Stephen's General Contracting Inc. v. Registrar of Motor Vehicles, 2015 CanLII 89162

Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2015-11-18

FILE:

9722/CVOR

CASE NAME:

9722 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 17 to refuse to issue a Commercial Vehicle Operator’s Registration Certificate

Stephen's General Contracting Inc.

Appellant

-and-

Registrar of Motor Vehicles

Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

Kenneth W. Koprowski, Vice-Chair

APPEARANCES:

For the Appellant:

Stephen McKendrick, Agent

For the Respondent:

Matthew Peachey, Counsel

Heard in Toronto:

October 30, 2015

DECISION AND ORDER

The Appellant appeals 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 June 16, 2015, pursuant to section 17 to refuse to issue a Commercial Vehicle Operator’s Registration Certificate to the Appellant.

BACKGROUND

The Appellant is a corporation incorporated in 2003 pursuant to the laws of the Province of Ontario. Its registered office and mailing address are both in the Province of Ontario. Since the incorporation of the Appellant, Stephen McKendrick has been and continues to be its President and sole Director. Mr. McKendrick possessed a Commercial Vehicle Operator’s Certificate from December 17, 2008 until March 1, 2012, when his Certificate expired.

On November 14, 2014, the Appellant applied for a Commercial Vehicle Operator’s Registration (“CVOR”) Certificate. The Deputy Registrar reviewed the application, the Appellant’s safety record and the safety record of Stephen McKendrick, because the Registrar considered him to be someone who was related to the Appellant. The Deputy Registrar refused to issue the CVOR Certificate by Notice of Refusal dated January 9, 2015, because he was not satisfied that the Appellant will operate commercial vehicles safely and in accordance with the Act, the regulations and other laws relating to highway safety. The basis of the refusal was the safety record of Stephen McKendrick who directly or indirectly controlled or managed, or will control or manage, the Appellant. The Deputy Registrar invited further submissions to show cause why the refusal to issue the CVOR Certificate should not take effect.

On reviewing further submissions, the Deputy Registrar issued a Refusal to Issue a CVOR Registration Certificate on June 16, 2015.

The Appellant appealed the Refusal Order to the Tribunal on the ground that it was the corporation that applied for the CVOR Certificate and not Mr. McKendrick. Mr. McKendrick refused to accept the Registrar’s position that Mr. McKendrick came within the provision of section 17(4) of the Act as being someone who was “related’ to the Appellant.

THE EVIDENCE

Evidence on Behalf of the Registrar

Rick Borris is a carrier safety rating administrator for the Ontario Ministry of Transportation (“MTO”). He has been with the MTO since 1988. He was transferred to the Carrier Enforcement Branch in 1995 and became a facility auditor in 1997. In 2001, he became a CVOR analyst.

As a safety rating administrator, he monitors CVOR performance, conducts interviews of certificate applicants, reviews the issuing of certificates and prepares the necessary files for the Deputy Registrar’s review.

He referred extensively to the Commercial Vehicle Operator’s Safety Manual found at Tab 11 of Exhibit #3. The manual describes the compliance monitoring system for holders of CVOR Certificates. All operators of commercial vehicles over 4500 kilograms or operators of buses must hold such a certificate and are subject to the compliance requirements. The compliance monitoring system is a proactive method to ensure highway safety on the part of certificate holders. The Safety Manual outlines the points that a CVOR operator is assessed, based on an overall violation rate based on the results of the three categories of inspections; namely, convictions, collisions and the results of facility audits. The goal is to monitor a carrier’s performance and intervene if a carrier falls below a given threshold of performance.

The CVOR system automatically identifies an operator for review when poor safety performance is identified based on the operator’s overall violation rate.

The violation rate is a percentage of points that an operator has accumulated against the set maximum thresholds. The threshold is the allowable rate, expressed as a percentage, that the operator may reach. An operator’s threshold is the maximum violation rate that is acceptable for that particular operator. It is based on the number of vehicles and drivers in the operator’s fleet and the number of kilometers travelled.

