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  • Class actions to watch for in the air transport sector

    Many Canadians travel by airline. Aside from the pleasure of travel, certain inconveniences may sometimes occur, for both air carriers and passengers alike. A class action suit is often the preferred procedural vehicle for customers to assert their rights. Recent class actions authorized by the Quebec courts raise interesting issues. The courts will be considering the application of the Convention for the Unification of Certain Rules for International Carriage by Air (the “Montreal Convention”) and of the right of passengers to claim moral damages, as well as the rates and accuracy of pricing under the Canada Transportation Act1 will be a subject of debate. Claims for moral damages Whether moral damages may be recovered pursuant to the Montreal Convention remains a thorny issue and the topic of much judicial discussion. The Court of Appeal decisions in Croteau v. Air Transat AT inc.2 and Plourde v. Service aérien FBO inc. (Sky Service F.B .O. Inc.)3 appeared to have settled the matter. In each of these cases, the Court of Appeal concluded, among other things, that the initial court judge had reason to refuse to authorize the class action with respect to the conclusions whereby class members sought compensation for psychological damage suffered during a flight. Such damage is not compensable pursuant to Article 17 of the Montreal Convention, which establishes the liability of the air carrier in the event of death or bodily injury of passengers. However, these cases did not address the matter of moral damages occasioned by a delay pursuant to Article 19 of the Montreal Convention, which stipulates that the air carrier is liable for damage occasioned by a delay. In 2012, in the matter of Yalaoui v. Air Algérie4, the Superior Court authorized a class action for the members of a group of passengers who were on a direct flight from Algiers to Montréal that had been delayed for approximately 15 hours. More specifically, the members claimed moral damages for the inconveniences occasioned by the delay, pursuant to Article 19 of the Montreal Convention. In 2017, the Superior Court5 dismissed the action on the basis that the air carrier had taken all of the reasonable measures to ensure the proper maintenance and repair of the aircraft, without being able to avoid the delay. The matter of moral damages was, therefore, not addressed. This question of awarding of moral damages recently resurfaced in Auguste v. Air Transat6. The group, composed of more than 120 passenger ticketholders, who were left in Port-au-Prince by the air carrier, received authorization to initiate a class action against the air carrier. The members of the group are claiming, pursuant to Article 19 of the Montreal Convention, moral damages occasioned by a two-day delay. In the same case, the Superior Court7 authorized in 2016 that the notices to the members, who were directed to the Haitian community, be broadcast over the airwaves of a Haitian radio station so as to reach the maximum number of persons. This method of broadcasting the notice is, at first blush, exceptional, yet the Court, using its discretion, was of the opinion that the interest of the members warranted it. The hearing is scheduled to take place in April 2018. Overcharging In 2013, in the case of Chabot v. WestJet,8 a class action was authorized against an air carrier. The members of a group allege that the carrier overcharged them for a companion seat or for a seat adapted to their condition due to a disability or surplus weight. The authorized group was composed of passengers with a functional disability and their travelling companions, which occurred on flights operated by the air carrier since December 5, 2005. The matter is of interest in that it is the result of a decision rendered by the Canadian Transportation Agency. An independent quasi-judicial tribunal and regulator, the Agency has all of the powers of a Superior Court with respect to the exercise of its jurisdiction in connection with national transportation matters. On January 10, 2008, the Agency ruled that air carriers could not demand a fee for additional seats needed to accommodate individuals having certain significant disabilities.9 Thus, in the context of the class action pending before the Superior Court, it must be determined whether the air carrier’s pricing policy is discriminatory or abusive and, if so, whether moral and punitive damages may be awarded. In connection with this same matter, the Court of Appeal10 confirmed in 2016 that the Superior Court had jurisdiction to hear the case, which is based on contractual liability and that, in so doing, it could interpret the Canada Transportation Act11, since the case does not fall within the exclusive jurisdiction of the Canadian Transportation Agency. In 2017, the Superior Court12 split the class into two groups distinguishing between domestic and international travellers. The matter is pending. Still on the subject of overcharging, the authorization to exercise a class action was granted in Choquette v. Air Canada13 for the members of a group who allege having to pay fuel surcharges when purchasing their airline tickets. As in Chabot v. WestJet,14 the Superior Court deemed competent to hear the matter, absent a legal provision granting exclusive jurisdiction to the Canadian Transportation Agency. The proceedings are also ongoing. Accuracy of Prices Finally, the matter of the Union des consommateurs v. Air Canada15 raises the question of the accuracy of the prices advertised by an air carrier. In 2014, the Court of Appeal authorized the exercise of a class action by customers who would have paid a higher price than that which was posted by the air carrier in its ads and on its website. In February 2018, notices to the attorney generals of Quebec and Canada were filed in the court record to challenge the constitutionality of the Consumer Protection Act with regards to travel tickets advertised and sold on an air carrier’s website. The case is ongoing. Several important questions in the context of class action proceedings against air carriers will be considered by the Courts. The answers could impact the rights of customers and air carriers, as well as those of their insurers.   Canada Transportation Act, S.C. 1996, c 10 Croteau v. Air Transat AT Inc., 2007 QCCA 737 Plourde v. Service aérien FBO inc. (Sky Service F.B.O. Inc), 2007 QCCA 739 Yalaoui v. Air Algérie, 2012 QCCS 1393 Yalaoui v. Air Algérie, 2017 QCCS 5479 Auguste v. Air Transat, 2015 QCCS 3923 Auguste v. Air Transat, 2016 QCCS 604 Chabot v. WestJet, 2013, QCCS 5297 Decision no 6— AT-A-2008  WestJet v. Chabot, 2016 QCCA 584; Application for leave to appeal to the Supreme Court of Canada was dismissed WestJet v. Nicole Chabot, in her quality of tutor to her minor child N.C., et al., 2016 CanLII 72704 (SCC)  Canada Transportation Act, S.C. 1996, c. 10  Chabot v. WestJet, 2017 QCCS 4942 Choquette v. Air Canada, 2017 QCCS 234 Westjet v. Chabot, 2016 QCCA 584 Union des consommateurs v. Air Canada, 2014QCCA 523  

