A CHANGING LANDSCAPE IN CONSUMER CLASS ACTIONS IN BRITISH COLUMBIA (AND BEYOND)

A CHANGING LANDSCAPE IN CONSUMER CLASS ACTIONS IN BRITISH COLUMBIA (AND BEYOND) Brad W. Dixon BORDEN LADNER GERVAIS LLP Introduction British Columbia courts continue to grapple with efforts by plaintiffs to achieve class-wide recovery on behalf of consumers who (1) cannot establish any actual loss or (2) seek to avoid the individuality of proving causation of loss. A number of recent decisions have refused to certify such claims. In so doing, the courts have explained and clarified the limits to the remedies provided by the Business Practices and Consumer Protection Act (BPCPA or the Act ). 1 Below, we review the recent decisions that have clarified the remedies provided by the Act and then review decisions that have addressed the intersection between statutory causes of action and common law claims in tort or restitution. British Columbia courts have held that where a statute provides a comprehensive scheme for the administration and enforcement of statutory rights and obligations, as does the Act, claimants may be restricted to the remedies provided by the statute itself. This reasoning has consequences for claims under other legislation and will be applicable in other jurisdictions. Scheme of the BPCPA Michelle T. Maniago BORDEN LADNER GERVAIS LLP The Act prohibits a supplier from engaging in a deceptive act or practice in respect of a consumer transaction. 2 Deceptive acts or practices are broadly defined 3 to mean, in relation to a consumer transaction, representations or conduct by a supplier that has the capability, tendency, or effect of deceiving or misleading a consumer. It is this prohibition on deceptive acts or practices that has been the focus of most attention in consumer class actions in British Columbia. Where it is alleged there has been a violation of the Act, statutory causes of action are available. Under s. 171, a person who has suffered damage or loss due to a contravention of the Act may bring an action against a supplier who engaged in or acquiesced in the contravention that caused the damage or loss. Other remedies are provided by s. 172, which permits the director or other person, whether or not the person bringing the action has a special interest or any interest under the Act or is affected by a consumer transaction, to bring an action for a declaration that an act or practice contravenes the Act and for an injunction. 4 If a declaration or injunction is granted, the court may make further orders, one of which is provided by the terms of s. 172(3)(a): (a) that the supplier restore to any person any money or other property or thing, in which the person has an interest, that may have been acquired because of a contravention of this Act or the regulations. There is no issue that recovery of damages under s. 171 of the BPCPA requires proof of reliance on a deceptive act or practice. The requirement for proof of causation is clear on the face of the provision. 5 However, the proof of causation required for purposes of a restoration order under s. 172(3)(a) has been a more difficult issue. It has been accepted that there must be a causal connection between the breach and the supplier s acquisition of benefits from the consumer, but it has also been said that this does not mandate proof of reliance. 6 Recent developments in the case law relating to s. 172(3)(a) provide some clarity to the scope of relief available and the elements of proof required. In Wakelam v. Wyeth Consumer Healthcare [Wakelam], 7 Justice Newbury held that a restoration 20

order may be made only to a person who has an interest in the money or other property or thing acquired by the supplier. By analogy to the reason a claim for a constructive trust failed in that case (no causal connection between a contribution and specific property), Newbury J.A. held that the claim under s. 172(3)(a) was also bound to fail. 8 At first instance in Ileman v. Rogers Communications Inc., 9 this was interpreted to require proof of a proprietary nexus, such that a purely monetary claim could not give rise to a restoration order under s. 172(3)(a). On appeal, Justices Bennett, Lowry, and Groberman concurring, stated that a restoration order is merely ancillary to the public interest remedies in s. 172 (a declaration of breach and an injunction) and identified four prerequisites to the granting of a restoration order: a) [t]he Court must make a declaratory or injunctive order [ ]; b) the supplier must have acquired something [ ] because of a contravention of the legislation [ ]; c) [t]he beneficiary of [the restoration] order [ ] must have been the source of the money or [ ] thing acquired by the supplier; and d) [t]he beneficiary must have an interest in the thing to be restored. 