Alberta appeal court rules in favour of Lynx Air over airport improvement fees

A Lynx Air Boeing 737 jet sits at a gate at the international airport in Calgary on February 23, 2024. THE CANADIAN PRESS/Todd Korol (Todd Korol/The Canadian Press)

The Alberta Court of Appeal says Lynx Air will not need to pay more than $4 million in airport improvement fees (AIFs) it collected for five authorities it did business with.

The money includes more than $2 million that should have been paid to the Calgary Airport Authority but wasn’t because there was no trust agreement in place between the two parties.

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AIFs are collected by airport authorities and are spent on maintenance, improvements and expansions. All departing passengers are charged the fee, which varies between $25 and $38, and the AIF is included on ticket prices.

Lynx Air was expected to remit these fees monthly, but when the airline went into creditor protection on Feb. 22, 2024, those payments stopped.

The airport authorities, which include Calgary, Edmonton, Vancouver, Halifax and Winnipeg, all told the court the AIFs Lynx collected were held in trust and should have flowed to them when the company was granted protection.

The Alberta Court of King’s Bench (ABKB) ruled in favour of Lynx on Aug. 26, 2024, saying the airline would not need to remit those fees and the appeal court agreed with that decision.

During the appeal, the airport authorities admitted there was no formal trust agreement in place for the unremitted AIFs in its memorandum of agreement (MOA) signed with Lynx on April 26, 2022, but the judge did not “properly apply the test for finding an express or implied trust and failed to apply the remedy of constructive trust.”

“The airport authorities argued that without a constructive trust, allowing the AIFs to remain in the Lynx Air estate would be unfair to the Canadian public. A trust is necessary to do justice among the parties, and to maintain the integrity of the system,” the appeal court said in its decision.

However, it agreed with the chambers judge’s decision on the matter, saying she did not misinterpret the MOA.

“The chambers justice found the MOA created an agency relationship, which does not necessarily imply that a trust is created. The airport authorities provide no case law impugning that conclusion,” the appeal court wrote.

It also agreed with the chambers judge’s determination that no implied trust was present between Lynx (as the trustee), passengers (as the settlers) and the airport authorities (as the beneficiaries.)

“In determining whether a trust is implied, ‘effect must be given to inferences as to the intention of the parties which a reasonable person would draw from the words or conduct of the parties’ but not ‘subjective or other intention which was not made manifest at the time.’

“A trust cannot be wished into existence after the fact.”

The appeal court said there was no wrongdoing by Lynx Air in this case.

“The failure to remit the AIFs breached a contractual term but in these circumstances that did not constitute a breach of an equitable obligation. We agree with the chambers justice that there was no wrongdoing which would support the remedy of a constructive trust.”

In the same ABKB decision, the appeal court said the chambers judge found in favour of the Greater Toronto Airport Authority (GTAA), saying its agreement with Lynx included “express trust language” and awarded it $1,710,148.23 in unremitted AIFs.

The amounts owing to the Edmonton Regional Airports Authority of $355,640.79, Halifax International Airport Authority of $319,435.80, Winnipeg Airports Authority of $282,895, Calgary Airport Authority of $2,031,140.16 and Vancouver Airport Authority of $1,110,231.54 are all a result of “commercial risk,” the court said.

“Unlike the GTAA which executed a contract with the express protection of a trust relationship, the airport authorities maintained the terms of the MOA. In the absence of exceptional circumstances, clear contractual terms should be respected. The chambers justice reasonably exercised her discretion in denying the remedy of a constructive trust.”

The Calgary Airport Authority, in a statement to CTV News, said it respects the appeal court’s decision and it will not pursue the matter any further.

“There is no anticipated impact to airport operations or guest experience as a result of this judgement,” it said.