Judge upholds $500,000 penalty for failure to comply with the Container Trucking Act

When considering the nature and severity of non compliance, principles of proportionality, parity, rehabilitation, and deterrence, it was found that a $500,000 penalty was not patently unreasonable.

Administrative law – Decisions reviewed – Trucking Commissioner – Judicial review – Procedural requirements and fairness – Standard of review – Patent unreasonableness

Gulzar Transport Inc. v. British Columbia (Container Trucking Commissioner), [2023] B.C.J. No. 1794, 2023 BCSC 1601, British Columbia Supreme Court, September 12, 2023, A. Chan J.

Gulzar Transport Inc. (“Gulzar”) and Jet Speed Transport Inc. (“Jet Speed”) (collectively, the “Companies”) sought judicial review of the second reconsideration decision of the British Columbia Container Trucking Commissioner (the “Commissioner”). In this decision, the Commissioner had imposed an administrative penalty of $500,000 for under-paying its truck drivers and then trying to cover up the underpayments during an audit by the Commissioner’s office. The Companies provided container trucking services to marine ports in the lower mainland.

Following pay disputes and a work stoppage in 2014, the Container Trucking Act, SBC 2014, c 28 (the “Act”) and the Container Trucking Regulation, BC Reg 248/2014 (the “Regulation”) were enacted, creating the Office of the British Columbia Container Trucking Commissioner (the “Commissioner”). The Commissioner regulates licenses and sets minimum rates of pay to drivers.

In July 2018, the Commissioner audited the payroll records of the Companies. The initial audit showed that the Companies were paying drivers appropriately. Following this, the Commissioner received additional information from one of the Companies’ drivers. The Commissioner then authorized an investigation and seized the Companies’ records. The auditor found that the records were incomplete and additional records were requested. In April 2019, the auditor advised the Companies that she had concluded the companies failed to pay regulated rates to their independent owner-operators and their employee drivers. The Companies paid the outstanding amounts to their owner-operator drivers in May 2019.

Regarding the employee drivers, on October 30, 2019, the Commissioner directed the Companies to calculate those amounts using a formula supplied by the auditor. The Companies disagreed with the methodology and did not perform those calculations. The auditor found that the Companies failed to comply with the Act and a penalty notice was issued on November 19, 2019. The outstanding amount owed to employee drivers was found to be approximately $1,159,379.49. The Commissioner gave notice pursuant to the Act that he proposed to cancel the Companies’ licenses. The Companies sought an extension to pay the penalty and provided a report from a Chartered Professional Accountant (the “Sharma Report”) calculating the amounts owed to employee drivers to be approximately $262,944.12.

On February 10, 2020, the Commissioner issued its decision notice and found that cancellation of the Companies’ licenses was justified and ordered the Companies to pay the amount calculated in the Sharma Report.

On March 3, 2020, the Companies sought reconsideration pursuant to the Act, including a suspension of the license cancellation, a proposed further audit of their payroll for the time period from August 2019 to January 2020 (the “First Reconsideration Decision”).

On May 21, 2020, the Commissioner dismissed the reconsideration application and confirmed the cancellation of licenses. In January 2021, the Companies sought judicial review of the Decision notice and the First Reconsideration Decision. Because the licenses that had been cancelled had already expired in November 2020, the parties agreed to a consent order to set aside the First Reconsideration Decision, and to refer the matter back to the Commissioner to reconsider the issue of penalty.

On March 19, 2021, the Commissioner issued his second reconsideration decision (the “Second Reconsideration Decision”). Due to the amount of time that had passed, the Commissioner noted that cancellation of the license was no longer an available penalty, instead he awarded the maximum penalty of $500,000. This decision forms the subject of the judicial review.

At issue was the standard of review and whether the decision was patently unreasonable. The Companies argued that the commissioner erred in the Second Reconsideration Decision by unfairly relying on an estimate of wages owed to its employees as calculated by an auditor, characterizing the companies’ conduct as so severe as deserving of the maximum administrative penalty, and imposing a $500,000 fine without conducting a proper reconsideration.

The Act contained a privative clause. It was determined that the standard of review for discretionary decisions of the Commissioner was patent unreasonableness. To determine if the decision was patently unreasonable, it was held that a Court needs to determine whether the decision is clearly irrational.

Although the Companies argued that they were unaware of the ongling dispute regarding unpaid wages to company drivers, it was found that this claim was inaccurate. The Commissioner had made clear in each decision that he was unable to come to an accurate calculation regarding the unpaid wages to drivers and that this remained in dispute. Indeed, the Commissioner did not make a finding as to the outstanding wages to be paid.

The Companies argued that the Commissioner’s assessment of the severity of the Companies’ misconduct was patently unreasonable. It was found that the Commissioner did a proper assessment of the mitigating and aggravating factors in determining a proper penalty and did provide reasons for the imposition of the $500,000 penalty.

The Companies also argued that the discretionary decision to impose a $500,000 penalty was patently unreasonable. The Companies argued that the Commissioner’s rationale for not considering legal fees paid by the Companies in the first judicial review proceeding in 2021 was patently unreasonable. The Commissioner’s reasoning that the legal fees were incurred as a result of their noncompliance and therefore not compensable, was sound. The Commissioner also found that deducting legal fees would be inconsistent with the object of the Act.

The Companies argued that general deterrence ought to have less weight as the initial decision had become notorious in the industry. It was found that it was not patently unreasonable for the Commissioner to find that general deterrence was not to be given less weight.

Lastly, the Companies argued that the Commissioner did not properly conduct a second reconsideration of the penalty and that he ought to have undertaken a fresh weighing of relevant principles and aggravating and mitigating factors. This argument was not successful. It was found that the Commissioner considered the relevant issues and that the penalty was within the legislated range and was one that the Commissioner could impose.

This case was digested by Deanna C. Froese, and first published in the LexisNexis® Harper Grey Administrative Law Netletter and the Harper Grey Administrative Law Newsletter.  If you would like to discuss this case further, please contact Deanna C. Froese at dfroese@harpergrey.com.

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