Canada: B.C. Supreme Court Denies Certification In Action Against Large Canadian Wireless Service Providers

In Ileman v. Rogers Communications Inc., Justice Weatherill of the Supreme Court of British Columbia refused to certify a putative class action in connection with monthly system access fees charged and collected by various Canadian wireless service providers (the Defendants).

The Court held that one of the claims made by the proposed Representative Plaintiff (the Plaintiff) pursuant to the Business Practices and Consumer Protection Act (BPCPA), as well as the Plaintiff's claims for unjust enrichment and monies had and received, did not disclose a cause of action. With respect to the few claims that were found to disclose a cause of action, Weatherill J. concluded that the proposed class definition presented an insurmountable hurdle to certification and that a class proceeding was not the preferable procedure for resolving those claims.

Background

Beginning in July 1985, the federal Department of Communications (DOC) required individual cell phone users to apply for a radio license and pay annual radio license fees for access to the radio frequency spectrum. At this time, some or all of the Defendants (or their corporate predecessors) began collecting annual license fees from their customers on behalf of the DOC.

In 1987, the DOC eliminated the requirement that individual cell phone users purchase radio licenses. Instead, the DOC began selling spectrum licenses to cellular service providers, including the Defendants and/or their corporate predecessors. The Defendants commenced the practice of charging system licensing (or equivalent) fees to their cellular customers, shown as a separate item on their monthly invoices. The wording and terms of the various agreements used by the Defendants changed from time-to-time; however, they all clearly identified the customer's obligation to pay a monthly "system access fee".

Having paid a system access fee of $6.95 per month ever since he contracted with one of the Defendant service providers for wireless cellular phone services in 1998, the Plaintiff commenced the proposed class action on his own behalf and on behalf of the putative class who purchased cell phone services from the Defendants and who were charged a monthly system access fee. His claim was not about the legality of charging a system access fee - the contracts signed by customers plainly gave the Defendants the right to do so. Rather, his claim was about how the fee was described and presented in the Defendants' invoices to customers.

Causes of Action

Against all of the Defendants, the Plaintiff made the allegation that they had engaged in "deceptive acts and practices" contrary to s.5 of the BPCPA.  Against certain other of the Defendants, the Plaintiff alleged that: (1) they had been unjustly enriched by the collection of system access fees without any authority to do so; and (2) the system access fees were monies had and received by the Defendants to the use of the Plaintiff and putative class members. Weatherill J. examined each of these proposed causes of action in detail in his analysis of whether the pleadings disclosed a cause of action for the purposes of satisfying s. 4(1) of the British Columbia Class Proceedings Act (CPA).

The Plaintiff's Claim Pursuant to the BPCPA

Section 5 of the BPCPA provides as follows: "A supplier must not commit or engage in a deceptive act or practice in respect of a consumer transaction." The Plaintiff alleged that the Defendants breached s. 5 in two ways. First, the Plaintiff alleged that the phrase "system access fee" had the capability, tendency or effect of deceiving or misleading a consumer into believing that the monies were either being remitted to the government as a tax, or used to recover monies that were being remitted to the government when, in fact, the fees were being used by the Defendants, at least in part, as general revenue (Claim One). Second, the Plaintiff alleged that the phrase "system access fee" was a deceptive act or practice when viewed objectively and in the context of historical facts (Claim Two).

With respect to Claim One, Weatherill J. agreed with the Defendants that there was nothing in the words "system access fee" to suggest that the fee will be remitted to the government as a tax, levy or license fee; however, His Lordship found that, objectively, the phrase "system access fee" had the capability of leading consumers to believe that the entirety of the fee was required to offset the Defendants' costs paid to the government for their respective spectrum licenses. To the extent the fees were used by the Defendants for such an offset there was nothing deceptive, but to the extent such fees were used by the Defendants for other purposes, His Lordship could not conclude that it was "plain and obvious that the claim will not succeed."

