Federal Court of Canada Denies Application for Class Action Against Compensation for Delayed Flights

The Federal Court of Canada recently denied an application to certify a proposed class action against SATA Internacional for claims of compensation for delayed flights. In Berenguer v. SATA Internacional, the Plaintiff was an Alberta resident and the Defendant a Portuguese commercial airline, which operates scheduled flights to and from Canadian cities. The claim related to the alleged failure of SATA to pay compensation in accordance with European Union Regulation (EC) No. 261/2004 (“EU261”). EU261 is a consumer protection regulation which sets out requirements for providing compensation and assistance to passengers in the event of denied boarding and cancellation or delays of flights.

The Plaintiff sought to certify a class action on behalf of all passengers worldwide who experienced delays on flights operated by SATA to and/or from Canada, which arrived at the final destination more than 3 hours after the scheduled arrival time. The Plaintiff sought a declaration that SATA breached the express and/or implied terms of its contract of carriage to pay cash compensation in accordance with EU261 and an order that SATA pay compensation to each class member. At the same time, SATA brought an application for an order to strike the claim, without leave to amend, and dismiss the proceeding on the basis that the pleadings did not disclose a viable cause of action. Before considering the motion to certify, the Court dealt with the threshold jurisdictional issue as to whether the Federal Court of Canada had jurisdiction to hear the action.

SATA argued that the Court had no jurisdiction, whether the claim sought relief under EU261 or on the basis of a breach of contract to comply with EU261, as it was plain and obvious that the relief sought was not “under an Act of Parliament or otherwise” as required by the Federal Courts Act (the “Act”).  The Plaintiff argued that her claim was recognized, created, and/or determined to some material extent by federal law and that SATA, expressly or by implication, contractually agreed to apply EU 261 to its passengers and flights.

On its motion to strike the claim, SATA had the burden to prove that it was plain and obvious that the Federal Court had no jurisdiction. The Federal Court is a statutory court and can only exercise jurisdiction under a statutory grant of power. The Court confirmed that in order for it to have jurisdiction to hear a matter, three conditions must be met:

  1. There must be a statutory grant of jurisdiction by the federal Parliament;
  2. There must be an existing body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of jurisdiction; and
  3. The law on which the case is based must be “a law of Canada” as the phrase is used in section 101 of the Constitution Act, 1867.

In analyzing whether the Federal Court had jurisdiction, it was first necessary to determine the essential nature of the claim.  Here, the Plaintiff framed her pleadings as a claim for breach of contract. She alleged that the Defendant, under its tariff, contractually incorporated and agreed to comply with the flight delay/cancellation rules of EU261. The Plaintiff sought to enforce the Defendant’s contractual obligation to pay compensation. The Defendant agreed that the core issue related to a contractual dispute. However, the parties disagreed on whether the damages claimed were sought under an Act of Parliament or otherwise, as required by the Act.  The Court was satisfied that the claim fell under the field of aeronautics, as defined in the Act, and therefore the first condition was met.  However, the Court found that the two other conditions were not.

The jurisdictional dispute focussed on the second and third elements that there was a “body of federal law” based on “a law of Canada.”  SATA acknowledged that the Montreal Convention is part of Canadian federal law by virtue of the Carriage by Air Act and that the Federal Court has jurisdiction to hear carriage by air disputes.  However, the claim must be founded on the Montreal Convention.  In Thibodeau v. Air Canada, the Supreme Court of Canada held that the Montreal Convention provides the exclusive recourse against airlines for various types of claims arising in the course of international carriage by air.  SATA argued that the Plaintiff’s claim did not respect the exclusivity principle.  Further SATA said that the claim was based on contract and EU261, and that any federal law related to the claim was merely a bystander.  The Court agreed.  The claim did not rely on Article 19 of the Montreal Convention which does relate to delays.  Rather, the Plaintiff sought damages for breach of contract, in that SATA breached its tariff and did not pay compensation under EU261.

The Court held that it was plain and obvious that the source of the Defendant’s alleged liability did not arise out of the Carriage by Air Act or any other Canadian law. Rather, it related to contract law and EU261, not federal law. The Court found that there was no body of federal law “essential to the disposition of the case and which nourishes the statutory grant of jurisdiction” and therefore it was plain and obvious that there was no cause of action.  As there was no reason to suggest that the Plaintiff could improve her case by amending the pleadings, the Court granted the Defendant’s motion to strike the claim. The court reaffirmed another recent decision of the Federal Court, limiting the jurisdictional authority of the Federal Court to consider and adjudicate upon aviation matters (see our previous blog post here).

The Court held that even if that finding was incorrect, it was plain and obvious that the claim had no prospect of success. Article 29 of the Montreal Convention provides that “any action for damages, however founded” may be only be brought “subject to the conditions and such limits of liability as are set out in this Convention”. Further, it provides that non-compensatory damages should not be recoverable. Article 19 of the Montreal Convention imposes liability on a carrier for damage occasioned by delay, but the Plaintiff did not allege that she sustained any damages, occasioned by delay or otherwise.

In the circumstances the Court granted the motion to strike the claim for failing to disclose a reasonable cause of action. Nevertheless, if that determination was wrong, the Court went on to consider whether the Plaintiff met the required conditions set out in the Federal Court Rules in order to certify a class proceeding.  The Court considered whether:

  1. The pleadings disclose a reasonable cause of action;
  2. There is an identifiable class of two or more persons;
  3. The claims of the class members raise common questions of law or fact;
  4. A class proceeding is the preferable procedure; and
  5. There is a representative plaintiff.

Although the Court found that most of the conditions may have been met, not all were.  Not all claims raised common issues among the proposed class members and the Court was not satisfied that a class action would be preferable to the informal facilitation process and formal adjudicative process offered by the Canadian Transport Agency (“CTA”).  The Court noted that the CTA is an independent, quasi-judicial tribunal which makes decisions on a wide range of aviation matters.  It has considerable power, including the authority to examine and interpret SATA’s tariff.  Where it determines that a carrier has not properly applied its tariff, the CTA has the power to order a carrier to take corrective measures and/or pay compensation to passengers.

The Court concluded by confirming that the Defendant’s motion to strike for want of jurisdiction was granted and the action was dismissed. The Plaintiff’s application to certify a class action was dismissed as she had failed to meet the burden of establishing all 5 criteria for certification.

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