Bank of Montreal Appellant v. Réal Marcotte, Bernard Laparé, Attorney General of Quebec and, 2014 SCC 55

SUPREME COURT OF CANADA Citation: Bank of Montreal v.

Marcotte, 2014 SCC 55, [2014] 2 S.C.R. 725 Date: 20140919 Docket: 35009 Between: Bank of Montreal Appellant and Réal Marcotte, Bernard Laparé, Attorney General of Quebec and Président de l’Office de la protection du consommateur Respondents And Between: Citibank Canada Appellant and Réal Marcotte, Bernard Laparé, Attorney General of Quebec and Président de l’Office de la protection du consommateur Respondents And Between: Toronto-Dominion Bank Appellant and Réal Marcotte, Bernard Laparé, Attorney General of Quebec and Président de l’Office de la protection du consommateur Respondents And Between: National Bank of Canada Appellant and Réal Marcotte, Bernard Laparé, Attorney General of Quebec and Président de l’Office de la protection du consommateur Respondents And Between:

Réal Marcotte and Bernard Laparé Appellants and Bank of Montreal, Amex Bank of Canada, Royal Bank of Canada, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, National Bank of Canada, Laurentian Bank of Canada, Citibank Canada and Attorney General of Canada Respondents - and - Attorney General of Canada, Attorney General of Ontario, Attorney General of Quebec, Attorney General of Alberta, Président de l’Office de la protection du consommateur and Canadian Bankers Association Interveners Coram: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell, Moldaver and Wagner JJ.

Joint Reasons for Judgment: (paras. 1 to 117) Rothstein and Wagner JJ. (McLachlin C.J. and LeBel, Abella, Cromwell and Moldaver JJ. concurring) bank of montreal v. marcotte, 2014 SCC 55, [2014] 2 S.C.R. 725 Bank of Montreal Appellant v. Réal Marcotte, Bernard Laparé, Attorney General of Quebec and President of the Office de la protection du consommateur Respondents - and - Citibank Canada Appellant v. Réal Marcotte, Bernard Laparé, Attorney General of Quebec and President of the Office de la protection du consommateur Respondents - and - Toronto-Dominion Bank Appellant v.

Réal Marcotte, Bernard Laparé, Attorney General of Quebec and

President of the Office de la protection du consommateur Respondents - and - National Bank of Canada Appellant v. Réal Marcotte, Bernard Laparé, Attorney General of Quebec and President of the Office de la protection du consommateur Respondents - and - Réal Marcotte and Bernard Laparé Appellants v.

Bank of Montreal, Amex Bank of Canada, Royal Bank of Canada, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, National Bank of Canada, Laurentian Bank of Canada, Citibank Canada and Attorney General of Canada Respondents and Attorney General of Canada, Attorney General of Ontario, Attorney General of Quebec, Attorney General of Alberta, President of the Office de la protection du consommateur and Canadian Bankers Association Interveners Indexed as: Bank of Montreal v. Marcotte 2014 SCC 55 File No.: 35009. 2014: February 13; 2014: September 19.

Present: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell, Moldaver and Wagner JJ. on appeal from the court of appeal for quebec Civil procedure — Class actions — Standing — Representative plaintiffs initiating class action against credit card issuers on grounds they failed to disclose conversion charges on credit card purchases made in foreign currencies — Representative plaintiffs not having direct cause of action or legal relationship with each defendant — Whether plaintiffs have standing to sue all defendants — Code of Civil Procedure, CQLR, c. C-25, art. 55 .

Consumer protection — Contracts of credit — Contracts extending variable credit — Credit cards — Obligation to disclose costs in contract — Appropriate remedy for failing to disclose — Conversion charges imposed by financial institutions on cardholders for transactions in foreign currencies — Class actions — Whether conversion charges imposed are “credit charges” or “net capital” as defined by legislation — Whether Banks failed to disclose charges to cardholders — Whether reimbursement of conversion charges collected from consumer class members should be ordered — Consumer Protection Act, CQLR, c.

P-40.1, ss. 12 , 68 , 69 , 70 , 272 . Consumer protection — Recourses — Punitive damages — Obligation to disclose costs in contract — Appropriate remedy for failing to disclose — Whether class members are entitled to punitive damages — Consumer Protection Act, CQLR, c. P-40.1, s. 272 .

Constitutional law — Division of powers — Banking — Interjurisdictional immunity — Federal paramountcy — Quebec’s consumer protection legislation regulating disclosure of conversion charges with respect to contracts of credit — Whether provincial legislation constitutionally inapplicable or inoperative in respect of bank-issued credit cards by virtue of doctrine of interjurisdictional immunity or federal paramountcy — Constitution Act, 1867, s. 91(15) — Bank Act, S.C. 1991, c. 46, ss. 16 , 988 — Consumer Protection Act, CQLR, c. P-40.1, ss. 12 , 272 .

A class action was launched by consumers to seek repayment of conversion charges imposed by several credit card issuers (the “Banks”) on credit card purchases made in foreign currencies primarily on the basis that the conversion charges violated Quebec’s Consumer Protection Act (“ CPA ”). The Banks argued that (1) the representative plaintiffs did not have a direct cause of action against each of the Banks and therefore did not have standing to sue all of them, (2) the CPA did not apply to them due to the Constitution Act,

1867 , and (3) no repayment of the conversion charges was owed. The Superior Court maintained the class action and found that the CPA applied to the Banks. It determined that the conversion charges were “credit charges” for the purposes of contracts extending variable credit, and ordered all the Banks to reimburse the conversion charges. It further required BMO, NBC, Citibank, TD and Amex (the “Group A Banks”) to pay punitive damages for failing to disclose the conversion charges. The Court of Appeal determined that the conversion charges were “net capital” and allowed the appeal of the non-Group A Banks.

It maintained the order against the Group A Banks, but overturned the amount awarded against Amex as well as the award of punitive damages against all Group A Banks, with the exception of TD. Held : The appeals by the Group A Banks should be dismissed. The appeal by the representative plaintiffs should be allowed in part. The representative plaintiffs have standing to sue all of the Banks. The law permits a collective action where the representative does not have a direct cause of action against, or a legal relationship with, each defendant.

Indeed, art. 55 of the Code of Civil Procedure (“ CCP ”), which requires plaintiffs to have “sufficient interest” in the action, must be interpreted in harmony with the provisions governing class actions and in accordance with the principle of proportionality found in art. 4.2 of the CCP . This approach is consistent with most other Canadian jurisdictions and the CCP itself, and it ensures the economy of judicial resources, enhances access to justice and averts the possibility of conflicting judgments on the same question of law or fact.

In addition, the analysis of whether the plaintiffs have standing must have the same outcome regardless of whether it is conducted before or after the class action is authorized, because at both stages, the court must look to the authorization criteria of art. 1003 of the CCP . Different obligations flow from whether conversion charges are qualified as credit charges or net capital. If the conversion charges qualify as credit charges, then according to the CPA they would have to be disclosed on their own, be included in the disclosed credit rate, and be subject to a grace period.

If conversion charges qualify as net capital, they would not be included in the credit rate or be subject to the grace period, but would still have to be disclosed under s. 12 of the CPA , the general disclosure provision. In this case, conversion charges constitute sums for which credit is actually extended, within the meaning of s. 68 of the CPA , and are best classified as net capital. They do not fall under any of the categories in s. 70 of the CPA . Treating conversion charges as administrative charges or commissions pursuant to s. 70(

d) and (

f) of the CPA , and therefore as credit charges, would not achieve the objectives of the CPA either by restoring the balance between merchants and consumers or by improving consumers’ abilities to make informed choices. Rather, it would force merchants to either disclose a wide range for the credit rate, which would confuse consumers, or require cardholders to unknowingly subsidize ancillary services that other cardholders choose to use, which would only benefit some consumers at the cost of others and reduce the ability of consumers to make informed choices.