10 As to the required interest, Bennett J.A. held that s. 172(3)(a) had been too narrowly interpreted by importing a proprietary nexus requirement, concluding instead that the interest required is one recognized by law outside of s. 172(3)(a). 11 This interpretation flowed from an understanding that the purpose of the provision is not to create a new legal right but to allow existing private rights to be recognized within the context of public interest litigation. A right to recover damages under s. 171 was cited as an instance of a sufficient interest to allow recovery under s. 172(3)(a). Where a right to damages under s. 171 is the basis for the interest pleaded, it will be necessary to plead and prove the material facts establishing reliance. This was the conclusion in Unlu v. Air Canada (sub nom Ozturkler v. British Airways). 12 It is clear that the remedy provided for in s. 172(3)(a) does not provide a means by which consumers may obtain disgorgement of revenues from a supplier simply by establishing a breach of the BPCPA. Attempts to Supplement BPCPA Remedies Putative representative plaintiffs have often in the past sought to layer over the BPCPA various common law causes of action or equitable remedies, with the intention of achieving a remedy for statutory breach that would force a supplier to disgorge its revenues associated with consumer transactions. As in other areas of class action jurisprudence, one vehicle of choice has been the doctrine of waiver of tort. This obscure doctrine allows a claimant to seek disgorgement of a wrongdoer s gain rather than recovery of damages sustained. It was resurrected in modern class proceedings precisely for the purpose of avoiding the necessity of individual proof of loss. 13 There is uncertainty in the law as to whether or not the doctrine provides simply for an alternative remedy where a tort has been established or is, itself, an independent cause of action. If simply an alternative remedy, the doctrine should require proof of loss, where loss is an element of the cause of action, before a gain must be disgorged; but if waiver of tort is an independent cause of action, then disgorgement of revenues or profits should be available on proof of wrongful conduct, or so that argument goes. This question and indeed the scope of wrongful conduct for which the doctrine may be engaged remain unsettled issues that vex the courts in many areas of class action jurisprudence. In the context of claims based on alleged violations of the Act, the British Columbia Court of Appeal has brought this debate to a conclusion not by resolving those uncertainties but by construing the legislation as a comprehensive code that does not admit of other remedies for breach, beyond those specified in the statute. 21

In Koubi v. Mazda Canada [Koubi], 14 Justice Neilson (Lowry and Frankel JJ.A. concurring) considered the relationship between a statutory breach and a civil cause of action. 15 On review of the statute, the court held that the BPCPA provides an exhaustive code regulating consumer transactions that [occupies] the field of consumer rights and remedies arising from deceptive acts by suppliers. 