Originally published in Blakes Bulletin on Class
Actions, April 2011
On April 15, 2011, the British Columbia Court of Appeal released
its reasons for judgment in two important class actions brought in
British Columbia: Pro-Sys Consultants Ltd. v. Microsoft
Corporation and Sun-Rype Products Ltd. v. Archer Daniels Midland
The action against Microsoft, which had been certified as a
class proceeding, alleged that Microsoft had engaged in various
kinds of anticompetitive behaviour that purportedly allowed it to
overcharge for its products. The class members were all indirect
purchasers who had purchased computers or software licences from
various stores, distributors, or manufacturers who had installed
Microsoft operating systems and application software into those
The plaintiffs alleged that Microsoft had combined with the
computer manufacturers in schemes to exclude competition and keep
prices higher than they should have been. The plaintiffs further
alleged that the overcharges at the direct-purchaser level were
passed through to the indirect purchasers, and they claimed redress
in tort and restitution.
The majority of the British Columbia Court of Appeal set aside
the certification order and dismissed the action. The court held
the pleadings failed to disclose a cause of action that could be
maintained at law on the basis of the decision of the Supreme Court
of Canada in Kingstreet Investments Ltd. v. New Brunswick
(Finance), 2007 SCC 1,  1 S.C.R. 3 in which the Supreme
Court rejected the pass-on defence as a matter of law. On this
basis, the Court of Appeal held that it follows that any passing on
of an overcharge is not recognized in law and cannot give rise to a
cause of action for its recovery by those to whom the charge was in
whole, or in part, said to have been passed on. To hold otherwise
would result in liability for double recovery; that is, some of or
all of the same charge being recoverable from the defendant
The court further held that Canadian law was consistent with
American federal law, as established by the Supreme Court of the
United States in Hanover Shoe v. United Shoe Machinery
Corp. and Illinois Brick Co. v. Illinois.
In the Sun-Rype Products Ltd. case, the court allowed
the appeal from a certification order and declared that the
pleading did not disclose a cause of action as against the indirect
purchasers of high-fructose corn syrup, a sweetener used in various
In this case, the plaintiffs alleged that the defendants had
fixed the price of high-fructose corn syrup. Claims were asserted
on behalf of both direct and indirect purchasers. The court allowed
the appeal on the basis that there was no passing on defence in
Canadian law and no sound basis upon which it could be said that a
claim can be made for an illegal overcharge that may have been
passed on to an indirect purchaser.
These two decisions of the British Columbia Court of Appeal are
the clearest statements from a Canadian appellate court that the
passing on defence will not be recognized in anticompetitive or
restraint of trade cases. These decisions are further signals that
Canadian and federal U.S. rulings on this important issue are
It is anticipated that the plaintiff in both cases will seek
leave to appeal to the Supreme Court of Canada.
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