVOR – no inspections, even positive inspections where nothing untoward was discovered and no infractions. Ms Atallah reviewed the vehicle plates registered to Haniya’s CVOR and found that it had no vehicles registered. She concluded that Haniya had stopped operating. The Registrar received no notification of a reduction of fleet size or decrease in kilometric travel until Haniya filed its November 2014 renewal. That renewal indicates Haniya is operating one truck and expects to drive approximately 73,000 km in the next twelve months and travelled approximately 72,000 km in the prior twelve months, not the 1.5 million kilometres previously indicated.

10In response to Haniya’s position that Induraj Nagularajah was not the controlling mind of Joyce Express, Ms Atallah reviewed the dealings between Joyce Express and the Registrar. Her starting point was the MTO records showing Induraj Nagularajah was a corporate officer of Joyce Express. He was the secretary. She then went on to dealings between the Registrar and Joyce Express and Mr. Nagularajah’s express representation that he ran the corporation together with his brother. In April 2010, for instance, in response to a March 18, 2010 Show Cause meeting regarding Joyce Express, Mr. Nagularajah wrote:

Joyce express 2092889 Ontario Inc. has got original CVOR on 08th feb 2007 and is being run by Induraj Nagularajah and Thamaraj Nagularajah. I Induraj runs all the operations but since I do not have a back ground of Transportation and my brother was only driver so we were not aware of any technical part of CVOR (Ex 6).

At the 2011 hearing, Joyce Express represented to the Tribunal that Induraj Nagularajah was the controlling mind:

14 Mr. Rangan testified that at one time, two brothers did operate this company, but due to a disagreement, one brother, listed as President, moved part of the operation to Western Canada and is no longer involved with the Applicant carrier. The other brother listed as the Secretary is now the President of the operation in Ontario. As far as he is aware, MTO has not been notified of these changes. (Ex 3 Tab 9)

11On April 15, 2014, a Show Cause meeting was held with respect to the Registrar’s concerns over the operation of Haniya. Mr. Nagularajah attended on behalf of Haniya. Ms Atallah kept notes of the meeting. During a general discussion, Mr. Nagularajah stated that he was a dispatcher and managed operations at the company. He explained that his mother was listed as a corporate officer because he would not have been able to obtain a CVOR due to his past involvement with a cancelled carrier under 2092889 Ontario Inc. (Joyce Express). He went on to state that his mother has no involvement in the company. Her name was used because she has a good credit rating. Mr. Nagularajah confirmed that JE Express was the operating name of Haniya to keep Joyce Express’s customers.

12Mr. Nagularajah’s evidence was a mix of frank admissions and absurdities. He frankly admitted that his mother has little role in Haniya while insisting that it is her company and he has no direct or indirect controlling position. He frankly admitted that he was the moving force behind Joyce Express but insisted that he had no control over the company and that his brother was the controlling mind. He frankly admitted that Mike Mohammed is his partner in Haniya. He admitted Mr. Mohammed is in charge of maintenance while Mr. Nagularajah manages dispatch and operations and hires and fires drivers. The distinction between him and Mr. Mohammed is that he draws salary and is paid a bonus while Mr. Mohammed participates in profit sharing.

13In describing the creation of both Joyce Express and Haniya, Mr. Nagularajah was forthright in informing the Tribunal that they were both his idea. He had been working for a corporation a number of years ago and had responsibilities for shipping goods. He found that freight forwarders did not deliver good service so he approached the company president and asked him for the company’s freight forwarding business. His brother was a driver so they formed a corporation and operated Joyce Express as a freight forwarder. Because of his brother’s poor English language skills, Mr. Nagularajah ran operations at the company. At some future date, he stopped working with his brother and believes his brother is working as a driver and loading trucks at present. Over the years, Mr. Nagularajah has built up an extensive client base. When Joyce Express stopped operating, he decided to use the name JE Express for the new entity to keep the customers.