Because neither option benefits consumers, s. 17 of the CPA and art. 1432 of the Civil Code of Qu ébec — both of which require contracts to be interpreted so as to favour consumers in cases of doubt or ambiguity — do not require classifying these charges as credit charges. Moreover, conversion charges are not fees that consumers must pay under the contract in order to access credit within the meaning of s. 69 of the CPA . Rather, they are additional fees for an optional service that is not necessary for consumers to access the credit. The doctrine of interjurisdictional immunity does not apply.

Sections 12 and 272 of the CPA , which deal with the disclosure of charges requirement and the remedies for breach of same, do not impair the federal banking power. While lending, broadly defined, is central to banking, it cannot be said that a disclosure requirement for certain charges ancillary to one type of consumer credit impairs or significantly trammels the manner in which Parliament’s legislative jurisdiction over bank lending can be exercised. Similarly, the doctrine of paramountcy is not engaged.

Assuming that a purpose of the Bank Act is to provide for exclusive national standards, ss. 12 and 272 of the CPA cannot be said to frustrate or undermine that purpose, because they do not provide for standards applicable to banking products and banking services offered by banks. Rather, they articulate a contractual norm analogous to the substantive rules of contract found in the Civil Code .

The basic rules of contract cannot be said to frustrate the federal purpose of comprehensive and exclusive standards, and the general rules regarding disclosure and accompanying remedies support rather than frustrate the federal scheme. In addition, ss. 12 and 272 of the CPA are not inconsistent with ss. 16 and 988 of the Bank Act and therefore do not frustrate the narrower federal purpose of ensuring that bank contracts are not nullified even if a bank breaches its disclosure obligations.

The representative plaintiffs seek restitution of the conversion charges and punitive damages, not nullification of their contracts or of the specific clauses at issue. The Group A Banks breached s. 12 of the CPA by failing to disclose the conversion charges. This violation is not related to the terms and conditions of payment or to the computation or indication of the credit charges or the credit rate, which are specifically covered by s. 271 of the CPA .

It is a substantive violation that goes against the CPA ’s objective of permitting consumers to make informed choices, and, at the very least, the violation results from ignorant or careless conduct.

Section 272 of the CPA applies, and the appropriate remedy is a reduction of the cardholders’ obligations in the amount of all conversion charges imposed during the period of non-disclosure. As there is an absolute presumption of prejudice for violations that give rise to s. 272 remedies, the commercial competitiveness of the conversion charges imposed is of no consequence. In addition, the trial judgment with respect to punitive damages should be restored.

The threshold for awarding punitive damages is not higher in the context of class actions where the plaintiffs are awarded collective recovery as opposed to individual recovery. The mode of recovery is not a factor set out in the jurisprudence for assessing punitive damages, nor would it be reasonable to include it as one. Moreover, the amount of punitive damages awarded in this case is rationally connected to the purposes for which the damages are awarded. Indeed, neither evidence of antisocial behaviour nor reprehensible conduct is required to award punitive damages under the CPA .

Rather, what is necessary is an examination of the overall conduct of the merchant, before, during and after the violation, for behaviour that was lax, passive, or ignorant with respect to consumers’ rights and to their own obligations, or conduct that displays ignorance, carelessness or serious negligence. In this case, the Group A Banks breached the CPA without any explanation for a period of years, and that negligence overwhelms their unexplained decision to start disclosing a fee they were charging consumers without their knowledge. Cases Cited Applied: Richard v.

Time Inc. , 2012 SCC 8 , [2012] 1 S.C.R. 265; overruled: Bouchard v. Agropur Coopérative , 2006

QCCA 1342, [2006] R.J.Q. 2349; distinguished: Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39,[2010] 2 S.C.R. 536; referred to: Marcotte v. Fédération des caisses Desjardins du Québec, 2014 SCC 57, [2014] 2 S.C.R. 806; AmexBank of Canada v. Adams, 2014 SCC 56, [2014] 2 S.C.R. 788; Regroupement des CHSLD Christ-Roi (Centre hospitalier, soins longueduré

e) v. Comité provincial des malades, 2007 QCCA 1068, [2007] R.J.Q. 1753; MacKinnon v. National Money Mart Co., 2004 BCCA472, 33 B.C.L.R. (4th) 21; Service aux marchands détaillants ltée (Household Finance) v. Option consommateurs, 2006 QCCA 1319, leave to appeal refused, [2007] 1 S.C.R. xi; Imperial Tobacco Canada Ltd. v. Conseil québécois sur le tabac et la santé, 2007QCCA 694 ; General Motors du Canada ltée v. Billette, 2009 QCCA 2476, [2010] R.J.Q. 66; Infineon Technologies AG v.Option consommateurs, 2013 SCC 59, [2013] 3 S.C.R. 600; Vivendi Canada Inc. v.

Dell’Aniello, 2014 SCC 1, [2014] 1 S.C.R. 3;Marcotte v. Longueuil (City), 2009 SCC 43, [2009] 3 S.C.R. 65; Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3;Law Society of British Columbia v. Mangat, 2001 SCC 67, [2001] 3 S.C.R. 113; United States of America v. Dynar, (SCC), [1997] 2 S.C.R. 462; Bank of Montreal v. Hall, (SCC), [1990] 1 S.C.R. 121; Multiple Access Ltd. v.McCutcheon, (SCC), [1982] 2 S.C.R. 161; Cinar Corporation v. Robinson, 2013 SCC 73, [2013] 3 S.C.R. 1168. Statutes and Regulations Cited Bank Act, S.C. 1991, c. 46,

preamble [ad. 2012, c. 19, s. 525], ss. 16, 452, 988. Civil Code of Québec, arts. 1422, 1432, 1621. Code of Civil Procedure, CQLR, c. C-25, arts. 4.2, 55, 59, 67, Book IX, 1003, 1015, 1048, 1051. Constitution Act, 1867, s. 91(15). Consumer Protection Act, CQLR, c. P-40.1, Title I, ss. 12, 17,

Chapter III, Division III, 68, 69 “credit charges”, 70, 72, 126, 127, 271,272. Cost of Borrowing (Banks) Regulations, SOR/2001-101. Financial Consumer Agency of Canada Act, S.C. 2001, c. 9. Authors Cited Bulmer, John. “Payment Systems: The Credit Card Market in Canada”. Background paper PRB 09-10E, prepared for the Library ofParliament, Parliamentary Information and Research Service, September 24, 2009 (online: http://www.parl.gc.ca/content/lop/researchpublications/prb0910-e.pdf). Masse, Claude.

Loi sur la protection du consommateur: analyse et commentaires. Cowansville, Qué.: Yvon Blais, 1999. APPEALS from a judgment of the Quebec Court of Appeal (Forget, Dalphond and Bich JJ.A.), 2012 QCCA 1396, [2012]R.J.Q. 1541, [2012] AZ-50881449, [2012] Q.J. No. 7428 (QL), 2012 CarswellQue 14792, setting aside in part a decision of Gascon J., 2009 QCCS 2764, [2009] AZ-50560820, [2009] J.Q. no 5771 (QL), 2009 CarswellQue 6515. Appeals by the Bank of Montreal,Citibank Canada, the Toronto-Dominion Bank and the National Bank of Canada dismissed and appeal by Réal Marcotte and BernardLaparé allowed in part.

