BETWEEN:
and
CANADIAN TRANSPORTATION AGENCY and
MOHAMMED OMAR SATARI
Heard at Toronto, Ontario, on January 30, 2007.
Judgment delivered at Toronto, Ontario, on February 1, 2007.
REASONS FOR JUDGMENT BY: EVANS J.A.
CONCURRED IN BY: DÉCARY J.A.
MALONE J.A.
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.
[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.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-658-05
(APPEAL FROM CANADIAN TRANSPORTATION AGENCY DATED JUNE 22, 2005, DOCKET NO. 388-C-A-2005)
STYLE OF CAUSE: LUFTHANSA GERMAN AIRLINES v. CANADIAN
TRANSPORTATION AGENCY and
MOHAMMED OMAR SATARI
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: JANUARY 30, 2007
REASONS FOR JUDGMENT BY: EVANS J.A.
CONCURRED IN BY: DÉCARY J.A.
MALONE J.A.
APPEARANCES:
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Tae Mee Park |
FOR THE APPELLANT
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FOR THE RESPONDENTS
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SOLICITORS OF RECORD:
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Bersenas Jacobsen Chouest Thomson Blackburn LLP Toronto, Ontario |
FOR THE APPELLANT
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Canadian Transportation Agency Gatineau, Quebec |
FOR THE RESPONDENTS
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