Research Summary - Enforcement and Definitions

  • As part of the Pilotage Act Review

Ted Gale

October 2017

This report consists of four chapters and an Annex:

Conduct of the Ship: The Pilotage Act stipulates that a licensed pilot who operates within a compulsory pilotage area has conduct of the ship. The Act does not specify how the pilot exercises that conduct, apart from citing the pilot’s responsibility for ensuring safe navigation. Pilots have sometimes asserted an independent authority to which vessel masters or an owner have objected. The client has asked whether the definition of pilot and/or the substantive provisions of the Act should be amended to clarify the meaning of “conduct of the ship” or set some parameters – either constraints or positive duties – for the pilot’s role when aboard a vessel under compulsory pilotage.

“Conduct” appears in seven substantive provisions of the Act. The Act’s definition of “pilot” (which includes having conduct of the ship) has its roots in 19th century British legislation and is widely used in Commonwealth pilotage statutes. “Conduct” seems to be broadly understood internationally, without any need for further elaboration in law.

While the pilot has been given the control of a ship for navigational purposes, this does not mean the pilot has superseded the master. The master remains responsible for the safety and well-being of the vessel and her crew. Though the Pilotage Act does not specifically address the master-pilot relationship, that relationship is reflected in the statute – in the limit on pilots’ civil liability and in the master’s ability to take over navigational control in cases of danger and pilot incapacity. Those looking for a codification of the master-pilot relationship will find helpful material in the International Maritime Organization documents and in guidance issued by the Canadian Coast Guard, Transport Canada and the pilots’ association. This guidance is largely advisory, not legally binding.

The Royal Commission on Pilotage, noting “a gap” in the legal definition of “pilot”, suggested a re-formulation of the standard definition. This wording merits examination, though its legal impact would be less than new provisions explicitly aimed at setting out the functions and duties of pilots and masters while pilotage is underway. Examples of such provisions in foreign statutes are provided. The chapter offers two options for proceeding: i) entrenchment of a pilots’ code in the body of the statute, to provide a consistent national approach; and ii) creation of a regulation-making power to allow a pilotage authority to develop and enact its own code of practice. Both options could be made enforceable – either through the courts or through administrative sanctioning.

Pilot Liability: The Pilotage Act sets a limit of $1,000 on the civil liability of a licensed pilot for losses suffered due to poor pilot performance (as distinct from “willful or wrongful acts”). The Act also protects Her Majesty, the pilotage authority and the pilot corporation from vicarious liability for the pilot’s performance. The first two are also indemnified against liability for the pilot’s willful or wrongful acts. This client has asked whether the Act’s approach to civil liability still reflects international norms and whether the $1,000 ceiling on liability, unaltered since 1972, needs to be re-examined. The 1910 Brussels Collision Convention is a primary instrument for assigning liability between pilots and vessels. Canada has acceded to this convention, which largely shields pilots from civil liability (but not from liability in administrative and criminal spheres).

Research into the legal frameworks of developed nations uncovered no jurisdiction that allows significant recoveries from the pilot, local port or maritime administration for loss, damage or liabilities incurred as a result of pilot error. The general principle enshrined in those nations’ statutes is that the pilot, while on board a ship, acts as a servant of the ship and its owner and operator, who therefore remain liable for damages arising as a result of the pilot’s negligence, notwithstanding that pilotage is compulsory.

Many national statutes (listed) indemnify the pilot and pilotage provider entirely for acts done in good faith and in the course of the pilot’s duties. In other jurisdictions, a low ceiling is set for pilot civil liability – generally 1,000 units of the local currency. Canada’s practice is consistent with the latter approach. Several countries also make the pilot additionally liable in the amount of the pilotage fee for the voyage in which the incident occurred – perhaps a symbolic gesture, as recovery of damages from pilots is generally difficult.

The approach taken in the Pilotage Act therefore appears sound and up-to-date. It closely mirrors legislative models prevailing throughout the developed world, some of which are very recent. While the status quo is generally viable, Transport Canada might consider raising the liability ceiling to include the amount of the pilotage fee paid.

Penalties and Administrative Sanctions: Breaches of the Pilotage Act and its regulations draw comparatively low penalties: up to $5,000 for proceeding without a pilot through an area where pilotage is compulsory and for other breaches of the Act and regulations; up to $10,000 per day for refusing to provide pilotage services while a contract for services is in effect or being negotiated. The Act provides for administrative sanctioning of pilot licences and pilotage certificates by an Authority for a prescribed set of causes. There is recourse to the Minister when a licence or certificate has been refused or sanctioned. The client has asked whether the penalty levels imposed upon summary conviction are adequate and whether an Administrative Monetary Penalty System should be created, as an alternative to prosecution.

The Pilotage Act and the current regulations contain few prohibitions. Pilotage Act maximum penalties are below the ceiling of Administrative Monetary Penalty regimes in departmental statutes, especially for infractions by vessels and companies (the usual Administrative Monetary Penalty System ceiling is $25,000). With such low penalties, it is unlikely a pilotage authority would prosecute any but the most grievous cases.

To establish comparability with other departmental regimes, the maximum penalty under the general offense provision could be raised to $25,000 – at least for companies and vessels. The penalty for refusing to provide pilotage services – up to $10,000 per day – seems adequate, given that it compounds daily. Suspension or cancellation of a licence/ certificate (or a prohibition on applying for a future one) should probably be added to the penalties that a court may impose.