16 In particular, the court held that there was nothing in the Act that would allow consumers to mount an action against a supplier for restitutionary relief based on the novel doctrine of waiver of tort. Indeed, the court held that such a conclusion is inconsistent with the express language of ss. 171 and 172(3)(a), which clearly limit recovery for pecuniary loss to restoration of the consumer s own damages or loss arising from a deceptive act. The reasoning of the Court of Appeal in Koubi was followed and applied to other restitutionary claims in Wakelam, 17 where the court held that the plaintiff s claims in unjust enrichment and constructive trust that were based on breach of the Act should be struck. The court again reasoned that there was no legislative intent to create restitutionary causes of action arising from or based on breaches of the Act. 18 Application to Other Statutory Causes of Action The court in Wakelam also applied the Koubi comprehensive code reasoning to the Competition Act 19 and the statutory cause of action provided by s. 36 of that legislation. Justice Newbury stated: [90] Section 36 clearly limits recovery for pecuniary loss to the loss or damage proved to have been suffered by the plaintiff, together with possible investigatory costs incurred by the plaintiff. I see nothing in the Competition Act to indicate that Parliament intended that the statutory right of action should be augmented by a general right in consumers to sue in tort or to seek restitutionary remedies on the basis of breaches of Part VI. It follows in my view that the certification judge did err in finding that the pleading disclosed a cause of action under the Competition Act for which a court might grant restitutionary relief; and that accordingly, paras. 34 38 of Ms. Wakelam s statement of claim do not disclose a cause of action. This treatment of the Competition Act in Wakelam and the restriction of causes of action or available remedies for breach of that legislation have raised considerable controversy in subsequent cases. In Watson v. Bank of America, et al. [Watson], 20 Justice Bauman determined that he was bound to follow Wakelam and held that the plaintiff class cannot found causes of action in unjust enrichment, waiver of tort, or unlawful means conspiracy only on conduct contrary to the Competition Act. This left the plaintiff class only the statutory claim for damages under s. 36 of the Competition Act and civil conspiracy to injure. In other cases, lower courts have interpreted Wakelam as restricted to foreclosing restitutionary remedies for breach of statute but not to foreclosing tort claims based on breach of statue (where wrongful conduct is an element of the tort). The basis for this distinction made in Pro-Sys v. Microsoft [Pro-Sys] 21 is that although Newbury J.A. referred in Wakelam to tort claims based on breach of statute, none were actually pleaded (the tort of unlawful interference with economic relations having been struck by the chambers judge, and no appeal taken on that point). Justice Myers stated that [t]herefore the Court of Appeal s decision was only concerned with breaches of the Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2 and the Competition Act, and the remedies (not torts) arising from that [original emphasis]. 22 Arguably, this distinction does not stand up well to close scrutiny if one recalls that (1) the Court of Appeal in Wakelam endorsed the reasoning in Koubi and (2) in the latter case, the court proceeded on the footing that waiver of tort may not simply be an alternative remedy but may be an independent cause of action (based on wrongful conduct) a point as yet unsettled. Justice Myers went on to say 23 that if Wakelam is interpreted to affect tort claims, it would conflict with the 22

decisions of the Supreme Court of Canada in the same litigation (affirming certification of tort claims as well as statutory claims) 24 and in A.I. Enterprises Ltd. v. Bram Enterprises Ltd. 25 This latter point was one that the chambers judge did not view as having been considered in Watson. In the result, Myers J. held that (1) it is not plain and obvious that breaches of the Competition Act cannot be relied on as the basis for the tort of unlawful means conspiracy, or, alternatively, (2) issue estoppel applies in the Pro-Sys case itself. The reasoning in Pro-Sys, restricting Wakelam to foreclosing claims for restitution based on breach of the Competition Act, but not affecting tort claims, was followed in Fairhurst v. Anglo-American PLC 26 27, 28 and Harrison v. Afexa Life Sciences Inc. On August 19, 2015, the Court of Appeal released its judgment in Watson v. Bank of America, et al. 29 Justices Saunders, Donald, and Neilson concurring declined to refer Wakelam to a five-judge division for reconsideration, as requested by the Appellant/Plaintiff, but concluded that the decision in that case does not govern the issue of the availability of the tort of unlawful means conspiracy based on breach of the Competition Act. 30 On review of the legislative history and the elements of the common law and statutory causes of action, the court held that it cannot be said that the scheme for civil redress in s. 36 of the Competition Act is a replacement for an action in common law for unlawful means conspiracy. 