In Wakelam v. Wyeth Consumer Healthcare/Wyeth Soin de Sante Inc., a unanimous division of the Court of Appeal for British Columbia restricted the ability of plaintiffs to claim disgorgement based on statutory causes of action found in the Business Practices and Consumer Protection Act ("BPCPA ") and Competition Act. In so doing, the Court of Appeal reversed the certification of the Wakelam class proceeding by the trial court.
This result continues the development of a line of authority that will be important to manufacturers and distributors, limiting any claims to actual losses sustained; non-injured plaintiffs will not be able to claim under these statutes.
The Wakelam Case
On December 18, 2008, Health Canada reversed a longstanding
policy that had permitted the sale in Canada of certain
non-prescription cough and cold medicines for use by children,
requiring
manufacturers to re-label the medicines to instruct consumers that
they should not be used in children under six years of age. This
reversal was based on new scientific findings that these medicines
were ineffective for use by children. The defendant cold medicine
manufacturers complied with the re-labeling.
Ms. Wakelam, the proposed representative plaintiff, brought claim against several defendant manufacturers purportedly on behalf of "all persons resident in British Columbia who purchased Children's Cough Medicine for use by children under the age of six, that was supplied, offered for sale, advertised or promoted by the defendants between December 24, 1997 to present".
The Court noted that Ms. Wakelam did not give evidence that she gave the cough syrup to her son, nor (if her son took any) that the cough syrup was not effective or caused him injury or harm.
Ms. Wakelam's claim was that in marketing the medicines for use in children under six, the defendant manufacturers engaged in "deceptive acts or practices" contrary to the BPCPA and made representations to the public that were false or misleading in a material respect, contrary to the Competition Act. She sought the disgorgement of any benefits received by the defendants as a result of their alleged contraventions of the two statutes.
In reasons indexed as 2011 BCSC 1765, the certification judge certified the proceeding as a class proceeding on substantially the terms sought. The defendant manufacturers appealed the certification to the Court of Appeal. Reasons were released by the Court of Appeal on 30 January 2014.
Doctrine of Paramountcy Considered by Court of Appeal
The defendants argued both at certification and on appeal, under the second branch of the paramountcy ("frustration") constitutional doctrine, that the purposes of the federal Foodand Drug Act, administered by Health Canada, would be frustrated if the BPCPA were to apply to the packaging, labelling and sale of the medicines in question. The certification judge rejected this argument, finding that applying the BPCPAmerely added an "additional layer of protection" for the consumer, rather than creating a conflict between the two statutes or "rendering inoperative" the federal statute.
The Court of Appeal agreed with the certification judge, noting that while there was no inconsistency between the statutes in the facts of this case, a future argument about inconsistency (on appropriate facts) was not foreclosed.
Disgorgement Remedies Rejected by Court of Appeal: BPCPA
Ms. Wakelam sought recovery under restitutionary principles (for "unjust enrichment, waiver of tort and constructive trust") premised on breach of the BPCPA. The remedy specifically sought was the restitution or disgorgement of money received by the defendants as a result of the alleged statutory breach.
The facts of these sought remedies required the Court of Appeal to revisit its 2012 decision in Koubi v. Mazda Canada, a decision not available to the certification judge in Wakelam.
In Koubi, the plaintiff complained of a defect in the
door locks in certain Mazda vehicles that she alleged made the
vehicle susceptible to a break-in. Her vehicle was not broken into
but she became concerned about its security. Soon after, she was
notified that she could have a reinforcement installed at her local
dealership, which she did in September 2007. Nevertheless, Ms.
Koubi initiated a class action on the basis that Mazda Canada's
representations as to the quality of its components, including door
locks, were "deceptive acts" by a "supplier"
contrary to ss. 4 and 5 of the BPCPA.
She sought resitutionary remedies, on the basis of "waiver of
tort".
In considering the BPCPA and whether a claim of waiver of tort was available for alleged "breach" of the statute, the Court of Appeal in Koubi held that the statute provided an "exhaustive code regulating consumer transactions" and that there was nothing in the BPCPA to indicate that the Legislature intended to augment the statutory remedy by permitting consumers to mount restitutionary actions.
The Court of Appeal in Wakelamfound Koubito be on point, and applied it to Ms. Wakelam's claim. Madam Justice Newbury wrote:
argue that the [BPCPA] provides only 'ineffective enforcement'.
Disgorgement Remedies Rejected by Court of Appeal: Competition Act
In the alternative to her claims under the BPCPA, Ms. Wakelem also asserted breaches of the Competition Act.
The defendants contended that just as the BPCPAis a "complete code" for consumer transactions, the Competition Act deals comprehensively with anti- competitive and unfair trade practices. The Court of Appeal, after reviewing the statutory scheme and several decisions, agreed with the defendants and reversed the certification judge:
Impact on Manufacturers and Distributors
Critically, the Court of Appeal decision restricts the ability
of plaintiffs to bring consumer protection- based claims for
disgorgement of profits of manufacturers and distributors under
both the BPCPAand the Competition Act. This
decision, along with the Court of Appeal's decision in
Koubi, is of significance to any manufacturer or
distributor, especially in cases where no losses are suffered
by consumers. The Court of Appeal decisions in Wakelem
and in Koubi will likely be applied to other consumer
protection laws across Canada. Expect restitutionary remedies,
especially waiver of tort,
to be more carefully scrutinized on a summary basis without the
need of a full trial.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.