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Consumer - Punitive Damages. Hoy v. Expedia Group, Inc.
In Hoy v. Expedia Group, Inc. (Div Court, 2024) the Divisional Court dismissed an appeal from a denial of a class action certification motion, here one grounded heavily in the Consumer Protection Act (CPA) 'misleading representations' provisions.
Here the court considers the potential for punitive damages under the CPA:Did the Motion Judge Err when he found that the claim for punitive damages did not satisfy the cause of action criterion?
[89] As acknowledged by the motion judge, punitive damages are available for breaches of the Consumer Protection Act. Section 18(11) expressly provides that a court may award punitive or exemplary damages in addition to any other remedy in an action commenced under section 18.
[90] However, the motion judge concluded that the plaintiffs’ claim exclusively for punitive damages (compensatory damages not having been claimed and the remedies of disgorgement and nominal damages having been found to be unavailable) was not legally tenable.
[91] That conclusion was informed by the motion judge’s review of the Supreme Court of Canada’s decision in Richard and in particular that court’s analysis of the Québec Consumer Protection Act, which he contrasted with the provisions of the Ontario Act.
[92] In Richard, the Supreme Court observed that the conditions for claiming punitive damages are approached differently by the common law and Québec civil law respectively. Whereas at common law, punitive damages can be awarded in any civil suit in which the plaintiff proves that the defendant’s conduct was “malicious, oppressive and high‑handed [such] that it offends the court’s sense of decency”, the Civil Code of Québec does not create a general scheme for awarding punitive damages and does not establish a right to this remedy in all circumstances. Rather, punitive damages can be awarded only where the law so provides.
[93] The Supreme Court held that, as a matter of statutory interpretation of the Québec Consumer Protection Act, CQLR c P-40.1, consumers can be awarded punitive damages even if they are not awarded contractual remedies or compensatory damages at the same time.
[94] That said, the Supreme Court observed that the purpose of an award of punitive damages under Québec’s Consumer Protection Act is to prevent conduct on the part of merchants and manufacturers in which they display ignorance, carelessness or serious negligence with respect to consumer’s rights and the merchant’s and manufacturer’s obligations to consumers under the Act and also to provide a recourse to consumers in response to merchants’ and manufacturers’ acts that are intentional, malicious or vexatious. The mere fact that a provision of the Consumer Protection Act had been violated was not enough to justify an award of punitive damages: the court was required to consider the whole of the merchant's conduct at the time of and after the violation.
[95] The objective of punitive damages in common law jurisdictions is described by Laurence David and Bruce Feldthusen in Halsbury's Laws of Canada - Damages, (II(3)(5)) at HAD-12 “Damages aimed at punishment, deterrence and denunciation” (2021 Reissue):Punitive (also called exemplary) damages are awarded against a defendant in exceptional circumstances. Punitive damages are awarded to punish the defendant (in the sense of retribution), to deter future wrongdoing by the defendant or others and to denounce the defendant’s conduct. Punitive damages are an important exception to the general common law rule that damages are awarded to compensate the victim, not punish the wrongdoer. This is because punitive damages focus on the defendant’s misconduct rather than the loss suffered by the plaintiff. Punitive damages are, moreover, “only to be awarded where compensatory damages are inadequate to accomplish the objectives of retribution, deterrence, and condemnation …”. [96] The question of whether, as a general proposition, punitive damages are available as a free-standing remedy in the absence of other remedies is not free from doubt. Professor Waddams, in The Law of Damages (Toronto: Canada Law Book, looseleaf) writes, at §11:9, that “exemplary damages may be awarded where the plaintiff has suffered no loss at all”. However, the authorities which he cites in support are all cases where the plaintiff also obtained either nominal damages (Johnston Terminals & Storage Ltd. v. Miscellaneous Workers' Wholesale & Retail Delivery Drivers & Helpers Union, Local 351, (1976) 1975 CanLII 933 (BC SC), 61 D.L.R. (3d) 741 (B.C.S.C.), Cousins v. Wilson, [1994] 1 N.Z.L.R. 463 (H.C.)) or injunctive relief (Cash & Carry Cleaners Ltd. v. Delmas (1973), 1973 CanLII 1232 (NB CA), 44 D.L.R. (3d) 315 (NB C.A.).
