Sonicblue Airways owner Ranjit Singh Gill sued the national safety agency and two of its managers for negligence and "misfeasance in public office" over the decision to suspend his operating certificate the day after the Jan. 21, 2006 accident.
Gill claimed the agency had no grounds to do so and supervisors Trevor Heryet and David Nowzek acted with "in excess of their legal authority, with malice and in bad faith."
They showed reckless indifference to the facts and the law, and they did so with the intent of causing irreparable harm, Gill's lawyers argued in court.
Three people — including the pilot and a three-month-old boy — died when the flight from Tofino, on the west coast of Vancouver Island, lost power in mid-air en route to Vancouver.
The pilot crashed the single-engine Cessna Caravan into the trees as he attempted a landing on a logging road. Five other passengers were seriously injured.
A Transportation Safety Board report 18 months later attributed the accident to a manufacturing defect in a turbine blade, "a matter over which (the company) had no control," B.C. Supreme Court Judge Bruce Greyell said in a written decision posted online Monday.
Gill claimed the decision to suspend his certificate forced him into bankruptcy, and he lost between $10- and $12 million.
Sonicblue was an air courier service that delivered courier packages in B.C. and Alaska and operated a chartered passenger service between Vancouver and Tofino. It was one of three components of International Express Aircharter Ltd., which also had flight training and aircraft maintenance operations.
The judge noted a series of fines and infractions that led the Transport Canada Civil Aviation branch to place the company on an enhanced monitoring program in August 2004.
In August and September of that year, the agency conducted 21 inspections that resulted in 15 letters of notification identifying regulatory issues, four detection notices sent to the enforcement branch for further investigation and 62 defects brought to the attention of the company.
But only 12 of the 62 defects were significant and there was no evidence any of the detection notices resulted in enforcement action, the judge noted.
Still, he found Transport Canada and its officials did not act in a malicious way in suspending the company's operating certificate.
"The facts of this case must be considered in context," Greyell wrote.
Officials were dealing with an emerging fatal accident. The press wanted to know the circumstances and the carrier's record. Officials didn't know what caused the crash but they did know about International Express Aircharter's past infractions.
They followed procedure, the judge said.
"While the decision may be criticized, as it was by the (Transportation Appeal Tribunal), I find the defendants (Transport Canada), Nowzek and Heryet did not act in a malicious, arbitrary, high-handed or oppressive manner, but rather were motivated by their sense of what was in the public interest at the time," Greyell said.
"I find they did not knowingly act illegally or in bad faith chose a course of action specifically to injure (the company)."