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  • On appeal from a judgment on a Wellington-type motion

    The Court of Appeal of Quebec recently ruled on a leave to appeal from an interlocutory judgment dismissing a Wellington type motion seeking to order an insurer to take up the defence of its insured. The decision of the Court in Technologies CII inc. v. Société d’assurances générales Northbridge1 follows the one issued on April 21, 2015 by the Honourable Michel A. Pinsonnault, dismissing a motion of this type in the context of litigation opposing the Attorney General of Quebec (hereinafter, the “AGQ”) and the Commission scolaire de la Rivière du Nord (the “School Board”) and, among others, Technologies CII Inc. (“CII”) and its liability insurer Northbridge General Insurance Corporation (“Northbridge”). After analysis, Ms. Justice Marie-France Bich concluded that an interlocutory judgment dismissing a Wellington-type motion must still be recognized as a judgment contemplated in second paragraph of the first alinea of article 29 Code of Civil Procedure (Quebec) (“CCP”). THE DISPUTE CII is a business specializing in the installation of heating and air conditioning systems. It was sued, solidarily with other defendants, for an amount of $16,537,687.00 by the AGQ and the School Board for a fire which occurred on September 21, 2011. The plaintiffs alleged that the fire was caused by the negligence of CII while performing its work, since it failed to comply with the legal requirements and standards of care applicable to welding activities. After it conducted a statutory examination of a CII representative, Northbridge refused to take up the defence of its insured on the ground that the coverage provided under the insurance policy was suspended at the time the events took place. It argued that CII had failed to comply with an endorsement, thus contravening to article 2412 of the Civil Code of Québec (“CCQ”) which provides that a breach of warranty aggravating the risk suspends the insurance coverage. The endorsement in question set out specific conditions for the control of sparks during welding activities, such as the use of protective screens or canvases. Therefore, Northbridge blamed CII for having breached what it considered to be a warranty by carrying out welding work in a closed environment without using any form of fire protection. For its part, CII argued that the endorsement did not constitute a warranty, but an endorsement modifying the terms of the policy. It added that this endorsement could not be held against CII because it had not been brought to the attention of a person in authority, that it did not form part of the original policy and because Northbridge would not have complied with the provisions of article 2405 CCQ. Hence CII filed a Wellington-type motion with the Superior Court to force Northbridge to take up its defence in the proceedings against the AGQ and the School Board. THE JUDGMENT ON THE WELLINGTON-TYPE MOTION2 The Superior Court concluded that, based on the allegations of the proceedings, the insurance policy, the exhibits filed and the statutory examination, CII had clearly breached the terms of the endorsement. According to the Court, [TRANSLATION] “there is no doubt that when the work was performed by its employees [CII’s] on the day the fire occurred, the employees did not use any protective screen or asbestos canvas to limit the spread of sparks (…).” The Court added that the endorsement indeed constituted a warranty incurred in the original policy, dismissing CII’s arguments and thus, its Wellington-type motion. THE LEAVE TO APPEAL FROM THE JUDGMENT OF THE SUPERIOR COURT On the basis of article 511 CCP, CII applied for a leave to appeal from the judgment of the Superior Court. From the outset, the Court of Appeal reiterated the two conditions which are necessary to obtain a leave to appeal from an interlocutory judgment, namely: the judgment is one that is contemplated in article 29 CCP; and the pursuit of justice requires that the leave be granted. The Court of Appeal wondered whether the case law prior to 2012, according to which a judgment dismissing a Wellington-type motion is a judgment contemplated in the second paragraph of the first alinea of article 29, still applied in the wake of the case of Elitis Pharma inc. v. RX Job inc.3 In this last case, Justices Rochon and Kasirer wrote that the sole economic harm or the financial or business inconvenience arising from an interlocutory judgment was not sufficient to consider same as a judgment ordering the doing of something which cannot be remedied by the final judgment. The Court concluded that it must still be recognized that an interlocutory judgment dismissing a Wellington-type motion may be appealed on the basis of this provision. Indeed, in addition to the economic harm caused to the insured by the dismissal of this type of motion, the Court was of the view that the insured is also deprived of one of the substantive rights provided in his insurance policy and by article 2503 CCQ. The second criteria, which relates to the pursuit of justice is not discussed in detail in this decision. The Court simply mentioned that this condition weighed in favour of granting the leave to appeal. In the end, the Court, reiterated that a judgment which dismisses a Wellington-type motion is a judgment contemplated in the second paragraph of the first alinea of article 29 CCP. WHAT ABOUT THE LEAVE TO APPEAL A JUDGMENT GRANTING A WELLINGTON-TYPE MOTION? If it seems henceforth clear that a judgment dismissing a Wellington-type motion is a judgment contemplated in the second paragraph of the first alinea article 29 CCP, such is not necessarily the case of a judgment granting such a motion. Indeed, the issue remains as to whether the harm suffered by an insurer who is required to take up the defence of its insured is purely economic and may be remedied by the final judgment. In the judgment rendered in the Lloyd’s Underwriters v. 4170831 Canada inc.4 on August 12 last, Justice Kasirer accepted, for discussion purposes only, that an interlocutory judgment allowing in part a Wellington-type motion satisfies the conditions of section 29 CCP., but denied the leave to appeal from on the basis of the pursuit of justice criteria. However, referring to the decision of Ms. Justice Bich, Justice Kasirer wrote the following: [TRANSLATION] “One may wonder, in circumstances where the harm suffered by the insurer is purely economic and may be redressed on the merits, whether article 29 CCP is truly satisfied in all cases. I note the relevance of the discussion of this issue by my colleague Ms. Justice Bich in the context of the dismissal of a Wellington-type motion in Technologies CII inc. v. Société d’assurances générales Northbridge, 20015 QCCA 1246, par.[9] (sitting alone). This being said, in view of my conclusion respecting the criteria set out in article 511 CCP, I reckon that it is not necessary to rule on the issue for the purposes of this motion.” Having determined that the pursuit of justice did not weight in favour of granting the leave to appeal, the Court preferred not to deal with the issue of whether the judgment allowing a Wellington-type motion is a judgment contemplated in the second paragraph of the first alinea of article 29 CCP. We’ll take a raincheck! 1 2015 QCCA 1246. 2 2015 QCCS 1988. 3 2012 QCCA 1348. 4 2015 QCCA 1333.

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  • Class Actions: The Supreme Court of Canada addresses the issue of indirect purchasers and the jurisdiction of the Quebec courts over contracts formed at a distance

