• Competition Act Tort Claims Still Viable: Fairhurst v Anglo American PLC
  • January 23, 2015 | Authors: William A. Bortolin; Emrys Davis
  • Law Firm: Bennett Jones LLP - Toronto Office
  • Can indirect purchasers claim damages in tort for breaches of the Competition Act? This was one of the issues before the British Columbia Supreme Court in Fairhurst v Anglo American PLC, 2014 BCSC 2270. Madam Justice Brown considered the law on this issue to be contradictory, and held that the claims based in tort were not “bound to fail”. The claims were ultimately certified.

    This outcome is somewhat surprising, given the British Columbia Court of Appeal’s decision in Wakelam v Wyeth Consumer Healthcare/Wyeth Soins de Sante Inc, 2014 BCCA 36, from earlier this year. The Court of Appeal held that the Competition Act comprehensively codifies the remedies available for a breach of the Act, and therefore that it is not possible to claim equitable remedies (such as restitution) based solely upon a breach of the Act. The Court also suggested that breaches of the Competition Act would be incapable of supporting claims based in tort (as distinct from claims based on one of statutory causes of action available under the Act). In Watson v Bank of American Corporation, 2014 BCSC 532, the B.C. Supreme Court followed Wakelam, and held that it was plain and obvious that tort claims based solely on breaches of the Competition Act would fail (at para. 190).

    The same types of tort claims were made in Fairhurst. The plaintiff, an indirect purchaser, alleged price-fixing and bid-rigging in relation to diamonds. Amongst other things, the plaintiff claimed damages based on the torts of unlawful means and unlawful means conspiracy, and relied mainly on breaches of the Competition Act as constituting the “unlawful means”. The defendants argued, following the B.C. Court of Appeal decision in Wakelam, that plaintiffs cannot rely on Competition Act breaches as the “unlawful means” for either tort, because Parliament intended that section 36 of the Competition Act be the exclusive civil remedy for plaintiffs harmed by anticompetitive conduct.

    Justice Brown rejected this argument, however, mainly in reliance on the Supreme Court of Canada’s decisions in Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57, and A.I. Enterprises Ltd v Bram Enterprises Ltd, 2014 SCC 12. In Pro-Sys, the Supreme Court of Canada declined to strike claims for unlawful means and unlawful means conspiracy, even though - as in Fairhurst - they were based in breaches of the Competition Act. In Bram, the Supreme Court of Canada dealt with the elements of the unlawful means tort, and suggested that a breach of statute could constitute “unlawful means” for the purpose of the unlawful means conspiracy tort. A case involving a breach of the Combines Investigation Act (the predecessor to the Competition Act) was favourably cited. Justice Brown described these decisions as contradictory to Wakelam, but believed that she was bound by the higher authority of the Supreme Court of Canada.

    In our view, the viability of tort claims based on breaches of the Competition Act remains an open question. While the Supreme Court of Canada declined to strike such claims in Pro-Sys, it did so solely on the basis that the elements of the unlawful means torts were in flux, pending the release of the decision in Bram (which at the time was still under reserve). The Supreme Court of Canada did not give detailed reasons for declining to strike the claims, and did not accept or reject the codification argument from Wakelam (that decision had not yet been released). The decision in Bram was released after Wakelam, but only one day after, and it does not engage with the codification issue either.

    How to reconcile Wakelam on the one hand with Pro-Sys and Bram on the other will be before the British Columbia Court of Appeal next week, when it begins hearing the appeal of the Watson decision. It remains to be seen what approach will be taken by courts in Ontario and other provinces, when faced with the codification argument. The law in British Columbia is currently that breaches of the Competition Act can be used to support claims in tort, but not to support claims in equity. If there is any rational basis for this distinction, courts have yet to suggest it.