Mahmud Jamal, Sylvain Deslauriers, Silvana Conte, Alberto Martinez, W. David Rankin, Anne-Marie Lizotte and AlexandreFallon, for the appellants/respondents the Bank of Montreal, Citibank Canada, the Toronto-Dominion Bank and the National Bank ofCanada, and for the respondents the Amex Bank of Canada, the Royal Bank of Canada, the Canadian Imperial Bank of Commerce, theBank of Nova Scotia and the Laurentian Bank of Canada. Bruce W. Johnston, Philippe H. Trudel, André Lespérance and Andrew E. Cleland, for the respondents/appellants RéalMarcotte and Bernard Laparé.

Jean-François Jobin, Francis Demers and Samuel Chayer, for the respondent/intervener the Attorney General of Quebec. Marc Migneault and Joël Simard, for the respondent/intervener the President of the Office de la protection duconsommateur. Bernard Letarte and Pierre Salois, for the respondent/intervener the Attorney General of Canada. Janet E. Minor and Robert A. Donato, for the intervener the Attorney General of Ontario. Robert J. Normey, for the intervener the Attorney General of Alberta. John B. Laskin and Myriam M. Seers, for the intervener the Canadian Bankers Association.

The judgment of the Court was delivered by Rothstein and Wagner JJ. — I. Introduction [1] Credit cards are so ubiquitous and commonly used that their many conveniences have become easy to overlook.One such convenience is the ability to use a credit card provided by a Canadian issuer to make purchases in foreign currencies. Thisconversion service presents an alternative to exchanging Canadian currency for foreign currency, purchasing and cashing traveller’scheques, or withdrawing foreign currency using a bank convenience card.

[ 2 ] The present case and its companion cases, Marcotte v. Fédération des caisses Desjardins du Québec , 2014 SCC 57 , [2014] 2 S.C.R. 806, and Amex Bank of Canada v. Adams , 2014 SCC 56 , [2014] 2 S.C.R. 788, are appeals of decisions on the merits of three class actions. The class actions were launched to seek repayment of the conversion charges imposed by several credit card issuing financial institutions on credit card purchases made in foreign currencies primarily on the basis that the conversion charges violated Quebec’s Consumer Protection Act , CQLR, c. P-40.1 (“ CPA ”).

The financial institutions argue that the CPA does not apply to them due to the Constitution Act, 1867 and that no repayment of the conversion charges is owed, regardless of the manner in which the conversion charge was disclosed in the credit card contracts. [ 3 ] For the reasons below, we conclude that the CPA does apply to the credit card issuers. Any conversion charge imposed by an issuer without sufficient disclosure to the cardholder must be repaid. II. Facts [ 4 ] A list of

definitions of all technical terms used in these reasons is set out in the Appendix. A. Overview of Credit Cards and Conversion Charges [ 5 ] A simplified domestic credit card payment involves four parties: the cardholder, the merchant, the card issuer (typically a bank, credit union, or store), and the credit card company (Visa, MasterCard and American Express). The payment proceeds as follows: 1. The cardholder presents his credit card to the merchant. 2. The merchant sends the credit card information to the card issuer for authorization. 3. Once authorized, the merchant charges the purchase to the card. 4.

The card issuer pays the merchant the amount charged minus the interchange fee , a rate set by the credit card company but retained by the card issuer. 5. The card issuer pays the credit card company a network access fee per transaction. The network access fee is less than the interchange fee. 6. The cardholder pays the card issuer. (J.

Bulmer, “Payment Systems: The Credit Card Market in Canada”, Library of Parliament, background paper PRB 09-10E, September 24, 2009 (online)) For the sake of simplicity, the role of payment processors, which are corporations that act as middlemen between merchants and card issuers, has been omitted from this description as payment processors are not relevant to these appeals. [ 6 ] A credit card provided by a Canadian card issuer can be used to make purchases in a foreign currency. The conversion is performed by the credit card company and proceeds as follows: 1.

The purchase amount is converted from the foreign currency to Canadian dollars according to the interbank rate . The conversion occurs either directly or by first converting the purchase amount to U.S. dollars, then converting that amount to Canadian dollars. 2. The conversion charge is calculated by applying the conversion charge percentage rate to the amount resulting from the first step. 3. The amount from the first step and the conversion charge are added together and charged to the card. The monthly statement displays the total amount. B.

Cardholder Agreements [ 7 ] There are numerous cardholder agreements at issue in the present appeals. Each card issuer provides multiple cards. The cardholder agreements for these cards have changed over the years. However, the cardholder agreements fall into two groups: (1) those that state that an exchange rate or a conversion rate is applied to purchases in foreign currencies and either do not mention the conversion charge or do not provide details about it, and (2) those that describe the conversion charge in addition to the exchange rate.

An example of a group 1 provision is found in a Citibank MasterCard cardholder agreement that reads as follows:

Charges Made in Foreign Currency: If you make a purchase or obtain a cash advance (or return a purchase) in a foreign currency, youraccount will be charged (or credited for a return) in Canadian dollars. We will use a rate of exchange that reflects the cost of foreignfunds at the time of the transaction and an administration charge for the transaction handling through the MasterCard InternationalIncorporated network.

These costs will be included for both credits and debits to your account. [Emphasis added.] By contrast, an example of a group 2 provision is found in a Royal Bank of Canada Visa cardholder agreement that reads as follows: Foreign Currency Fee: [The card issuer] will charge a currency conversion fee equal to 1.8% of the amount of any Debt or othertransaction not incurred in Canadian dollars. [The card issuer] will convert this Debt or other transaction and fee to Canadian dollars at[its] conversion cost in effect on the day [it] post[s] the converted Debt or other transaction and fee to the Account. [Emphasis added.] [8] Cardholders receive information about their credit card through the initial application, the cardholder agreement,the “card carrier” used to deliver the card to its holder, monthly statements, and updates and amendments to the cardholder agreement.

C.

Procedural History [9] Réal Marcotte was the proposed representative plaintiff in the April 17, 2003 application for authorization (the civillaw equivalent of “certification” in common law class actions) to institute a class action against the Bank of Montreal (“BMO”), AmexBank of Canada (“Amex”), Royal Bank of Canada (“RBC”), Toronto-Dominion Bank (“TD”), Canadian Imperial Bank of Commerce(“CIBC”), Bank of Nova Scotia (“Scotiabank”), National Bank of Canada (“NBC”), Laurentian Bank of Canada (“Laurentian”) andCitibank Canada (collectively referred to hereafter as “Banks”), along with the Fédération des caisses Desjardins du Québec(“Desjardins”) (the “BMO Action”).

Mr. Marcotte is a BMO and Desjardins cardholder. Bernard Laparé, who is an Amex cardholder,was added as a representative plaintiff after Amex made a motion for dismissal on the basis of Mr. Marcotte’s lack of standing against it(Mr. Marcotte and Mr. Laparé are collectively referred to hereafter as the “Plaintiffs”). Amex was the only Bank to make such a motion. [10] Mr.

Marcotte filed a separate class action against Desjardins, a credit union (the “Desjardins Action”), after theBanks indicated that they would make a constitutional argument based on the s. 91(15) federal banking head of power in the ConstitutionAct, 1867. The hearing on the merits for the BMO and Desjardins Actions was held jointly.

The Banks agreed not to contest theauthorization of the class action in return for having a joint hearing, though they reserved the right to raise the issue of the Plaintiffs’ lackof standing against the Banks with which they did not hold a card. [11] A year and a half after the Plaintiffs filed suit against the Banks and Desjardins, a second class action wascommenced against Amex (the “Amex Action”). Unlike the BMO and Desjardins Actions, the class in the Amex Action includedconsumer and non-consumer holders of credit and charge cards.