All events are given a point value and if the operator exceeds the violation rate threshold, interventions and sanctions can be applied. The calculations are based over the previous 24-month period. If the overall violation rate exceeds 50%, the MTO requests that a facility audit be done. At such an audit, the auditor reviews all records that are to be kept by an operator, to ensure compliance with the record-keeping requirements of the Act and Regulations.

There are only five ratings that an operator can have: Excellent, Satisfactory, Satisfactory-un-audited, Conditional and Unsatisfactory. Until an operator has been the subject of a facility audit, the lowest rating that the operator can have and still operate is “conditional.”

In the case of Stephen McKendrick, his CVOR summary (Tab 5 of Exhibit #3) shows him to have had a conditional rating. That rating was given only because his CVOR licence expired in March, 2012, which was beyond the two-year period of review. He has had no activity since March, 2012.

The reasons for the “conditional” rating were that Mr. McKendrick failed two facility audits, one in 2009 and another in 2011. The Appellant was Mr. McKendrick’s corporation, of which he was the sole Director and President. The Registrar refused to grant the corporation’s application for a CVOR Certificate based on Mr. McKendrick’s conditional rating. The Registrar considered that, as Director and President of the Appellant corporation, Mr. McKendrick was “related” to the corporate Appellant. Considering his rating and the two failed audits, the Registrar was not satisfied that the Appellant would operate commercial vehicles safely and in accordance with the Act, the regulations and other laws relating to highway safety.

After the Deputy Registrar issued the initial refusal on January 9, 2015, the Appellant was allowed to make further submissions to support its application. Two letters were sent, found at Tab 8 of Exhibit #3. One letter was sent on behalf of the Appellant and the other was sent by Mr. McKendrick. The contents of both letters are similar in nature. Neither letter deals with the issue about Mr. McKendrick’s safety performance. Instead, both letters refer to the lack of violations on the part of the corporate Appellant. Mr. McKendrick wrote that it was an error to issue the refusal based on his personal driving record. He maintained that he was separate, in law, from the corporate Appellant.

After reviewing the further submissions, the Registrar issued the Refusal to Register on June 16, 2015.

On cross-examination, Mr. Borris acknowledged that, in Exhibit #5, the Carrier Record of the corporate Appellant shows two convictions in January, 2013. One of the convictions was for operating a commercial vehicle without a valid CVOR Certificate. He added that most new CVOR applicants do not have a record and are not related to a conditional registrant, as was the case in the current matter.

Alexandre Bugeya was the MTO employee who explained the results of the two audits of Mr. McKendrick’s operations while he was the holder of a CVOR Certificate. The audits were required because Mr. McKendrick’s overall violation rate was more than 50 percent. It was actually 59 percent.

Mr. Bugeya works for the MTO as the head of the enforcement programme of the MTO. He had been employed with the MTO since 2002 and was an auditor during the period 2009 to 2012. Although he did not perform the audit on June 2, 2009, of Mr. McKendrick’s operations, he explained the standard methods used and the findings that are calculated by way of a standardized procedure. The Facility Audit Findings of the audit on June 2, 2009, are found at page 20 of Exhibit #3.

During an audit, the auditor examines three categories of compliance: “Vehicles”, “Qualifications, Records and Reporting”, and “Hours of Service”.

Under the category, “Vehicles” there are four sub-categories of compliance rates. They are Detection Reporting and Repair, Records, Preventive Maintenance Intervals (“P M Intervals”) and Periodic Maintenance Commercial Vehicle Inspections (“PMCVI”). They are scored as against a maximum 100 percent rating. Mr. McKendrick’s compliance rating was 25 per cent.

Mr. McKendrick scored well in the category “Qualifications, Records and Reporting”. He held the correct class of driver’s licence, had no convictions in the previous two years and no collisions in the previous two years.

Under the category, Hours of Service, Mr. McKendrick scored 0 per cent. This category examines such things as keeping records to confirm that a driver operates no more than 13 hours in a day, is on duty for no more than 14 hours and has been off duty for ten hours each day.