    On October 31, 2013, the Supreme Court rendered three judgments with respect to class actions at the authorization or certification stage, one from the Province of Quebec1 and the other two from the Province of British Columbia.2In all three cases, the facts raised issues with respect to the price fixing of consumer products in contravention of the Competition Act,3 notably through a conspiracy. The class representatives sought to institute class actions against the persons or companies allegedly responsible for the price fixing, which raised the price of these products, on behalf of members of the class of persons who directly or indirectly purchased the products. Among other things, the three actions alleged the civil fault of the defendant companies.In the Infineon Technologies case ('Infineon'), the manufacturers of dynamic random-access memory microchips (“DRAM”), which allow information to be electronically stored and rapidly retrieved for use in a wide range of electronic devices, were alleged to have taken part in an international conspiracy to fix the price of the product, resulting in an increase in the purchase price. In the Pro-Sys Consultants Ltd. case ('Pro-Sys'), Microsoft was alleged to have engaged in unlawful conduct by overcharging for its operating systems and applications software. And in the Sun-Rype Products Ltd. case ('Sun-Rype'), manufacturers of food products allegedly engaged in an illegal conspiracy to fix the price of high fructose corn syrup used in various food products, including, for example, soft drinks.The three decisions raised the issue as to whether indirect purchasers of the products, hence, customers who did not purchase the product directly from the alleged overchargers, but who purchased it indirectly from a party further down the chain of distribution, could institute proceedings directly against the person alleged to have fixed the price. The Court’s reasons in answer to this question were rendered in the Pro-Sys matter and applied in the other two cases. In so doing, the Supreme Court resolved a judicial controversy over the rights and recourses of indirect purchasers in similar circumstances.In Sun-Rype, the Court dealt with the question as to whether a class of persons consisting both of purchasers who acquired the product directly from the party allegedly responsible for the price fixing, and of indirect purchasers, constituted an identifiable class.Finally, in Infineon, the Court dealt with the issue of the jurisdiction of the Quebec courts to authorize the bringing of a class action in the context where a product was purchased on the Internet or “online” from a company which manufactures and conducts business outside the province, such as a distance contract.Indirect Purchasers’ Right of Action: The Pro-Sys CaseIn reasons delivered by Justice Rothstein, the Court concluded that indirect purchasers could bring an action to recover losses which they suffered in purchasing a product whose price had allegedly been increased illegally. Justice Rothstein dismissed the argument pursuant to which only direct purchasers, who may have subsequently transferred the additional costs to subsequent purchasers, had a right of action. The risk of multiple recovery and the complexities of the evidence which the representatives of the class would have to adduce did not constitute sufficient reasons to stand in the way of allowing indirect purchasers to make their case against those responsible for the price fixing. Moreover, according to Justice Rothstein, the deterrence function of the Competition Act was not impaired by the actions of indirect purchasers.The Supreme Court of Canada therefore distinguished its position from that of the Supreme Court of the United States,4 which concluded that indirect purchasers had no cause of action against those responsible for the price fixing. According to Justice Rothstein, the refusal by a number of state level courts to follow the federal precedent, and the more recent doctrinal discussions in support of authorizing the right of action of indirect purchasers against the perpetrator of the illegal price fixing, favors the position of allowing the indirect purchasers’ right of action.After reviewing the criteria for certification, the Supreme Court concluded that they had all been met, and therefore granted the certification of the action as a class proceeding.Direct and Indirect Purchasers as Class Members: The Sun-Rype CaseIn a judgment for the majority, Justice Rothstein5 concluded that a class made up of indirect and direct purchasers met the requirement for an identifiable class. Although certain members of the class might not have been able to prove a direct individual loss, the proposed class did not give rise to sufficient difficulties that would have warranted dismissing the