14Mr. Nagularajah explained the sudden cessation of on-road inspections following April 2013. He stated that Haniya had decided to focus on freight forwarding and to get out of the long haul trucking business. He anticipated the problems that grounded Joyce Express resurfacing. He found it difficult to control drivers who are several thousand kilometres away. A driver speeding in Alberta or British Columbia, or getting into an accident, affects his CVOR despite his lack of immediate control. He would rather leave that task to other CVOR operators and focus on his core business. To operate as a freight forwarder he needs only one truck for local pick-up and delivery in and around the Greater Toronto Area (GTA). He needs to pull trailers to and from clients’ and the company yard in Vaughan. His business, which now employs about 20 people, but only one driver, would fail without the ability to place trailers at customer’s premises. The Tribunal notes that inspection stations are located some distance from the centre of the GTA, so it is likely that the company truck has not visited an inspection station in some time. This accords with the lack of activity on the CVOR abstract since April 2013.

THE LAW

15The statutory authority for the actions of the Registrar and the jurisdiction of the Tribunal are set out in sections 17, 47, 47.1 and 50 of the Highway Traffic Act (the Act), as follows:

17 (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.

47. (1) Subject to section 47.1, the Registrar may suspend or cancel,

(a) the plate portion of a permit as defined in Part II;

… or

(c) a CVOR certificate,

on the grounds of, …

(f) the Registrar having reason to believe, having regard to the safety record of the holder or of a person related to the holder, and any other information that the Registrar considers relevant, that the holder will not operate a commercial motor vehicle safely or in accordance with this Act, the regulations and other laws relating to highway safety; or

(g) any other sufficient reason not referred to in clause (d), (e) or (f).

(2.1) Subsection 17 (4) applies, with necessary modifications, for the purpose of determining who are related persons under clause (1) (f).

47.1 (1) Before taking any action under clause 47 (1) (a) or (c) or subsection 47 (2), the Registrar shall notify the person whose plate portion of a permit or CVOR certificate is to be affected of his or her proposed action.

50. (1) Every person aggrieved by a decision of the Minister made under subsection 32 (5) for which there is a right of appeal pursuant to a regulation made under clause 32 (14) (n) or a decision of the Registrar under section 17 or 47 may appeal the decision to the Tribunal.

(2) The Tribunal may confirm, modify or set aside the decision of the Minister or Registrar.

ANALYSIS

16The first issue before the Tribunal is to determine if Joyce Express is “related” to Haniya. The Act refers to the “applicant” and the other “person.” There is no definition of “person.” From a review of other sections in the Act using the term person, the Tribunal concludes that it should be used in its ordinary juridical meaning to include individuals and corporations. Indeed, s. 17 makes that distinction by defining parties as being related if they are related individuals i.e. that they have some degree of consanguinity. In this case, in considering the CVOR of one corporation, the Tribunal is being asked to take into account the CVOR record of another corporation. For a relationship to be established, the Tribunal must determine if Joyce Express and Haniya have officers, directors or shareholders or partners in common.

17There is no evidence that they have shareholders in common. Mr. Nagularajah testified that his mother was the sole shareholder and that Mr, Mohammed participated in profit sharing. He did describe Mr. Mohammed as his partner but, while Mr. Nagularajah described himself as a “partner” of Mr. Mohammed, he was an officer not a partner of Joyce Express. There is also no evidence that Mr. Nagularajah is a director of Haniya. He is not shown as a director on any corporate filings and the Registrar led no evidence to indicate he was as acting as a director in some fashion. This leaves the question of whether he was an officer.

18A person is an officer of a corporation if he exercises the functions of an officer. According to the s 1(1) of the Business Corporations Act, R. S. O. 1990 chap. B16 an officer is defined as:

“officer” means an officer designated under section 133 and includes the chair of the board of directors, a vice-chair of the board of directors, the president, a vice-president, the secretary, an assistant secretary, the treasurer, an assistant treasurer and the general manager of a corporation, and any other individual designated an officer of a corporation by by-law or by resolution of the directors or any other individual who performs functions for a corporation similar to those normally performed by an individual occupying any such office [emphasis added].