At the completion of the audit, the audit compliance achieved was only 41.67 per cent. As a result of one or more of the above categories receiving a score of less than 50 per cent (“Vehicles” was 25 per cent and “Hours of Service” was 0 per cent), the audit result was a “Fail”. A detailed list of the deficiencies following that audit is found at pages 21 and 22 of Exhibit #3. Without itemizing each listed deficiency, it is sufficient for the purposes of this decision to confirm that Mr. Bugeya explained that Mr. McKendrick, in general, did not have a preventive maintenance programme. There were also deficiencies in record-keeping relating to “Hours of Service” that prevented the auditor from being able to assess compliance with the Act and Regulations.

A second audit was performed on January 31, 2011, less than two years after the previous audit on June 2, 2009. Mr. Bugeya performed this audit. He contacted Mr. McKendrick by telephone on December 29, 2010. Generally, the auditor tries to schedule an audit within one week of the telephone call. On this occasion, Mr. McKendrick stated that he would be out of town and would not return to his office until January 18, 2011. Mr. Bugeya sent a standard-form letter dated December 29, 2010 (found at page 3 of Tab 1 of Exhibit #4) in which he scheduled an appointment for January 20, 2011 and outlined for Mr. McKendrick the documents that Mr. Bugeya would need to examine.

On January 19, 2011, Mr. Bugeya received a telephone call from Mr. McKendrick’s daughter who told him that Mr. McKendrick could not be back on January 20. She suggested a further delay of two weeks. Mr. Bugeya stated that two weeks would be too long and made two suggestions to Mr. McKendrick’s daughter. One was that Mr. McKendrick could designate someone to be present at the audit on his behalf. The other was that Mr. McKendrick could have all the required documents available at his place of business so that Mr. Bugeya could photocopy them and then return the originals.

On January 20, 2011, Mr. Bugeya attended at Mr. McKendrick’s offices and met with his daughter. He arranged to return on January 25 to retrieve all the documents for photocopying and to receive the authorization for Mr. McKendrick’s daughter to speak to Mr. Bugeya on his behalf.

When Mr. Bugeya returned on January 25, 2011, there was no letter of authorization from Mr. McKendrick and only a few of the required documents were provided, some being unreadable. He called Mr. McKendrick and told him to be available on January 31. Mr. Bugeya sent a letter dated January 25, 2011 (page 6 of Tab 1 of Exhibit #4) confirming the new date.

On January 27, Mr. McKendrick sent an e-mail to Mr. Bugeya stating that he would be at his lawyer’s office on February 1, 2011, in the same city in which Mr. Bugeya’s office was located. Mr. Bugeya had other audits to perform so that he could not delay until February 1. On January 31, 2011, Mr. Bugeya attended at the offices of Mr. McKendrick, who was not there. On returning to his office, Mr. Bugeya called Mr. McKendrick’s lawyer and was told that Mr. McKendrick was there. Mr. Bugeya immediately went to the lawyer’s office and performed what he called an “entrance interview” with Mr. McKendrick.

Mr. Bugeya stated that, to that point in time, this audit was the most difficult of his career to schedule.

The end result was that the Facility Audit Findings, found at page 31 of Tab 7 of Exhibit #3, were worse than the previous audit on June 2, 2009. The Audit Compliance was calculated at 36.67 per cent. The “Vehicles” category was rated at 10 per cent (compared to 25 per cent previously) and the “Hours of Service” category was at 0 percent, as it was the previous time. Consequently, the second audit result was also a “Fail.” The lengthy list of deficiencies from the second audit is found at page 32 of Tab 7 of Exhibit #3.

On February 3, 2011, Mr. Bugeya sent the results of the audit to Mr. McKendrick at his principal place of business and to Mr. McKendrick’s lawyer. He was unable to perform an “exit interview” with Mr. McKendrick, the only time that he was not able to perform such an interview with an operator after an audit.