action.However, in this case, the Court concluded that the criteria for certification had not been met. Based on the evidence, it was impossible for indirect purchasers to prove they had purchased a product containing high fructose corn syrup, and it was therefore impossible to prove they had suffered a loss. The Court found that there was therefore no factual basis to determine the class membership of indirect purchasers. According to Justice Rothstein, the Appellants had not met the relatively low evidentiary burden to adduce evidence to establish some basis in fact that at least two class members could be identified.In the dissenting opinion written by Justice Karakatsanis and concurred in by Justice Cromwell, Justice Karakatsanis came to the conclusion that the facts as alleged provided a sufficient evidentiary basis to reach a finding that there was “an identifiable class of two or more persons”.According to the dissent, evidentiary difficulties should not stand in the way of certification.Jurisdiction of the Quebec Courts: The Infineon CaseIn Infineon, the Petitioner, Option consommateurs, sought authorization to institute a class action against the manufacturers of DRAM chips used in various electronic devices, including personal computers. The designated class representative purchased her computer online by credit card from a company operating exclusively outside Quebec and which had no place of business in Quebec. Option consommateurs alleged that the price-fixing conspiracy artificially inflated prices of DRAM and products containing DRAM sold in Quebec. The manufacturers argued that the Quebec courts lacked jurisdiction because the contract was formed outside Quebec and none of the alleged faults, including the conspiracy, was committed in Quebec.The Supreme Court acknowledged that the challenge to Quebec’s jurisdiction could properly be raised and dealt with at the outset of a proceeding for the authorization of a class action. Even if a Quebec court concludes that it has jurisdiction, the issue may still be raised again at a later stage of the proceeding because the judgment rendered at this stage is only an interlocutory decision.Relying on article 3148 of the Civil Code of Quebec, Justices LeBel and Wagner, in an unanimous decision by the Court, concluded that the Quebec courts had jurisdiction. According to them, the alleged economic damage suffered by the purchasers of the products consisted of a higher price resulting from the conspiracy and constituted a sufficient connection with the Province of Quebec to ground jurisdiction. In other words, since the pecuniary loss was suffered in Quebec, this gave the Quebec courts jurisdiction. Moreover, the contract at issue was a “distance contract”, as defined by the Consumer Protection Act,6 which provides that it is deemed to be entered into at the address of the consumer, which, in this case, was in Quebec.Finally, Justices LeBel and Wagner concluded that the criteria for the authorization of a class action set out in article 1003 of the Code of Civil Procedure ('C.C.P.') had been met. They reiterated that, at this preliminary procedural stage, the criteria for the authorization of a class action must be interpreted and applied broadly, and that the burden is one of demonstration and not of proof. The Court noted that, in Quebec, the burden at the authorization stage is less onerous than at the certification stage in other Canadian jurisdictions. Thus, the Court highlighted that, in other Canadian jurisdictions, indirect purchasers would have to show that their claim has a sufficient basis in fact, and would have to produce expert testimony demonstrating an aggregate loss. To impose such a burden would be inconsistent with the requirements of article 1003 C.C.P. The class action was therefore authorized.ConclusionThese three judgments will certainly facilitate the authorization of class actions by direct and indirect purchasers. Moreover, consumers who purchase products over the Internet from the comfort of their homes may have a right of action against the persons that are alleged to have increased the prices. In the context of purchases in Quebec, where the economic damages are suffered in Quebec, consumers, and the associations who represent them, will in all likelihood resort to launching class action proceedings in Quebec, even where the vendor or manufacturer is located outside Quebec._________________________________________1 Infineon Technologies AG v. Option consommateurs, 2013 SCC 59.2 Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57 and Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2013 SCC 58.3 R.S.C., 1985, c. C-34.4 Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).5 With Chief Justice McLachlin and Justices LeBel, Fish, Abella, Moldaver and Wagner.6 R.S.Q., c. P-40.1.

