Executive Summary: Key Legal and Evidentiary Issues

• Toronto Airport's trust claim upheld: The Court confirmed a valid express trust over pre-filing Airport Improvement Fees (AIF) collected by Lynx under the Toronto AIF Agreement.

• Airport Authorities’ trust claims denied: The other airports' trust claims (Edmonton, Halifax, Winnipeg, Calgary, Vancouver) were rejected due to explicit disclaimers of trust in their governing agreements.

• Constructive trust not justified: The Court found no equitable basis to impose a constructive trust over AIF in favour of the Airport Authorities, emphasizing contract clarity and absence of unjust enrichment.

• Discretion over security funds: Toronto Airport lawfully exercised its contractual discretion in applying a Letter of Credit to general debt rather than trust claims.

• No entitlement to group termination pay: Employees were not entitled to 16 weeks' wages in lieu of group termination notice under s. 212 of the Canada Labour Code (CLC), as it imposes no such payment obligation.

• Group notice payments excluded from WEPPA: Since s. 212 does not require payment to employees, such amounts cannot be claimed under the Wage Earner Protection Program Act (WEPPA).

Background and Context

Lynx Air Holdings Corporation and its affiliate ceased operations and obtained protection under the Companies’ Creditors Arrangement Act (CCAA) in February 2024. As part of the insolvency proceedings, two separate legal disputes arose: one involving claims by airport authorities for unpaid Airport Improvement Fees (AIF), and another involving a union-led application for expanded employee wage claims under the Wage Earner Protection Program Act (WEPPA).

Dispute Over Airport Improvement Fees (AIF)

Toronto Airport Claim

Lynx Air collected AIF from passengers on behalf of airports, including Toronto Pearson. Under an AIF Agreement dated January 1, 2023, Lynx posted a $3.1 million Letter of Credit as security. Toronto Airport drew down the full amount post-insolvency but allocated it primarily to general debts, leaving $1.66 million in AIF unremitted.

Lynx sought a declaration that its obligations were discharged, arguing the trust obligations were satisfied by the Letter of Credit. However, the Court found:

• The AIF Agreement established an express trust for pre-filing AIF.

• Toronto Airport retained discretion over allocation of the Letter of Credit proceeds, as confirmed in its Rules and Application for Entry documents.

• Applying the security to other debts did not eliminate the trust obligations owed by Lynx.

Outcome: The Court upheld the trust and ordered Lynx to remit the outstanding $1.66 million AIF to Toronto Airport. However, it denied the airport's request for legal costs, consistent with the CCAA’s general no-costs policy.

Other Airport Authorities’ Claims

The remaining airport authorities (Vancouver, Calgary, Edmonton, Halifax, and Winnipeg) relied on a Memorandum of Agreement (MOA) and ancillary contracts. They argued that AIF collected should be held under express, implied, or constructive trust.

The Court rejected these claims:

• The MOA expressly disclaimed any intention to create a trust.

• The relationship was characterized as a principal-agent one limited to collection and remittance of AIF.

• There was no express or implied trust language in the agreements, nor any segregation of funds or fiduciary obligation to support a constructive trust.

The Court declined to impose a remedial constructive trust, noting:

• The agreements were between sophisticated parties capable of protecting their interests.

• No unjust enrichment or breach of equitable duty was found.

• Imposing a trust would unfairly elevate these airports over other unsecured creditors, violating the CCAA's pari passu principle.

Outcome: The Court dismissed the claims for trust status and prioritized payment by the other Airport Authorities.

Employee Compensation and WEPPA

Facts and Claim

After Lynx Air terminated all cabin crew in February 2025 without severance or vacation pay, the Canadian Union of Public Employees (CUPE) brought an application seeking to extend their compensation under WEPPA. Specifically, they sought wages in lieu of 16 weeks’ group termination notice under s. 212 of the Canada Labour Code (CLC).

The Monitor had already calculated and facilitated WEPPA claims covering regular unpaid wages, accrued vacation, and severance—amounting to ~$786,000 for all cabin crew. The Union’s application aimed to expand this by asserting entitlement to additional compensation for lack of group notice.

Legal Analysis and Outcome

The Court rejected the claim:

• Section 212 CLC requires employers to notify the federal Head of Compliance and Enforcement in advance of group terminations, but does not require payment to employees in lieu of that notice.

• The Court distinguished Division IX (group termination rules) from Divisions X and XI (individual termination and severance), the latter of which do include compensatory rights.

• Since s. 212 imposes procedural—not financial—obligations, its breach does not entitle employees to wages in lieu.

• Therefore, WEPPA does not cover such amounts, as only statutorily mandated wages, termination, and severance pay are eligible under its definition of “eligible wages.”

Outcome: The application was dismissed. Cabin crew employees remained entitled to the termination and vacation pay already approved but could not claim additional amounts under WEPPA for group termination notice.

Conclusion

These coordinated decisions illustrate a firm application of commercial contract principles and statutory interpretation in the insolvency context:

• Express and precise agreements, like those of Toronto Airport, can preserve trust rights over collected funds.

• Other airports, lacking such terms, could not rely on equitable doctrines to alter priorities.

• Employees are limited to explicit statutory entitlements under WEPPA; broader compensatory claims, even if equitable, are excluded where the statute is silent.

The Lynx Air cases reinforce the critical importance of contractual specificity and statutory clarity in protecting stakeholder rights during insolvency.