As for Claim Two, Weatherill J. reasoned that by framing the claim so that the alleged deception of the public arises only in the context of historical facts, the Plaintiff made his knowledge (and that of the members of the putative class) of the historical facts a necessary element of his cause of action. Because there was no plea that either the Plaintiff or the members of the putative class were aware of the historical facts, His Lordship found that the pleadings did not disclose a cause of action. Weatherill J. noted that the Plaintiff attempted to selectively choose from what occurred historically and this would undoubtedly fail to withstand scrutiny at the common issues trial stage if the action was to be certified as a class proceeding.

The Plaintiff's claims for relief under the BPCPA in the form of a declaration that the Defendants' conduct contravenes the BPCPA, and a permanent injunction restraining that conduct, were held to disclose a cause of action. However, Weatherill J. held that the remedy claimed under section 172(3) of the BPCPA for the restoration to putative class members of all monies which the Defendants may have acquired in contravention of the BPCPA did not disclose a cause of action and was bound to fail. Drawing on the recent Court of Appeal decision in Wakelam v. Johnson & Johnson, His Lordship reasoned that the putative class must demonstrate that they have an "interest" in "any money or other property or thing" acquired by the Defendants because of a deceptive act, or practice. Accordingly, while the Plaintiff pleaded that he and the putative class had an interest in the monies paid to the Defendants in respect of the system access fee, Weatherill J. held that this proprietary nexus was more theoretical than actual as no foundation for the alleged proprietary interest had been pleaded. His Lordship made it clear that in exercising its gate-keeping role at the certification stage, "[w]hen a bald and unsupported assertion of fact, in this case a proprietary interest in co-mingled funds of the Defendants, defies credulity and common sense," the Court should not side-step such a flaw in the pleadings.

The Plaintiff's Claim for Unjust Enrichment and Money Had and Received

Weatherill J. found that the Plaintiff's claim for unjust enrichment and the Plaintiff's claim for money had and received were certain to fail. Counsel for the Defendants argued that each of the contracts the customers entered into with the Defendants expressly provided for the payment of the system access fees and therefore, these contracts were a juristic reason for any alleged enrichment. While the Plaintiff's counsel conceded that these contracts expressly stipulated that the Defendants' customers would pay a system access fee, they argued that it was an implied term of the contracts that the fees collected would not be used for any purpose other than remitting them to the government, or offsetting those same charges from the government. Weatherill J. reasoned that if, as the Plaintiff alleged, there was an implied term that the fees would either be remitted to the government as a tax/license fee, or used to recover monies that were being remitted then the Plaintiff's claim was one of breach of contract, not unjust enrichment. Meanwhile, it was held that the plea regarding money had and received to the use of the Plaintiff was advanced on the basis that there had been a partial or total failure of consideration under the services contracts. The Plaintiff had not pleaded a failure of consideration, and therefore, His Lordship concluded that it was plain and obvious that the Plaintiff's claim for money had and received was bound to fail.

The Balance of the Certification Requirements

Given his finding that Claim One and the claims for a declaration and injunction disclosed a cause of action, Weatherill J. considered the remaining certification requirements under ss.4(1)(b)-(e) of the CPA. Ultimately, the Court held that the Plaintiff's claims that disclosed a cause of action failed to satisfy the requirement under s.4(1)(b) that there be an identifiable class and the requirement under s.4(1)(d) that the class proceeding be the preferable procedure for the fair and efficient resolution of the common issues.

Weatherill J. concluded that the identification of the class in this case was not amendable to a class proceeding on the basis that the identification of the class could not be resolved objectively. It was held that the class definition resulted in an "inherently and inescapably individualistic exercise." While counsel for the Plaintiff submitted that the subjective enquiry could be made at a later time, His Lordship plainly disagreed.

The Plaintiff's claims for a declaration or an injunction under s. 172(1) of the BPCPA were held not to warrant certification because both a declaration and injunction would be binding upon the Defendants regardless of whether or not the proceeding was a class action. It was held the three principal goals of class proceedings, namely judicial economy, behaviour modification and access to justice were not served and that continuing the claim as an uncertified proceeding would provide full and effective redress for the claims that did disclose a cause of action.

In the result, the Court held that the action was not appropriate for certification and dismissed the Plaintiff's application for certification.

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