Mr. Bugeya confirmed that Mr. McKendrick could have disputed the audit results with the MTO. If he challenged the audit, Mr. Bugeya would have been made aware of the challenge, but, to his knowledge, no challenge was made.

in his brief cross-examination of Mr. Bugeya, Mr. McKendrick asked questions only relating to him being “out of town” on the scheduled audit dates. He did not challenge the audit results.

In response to questioning from the Tribunal, Mr. Bugeya confirmed that at no time did Mr. McKendrick give any explanation as to why many documents were missing and not available for the audit.

Evidence on Behalf of the Appellant

Mr. McKendrick emphasized in his testimony that he and the corporate Appellant are different in law. The Appellant is a separate legal entity. He referred to the Commercial Vehicle Operator’s Safety Manual found at Tab 11 of Exhibit #3. He quoted from page 63 of Tab 11, where the Manual states, among other things, “A CVOR operator is the person or legal entity responsible for the operation of a commercial motor vehicle.” He maintained that it was the Appellant, as a separate legal entity, that applied for a CVOR Certificate. It had never had its own CVOR registration number. He referred the Tribunal to the areas of compliance of the Appellant that he outlined in his letter of June 8, 2015, found at Tab 9 of Exhibit #3. The second page of that letter outlines what he stated were the matters with which the Appellant has complied, according to the Act and Regulations.

He acknowledged that he is the President and sole Director of the corporate Appellant.

He claimed that the MTO was “lazy,” to quote his testimony, when, on January 9, 2015, it issued its intention to refuse the Appellant’s registration by reason of his own record. He claimed that the documents found at Tabs 5, 6 and 7 of Exhibit #3 had nothing to do with the corporate Appellant. Those documents were, respectively, Mr. McKendrick’s CVOR summary, the Facility Audit Findings of his operations, performed on June 2, 2009, and the Facility Audit Findings of his operations performed on January 31, 2011, all of which have been dealt with in detail earlier in these reasons.

He stated that he has been accident-free for the previous 32 years, has driven over one million miles and is a cautious driver. Nor have there been any claims against the Appellant under the Workplace Safety and Insurance Act of Ontario.

He stated that on the Appellant’s application for the CVOR Certificate, there was an error. At paragraph 12 of the form (Tab 1, Exhibit #3), under the heading, “”Position/Relationship to the Operator” (with “Operator” being the Appellant) the word, “owner,” is written, referring to himself. However, he stated that, before his wife sent in the application form by facsimile transmission, he had inserted additional words, after the word “owner.” The words that he added were “…of the truck leased to [the Appellant]” By doing so, he intended to separate himself from the corporate Appellant.

However, the Tribunal notes that those words that he says he added do not appear on the application form found at Tab 1.

On cross-examination, Mr. McKendrick stated that he disputed the results of the two failed audits. He stated that they do not reflect the training that he received in the 1980’s when he went to a truck-driving school in Toronto.

He stated that he knew what records Mr. Bugeya wanted for his audit, but the only truck he used had been parked for four months so that he could not understand why he had to complete any records or why Mr. Bugeya needed those records. He also could not understand why Mr. Bugeya could not have waited longer to perform his audit.

He also admitted that he “screwed up” on the records for “Hours of Service.”

He explained that he did not attend at an “exit interview” with Mr. Bugeya in January, 2011, because he was out of town from September of 2010 until the spring of 2011. He added that, when he is out of town, he does not bother with recording hours of service.

Despite his position as Director and President of the Appellant, he could not say how many employees the Appellant had in the previous five years, and maintained that he was currently only an employee of the corporation. Nor did he know how many trucks the Appellant had in the past but that, since May of 2015, the Appellant had no trucks or other vehicles. Also, no drivers drove any trucks for the Appellant in 2015.

He further acknowledged that he realized that he had failed two audits and that the intention to refuse the Appellant’s application in January, 2015, was based on those two failed audits.

