Date:
20070201
Docket: A-658-05
Citation: 2007
FCA 28
CORAM: DÉCARY
J.A.
EVANS
J.A.
MALONE
J.A.
BETWEEN:
LUFTHANSA
GERMAN AIRLINES
Appellant
and
CANADIAN TRANSPORTATION AGENCY and
MOHAMMED OMAR SATARI
Respondents
REASONS FOR JUDGMENT
EVANS J.A.
A. INTRODUCTION
[1]
This
is an appeal by Lufthansa German Airlines (“Lufthansa”) of a decision by the
Canadian Transportation Agency (“CTA”), dated June 22, 2005 (Decision No.
388-C-A-2005). In this decision, the CTA required Lufthansa to pay to
purchasers the full cost of their unused tickets for travel between Vancouver
and Djeddah, Saudi
Arabia.
[2]
The
matter came before the CTA as a result of a complaint by Mohammed Omar Satari
to the Air Travel Complaints Commissioner (“Commissioner”), who referred it to
the CTA. Mr Satari stated that he had paid $23,920.00 in cash to a travel agent
in British Columbia, Ideal Travel & Cruises Ltd. (“Ideal”), to purchase
Lufthansa tickets for sixteen people, including himself (“the Satari group”).
Ideal, in turn, purchased the tickets by telephone from two wholesale travel
agents, WorldPlus and SkyLink, who are authorized by Lufthansa to sell its
tickets. Ideal purported to pay WorldPlus and SkyLink for the tickets by using
credit cards. Having obtained preliminary authorization from the credit card
companies to charge the price of the tickets to the cards, WorldPlus and SkyLink
issued the tickets.
[3]
WorldPlus
and SkyLink were accredited by the International Air Transport Association
(“IATA”). Ideal was not, nor was it a member of the British Columbia Travel
Agents Association.
[4]
Lufthansa
honoured seven of the tickets; the other nine were not used: the persons
concerned were delayed because they not obtain Saudi visas. By the time that Mr
Satari asked Lufthansa to refund the cost of these tickets, it had discovered
that the credit card companies had declined to credit it with the charges,
because Ideal was not authorized to use the credit cards in question.
Meanwhile, Ideal had vanished.
[5]
Consequently,
as a result of Ideal’s fraud, nine members of the Satari group were out of
pocket because they had paid for airline tickets which they had been unable to
use. They sought to recover their loss from Lufthansa, which, through its
agents, WorldPlus and SkyLink, had issued tickets for which neither it nor its
agents had been paid.
B. THE CTA’S
DECISION
[6]
In
its reasons for decision, the CTA set out the parties’ positions and the
relevant provisions of the regulatory framework. In particular, it noted that
an airline is required to apply the terms and conditions of the contract of
carriage set out in the tariff which it had filed with the CTA: Air
Transportation Regulations, SOR 88-58 (“ATR”), subsection 110(4).
Section 113.1 of the ATR provides that, if an airline does not apply the
terms of carriage set out in its tariff, the CTA may direct it “to take such
corrective measures that the [CTA] considers appropriate”, and to compensate
any person who has incurred expenses as a result of the carrier’s non-compliance.
[7]
After
noting Lufthansa’s submission that the dispute should be determined in its
favour because the law of agency makes a principal responsible for the fraud of
its agent, the CTA identified the validity of the tickets as the key question:
para. 28. It stated that there was nothing on the face of the tickets to
indicate that they were invalid, and there was no evidence that the tickets
were invalid under Rule 65(A)(3) of Lufhansa’s Tariff, which provides:
A ticket which has not
been validated or which has been altered, mutilated or improperly issued shall
not be valid.
[8]
The
CTA also found that the Satari group had no reason to believe that Ideal had
been engaging in illegal activities. They had purchased the tickets in good
faith. Moreover, Lufthansa had honoured the tickets of the seven purchasers who
had presented them to fly between Djeddah and Vancouver and, in all
probability, would have honoured the other nine had they been used.
[9]
In
these circumstances, the CTA held that, by refusing a refund to the nine
members of the Satari group, Lufthansa had failed to apply Rule 90(E)(1) of its
Tariff, which provides:
a.
Voluntary
Refunds
For the purpose of this
paragraph, the term “Voluntary Refund” shall mean any refund of a ticket or
portion thereof other than an involuntary refund …. Voluntary refunds shall be
composed as follows:
(1) If no portion of the
ticket has been used, refund will be the full amount of the fare paid, less any
applicable service charge and communications expenses ….
[10]
The
CTA was not satisfied that Lufthansa had established good cause why it should
not be ordered to make a refund to the Satari group pursuant to its remedial
powers in section 113.1. It stated (at para. 35):
In determining the
appropriate corrective measures to order in this case, a balance must be struck
between the air carrier’s statutory, commercial and operational obligations and
the rights of ticketholders to rely on the validity of tickets issued by
accredited travel agencies, such as WorldPlus and SkyLink. An overriding
consideration in this regard is an air carrier’s obligation to oversee and
control the sale of its tickets, and to ensure that persons purchasing tickets
in good faith not be penalized because of the failure by the carrier to
properly manage its ticket distribution network.
