A Missed Opportunity: The Supreme Court Declines Leave to Appeal in Wakelam v. Wyeth Consumer Healthcare

The Supreme Court has declined leave to appeal in Wakelam v. Wyeth Consumer Healthcare. The decision means that the far-reaching findings of the British Columbia Court of Appeal in the areas of consumer protection, competition and restitution law, are permitted to stand. It also means that a conflict among several appellate decisions, concerning the availability of restitutionary remedies on the basis of breaches of the Competition Code, remains unresolved. The decision is of interest to class action practitioners throughout Canada and merits another look.

Introduction

The Supreme Court has declined leave to appeal in Wakelam v. Wyeth Consumer Healthcare. The decision means that the far-reaching findings of the British Columbia Court of Appeal¹ in the areas of consumer protection, competition and restitution law, are permitted to stand. It also means that a conflict among several appellate decisions, concerning the availability of restitutionary remedies on the basis of breaches of the Competition Code, remains unresolved. The decision is of interest to class action practitioners throughout Canada and merits another look.

Facts

On December 18, 2008, Health Canada, on the basis of “a better understanding” of the scientific evidence, decided that cold and cough medicines were not generally effective for children, or were unsafe when dosage requirements were not followed. The ministry ordered that such cold and cough medicines not be marketed for children under the age of six. Enhanced labeling was required for children aged 6 to 12.

The plaintiff, Ms. Wakelam, commenced a class action against the manufacturers of children’s cold medicines. In her affidavit, she deposed that she had purchased approximately five bottles of cough syrup to relieve her son’s cough and cold symptoms during the class period. She claimed that in selling the medicines prior to December 2008, the manufacturers had engaged in “deceptive acts or practices” under British Columbia’s Business Practices and Consumer Protection Act (“BPCPA”)² and made representations to the public that were false or misleading in a material respect, contrary to s. 52 of the Competition Act.³ In addition to damages available pursuant to the above legislation, the plaintiff sought the restitution or disgorgement of money received by the defendants as a result of alleged statutory breaches. The case was certified and appealed.

Holding

The appeal was primarily concerned with three issues:

1. whether the federal Food and Drugs Act (“FDA”)⁴ conflicted with the BPCPA, such that the doctrine of paramountcy made the BPCPA inoperative in this case;
2. whether the plaintiffs could avail themselves of restitutionary awards on the basis of breaches of the BPCPA and/or the Competition Act;⁵ and
3. whether sections 29-30 of the British Columbia Class Proceedings Act (“CPA”) could provide a cause of action.⁶

1) Paramountcy

In this case, the defendants took the position that while the BPCPA is constitutionally valid, the FDA was intended by Parliament to apply exclusively. The defendants argued that the comprehensive regulatory scheme of the FDA would be frustrated by the application of provincial legislation. The certification judge accepted that the subject matter of the plaintiff’s claim had a double aspect, such that the provincial government’s jurisdiction over property and civil rights and the federal government’s criminal law power overlapped. He found that there was no conflict between the BPCPA and the FDA in the particular instance, and hence the doctrine of paramountcy was not engaged. There was thus no basis to conclude that, as a matter of separation of powers, the plaintiff’s BPCPA claim could not succeed. This finding was upheld on appeal, although the court noted that “at a future time and on different facts,” an inconsistency between the FDA and BPCPA could arise.⁷

The debate regarding the applicability of consumer protection legislation has largely been settled by the recent Supreme Court decision in Bank of Montreal v. Marcotte.⁸ In that case, the Court rejected the defendant banks’ argument that certain sections of the Quebec Consumer Protection Act (“CPA”) did not apply to their conduct due to the constitutional doctrines of “interjurisdictional immunity” and “paramountcy.” The Court found that neither doctrine applied. The obligations imposed by the CPA did not impair the federal banking power. Nor could they be said to impair or undermine its purpose. In these circumstances, the Court reiterated its earlier comment that “constitutional doctrine must facilitate, not undermine what this Court has called ‘co-operative federalism’”⁹ and held that the CPA applied despite the presence of federal legislation.

2) Restitutionary Relief

As stated above, in addition to statutory damages, the plaintiff in this case sought restitutionary remedies on the basis of statutory breaches. Relying on its earlier decision Koubi v. Mazda,¹⁰ the Court of Appeal held that the BPCPA represented an “exhaustive code” for the regulation of consumer transactions, and that restitutionary remedies premised on a breach of the BPCPA were not available at law. In Koubi, the plaintiff sought the disgorgement of defendants’ profits on the basis of a “waiver of tort” premised on a breach of the BPCPA. The British Columbia Court of Appeal stated:

A close examination of the statute’s legislative objectives and provisions reveals a clear intent to provide an exhaustive code regulating consumer transactions, directed to both protection of consumers and fairness and consistency for all parties in the consumer marketplace. The Act has over 200 provisions that comprehensively establish, administer, and enforce statutory rights and obligations directed to the regulation of consumer transactions in a multitude of circumstances. It provides extensive powers and remedies to a statutory director and investigative staff to ensure compliance with its requirements. …  It also enacts a panoply of statutory sanctions for suppliers and other offenders who breach the statutory rights of consumers, including administrative penalties …