[97] Assuming that a claim for punitive damages alone is an available remedy at common law, a limiting factor is the requirement of s. 18(11) of Ontario’s Consumer Protection Act, when read in conjunction with s. 18(2). Section 18(11) provides that a court may award exemplary or punitive damages in addition to any other remedy in an action commenced under section 18. Where, as in the present case, rescission by a consumer who has entered into an agreement after or while a person has engaged in an unfair practice, is not possible, section 18(2) limits the remedies available to a consumer to recovery of the amount by which the consumer’s payment under the agreement exceeds the value that the goods or services have to the consumer, or to recover damages, or both.
[98] To similar effect, section 100 of the Ontario CPA provides that if a consumer successfully brings an action under the Act, the court, when ordering that the consumer recover the full payment which he or she is entitled to under the Act, may in addition to such order, award exemplary or punitive damages.
[99] The motion judge underlined, as we have, the words “in addition to”. Although he did find that the availability of damages under section 18(2) was a prerequisite to being able to recover punitive damages, the Plaintiffs argue that the motion judge’s interpretation of the Act was too narrow. Section 18(1) provides that “any remedy” is available to respond to an unfair practice, “including damages”. As a matter of statutory interpretation, the Plaintiffs say that remedies other than compensatory damages are implicitly available, thus giving courts broad discretion to craft a remedy appropriate to the circumstances. Indeed, in Richard, at para. 146, the Supreme Court adopted a previous interpretation of the provision in section 49 of the Charter of Human Rights and Freedoms, CQLR c C-12, that in case of unlawful and intentional interference with any right or freedom recognised by the Charter, a tribunal may, in addition, condemn the person guilty of it to punitive damages, as meaning:... that a court can not only award compensatory damages but can “in addition”, or equally, as well, moreover, also (see the definition of “en outre” in Le Grand Robert de la langue française (1986), vol. 6), grant a request for exemplary damages. The latter type of damages is therefore not dependent on the former. [100] As already referred to, the Plaintiffs, citing the Court of Appeal’s decision in Ramdath, at para. 98, argue that the language of section 18(2), read together with the availability of punitive and exemplary damages provided for by section 18(11), gives ‘a court “complete flexibility to award whatever damages would be appropriate at common law” including the restitutionary measure’.
[101] Ramdath concerned the propriety of making an award of aggregate damages at the trial of a class action. The Court of Appeal rejected arguments that the damages of class members, who were students enrolled in a post-graduate course in International Business Management, could only be assessed on an individual basis and could not be aggregated. Pursuant to an agreed-upon formula approved by the trial judge, all class members would be entitled to damages.
[102] In our view, Ramdath provides no assistance on the issue of whether, in a consumer protection action, a claim for punitive damages, absent a claim for compensatory damages or availability of the remedies of disgorgement and nominal damages, is legally tenable.
[103] While accepting the principle that consumer protection legislation should be “interpreted generously in favour of consumers”, we reject the argument that the motion judge’s application of the clear language of the statute amounted to a “reading down” of the remedies available to consumers under the CPA. Interpreting remedial legislation in a manner that furthers the important policy objective of protecting consumers and providing redress for unfair practices does not give courts liberty to ignore the entire context of the statutory scheme.
[104] That is what the motion judge did. In interpreting and applying the statute, he followed the admonition of the Supreme Court in Richard that even if a free-standing remedy of punitive damages is available in law, the pleaded facts must be capable of supporting such a claim, concluding, at para. 177:... the Plaintiffs claim for punitive damages is based on no more than the pleaded fact that the Defendants may have breached the unfair practices provisions of the Ontario Consumer Protection Act, 2002 and the comparable provisions from the other provinces and territories. However, as the Supreme Court pointed out, there must be something more than a breach of the Consumer Protection Act for an award of punitive damages. [105] The Plaintiffs’ statement of claim pleads in support of their claim for punitive damages that the Defendants have been the subject of unfair consumer practices proceedings brought by regulators in the United Kingdom, the European Union and Australia.