Counsel for the Registrar referred Mr. McKendrick to section 17(3) of the Act. That section reads as follows:

(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…

Despite the wording of section 17(3)(c), Mr. McKendrick maintained that he was not related to the corporate Appellant but was only an employee of it, notwithstanding that he was both a Director and President of the Appellant.

He gave an explanation for having failed the 2009 audit by saying that his error was not filling out documents when the trucks were not being used. He explained the 2011 failed audit by saying that he was out of town and did not fill out the required documents.

THE LAW

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

17. (1) The Registrar shall issue a CVOR certificate to and renew a CVOR certificate of every person who applies for the certificate or renewal in the form approved by the Minister and meets the requirements of this Act and the regulations..…

Refusal to issue

(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.

Same

(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…

Interpretation

(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….

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.

Powers of Tribunal

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

ANALYSIS

The Refusal to Issue a Commercial Operator’s Registration Certificate dated June 16, 2015, to the Appellant was based on the record of its President and sole Director, Stephen McKendrick. The Registrar is entitled, pursuant to section 17(3)(c) of the Act, to consider the record of someone who may be “related to” the applicant for registration. In this case, the applicant for registration was the corporate Appellant. Section 17(3)(c) is worth repeating here. It states:

(3) The Registrar may refuse to issue a CVOR certificate to an applicant if the applicant is related to …

(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…

A further explanation of what is meant by the phrase, “related to,” is found in section 17(4), the relevant portion of which reads as follows:

(4) An applicant is related to a person for the purpose of subsection (3) if,

(c) either the applicant or the person, directly or indirectly, controls or controlled or manages or managed the other; or…

There is no evidence that Mr. McKendrick ever challenged or disputed the audit findings. His only response to the Registrar’s refusal to register the Appellant is that he and the Appellant are separate entities and should be looked upon as such.

Notwithstanding his position, the evidence is clear that, as President and sole Director of the Appellant, Mr. McKendrick “controls or manages” the Appellant. To hold otherwise flies in the face of his own acknowledgement and in the face of the uncontradicted documentary evidence of Mr. McKendrick’s positions with the corporate Appellant (see Corporation Profile Report, Tab 4, Exhibit #3). To say otherwise is, on the evidence before the Tribunal, illogical and unreasonable. It is disingenuous. There is no evidence that has been presented to show that anyone else is in a position of control or management of the Appellant.

For Mr. McKendrick to maintain that he is only an employee of the Appellant is disaffirmed by the documentary evidence of the corporate status of the Appellant that confirms Mr. McKendrick’s position with the Appellant as an Officer and Director.

Accordingly, the Tribunal holds that, in considering the application for registration of the Appellant, the Registrar is entitled to consider the record of Mr. McKendrick as a person who is ‘related’ to the Appellant. That record reveals that Mr. McKendrick has two failed audits within less than two years of each other. The Tribunal rejects Mr. McKendrick’s insistence that he is not “related to” the Appellant.

The concern of the Registrar is reasonable. The Tribunal takes note of the two failed audits on the part of Mr. McKendrick and his attempts to lay blame on the MTO for being “lazy” in its decision not to grant a Certificate to the Appellant. The Tribunal also takes note of Mr. McKendrick’s failure to take responsibility for the audit results and of his failure to provide any evidence of how he intends to remedy the deficiencies. The Tribunal also notes Mr. McKendrick’s poor co-operation with Mr. Bugeya in the latter’s attempts to schedule the second audit.

Considering the foregoing, the Tribunal concludes that the Registrar has satisfied the Tribunal that there is reason to believe that the Appellant will not operate commercial vehicles safely and in accordance with the Act, the regulations and other laws relating to highway safety.

ORDER

Pursuant to the authority vested in it by section 50 of the Act, the Tribunal confirms the Registrar’s refusal to issue a Commercial Vehicle Operator’s Registration Certificate to the Appellant.

LICENCE APPEAL TRIBUNAL

Kenneth W. Koprowski, Vice-Chair

Released on: November 18, 2015