The same trial judge, Gascon J., as he then was, heard the BMO,Desjardins and Amex Actions, with the Amex Action hearing on the merits taking place soon after the joint hearing in the BMO andDesjardins Actions. All three trial judgments were rendered on the same day. III. Judicial History [12] Although separate trial and appeal judgments were rendered for the BMO, Desjardins and Amex Actions, thejudgments refer to each other on many occasions.

The summaries below concern the trial and Court of Appeal judgments for the BMOAction but refer to the judgments rendered for the Desjardins and Amex Actions where appropriate. A. Quebec Superior Court, 2009 QCCS 2764 [13] Gascon J. refused to dismiss the class action on the basis that the Plaintiffs do not have standing to sue all of theBanks. He held that once a class action has been authorized, it must be viewed from the perspective of the class rather than that of therepresentative plaintiff. In this case, the legal and factual backgrounds at issue were common to all the Banks.

Therefore, requiring aseparate class action against each Bank would be a waste of resources, whereas allowing the BMO Action to proceed would result in noidentified prejudice to the Banks. [14] Gascon J. concluded that the conversion charges are “credit charges” within the meaning of s. 69 of the CPA. Underthe CPA, any charge that is not net capital is a credit charge.

Gascon J. found that the evidence did not support the theory that theconversion charges are net capital since the foreign merchant never receives the conversion charge and it is not part of the exchange rate.Instead, the evidence demonstrated that the conversion charge is a fee for services related to the credit card and therefore a credit charge.It is the credit card companies, not the credit card issuers, that perform the actual conversion.

Credit charges under the CPA includeaccessory fees in addition to fees directly related to the extension of credit. [15] Gascon J. made a finding of fact that five of the Banks — BMO, NBC, Citibank, TD and Amex (the “Group ABanks”) — failed to disclose the conversion charges. The Plaintiffs did not challenge the disclosure made by the four other banks —RBC, CIBC, Scotiabank and Laurentian (the “Group B Banks”).

Gascon J. held that payment of the conversion charges by cardholdersdoes not constitute a waiver of their right of action or of the protection of the CPA. [16] According to Gascon J., the prescription period for cardholders of the Group B Banks who formed their initialcontract before April 17, 2000 — three years before the class action was filed — had not run out because a new contract is formed everytime a credit card is renewed.

Prescription for cardholders of the Group A Banks was suspended until those banks began to disclose thecharges. [17] Gascon J. rejected the Banks’ constitutional argument that the CPA does not apply to them due to the doctrine ofinterjurisdictional immunity, concluding that credit card contracts are not at the core of banking activities and the CPA does not interferewith the federal banking regime. He also rejected the similar argument based on the doctrine of paramountcy, concluding that there wasno operational conflict or frustration of federal purpose.

[18] Reimbursement of the conversion charges, as provided for in s. 272 of the CPA, was ordered as the appropriatesanction. Where possible, Gascon J. ordered collective recovery of all conversion charges imposed during the class periods, meaningeach Bank must repay all conversion charges in a lump sum. Individual recovery was ordered where there was insufficient evidence tosupport collective recovery, meaning each class member would have the right to claim repayment of the conversion charges they paidduring the relevant period.

This was the case for cardholders of the Group B Banks as a result of the different prescription periods thatapplied to each cardholder depending on when they first renewed their cards after April 17, 2000. Individual recovery was also orderedagainst TD, which failed to provide sufficient evidence that would have permitted collective recovery. The five Group A Banks wereadditionally required to pay $25 per class member as punitive damages for failing to disclose the conversion charge. B.

Quebec Court of Appeal, 2012 QCCA 1396 [19] Dalphond J.A. upheld Gascon J.’s conclusion that the Plaintiffs were adequate representative plaintiffs against all ofthe Banks. Dalphond J.A. held that permitting such class actions to proceed accorded with the general provisions of the Quebec Code ofCivil Procedure, CQLR, c. C-25 (“CCP”), some of which allow people to sue on behalf of another party, and with the spirit of Book IXof the CCP, which governs class actions. What is needed by the representative plaintiff is not a personal legal interest, but sufficientinterest.

The quality of the representative plaintiff is distinct from the interest of the represented members. As long as there is a real sub-group of members for each defendant, a defendant cannot move to dismiss the action against them on the basis of the authorizedrepresentative having insufficient legal interest. Here, the class action was authorized with Mr. Marcotte and Mr. Laparé as itsrepresentative plaintiffs.

The Banks’ argument on this issue attacked the quality of the representative plaintiffs, not whether there was areal sub-group of members for each Bank, and was rightly dismissed at trial. [20] Dalphond J.A. agreed that neither interjurisdictional immunity nor paramountcy prevent the CPA from applying tothe Banks. The credit offered through credit cards does not fall under s. 91(15) of the Constitution Act, 1867.

Paramountcy applies tocomplaints made to the Office de la protection du consommateur against banks — only the Financial Consumer Agency of Canada(“FCAC”) has the authority to receive customer complaints against banks — but in light of the fact that conversion charges constitute netcapital, the federal and provincial schemes work together harmoniously. The civil remedies in the CPA and the Civil Code of Québec(“CCQ”) remain available. [21] As explained by Dalphond J.A. in his judgment in the Desjardins Action, the conversion charges constitute netcapital under the CPA and not credit charges.

The CPA classifies all fees tied to a contract extending variable credit (such as a credit cardcontract) as either net capital or credit charges. Credit charges are fees imposed to access credit either in the lead up to obtaining a creditcard, such as membership fees, or subsequent to using the credit, such as interest or insurance premiums. Other fees imposed in thecontext of a credit card contract, such as fees for a copy of a lost monthly statement or to withdraw money from the ATM of anotherfinancial institution, are not credit charges.

They, like conversion charges, are fees charged in exchange for a service the cardholder haschosen to use, not to access the credit. [22] According to Dalphond J.A., classifying conversion charges as credit charges would have consequences contrary tothe purpose of the CPA. The annual percentage credit rate that the CPA requires be disclosed to consumers on the credit card contractwould vary between 18% and 900%, information more likely to confuse consumers than inform them.

The 21-day grace period wouldapply to conversion charges so that customers who pay their balance before that time would not have to pay the conversion charge. As aresult, card issuers would have to fund the conversion service by raising the membership fee or the general credit rate, resulting incardholders being charged a hidden fee for a service that only some use.

Dalphond J.A. concluded that conversion charges must beclassified as net capital as they are [translation] “charges invoiced for the use, at the consumer’s choice, of a service that is ancillary tothe [credit] card and unconnected to the actual issuance of credit in Canadian dollars that is available under the [credit card contract]”(2012 QCCA 1395 , at para. 60). [23] Applying the conclusion in the Desjardins Action to the BMO Action, Dalphond J.A. noted that under the Bank Act,S.C. 1991, c. 46, conversion charges are not included in the borrowing costs or borrowing rate defined in the federal scheme.

As a result,he allowed the appeals brought by the Group B Banks, who were found at trial to have disclosed the conversion charge to cardholders. [24] For the reasons given by Dalphond J.A. in the Amex Action, the Group A Banks were held to have breached boththe CPA and the CCQ by not disclosing the conversion charge to cardholders. In the Amex Action, Dalphond J.A. applied the finding attrial that Amex had not disclosed the conversion charges in contravention of the CPA, the general principles of law found in the CCQ,and s. 452 of the Bank Act.

Dalphond J.A. agreed with the trial judge that the conversion charge was not a component of the exchangerate but was instead a fee or cost for a service. For a 10-year period, neither the credit card contracts used by Amex nor common usageimposed an obligation to pay the conversion charge on cardholders. As a result, the receipt of a payment not due provisions permittedrecovery of the amounts paid. The fact that the conversion charge rate was reasonable and competitive was held to be insufficient causefor refusing to order restitution.