I discern nothing in the BPCPA to support the view that the legislature intended to augment its statutory remedies by permitting consumers to mount an action against a supplier for restitutionary relief based on the novel doctrine of waiver of tort. Such a conclusion is inconsistent with the express language of ss. 171, 172(3)(a) and 192, which clearly limit recovery for pecuniary loss to restoration of the consumer’s own damages or loss arising from a deceptive act.¹¹

In Wakelam, the Court “fully agree[d]” with the above observations.¹² As a preliminary matter, the Court noted that it was appropriate to deal with the availability of restitutionary relief already at the certification stage, and that “scarce judicial resources may be squandered when difficult questions of law are continually side-stepped in the class action context.” Thus, “it is likely to be beneficial to all concerned, including the justice system, if such questions are directly addressed when raised at an early stage, rather than left for a trial that may never take place, or for another court in another case.”¹³ Furthermore, the Court found that the reasoning in Koubi applied not only to the waiver of tort claim, but also to claims for unjust enrichment and constructive trust, insofar as they were based on a breach of the BPCPA. The Court found “no legislative intent to create restitutionary causes of action arising from or based on breaches of the [BPCPA].”¹⁴

The Court, similarly, held that section 36 the Competition Act, which provides for a private cause of action based on breaches of certain of the Act’s provisions, cannot serve as the basis for restitutionary relief:

The statutory right of action [under the Competition Act] remains “hedged about by restrictions” … including the two-year limitation imposed by s. 36(4). The Court in General Motors was careful to emphasize that this right of action was part of the “well-integrated scheme” of the whole Act, and that it did not create a right of action “at large” …

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 [of the Competition Act.]¹⁵

Thus, the plaintiff’s damages for breach of the Competition Act were limited to the damages actually suffered as a result of the alleged breach. Because the plaintiff “failed to plead any material facts in support of the required causal connection” between the breach and her damages, the Court inferred that she was unable to demonstrate such a connection and struck the Competition Act claim in its entirety.¹⁶

3) Aggregate Damages

Finally, the Court addressed the availability of “aggregate damages” pursuant to sections 29 and 30 of the BC CPA. It observed that in Pro-Sys v. Microsoft, the Supreme Court overruled several British Columbia Court of Appeal decisions, and held that aggregate damages are available only after liability has been established.¹⁷ In particular, the Supreme Court has stated:

The CPA was not intended to allow a group to prove a claim that no individual could.  Rather, an important objective of the CPA is to allow individuals who have provable individual claims to band together to make it more feasible to pursue their claims.¹⁸

Accordingly, the Court held that the plaintiff could not rely on the aggregate damages provisions to establish restitutionary claims not otherwise open to her under the BPCPA or the Competition Act.

Implications for future cases

1) Consumer Protection Statutes in Other Provinces

The case’s holding that restitutionary damages are not available on the basis of breaches of the BPCPA is highly significant. In the absence of restitutionary relief, plaintiffs in BC who wish to assert a breach of the BPCPA will have to prove causation, and thus reliance, on a class-wide basis.

However, the case’s impact upon availability of restitutionary remedies based upon breaches of consumer protection legislation is likely limited to British Columbia. Indeed, the decision has not been followed by other provincial courts to date, and may not be adopted in the future. Further, the Ontario legislation explicitly permits consumers to seek remedies outside the statutory scheme:

Nothing in this Act shall be interpreted to limit any right or remedy that a consumer may have in law.¹⁹

In addition, a consumer who has fallen victim to “unfair practices,” as defined in Part III of the Ontario Consumer Protection Act, is explicitly permitted to rescind an agreement and to seek “any remedy that is available in law, including damages.”²⁰

The BPCPA has no equivalent provisions. The Ontario Parliament explicitly reserved for the plaintiffs the ability to seek remedies outside the statutory scheme – a provision that would be rendered meaningless if the Wakelam holding applied in the Province.

Accordingly, the Wakelam holding in respect of the availability of restitutionary relief in the presence of consumer protection legislation is likely limited to British Columbia.

2) Restitutionary Remedies for Breaches of the Competition Act

The other significant finding of the Wakelam decision is the unavailability of restitutionary remedies on the basis of the Competition Act. The difficulty with this finding is that it appears to be contradicted by a subsequent Supreme Court decision and a number of earlier provincial appellate authorities, including one from British Columbia. It was followed only reluctantly by the British Columbia Supreme Court in the recent Watson v. Bank of America Corporation²¹ case. In declining to hear the Wakelam appeal, the Supreme Court of Canada thus missed an opportunity to resolve an inter-provincial conflict in this area.