[11]
After
considering “the unique circumstances” (at para. 36) of this case, the CTA
ordered Lufthansa to take the corrective measure of refunding the amount that
each of the nine holders of an unused ticket had paid to Ideal for it, and to
compensate any person adversely affected by its failure to apply the Tariff.
C. ANALYSIS
[12]
Counsel
for Lufthansa argued that Ideal was the agent of the Satari group alone and
that, as principals, they were responsible for Ideal’s fraudulent
misrepresentation that it was authorized to use the credit cards with which it
purported to pay for the Satari group’s tickets. There was no evidence that
Lufthansa had appointed Ideal as its agent, nor that it had ever held out that
Ideal acted on its behalf.
[13]
Accordingly,
counsel submitted, when Lufthansa discovered the fraud, it was entitled to
treat the contract of carriage with the Satari group as void. Since it elected
to avoid the contract before Mr Satari made his complaint to the Commissioner,
there was no contract of carriage in existence when the matter came before the
CTA and, therefore, no terms of the Tariff for it to interpret. Hence, the CTA
had no jurisdiction to determine the complaint.
[14]
Further,
he submitted, it would be unfair to require an airline to bear a loss resulting
from a fraud perpetrated by a purchaser’s agent with whom the airline had no
legal relationship. He distinguished Northwest Airlines Inc. v. Canadian Transportation
Agency, 2004 FCA 238, 325 N.R. 147, on the ground that the airlines in that
case were made responsible for loss caused by the fraud of their own agent.
[15]
Mr
Satari made no written submissions in response to Lufthansa’s appeal. He was duly
notified of the hearing of the appeal but did appear.
[16]
Counsel
for the CTA agreed that the law of contract and agency governed the disposition
of the Satari group’s complaint. He also agreed that correctness was the
applicable standard of review to the main question in dispute, since it was one
of pure common law. Counsel further conceded that the CTA’s decision must be
set aside for the reasons advanced on behalf of Lufthansa if Ideal was the
agent of only the Satari group.
[17]
However,
he submitted, Lufthansa was a principal of Ideal by acquiescence, because
Lufthansa knew that its authorized agents sold tickets to travel agents, like
Ideal, who were not members of IATA and who used credit cards to pay for
tickets. Indeed, WorldPlus had had previous dealings with Ideal.
[18]
Like
other airlines, he said, Lufthansa, should bear the occasional, but
foreseeable, costs of fraud arising from the operation of a ticket distribution
network, which Lufthansa had created and which generally served its commercial
interests very well. While admitting that the CTA made no finding that Ideal
was an agent of Lufthansa, counsel suggested that this was implicit in its
decision.
[19]
I
have some difficulty in extracting an implicit finding to this effect from the
CTA’s reasons. I understand the CTA to have held that the central problem was
the validity of the tickets, not the legal implications of an agency
relationship between Ideal and the Satari group: see para. 28. It appears to
have avoided taking a position on Lufthansa’s submissions that Ideal was the
agent of the Satari group and that, as Ideal’s principal, they were responsible
for its fraud.
[20]
Be
that as it may, the evidence in the record does not, in my opinion, establish
the existence of an agency relationship between Lufthansa and Ideal. There was
neither an express agency, nor an apparent agency emanating from a holding out
by Lufthansa that Ideal was its agent.
[21]
An
apparent agency may also be inferred from the conduct of the alleged principal,
including permitting or instigating the purported agent to represent that he or
she is the agent of the alleged principal. See generally, F.M.B. Reynolds,
Bowstead and Reynolds on Agency, 17th ed. (London: Sweet and
Maxwell, 2001), 8-022. However, there is no basis in the record for concluding
that Lufthansa did anything to represent that Ideal was its agent. There was no
evidence that Ideal had represented that it was Lufthansa’s agent, or that
Lufthansa knew that any such representations were being made by Ideal.
[22]
On
the CTA’s theory, every agent who purchases tickets for its clients directly from
an airline, or indirectly from one of the airline’s authorized agents, is an
agent of the airline which issues the tickets. Counsel produced no authorities
to support his contention that an agency relationship arises on facts analogous
to those of the present case.
[23]
In
my view, since, on the evidence, Ideal was the agent only of the Satari group,
the CTA had no legal authority to adjudicate the complaint: the contracts of
carriage had been avoided by Lufthansa before the complaint was made.
[24]
Counsel
for Lufthansa also submitted that, if he was wrong on his major point, it was
unreasonable for the CTA to direct as a corrective measure under paragraph 113.1(b)
that Lufthansa pay to the Satari group the cost of the unused tickets. He
argued that this was not a “refund” within the meaning of Rule 90(E)(1), since
neither Lufthansa nor its agents had received any money from Ideal or the
Satari group which they could refund. Rather, he said, the payment directed by
the CTA was more akin to an indemnity than to a refund contemplated by Rule
90(E)(1).
[25]
In
view of my conclusion on the jurisdictional issue, I express no opinion on
Lufthansa’s alternative argument.
D. CONCLUSIONS
[26]
For
these reasons, I would allow the appeal with costs, and set aside CTA Decision
No. 388 C-A-2005.
“John M. Evans”
“I agree
Robert Décary”
J.A.
“I agree
B.
Malone”
J.A.
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