31 Claims in restitution and waiver of tort in relation to the tort of unlawful means conspiracy were also held to disclose a reasonable claim. The decision in Wakelam was, however, dispositive of the claim for a restitution remedy for breach of the Competition Act, and such claims cannot succeed. 32 The debate has moved to other courts, and there is some divergence, as between the case law in British Columbia and Ontario, at least in the further developments seen to date. In Wellman v. Telus Communications Co., 33 Justice Conway declined to follow the Wakelam decision of the British Columbia Court of Appeal, on the view that Ontario courts have not taken such a restrictive approach to pleading unjust enrichment and have allowed it to stand based on breach of the Consumer Protection Act, 2002. 34 In Airia Brands Inc. v. Air Canada, 35 Justice Leitch considered developments in British Columbia cases but did not consider it plain and obvious that a common law claim for unlawful means conspiracy based on breach of the Competition Act was bound to fail. Yet more recently, in Shah v. LG Chem, Ltd., 36 Justice Perell has had occasion to review those same decisions of the British Columbia courts and, as well, the decision of the British Columbia Court of Appeal in Watson. In reasons released October 5, 2015, Perell J. preferred the reasoning in Wakelam, over that in Watson, and held that it is plain and obvious, as a matter of statutory interpretation, that the common law claim for unlawful means conspiracy is precluded by the statutory cause of action available under s. 36 of the Competition Act. 37 This conclusion was seen to be supported by sound legal policy reasons, including the proposition that the legislature should be able to craft a remedial scheme, without it being circumvented by common law causes of action or remedies grafted onto the statutory breach. 38 Conclusion The recent decisions reviewed above indicate that the landscape for consumer class actions has changed in British Columbia. The BPCPA may be consumer protection legislation, and as such it may call for a generous interpretation, but it is legislation that is also directed to fairness and consistency for all parties in the consumer marketplace 39 suppliers included. Courts in British Columbia have construed the BPCPA in a manner that respects the balance crafted by the legislature and have limited plaintiffs to the remedies specified in the Act for 23

recovery of loss. Resort to other causes of action or remedies, to supplement the statutory relief, has been curtailed. This development has had implications for causes of action under other statutes and in other jurisdictions. It remains to be seen precisely how far those implications will extend, as the law continues to develop. [Editor s note: Brad W. Dixon and Michelle T. Maniago acted together as defendant s counsel in certain of the cases discussed here, Koubi v. Mazda Canada, Marshall v. United Furniture Warehouse, and Ozturkler v. British Airways. Mr. Dixon also acted as counsel for a defendant in Watson v. Bank of America, et al.] 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 BPCPA, S.B.C. 2004, c. 2. Ibid., s. 5(1). Ibid., s. 4(1). The section goes on to provide that if the director brings such an action, the director may sue on the director s own behalf or, at the director s option, on behalf of consumers generally or a designated class of consumers: ibid., s. 172(2). Knight v. Imperial Tobacco Canada Limited, [2005] B.C.J. No. 216, 2005 BCSC 172, para. 34; varied on other grounds [2006] B.C.J. No. 1056, 2006 BCCA 235 [Knight]. See also Wakelam v. Wyeth Consumer Healthcare, [2014] B.C.J. No. 167, 2014 BCCA 36, para. 69 [Wakelam]. Knight (B.C.S.C.), paras. 