Refusing to grant restitution is a discretionary decision of the trial judge, and “Amex has failed to showthat the trial judge did not exercise his discretion judiciously” by “showing that there was a palpable and overriding error in hisassessment of the situation” (2012 QCCA 1394, [2012] R.J.Q. 1512, at paras. 47 and 50). [25] As a result, in the Amex Action, Amex was ordered to repay the conversion charges collected during the period ofnon-disclosure on a collective recovery basis to the defined classes.

Similarly, in the BMO Action, BMO, NBC and Citibank wereordered to repay the conversion charges collected during the relevant periods on a collective recovery basis. TD was ordered to repay theconversion charges on an individual recovery basis because it provided insufficient evidence to determine the total amount of conversioncharges imposed during the relevant period. The Court of Appeal overturned the amount awarded against Amex in the BMO Action,stating that that amount was entirely covered by the amount awarded against Amex in the Amex Action.

Punitive damages were onlyawarded against TD in light of its failure to provide evidence that would have permitted collective recovery. The punitive damagesagainst the other Group A Banks were overturned because collective recovery already has an important punitive aspect and orderingpunitive damages would serve no preventive purpose. [26] Dalphond J.A. concluded by dismissing waiver, prescription and the absence of prejudice as grounds for refusing togrant restitution against the Group A Banks. The cardholders could not have waived their right to dispute the conversion charges by

paying off their accounts because the conversion charges were not disclosed to the cardholders and waivers can only be made with full knowledge. Prescription only began to run when the Group A Banks’ failure to disclose the conversion charges was discovered. The absence of prejudice is irrelevant since the Group A Banks had no legal right to impose the conversion charges and restitution would not grant an undue advantage to the cardholders. [ 27 ] In the BMO Action, the Group A Banks and the Plaintiffs appeal the decision of the Court of Appeal before this Court.

The Banks appeal Dalphond J.A.’s conclusion that interjurisdictional immunity and paramountcy do not apply, that the conversion charges imposed by the Group A Banks should be reimbursed, and that the Plaintiffs had standing against all of the Banks. The Plaintiffs appeal Dalphond J.A.’s conclusion that the conversion charges are net capital and not credit charges. Leave was granted by this Court for both appeals on April 11, 2013, along with the appeals in the Desjardins and Amex Actions ([2013] 2 S.C.R. v, vi and x). IV. Issues [ 28 ] This appeal raises the following issues: (

a) Do the representative plaintiffs have standing to bring a class action against all of the Banks, including those against which they do not have a personal right of action? (

b) Are the conversion charges net capital or credit charges under the CPA ? (

c) Are ss. 12 and 272 of the CPA constitutionally inapplicable in respect of bank-issued credit cards by reason of the doctrine of interjurisdictional immunity? (

d) Are ss. 12 and 272 of the CPA constitutionally inoperative in respect of bank-issued credit cards by reason of the doctrine of federal paramountcy? (

e) What remedies, if any, are owed to the class members? V. Analysis A. The Representative Plaintiffs Have Standing [ 29 ] The five Group A Banks argue that the trial judge and Court of Appeal erred in finding that the Plaintiffs had standing to bring this class action. The Banks argue that the Court of Appeal decision conflicts with arts. 55 and 59 of the CCP , which respectively require plaintiffs to have a “sufficient interest” and a “common interest” in the action. The Group A Banks rely on Bouchard v.

Agropur Coopérative , 2006 QCCA 1342 , [2006] R.J.Q. 2349, for the proposition that a representative plaintiff in a class action must have a cause of action against each defendant. They submit that the Court of Appeal’s decision has replaced Agropur ’s clear rule with “an elastic, case-by-case knowledge test” (Banks A.F., at para. 111). [ 30 ] The Plaintiffs, Mr. Marcotte and Mr.

Laparé, counter that Agropur does not apply for two reasons: first, it was decided at the authorization stage, and second, this case falls into an exception to Agropur created by the Court of Appeal in Regroupement des CHSLD Christ-Roi (Centre hospitalier, soins longue duré

e) v. Comité provincial des malades , 2007 QCCA 1068 , [2007] R.J.Q. 1753.

They further argue that the CCP allows a person to act on behalf of others, that the banks have not suffered any prejudice from the current arrangement, that the Court of Appeal’s position is shared by most Canadian jurisdictions, and finally, that the Banks’ position would lead to a waste of judicial resources. [ 31 ] That the Banks’ position would lead to a waste of juridical resources is true, as echoed by the statement of the trial judge: [ translation ] “. . . this would all have been done for nothing, and such a conclusion would have no adverse effect on the members and would not clearly benefit the banks” (para. 200).

But the question is not solely whether granting standing is right in terms of judicial economy, or whether to deny it at this stage of the proceedings is pointless. The question is also whether the law permits a collective action where the representative does not have a direct cause of action against, or a legal relationship with, each defendant. In our opinion it does.

Article 55 of the CCP must be interpreted in harmony with Book IX of the CCP in order to achieve the outcome that is best suited to the goals of class actions. However, a few points merit further clarification: how to interpret Agropur , and how to apply the principle of proportionality found in art. 4.2 of the CCP . [ 32 ] We will begin with the Court of Appeal judgment.

In our opinion, Dalphond J.A. correctly concluded that art. 55 of the CCP , which requires plaintiffs to have “sufficient interest” in the action, must be adapted to the context of class actions in accordance with the principle of proportionality found in art. 4.2 of the CCP . We note in particular the effect of art. 1051 of the CCP which renders the other provisions of the CCP , including art. 55, applicable to class action proceedings, but in a way that respects the spirit of Book IX of the CCP . The nature of this “sufficient interest” has to reflect the collective and representative nature of a class action.

Dalphond J.A. also correctly distinguished between the ability to adequately act as a representative and the ability to obtain a judgment against a defendant. As long as the representative plaintiff is an adequate representative of the class per art. 1003 (

d) of the CCP and the actions against each defendant involve identical, similar or related questions of law or fact per art. 1003( a ), it is open to a judge to authorize the class action. This conclusion ensures the economy of judicial resources, increases access to justice, and averts the possibility of conflicting judgments on the same question of law or fact.

[33] It is an approach that is consistent with most other Canadian jurisdictions. In MacKinnon v. National Money MartCo., 2004 BCCA 472, 33 B.C.L.R. (4th) 21, the British Columbia Court of Appeal held that a cause of action against each defendantcould be held by class members rather than by the representative plaintiff (para. 51). Alberta, Manitoba and Saskatchewan followed suit(see Court of Appeal reasons, at paras. 55-57). [34] It is an approach that is also consistent with the CCP itself.

As Dalphond J.A. notes in the Court of Appeal reasons,art. 55 requires that interest be direct and personal to be sufficient: [translation] This interest may result from a contractual relationship between the plaintiff and the named defendant or from an extra-contractual breach by the named person against the plaintiff. This does not mean, however, that the plaintiff must always be the one withthe standing (the victim of a fault who sues the wrongdoer, for example).

Indeed, Quebec law acknowledges that some people may sueon behalf of an interested person (e.g., the tutor of a minor (article 159 C.C.Q.), the ad hoc tutor (article 190 C.C.Q.) or the mandatarydesignated by mandate in anticipation of incapacity (article 2166 C.C.Q.)). This acknowledgement of a person’s capacity to act on behalfof others arises from explicit statutory authorization (e.g., parents’ tutorship of their minor, unemancipated children,

article 192 C.C.Q.),from appointment (e.g.,

article 200 C.C.Q.), or from a judgment (article 205 C.C.Q.). [Emphasis added; para. 61.] Additionally, art. 1048 of the CCP allows a corporate body or association to act as a representative in a class action as long as one of itsmembers is part of the class and that member’s interest against the defendant is linked to the objects for which the corporate body orassociation was constituted.