[106] As already noted, the record discloses that in the United Kingdom and the European Union, Expedia Group, Trivago and the Bookings Group entered into undertakings with the regulators to refrain from engaging in practices similar to those pleaded by the Plaintiffs in the Ontario action. In Australia, proceedings were brought against Trivago in the Federal Court of Australia by the Australian Competition and Consumer Commission alleging misleading or deceptive conduct under the Australian Consumer Law. The Federal Court found Trivago liable for breaches of the Australian Consumer Law (Australian Competition and Consumer Commission v. Trivago N.V. [2020] FCA 16) and imposed injunctive relief and a fine of AUD $44.7 million (Australian Competition and Consumer Commission v. Trivago N.V. (No 2) [2022] FCA 417).
[107] The motion judge continued, at para. 178:In the immediate case, there is no pleading beyond the allegations of breaches of the legislation. The circumstance that there were regulatory proceedings in Australia, the United Kingdom, and the European Union are no more than doubling down on the allegations of breaches of the legislation in the Statement of Claim, and it remains to be determined whether the conduct in Canada is the same or different than in Australia and the United Kingdom and it even remains to be determined whether the regulatory proceedings elsewhere are relevant given that the statutes and the jurisprudence may be different. [108] Although more germane to the issue of preferable procedure, it is noteworthy that in the Australian Trivago case, which was prosecuted by a regulator, the court considered it “necessary for the purposes of specific and general deterrence to fix penalties that are far greater than the profit Trivago earned from its contravening conduct” and that Australian consumers had suffered loss and damage estimated at approximately AUD $30 million. By contrast the Plaintiffs in the present case do not assert compensatory loss or damage.
[109] To be capable of supporting a claim for punitive damages, the allegations made against the defendants which are grounded on the foreign regulatory proceedings, must amount to high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 at para. 36
[110] In support of its claim for punitive damages, the Statement of Claim pleads that:102. This Court should order the Defendants to pay substantial exemplary and punitive damages. The Defendants' conduct was high-handed, malicious and reprehensible, and it departs to a marked degree from the standards expected of the most used and trusted online travel websites.
103. The Defendants consistently and repeatedly made the Advertising Practice Claims, which were false, misleading, deceptive, and unconscionable. The Defendants continued to do so (in whole or part) even after they agreed in other jurisdictions to cease engaging in these unfair and deceptive practices. A substantial exemplary and punitive damages award is appropriate to deter the Defendants and other travel metasearch and OTAs from engaging in this predatory and abusive conduct. [111] It is not sufficient to simply recite in a pleading the words that are required to advance a claim for punitive damages. Courts must look beyond the labels used by parties and determine the true nature of the claim pleaded. At the pleadings stage, this requires a determination of whether, assuming the verity of all of the plaintiff’s factual allegations, the pleadings could possibly support the plaintiff’s legal allegations: Non-Marine Underwriters, Lloyd's of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, per McLachlin J. at para. 84. A similar approach is warranted at the certification stage in a class proceeding.
[112] We agree with the motion judge’s conclusion that what amounts to little more than a bare allegation that the Defendants may have breached the unfair practices provision of the Ontario Consumer Protection Act, without more, is insufficient to meet the punitive damages requirement for misconduct that is high-handed, malicious, arbitrary or highly reprehensible. The factual allegations that regulatory proceedings, in other jurisdictions, under different statutes, resulting in one adverse adjudicated outcome against one of the defendants in Australia, and undertakings not to engage in certain conduct given to EU and UK regulators by some of the Defendants, do not address the issue of how the Defendants’ conduct in respect of Plaintiffs seeking redress under Canadian consumer protection legislation amounted to the exceptional circumstances that, if proven, would justify an award of punitive damages.
[113] Accordingly, we agree with the motion judge that the Plaintiffs’ claim for the remedy of punitive damages does not satisfy the cause of action criterion.
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