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The Second Opinion: Appellate Court Applies Provincial Consumer Protection Laws in a Class Proceeding Against a Federally-Regulated Company

A Commentary on Recent Legal Developments by the Opinions Group of McCarthy Tétrault LLP

Posted in Class Actions, The Second Opinion
Hovsep Afarian

In a recent decision of great importance to federally-regulated entities such as banks, airlines and navigation and shipping companies, the B.C. Court of Appeal ruled that a provincial consumer protection statute applies to airlines:  Unlu v. Lufthansa et al, 2013 BCCA 112.

The Unlu case involves a putative class action against various airlines alleging deceptive practices under B.C.’s Business Practices and Consumer Protection Act (the “Act”).  More specifically, the intended representative plaintiff asserts that the airlines improperly identified as taxes the fuel surcharge on airline tickets, in breach of the provincial Act.  The airlines, in defence, argued that the provincial consumer legislation is constitutionally inapplicable to them by virtue of the doctrines of paramountcy and interjurisdictional immunity.  The summary trial judge rejected these defences.  The B.C. Court of Appeal affirmed the lower court judgment and permitted the intended class action against the airlines to proceed.

The doctrine of paramountcy provides that federal legislation will prevail in case of a conflict with provincial legislation.  A conflict can be established in two ways.  First, there can be an “operational” conflict between the two statutes.  Second, a provincial law can be incompatible with the purpose of a federal legislation.  Although the airlines are subject to the various regulations promulgated pursuant to the federal Canada Transportation Act, the Court ruled that these federal regulations were not at odds with the provincial Act:  the federal regulations do not require conduct that the provincial Act forbids.  Moreover, the Court concluded that the federal regime was not intended to be an exclusive or complete code with respect to matters relating to air travel (citing, among other things, an official statement by the Canadian Transportation Agency contemplating the application of provincial consumer legislation to airlines).  Accordingly, the Court concluded that the provincial Act did not frustrate the federal purpose.

Moving next to the issue of interjurisdictional immunity, the Court found that the provincial Act does not impede a core federal power and that, even if it did, such impairment was not sufficiently serious to invoke the immunity afforded by the doctrine.

The Unlu decision has important ramifications for federally-regulated companies.  In essence, in addition to fulfilling federal requirements, entities such as banks, airlines or navigation and shipping companies may be required to also satisfy the requirements of a host of co-existing (but potentially inconsistent) provincial consumer protection statutes.  Although the Court in Unlu was careful to state that it was not deciding that the provincial Act in its entirety was applicable to the airlines, the decision nevertheless subjects the airlines to substantial provincial obligations alongside federal obligations.  The Supreme Court of Canada will provide further clarification regarding the scope of these doctrines in a series of similar cases involving the application of provincial consumer protection legislation to banks, in which the Court recently granted leave to appeal.

The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions.  The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain, Hovsep Afarian and Kirsten Thompson.