The CCP therefore permits an entity or person without a direct and personal interest in the claims againstsome of the defendants to represent the class in various circumstances. [35] Moreover, the malleability of the “sufficient interest” criteria is evident in art. 1015, which states that arepresentative plaintiff “is deemed to have a sufficient interest notwithstanding his acceptance of the defendant’s offers respecting hispersonal claim”.

In a similar vein, the Quebec Court of Appeal allowed a class action where the representative’s personal claim wasprescribed, but the majority of group members’ actions were not (Service aux marchands détaillants ltée (Household Finance) v.

Optionconsommateurs, 2006 QCCA 1319 , at para. 66, leave to appeal refused, [2007] 1 S.C.R. xi). [36] The question then becomes how to reconcile Agropur and CHSLD Christ-Roi. [37] In Agropur, the Quebec Court of Appeal upheld an authorization judgment denying standing to a representative whodid not have a personal cause of action against, or a legal relationship with, each defendant (paras. 110 and 112).

Pelletier J.A. found thatthe representative plaintiff had only consumed milk from one of the producers being sued, and held: [translation] In class actions involving a number of respondents, this court has implicitly confirmed that the applicant must assert a causeof action against each of them. Moreover, this jurisprudence is consistent with that of the Ontario and U.S. courts.

In my opinion, anyambiguity in this regard should be removed by clearly reaffirming the principle that a representative must establish a cause of action inrespect of each of the parties against whom the action is to be brought. [Emphasis added; para. 110.] [38] Although Agropur seems to establish a bright-line rule forbidding class actions with multiple defendants where therepresentative does not have a cause of action against each defendant, later judgments of the Court of Appeal do not appear to haveapplied such a principle. Indeed, the Court of Appeal allowed such a claim to proceed in CHSLD Christ-Roi.

In doing so, the court heldthat its situation was distinct from that of Agropur in two ways: first, Agropur contested the authorization itself, whereas in CHSLDChrist-Roi the decision was an appeal from the trial decision on the merits; and second, unlike Agropur, there was one cause of actioncommon to the class, rather than several. [39] The court in CHSLD Christ-Roi reasoned that art. 1003(

d) of the CCP focuses on the representative character of theplaintiff and his or her capacity to adequately serve as a representative of the group members, and that representative plaintiff’s standingwas satisfied by his or her being a part of the class that had already been authorized based on a legitimate single cause of action (para.27). Moreover, the court then found the consequences of denying standing would be contrary to the objectives of the class actionmechanism: [translation] The presence of multiple defendants in this case does not require that there be as many representatives as there areCHSLDs.

Indeed, the issue in dispute is common to all the establishments, be they private under agreement or public, that do not offertheir users the laundry services to which they argue they are legally entitled. To proceed as the appellants suggest would result in asmany class actions as there are establishments, which would entail significant, maybe even very significant, fees and proceduralcomplexity that would require more resources from the legal system than are required.

To impose on the users of long-term treatmentfacilities the obligation to bring as many class actions as there are establishments [could] dissuade them from asserting their rights beforethe courts, which would be contrary to the objectives of class action lawsuits.

To accept the public establishments’ proposal would, in acase such as this one, [tend to] stifle the class action lawsuit and undermine its social objective. [para. 31] [40] As the law stands, it is unclear in the province of Quebec whether it is possible to bring a class action suit againstmultiple defendants where the representative does not have a direct cause of action against each of them. The cases since Agropur thathave allowed such class actions all occurred at the post-authorization stage and used this distinction to allow the class action (seeImperial Tobacco Canada Ltd. v.

Conseil québécois sur le tabac et la santé, 2007 QCCA 694 , at para. 22; General Motors duCanada ltée v. Billette, 2009 QCCA 2476, [2010] R.J.Q. 66, at paras. 50-51).

In fact, in his reasons for this case, Dalphond J.A. similarlywrote that the legal link between each defendant and the members of the relevant sub-group had been established at the authorizationstage, thereby ensuring that there was a genuine cause of action on the part of the class members towards all of the defendants (para. 71). [41] We cannot agree that representative plaintiffs for a class action who do not have a direct cause of action against eachdefendant do not have standing if that issue is raised at the authorization stage, but do have standing if the issue is raised once the classaction is already authorized.

Both lower courts justified this result by noting that once a class action has been authorized, the analysismust be done from the view of the group rather than the representative plaintiffs because at that point a class with a valid cause of actionalready exists. The question of whether representative plaintiffs can have standing against defendants with whom they do not have adirect cause of action must have the same answer whether or not it is raised before or after the class action is authorized.

[ 42 ] Standing in the context of class actions must be analyzed through the lens of the criteria for authorization of class actions set out in the CCP . That analysis must have the same outcome regardless of whether it is conducted before or after the class action is authorized. As stated above, determining whether art. 55 of the CCP is satisfied requires interpreting that provision harmoniously with the class action authorization criteria of art. 1003 in order to take into account the collective nature of class actions.

The nature of the interest necessary to establish the standing of the representative must be understood from the perspective of the common interest of the proposed class, and not solely from the perspective of the representative plaintiffs. The legal principles that govern a challenge to standing should be the same whether the challenge occurs at the authorization stage or at the merits stage, because, at both stages, the court must look to the authorization criteria of art. 1003 to resolve the issue.

The difficulty of concluding otherwise is well illustrated in this case, where, by this reasoning, the entire class action could have been halted at the authorization stage had the Banks contested standing at that time instead of at the merits stage. [ 43 ] Nothing in the nature of class actions or the authorization criteria of art. 1003 requires representatives to have a direct cause of action against, or a legal relationship with, each defendant in the class action.

The focus under art. 1003 of the CCP is on whether there are identical, similar or related questions of law or fact; whether there is someone who can represent the class adequately; whether there are enough facts to justify the conclusion sought; and whether it is a situation that would be difficult to bring with a simple joinder of actions under art. 67 of the CCP or via mandatary under art. 59 of the CCP . As noted in Infineon Technologies AG v. Option consommateurs , 2013 SCC 59 , [2013] 3 S.C.R. 600, this Court has given a broad

interpretation and application to the requirements for authorization, and “the tenor of the jurisprudence clearly favours easier access to the class action as a vehicle for achieving the twin goals of deterrence and victim compensation” (para. 60).

Article 1003(

d) still requires the representative plaintiff to be “in a position to represent the members adequately”. Under this provision, the court has the authority to assess whether a proposed representative plaintiff could adequately represent members of a class against defendants with whom he would not otherwise have standing to sue. [ 44 ] In addition, reading art. 55 of the CCP harmoniously with the requirements of art. 1003 is in line with this Court’s jurisprudence on art. 4.2 and proportionality more generally. In Vivendi Canada Inc. v.

Dell’Aniello , 2014 SCC 1 , [2014] 1 S.C.R. 3, this Court recently confirmed that the principle of proportionality is an important factor in civil procedure, one that “must be considered in the assessment with respect to each of [the] criteria” found under art. 1003 (para. 66). This principle reinforces the judicial discretion already found in the language of art. 1003 ( Vivendi , at paras. 33 and 68). The importance of the proportionality requirement of art. 4.2 has been underlined in Marcotte v.