32 33. See also, Marshall v. United Furniture Warehouse, [2013] B.C.J. No. 2462, 2013 BCSC 2050, para. 199; affirmed on other grounds, [2015] B.C.J. No. 1129, 2015 BCCA 252 (application for leave to appeal pending at date of writing). Wakelam, [2014] B.C.J. No. 167, 2014 BCCA 36; leave to appeal to S.C.C. denied, [2014] S.C.C.A. No. 125, September 4, 2014. Ibid. (B.C.C.A.), para. 68. Ileman v. Rogers Communications Inc., [2014] B.C.J. No. 1119, 2014 BCSC 1002. Ileman v. Rogers Communications Inc., [2015] B.C.J. No. 1178, 2015 BCCA 260, paras. 51 53 (application for leave to appeal to the S.C.C pending at date of writing). Ibid., paras. 57 62. Unlu v. Air Canada (sub nom Ozturkler v. British Airways), [2015] B.C.J. No. 1778, 2015 BCSC 1453, paras. 43 51 (appeal pending) [Unlu]. See the discussion in Koubi v. Mazda Canada, [2012] B.C.J. No. 1464, 2012 BCCA 310, paras. 16 17 and following; leave to appeal to S.C.C., [2012] S.C.C.A. No. 398, denied January 17, 2013 [Koubi]. Ibid., Koubi (B.C.C.A.). Referring to R. v. Saskatchewan Wheat Pool, [1983] 1 S.C.R. 205, and Macaraeg v. E Care Contact Centers Ltd., [2008] B.C.J. No. 765, 2008 BCCA 182. Koubi (B.C.C.A.), supra note 13, paras. 63 67. 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Wakelam, supra note 7, para. 66. Ibid. The decisions in Koubi and Wakelam were followed, and a certification order set aside in Charlton v. Abbott Laboratories, Ltd., [2015] B.C.J. No. 88, 2015 BCCA 26. See also, Unlu, supra note 12, para. 58, where a claim for unjust enrichment based on breach of the BPCPA was held not to disclose a reasonable cause of action based on Koubi and Wakelam. It has been argued that this reasoning is a bar to claims for punitive damages for breach of the BPCPA; although said to be an attractive argument, the issue has not yet been decided: Unlu, paras. 60 63. Competition Act, R.S.C. 1985, c. C-34. Watson v. Bank of America, et al., [2014] B.C.J. No. 534, 2014 BCSC 532. Pro-Sys v. Microsoft, [2014] B.C.J. No. 1450, 2014 BCSC 1280. Ibid., paras. 56 and 59. Ibid., para. 60. Pro-Sys Consultants Ltd. v. Microsoft Corporation, [2013] S.C.J. No. 57, 2013 SCC 57. A.I. Enterprises Ltd. v. Bram Enterprises Ltd., [2014] S.C.J. No. 12, 2014 SCC 12: addressing the elements of the tort of intentional interference with economic interests. Fairhurst v. Anglo-American PLC, [2014] B.C.J. No. 2973, 2014 BCSC 2270, para. 15. Harrison v. Afexa Life Sciences Inc., [2015] B.C.J. No. 793, 2015 BCSC 638, paras. 128 129. Also of interest is the recent decision in Low v. Pfizer Canada Inc., [2014] B.C.J. No. 2028, 2014 BCSC 1469, where a consumer class action seeks recovery for overpayment for Viagra consequent on breach of the Patent Act, R.S.C. 1985, c. P-4. The court concluded that the Patent Act does not exclude common law causes of action where breach of statute is relevant (but note that the legislation made no provision for a consumer remedy). The court did strike a claim pleaded in waiver of tort on the basis that the disclosure requirements (breached by Pfizer) were created by statute, the statute did not create a private law remedy, and the requirements did not exist at common law. The reasoning here may form the basis for answers to some of the larger questions surrounding waiver of tort in the context of other tort claims as well. Watson v. Bank of America, et al., [2015] B.C.J. No. 1775, 2015 BCCA 362. Ibid., para. 24. See also para. 49 and following, where Saunders J.A. held that as the case was framed in Wakelam, there was no claim in tort and certainly not the claim of unlawful means conspiracy. Ibid., para. 58. Ibid., paras. 59 61. No application for leave to appeal to the S.C.C. was brought in respect of the decision in Watson. Wellman v. Telus Communications Co., [2014] O.J. No. 5613, 2014 ONSC 3318. Consumer Protection Act, 2002, S.O. 2002, c. 30. Airia Brands Inc. v. Air Canada, [2015] O.J. No. 4450, 2015 ONSC 5352. Shah v. LG Chem, Ltd., [2015] O.J. No. 516, 2015 ONSC 6148. Ibid., paras. 221 228 (and declined to follow Airia Brands Inc. v. Air Canada, supra note 35). Ibid., paras. 207 208. Koubi (B.C.C.A.), supra note 13, para. 63. 24