Prior to Wakelam, the question of whether the Competition Act provides a “comprehensive code” had been discussed at length by the Manitoba Court of Appeal in Westfair Foods Ltd. v. Lippens Inc.²² In that case, at issue was whether there was an independent cause of action for unlawful interference with economic interests and for conspiracy in a case alleging a breach of ss. 45 and 61 of the Competition Act. The Court stated:

[I]n the present case, the use of the breach of the Competition Act as proof of the “unlawful means” of a conspiracy or an unlawful interference with economic interests is “intellectually acceptable.” The statute in question here did not create the cause of action. Although English jurisprudence shows authority for allowing the pleading of a breach of a statute to substantiate a claim for damages [London Passenger Transport Board v. Upson, [1949] A.C. 155], the same is not true in Canada. The plaintiff is not pleading breach of a statutory duty giving rise to a cause of action. The plaintiff is pleading conspiracy and, in the alternative, unlawful interference with economic interests. The plaintiff will be obliged to prove the breach of the specific provisions of the Act as one of the elements of the torts pleaded.²³

Since Westfair, a number of provincial appellate authorities reached a similar conclusion.²⁴ Similarly, the Ontario Court of Appeal in Apotex Inc. v. Hoffmann LaRoche Ltd.,²⁵ followed Westfair to find that the plaintiffs could ground a claim in civil conspiracy and unlawful interference with economic relations upon a breach of the Competition Act.

Furthermore, the finding in Wakelam appears to contradict an earlier British Columbia Court of Appeal decision in TELUS Communications Co. v. Rogers Communications Inc., where the Court held that that the Competition Act was “not, on its face, a code purporting to comprehensively regulate an area of commerce.”²⁶

Finally, as the Court in Watson observed, the Wakelam decision also appears to contradict the Supreme Court’s ruling in Pro-Sys Consultants Ltd. v. Microsoft Corporation,²⁷ where the Court ultimately certified both tortious and restitutionary claims premised on a breach of the Competition Act.

Thus, the same court which followed Wakelam, albeit reluctantly, in Watson, refused to follow Wakelam on a motion arising out of the Microsoft class action.²⁸ In refusing the follow Wakelam, the court stated:

If Wakelam is interpreted to affect tort claims, it would be in conflict with the combination of the Supreme Court’s ruling in this case and Bram, which was decided the day after Wakelam. At the Supreme Court of Canada, Microsoft argued that the conspiracy claim (as well as the interference with economic relations claim) should be struck because the plaintiff could not establish the required illegal means. The Supreme Court of Canada held … that [it] was not plain and obvious and declined to strike the claim. … If there is a conflict between Wakelam and Bram, Bram must obviously prevail.  Wakelam cannot affect the certification of a claim certified by the Supreme Court in this case.

In summary, I do not find it plain and obvious that breaches of Part VI of the Competition Act cannot be relied on as the basis for the tort of illegal means conspiracy.²⁹

Accordingly, the scope of the Wakelam holding remains unclear even in British Columbia. It is doubtful that Wakelam is good law in other provinces, given various provincial courts’ contrary holdings and, most recently, the Supreme Court’s decisions in Microsoft and A.I. Enterprises Ltd. v. Bram Enterprises Ltd.³⁰

¹ 2014 BCCA 36 (“Wakelam Appeal”).

² SBC 2004, c. 2.

³ R.S.C. 1985, c. C-34.

⁴ R.S.C., 1985, c. F-27.

⁵ R.S.C., 1985, c. C-34.

⁶ RSBC 1996, c. 50.

⁷ Wakelam Appeal at para. 43.

⁸ 2014 SCC 55.

⁹ Ibid. at para. 84, citing Canadian Western Bank v. Alberta, 2007 SCC 22, at para. 24

¹⁰ 2012 BCCA 310

¹¹ Ibid. at paras. 63-64, emphasis added.

¹² Wakelam Appeal at para. 64.

¹³ Ibid.

¹⁴ Ibid. at para. 66.

¹⁵ Wakelam Appeal at paras. 89-90.

¹⁶ Ibid. at para. 92.

¹⁷ 2013 SCC 57.

¹⁸ Ibid. at para. 133.

¹⁹ Consumer Protection Act, S.O. 2002, Ch. 30, Sch. A., section 6.

²⁰ Ibid., section 18(1).

²¹ 2014 BCSC 532.

²² [1989] M.J. No. 572 (C.A.), leave to appeal ref’d [1990] S.C.C.A. No. 17.

²³ Ibid. at 338.

²⁴ Polar Ice Express Ltd. v. Arctic Glacier Inc., 2007 ABCA 20; Acier Leroux Inc. v. Tremblay, [2004] R.J.Q. 834 (C.A.); Industrial Union of Marine and Shipbuilding Workers of Canada, Local 1 v. International Brotherhood of Electrical Workers, Local 625, 2002 NSCA 56.

²⁵ 2000 CanLII 16984 (ON CA).

²⁶ 2009 BCCA 581 at para. 43.

²⁷ 2013 SCC 57.

²⁸ 2014 BCSC 1280.

²⁹Ibid. at paras. and 60 and 65.

³⁰ 2014 SCC 12.