Longueuil (City) , 2009 SCC 43 , [2009] 3 S.C.R. 65, in a passage that seems particularly apt in the context of the function of class actions: Moreover, the requirement of proportionality in the conduct of proceedings reflects the nature of the civil justice system, which, while frequently called on to settle private disputes, discharges state functions and constitutes a public service.

This principle means that litigation must be consistent with the principles of good faith and of balance between litigants and must not result in an abuse of the public service provided by the institutions of the civil justice system. [para. 43] [ 45 ] In other words, the authorizing judge has an obligation to consider proportionality — the balance between litigants, good faith, etc. — when assessing whether the representative is adequate, or whether the class contains enough members with personal causes of action against each defendant. [ 46 ] The facts of this case demonstrate the importance of granting the representative plaintiffs standing even where they do not have a personal cause of action against each defendant.

As in CHSLD Christ-Roi , the same legal issues are present in the action of each class member against each Bank. Each Bank faces more or less the same issues regarding the

interpretation and application of the CPA , and counters with the same arguments about its constitutional applicability. Even more tellingly, when questioned by the trial judge as to whether he should disregard the evidence heard from one Bank in his decision vis-à-vis the other Banks, the Banks argued that even if Mr. Marcotte and Mr.

Laparé were found to not have standing for all of the Banks, this evidence was pertinent to the questions at issue for all the Banks and should not be disregarded (trial reasons, at para. 197). [ 47 ] We conclude that the trial judge and the Court of Appeal were correct to find that the representative plaintiffs have standing to sue all of the Banks. The class action was authorized under the criteria of art. 1003 , and for the aforementioned reasons, the current challenge to the representative plaintiffs’ standing must fail.

This Court’s flexible approach to authorization in Infineon and Vivendi supports a proportional approach to class action standing that economizes judicial resources and enhances access to justice. It is inappropriate that different outcomes might result depending on when standing is challenged. For these reasons, we find the portions of Agropur pertaining to standing should no longer be followed and that the Plaintiffs in the present appeals have standing to bring a class action against all of the Banks. B.

The Conversion Charges Are Net Capital Under the CPA [ 48 ] On appeal, Dalphond J.A. reversed the trial judge’s finding that the conversion charges constitute credit charges under the CPA . Before this Court, the parties largely reprise their arguments before the lower courts. The Banks and Desjardins argue that characterizing the conversion charges as credit charges would result in absurd outcomes that are counter to the purposes of the CPA .

The Plaintiffs argue that characterizing the conversion charges as net capital would undermine the standardized disclosure regime of the CPA that permits consumers to meaningfully compare credit options. [ 49 ] The CPA defines “net capital” and “credit charges” for the purpose of contracts extending variable credit (which include credit card contracts) as follows: 68. The net capital is . . .

(

b) in the case of a contract involving credit or a contract extending variable credit, the sum for which credit is actually extended . Every component of the credit charges is excluded from this sum. 69. “ Credit charges ” means the amount the consumer must pay under the contract in addition to (

a) the net capital in the case of a contract for the loan of money or a contract extending variable credit; . . . 70. The credit charges shall be determined as the sum of their components, particularly the following : (

a) the amount claimed as interest; (

b) the premium for insurance subscribed for, except any automobile insurance premium; (

c) the rebate; (

d) administration charges, brokerage fees, appraiser’s fees, contract fees and the cost incurred for obtaining a credit report; (

e) membership or renewal fees; (

f) the commission; (

g) the value of the rebate or of the discount to which the consumer is entitled if he pays cash; (

h) the duties chargeable, under a federal or provincial Act, on the credit. The categories of net capital and credit charges are exhaustive: all fees or charges that consumers pay by reason of a credit card contract must be one or the other. [ 50 ] All credit charges other than membership fees and cash rebates are used to calculate the credit rate (s. 72 of the CPA ). The credit rate is applied to any outstanding amount owed after a 21-day grace period (ss. 126 and 127).

If the conversion charge qualifies as a credit charge, then according to the CPA it would have to be disclosed on its own, included in the disclosed credit rate, and be subject to the 21-day grace period. If the conversion charge qualifies as net capital, it would not be included in the credit rate or be subject to the 21-day grace period, but would still have to be disclosed under the general s. 12 disclosure provision of the CPA . [ 51 ] There are two steps to determine whether a fee is a credit charge or net capital.

The first step is to determine whether the fee or charge falls under one of the enumerated credit charge categories in s. 70 . If it does, it is a credit charge. If it does not, the second step is to determine whether the fee or charge constitutes a “sum for which credit is actually extended” ( s. 68 ). If it does, it is net capital. If it does not, it is a non-enumerated credit charge ( s. 69 ). [ 52 ] Conversion charges do not fall under any of the s. 70 categories.

At trial, they were characterized in the Desjardins Action as either administration charges or commissions, which are enumerated credit charges ( s. 70 (

d) and ( f )). However, the trial judge based this characterization on an assumption that the legislature did not intend for consumers to have to distinguish administration charges or commissions related to services ancillary to the contract from administration charges or commissions related to the actual granting of credit. According to this reasoning, having to distinguish between ancillary and directly related charges would create ambiguity and uncertainty and would therefore be contrary to the CPA ’s goals of consumer protection and information.

[53] The result of this reasoning would be that any administration charges or commissions disclosed in the credit cardcontract, not just those related directly to the granting of credit, would be considered credit charges. The Amex trial judgment notes thatthe FCAC classifies the conversion charge as “similar to the fee for making copies, the cash advances fee, the over the limit fee, the wiretransfer or money orders fees, or the annulled or dishonoured cheques fees” (2009 QCCS 2695, [2009] R.J.Q. 1746, at para. 136).

In theDesjardins Court of Appeal decision, Dalphond J.A. similarly pointed out such charges would include the fee for obtaining an extra copyof a monthly statement or an additional card, stopping payment on a cheque drawn on a credit card account, and ATM fees. Similar toconversion charges, these fees are incurred when a cardholder chooses to use a service connected to the use of a credit card. [54] If all of these fees were credit charges, they would have to be included in the credit rate. Card issuers could do this inone of two ways.

They could impose the charges on a transaction basis, in which case they would have to disclose a wide range for thecredit rate (in the Desjardins Court of Appeal decision, at para. 55, Dalphond J.A. gave between 18% and 900% as an example of thecredit rate that Desjardins would have to disclose to its Visa cardholders if the credit rate included conversion charges). Charges imposedon a transaction basis would benefit from the 21-day grace period, meaning cardholders who pay the balance of their account before theend of the grace period would not pay any of those charges at all.

Alternatively, card issuers could choose not to charge for such serviceson a transactional basis. The result of this option would inevitably be the cross-subsidization of the cost of these services by cardholderswho do not utilize the services. This option would conceal the existence of the costs of these services and their imposition on othercardholders as they would not be disclosed separately. [55] Neither option achieves the objectives of the CPA.

As explained recently by this Court, the CPA’s objectives are “torestore the balance in the contractual relationship between merchants and consumers” and “to eliminate unfair and misleading practicesthat may distort the information available to consumers and prevent them from making informed choices” (Richard v. Time Inc., 2012SCC 8, [2012] 1 S.C.R. 265, at paras. 160-61). Neither option for treating conversion charges as credit charges would restore the balancebetween merchants and consumers or improve consumers’ abilities to make informed choices.