To supplement these changes to sentencing provisions, there is a clear need for a new, expeditious, less onerous means of proceeding against minor cases. Within the federal government, there are two types of ticket-based regimes for dealing with violations of regulatory requirements: ticketing under the federal Contraventions Act; and the various Administrative Monetary Penalty Systems enacted under individual statutes. These do not replace the summary conviction process but create a new procedural option for dealing with offences (once designated in regulations as “contraventions” or “violations”). The paper describes both systems in detail and outlines their respective strengths and limitations.

There are arguments both for using the Contraventions Act and for creating a new, stand-alone Administrative Monetary Penalty tool to be administered by the four pilotage authorities. The great appeal of the Contraventions Act ticketing system is that the basic legal and administrative infrastructure is already in place. Creating an Administrative Monetary Penalty System – with a sliding scale of penalties – offers a more comprehensive and supple solution than ticketing. However, it requires a larger investment in capacity-building, including staff training and development of penalty schedules. It also poses a much larger challenge: how to integrate the Administrative Monetary Penalty System with the existing administrative sanctioning process for pilot licences and certificates. Integrating the two could require a complete re-engineering of the current sanctioning system. The scale of the task may outweigh the benefits.

Under the current system, individuals whose documents have been sanctioned by the Authority or who have been denied issuance of a licence or certificate can seek a review by the Minister, who makes the final decision. It is difficult to see any rationale for retaining the Minister’s role in such cases. These cases should probably be directed to the Transportation Appeals Tribunal of Canada – regardless of whether the Administrative Monetary Penalty System option is or is not implemented.

Financial Self-sufficiency: Subsection 33(3) of the Pilotage Act provides that pilotage fees “shall be fixed at a level that permits the Authority to operate on a self-sustaining financial basis and shall be fair and reasonable”.  “Self-sustaining” is not a defined term in the Act. When pilotage fees are challenged before the Canadian Transportation Agency, Authorities are obliged to defend the fees by demonstrating that the tariffs properly balance the corporate need to be financially self-sufficient with reasonableness and fairness to users. Some industry groups have claimed that an Authority has ignored opportunities for cost-cutting and increased efficiency in its operations, relying instead on the use of coercive powers to achieve financial security at industry’s cost. Arbiters, too, have little guidance when choosing between Final Offers for a pilotage contract whose financial impacts on a regional Authority may be large.

The paper considers whether the Act should include a definition of the term “self-sustaining” or otherwise clarify the criteria for tariff-setting (and Final Offer Selection), for the benefit of all parties – users, the Authorities and the Canadian Transportation Agency. The Annex elaborates one option for proceeding.

Crown corporations are divided into “dependent”, “self-sufficient” and “lending” entities. The term “self-sufficient” is not defined in the Financial Administration Act. When the terms “self-sufficient” or “self-sufficiency” are used within constituting statutes for Crown corporations, these terms are not normally defined in the legislation. Generally speaking, the legislation expresses little more than a general concept, buttressed by making the corporation ineligible to receive Parliamentary appropriations.

One reason that constituting statutes may refer to self-sufficiency without defining it is that the government has many administrative levers to keep corporations in line – requirements to develop and submit corporate and capital plans for Treasury Board approval; annual Ministerial letters outlining expectations and priorities for the corporation; even the rarely-used Ministerial directive power.

Where pilotage authorities are not self-sufficient, an evident management deficiency may explain it. The Auditor General’s recent Special Examination of the financially troubled Atlantic Pilotage Authority suggested the failure to achieve financial health is attributable to inadequate internal systems of forecasting and budgeting. These are not problems that a statute can repair.

Faced with the open-ended language of sub-section 33(3), the Canadian Transportation Agency has not hesitated to interpret and amplify the government’s intentions respecting self-sufficiency. The Canadian Transportation Agency has developed a body of precedent and principles to guide its tariff reviews. The paper argues that this should be viewed as a positive development, notwithstanding that the Canadian Transportation Agency has disallowed pilotage tariffs on several occasions. If these decisions generally make sense to stakeholders and Authorities; are being consistently applied across regions; and have succeeded in influencing Authorities’ subsequent behaviour, it is hard to see a policy gap requiring new legislative action.

Before deciding that further direction to the parties is needed, the department should carefully review the body of existing Canadian Transportation Agency decisions, to determine exactly where the Agency is “getting it wrong”. If a decision is then taken to amend the tariff-setting provisions in section 33, new provisions could be used to confine or direct the Authority when developing a tariff. When a tariff is challenged, the Authority would have to demonstrate how its tariff meets the imposed definition, conditions or standards. Alternatively, the provisions could be directed at the Canadian Transportation Agency, to direct or limit the agency’s decision-making authority when arbitrating a challenge to the tariff. The Canadian Transportation Agency decision would have to demonstrate that it took these factors into account. Imposing a duty to consider factors is completely consistent with the concept of independent decision-making by a quasi-judicial tribunal. More stringent requirements could be set for Authorities but might be unsuitable for an independent tribunal. The Annex further develops these ideas.

Caution is warranted, too, in intervening in Final Offer Selection. In contract negotiations, the two parties assume a level playing-field, based on mutual dependence, with neither side given an inherent advantage. The process could be undermined if both parties know that where negotiations failed, the arbiter has been directed to give special consideration to the Authority’s financial self-sufficiency.

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