Thus, a person exercising the functions of a general manager is an officer. The evidence disclosed that Mr. Nagularajah runs the operations of Haniya and, as a result, performs the functions of a general manager. The Tribunal finds that he is an officer of Haniya. It follows from this finding that Haniya and Joyce Express have officers in common and are related for the purposes of s. 47 of the Act. The Tribunal can consider the safety record of Joyce Express in determining if the is reason to believe that Haniya will not operate safely.

19If the Tribunal is wrong in this interpretation, the Act still permits it to consider the safety rating of Joyce Express. The Act specifically empowers the Registrar, and on appeal, this Tribunal, to consider “any other information the Registrar considers relevant.” The Tribunal considers the track record of the actual operators of a corporation to be information that is highly relevant in determining if that corporation will operate safely. The close relationship between Joyce Express and Haniya, especially the role of Mr. Nagularajah in both corporations, is a critical consideration.

20There is one other provision that the Registrar urges on the Tribunal for consideration in revoking Haniya’s CVOR. Subsection 47(1)(g) directs the Tribunal to consider any other sufficient reason not referred to elsewhere in s. 47. According to the Registrar, Mr. Nagularajah created Haniya specifically to avoid the consequences of his involvement in Joyce Express. The evidence shows that he admitted as much at the Show Cause hearing. The false disclosure of the name of the president on and the address of the head office of the corporation on the CVOR application establishes a deliberate attempt to mislead. Before this Tribunal, it is clear that Mr. Nagularajah was aware of the ramifications of his involvement in Joyce Express and tailored his evidence in an attempt to distance himself from the very obvious fact that he was the controlling mind of Joyce Express and is the controlling mind of Haniya.

21Haniya points to its current safety rating as indicative, and even determinative, of the fact that it will operate safely, going forward. There have been no incidents or offences since April 2013 and the VR rating is declining and will continue to decline. Mr. Nagularajah testified that the company has a fulltime safety officer. He also stated that it was easier to control one driver operating locally and that local operation is the new business model. Other than the evidence of a safety officer, Haniya led no other evidence addressing safety. It did not put forward a safety action plan, a maintenance plan, or a discipline policy. The absence of these documents calls into question the commitment of Haniya to operate safely. It also calls into question its recent improved record. Has this record come about simply because Haniya’s truck drives less and rarely visits weigh scales or inspection stations or is it because of a real change in corporate attitude? Overall, given that Haniya has had no safety related incidents for 19 months, the Tribunal is satisfied that the absence of evidence of specific safety plans does not mean they are non-existent. The evidence indicates that Haniya has identified those areas in its operation that were causing safety problems and eliminated them.

22Thus, notwithstanding the concerns raised above, the Tribunal is impressed by the recent and lengthy improvement in Haniya’s safety rating. Mr. Nagularajah’s testimony, that he identified those areas where he was unable to guarantee a safe operation and changed his business to address the problem, shows an awareness of his duty to other road users to operate safely. Given that the purpose of the legislation is to protect the public by ensuring only safe carriers can operate heavy trucks on the road, the Tribunal is of the view that Haniya’s recent improvement warrants registration with restrictions on fleet size.

23The Appellant has said that it is its intention to operate one truck in local deliveries only. The Registrar is concerned that the grant of a CVOR authorises Haniya to operate anywhere in Canada. The Tribunal is satisfied that limiting the fleet size to one vehicle renders it unlikely that Haniya will recommence a long range haulage business. A provision requiring Haniya to remain below a 35% VR will also address safety concerns and permit early intervention should Haniya begin to slide into unsafe operations.

ORDER

24Pursuant to the authority set out in s. 50 (2) of the Act, the Tribunal orders the Registrar to not carry out the provisions of the Cancellation and Seizure Order dated May 21, 2014 with respect to CVOR # 172-170-588 subject to the following conditions:

1. For a period of 24 months from the release of this order, the Haniya Enterprise Inc. fleet size shall be limited to one truck.

2. For a period of 24 months from the release of this order, Haniya Enterprises Inc. shall maintain a violation rate of 35% or below.