The British Columbia Court of Appeal holds that breach of the Competition Act can ground a claim in civil conspiracy

In Watson v. Bank of America Corporation, the British Columbia Court of Appeal upheld the certification of a class action by retail merchants against Visa Canada Corporation, MasterCard International Inc. and a number of major Canadian banks in which the plaintiff alleges that banks and credit card companies unlawfully conspired in relation to fees charged to merchants on credit card transactions.¹

This case has implications for B.C. class actions based on alleged breaches of the Competition Act,² and potentially for similar class actions in other Canadian provinces if the B.C. Court of Appeal’s decision is followed in other jurisdictions.

In Watson, the plaintiff alleges that the defendants entered into agreements to impose burdensome fees upon merchants who accept payment via credit cards and to mandate rules that restrict merchants’ ability to determine their business practices. The plaintiff claims that these agreements are contrary to s. 45 (criminal conspiracy) and s. 61 (price maintenance) of the Competition Act, and seeks damages under s. 36 of the Competition Act. The plaintiff further relies on the various alleged breaches of the Competition Act to found claims in tort and equity for civil conspiracy (including both unlawful means conspiracy and conspiracy to injure), unlawful interference with economic interests, unjust enrichment, constructive trust and waiver of tort.

In 2014, Chief Justice Bauman of the B.C. Supreme Court certified the class action but struck out the plaintiff’s claims for breach of s. 61 of the Competition Act, unlawful means conspiracy, unlawful interference with economic interests, and constructive trust.³ In striking out these claims, Bauman C.J. followed the B.C. Court of Appeal’s decision in Wakelam v. Wyeth Consumer Healthcare⁴ in which the Court found the Competition Act to be a “complete code” with exhaustive remedies for breach of the Competition Act. The plaintiff appealed the parts of the order striking out the claims for unlawful means conspiracy and constructive trust. The defendants cross-appealed the certification order arguing that Bauman C.J. erred in certifying any of the plaintiff’s claims.

The primary issue on the plaintiff’s appeal was whether the Competition Act provided a “complete code” for remedies for breach of the Act, or whether a breach of the Competition Act could also give rise to “unlawful means” that could ground a claim for damages in common law or equity independent of the statutory remedies contained in the Act. In deciding this case, the Court of Appeal considered (a) whether the breach of a statute could amount to “unlawful means” and (b) whether breach of the Competition Act in particular could amount to “unlawful means.”

On the first question, the Court of Appeal held that “unlawful means” could be established by a statutory breach. The Court held that this principle was already established in the case law.

On the second question, the Court of Appeal held that a breach of the Competition Act in particular could give rise to “unlawful means.” The Court cited its previous holding in Wakelam for the proposition that a breach of the Competition Act alone could not ground claims for restitutionary remedies, but distinguished it from claims based on the tort of unlawful means conspiracy. In the Court’s view, there was no evidence of legislative intent to limit civil remedies for breach of the Competition Act to those remedies contained in the Act. The Court held that the scheme for civil redress contained in s. 36 of the Competition Act was not intended to replace the common law action in unlawful means conspiracy. The fact that the statutory and common law causes of action had different elements, remedies and limitation periods was evidence that the legislature intended them to co-exist.

For these reasons, the B.C. Court of Appeal held that a breach of the Competition Act could constitute “unlawful means” and ground claims for damages in common law or equity.

The Court of Appeal then turned to the cross-appeal, the focus of which was whether the court below had correctly interpreted and applied section 4(1)(a) of the British Columbia Class Proceedings Act,⁵  which requires the pleadings to disclose a proper cause of action in order to be certified as a class action.

The Court of Appeal gave deference to the lower court’s decision with only one exception. The Court of Appeal agreed with the defendants that Bauman C.J. erred in certifying the plaintiff’s statutory claim for conspiracy under s. 36(1) and s. 45 of the Competition Act because the pleadings did not disclose a proper cause of action. The plaintiff’s pleadings failed to state that the defendants made any agreements with a “competitor” as required by s. 45. Although the plaintiff had pleaded that agreements were made between banks, networks and issuers of credit cards, these entities were not in competition with one another. The pleadings could not be read to allege agreements between banks and other banks, for instance, who were competitors.

The Watson case synthesizes a number of recent B.C. competition law decisions and clarifies the relationship between the Competition Act and common law or equitable claims for relief in that province. The Competition Act does not preclude existing common law or equitable claims for relief to be brought in B.C., such as unlawful means conspiracy. This means that defendants in B.C. will continue to be required to defend against statutory, common law and equitable claims of relief arising from the same alleged conspiracy (as they had before the Watson case was originally decided). It remains to be seen whether the B.C. Court of Appeal’s reasoning will be followed in other Canadian provinces or by the Supreme Court of Canada where the question of whether the Competition Act provides a complete remedial code has yet to be judicially considered.⁶