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  • The Canada Consumer Product Safety Act: Are you ready?

    After more than three years of delays, studies and public consultations, the Canada Consumer Product Safety Act came into force on June 20, 2011. The Act imposes new obligations on manufacturers, importers and sellers of consumer products and grants significant powers to Health Canada. It will impact this critical sector of our economy.

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  • Exclusions of work performed by the insured new interpretation and duty to defend

    On September 23, 2010, the Supreme Court of Canada issued an unanimous judgment in the case of Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, reversing two lower Court judgments of British Columbia which had concluded that the insurer, Lombard, had no duty to defend the general contractor Progressive Homes, against a claim for defects and damages caused by water infiltration in four buildings built by it.

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  • Hidden Defect, reduction in the purchase price and liability insurance coverage

    On June 2, 2010, the Quebec Court of Appeal confirmed the Superior Court’s decision, which dismissed the insured’s action in warranty against his liability insurer under his home owner’s policy. The insured alleged that the purchasers’ claim for reducing the purchase price due to a hidden defect was covered under the liability insurance policy.

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  • Manufacturers, Importers, Distributors and Retailers: the Public’s Safety is your Business

    The increasing number of recalls of consumer products in recent years is indicative of a trend that has raised concerns for governmental authorities. In response, the Canadian government announced, on April 8, 2008, a reform of the existing legislation to strengthen the protection of human health and safety. The first step was the introduction of the Canada Consumer Product Safety Act and the second, the reform of the Food and Drugs Act.Both elements of this reform may have considerable impact on this critical sector of our economy. The Canada Consumer Product Safety Act is ambitious and may have serious repercussions on the activities of any number of businesses, and so it warrants particular attention.A contravention of the provisions of the Bill (if it becomes law), its regulations or an order issued pursuant to it may lead to sanctions, including fines and imprisonment. Where a corporation contravenes the Bill, its directors, officers, agents and representatives who acquiesced or participated in the commission of the offence will be considered parties to the offence and be liable on conviction to the punishment provided for by the Bill. Although Bill C-52 is making its way through the legislative process, the government has already made it clear that the current regime does not provide consumers with sufficient protection and that it intends to clamp down on manufacturers and importers. Although the proposed legislation will in all likelihood be adopted, much of the detail will be contained in the regulations which have yet to be published.

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  • Do the costs of a correcting manufacturing defect result from an accident?

    Can the cost of remedying a manufacturing defect be considered as damage resulting from an "accident" covered under a liability insurance policy?This is the question the Quebec Court of Appeal considered recently. Its judgement is of interest not only as regards to the Court of Appeal's answer but also for its extra-provincial implications, as the underlying litigation is pending before the Newfoundland Supreme Court.

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