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 theBusiness 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:

[66] In my view, the reasoning in Koubiapplies not only to the allegation of waiver of tort advanced by Ms. Wakelam but also to her claims for unjust enrichment and constructive trust insofar as they are based on breach of  the [BPCPA]. Although I might not have used the phrase “occupying the field” (which has constitutional connotations), I see no legislative intent to create restitutionary causes of action arising from or based on breaches of the [BPCPA]; nor has the plaintiff sought to 
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 Actdeals 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:

[90] Section 36 [of the Competition Act ] 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. It follows in my view that the certification judge did err in finding that the pleading disclosed a cause of action under theCompetition Act for which a court might grant restitutionary relief; and that accordingly, paras. 34-38 of Ms. Wakelam’s statement of claim do not disclose a cause of action.

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 full decision in Wakelam v. Wyeth Consumer Healthcare/Wyeth Soin de Sante Inc. is available online, and is indexed as 2014 BCCA 36.