Disclosing a wide range for the credit rate,the result of imposing such charges on a transactional basis, would confuse consumers. Requiring cardholders to unknowingly subsidizeancillary services that other cardholders choose to use reduces the ability of consumers to make informed choices while only benefittingsome consumers at the cost of others. Because neither option benefits consumers, s. 17 of the CPA and art. 1432 of the CCQ — both ofwhich require contracts to be interpreted so as to favour consumers in cases of doubt or ambiguity — do not require classifying thesecharges as credit charges. [56]

Section 69 of the CPA defines “credit charges” as fees that consumers “must pay under the contract” other than netcapital. Conversion charges are not fees that consumers “must pay” in order to access credit. Rather, they are additional fees for anoptional service that is not necessary for consumers to access the credit. In addition, unlike obtaining an additional card or copy of amonthly statement, consumers can choose to obtain conversion services from third parties. The conversion charge is even less connectedto gaining access to credit than the other fees for ancillary services listed by the Court of Appeal.

For these reasons, it is appropriate todistinguish administration charges or commissions related to services ancillary to the contract from administration charges orcommissions related to the actual granting of credit. [57] In contrast with the problems created by classifying conversion charges as credit charges, classifying them as netcapital fits with the text of the CPA and is easy to implement. Any purchaser who chooses to buy something in a foreign currency mustfirst convert their Canadian dollars into the foreign currency.

Common conversion methods other than that provided through a creditcard include exchanging cash, buying traveller’s cheques, withdrawing money at a foreign ATM, or using a conversion service providedby the merchant (referred to as “dynamic currency conversion”). Generally, all of these methods involve a conversion charge. It is notusually possible for ordinary purchasers to convert currency without paying a fee or an exchange rate higher than the interbank rate, therate used by credit card companies to convert purchases in foreign currencies into the local currency.

Only large financial institutionstrading in $1 million blocks have direct access to the interbank rate. [58]

Section 68 of the CPA defines “net capital” (in the context of credit cards) as “the sum for which credit is actuallyextended”. Professor Claude Masse expands on this definition, stating that it must be [translation] “sums or values that benefit theconsumer” (Loi sur la protection du consommateur: analyse et commentaires (1999), at p. 418). Whether a sum or value benefits aconsumer must be considered from the point of view of the consumer, not the merchant.

For this reason, the trial judge erred in holdingthat conversion charges do not benefit consumers because they are not received by the foreign merchant (Desjardins trial reasons, 2009QCCS 2743 , at para. 246). In the case of conversion charges, consumers benefit from having their currency converted to theforeign currency. If a consumer chooses to use a foreign merchant’s dynamic currency conversion and pays by credit card, theconversion charge would clearly be considered net capital.

It would make little sense to reclassify conversion charges as credit chargesfor the sole reason that they are imposed by the card issuer. For that reason, conversion charges constitute sums for which credit isactually extended and are best classified as net capital. [59] Additional support for classifying conversion charges as net capital comes from considering the fact that instead ofimposing a separate conversion charge, card issuers could choose to define the exchange rate as the interbank rate plus some percentagemarkup.

In that case, there would be no doubt that the exchange rate in its entirety constitutes net capital. The result would be identicalfrom the point of view of the cardholder and the card issuer. The only difference would be that the wording of the disclosure of theexchange rate would be slightly different. The trial judge was correct to conclude that the conversion charge at issue in the presentappeals cannot be considered part of the exchange rate. However, it would make little sense to classify an exchange rate plus aconversion charge as

part credit charge and part net capital, but an exchange rate that includes a percentage markup as purely net capital.Doing so would neither protect nor benefit consumers. [60] It is irrelevant that the card issuers do not perform the actual conversion of the currency. Card issuers contract withthe entity that actually performs the conversion, then in turn contract with the cardholders that benefit from the service. From the point ofview of cardholders, they benefit from the conversion service as a result of their contract with the card issuers.

It makes no difference tothem who actually converts their currency. [61] To summarize, conversion charges do not fall under any of the enumerated credit charge categories in s. 70 and doqualify as net capital under s. 68. As the Court of Appeal correctly concluded, classifying conversion charges as credit charges would

lead to numerous problems, both practical and conceptual, that would hinder the objectives of the CPA . This conclusion is not based on whether classifying conversion charges as net capital is preferable , as the Plaintiffs argue it was, but rather on a proper

interpretation of the provisions at issue. C. The Doctrine of Interjurisdictional Immunity Does Not Apply [ 62 ] The Banks argue that the doctrine of interjurisdictional immunity renders the CPA inapplicable to their credit card activities. Interjurisdictional immunity operates to prevent laws enacted by one level of government from impermissibly trenching on the “unassailable core” of jurisdiction reserved for the other level of government. Under s. 91(15) of the Constitution Act, 1867 , Parliament enjoys exclusive jurisdiction over banking.

The Banks submit that the applicability of the relevant provisions of the CPA to banks would impair the core federal banking power. We disagree. [ 63 ] While interjurisdictional immunity remains an extant constitutional doctrine, this Court has cautioned against excessive reliance on it. A broad application of the doctrine is in tension with the modern cooperative approach to federalism which favours, where possible, the application of statutes enacted by both levels of government. As such, this Court in Canadian Western Bank v.

Alberta , 2007 SCC 22 , [2007] 2 S.C.R. 3, held that the doctrine must be applied “with restraint” and “should in general be reserved for situations already covered by precedent” (paras. 67 and 77). We note that there is no precedent for the doctrine’s application to the credit card activities of banks. [ 64 ] In the rare circumstances in which interjurisdictional immunity applies, a provincial law will be inapplicable to the extent that its application would “impair” the core of a federal power.

Impairment occurs where the federal power is “seriously or significantly trammel[ed]”, particularly in our “era of cooperative, flexible federalism”: Quebec (Attorney General) v. Canadian Owners and Pilots Association , 2010 SCC 39 , [2010] 2 S.C.R. 536 (“ COPA ”), at para. 45 . Therefore two related questions must be asked: First, does the power to regulate disclosure of conversion charges lie at the core of federal jurisdiction over banking?

Second, if so, do the provisions of the CPA at issue significantly trammel or impair the manner in which the federal power can be exercised? [ 65 ] To answer these questions, the only provisions that need be considered are ss. 12 and 272 of the CPA , which deal with the disclosure of charges requirement and the remedies for breach of same. The overall regulatory regime established by the CPA , namely the enforcement role granted to the Office de la protection du consommateur, is not at issue.

All that need be considered is whether the provisions that found a civil suit brought directly by consumers are applicable under the interjurisdictional immunity doctrine. [ 66 ] Setting aside the first question for the moment, whether either of these provisions touches on the core of the federal banking power, the answer to the second question is clear: neither provision can be said to impair that federal power. Even if the provisions are characterized broadly as regulating bank lending or foreign currency conversion, they still fail to satisfy the impairment step of the COPA test.

While lending, broadly defined, is central to banking and has been recognized as such by this Court in previous decisions, it cannot plausibly be said that a disclosure requirement for certain charges ancillary to one type of consumer credit “impairs” or “significantly trammels” the manner in which Parliament’s legislative jurisdiction over bank lending can be exercised.

Although the s. 12 disclosure obligation and the s. 272 civil remedies relate to bank lending, these provisions do not in any way impair any activities that are “vital or essential to banking” such that Parliament might be forced to specifically legislate to override the provincial law ( Canadian Western Bank , at para. 86 ). Requiring banks to inform customers of how their relationship will be governed or be subject to certain remedies does not limit banks’ abilities to dictate the terms of that relationship or otherwise limit their activities.

Similarly, even if foreign currency conversion is accepted as being part of the core of the federal banking power, imposing a broad disclosure requirement for charges relating to currency conversion in no way impairs that power. As such, the CPA does not impair the federal banking power and the doctrine of interjurisdictional immunity is not engaged. [ 67 ] This conclusion fits with prior decisions of this Court that have dealt with interjurisdictional immunity in the context of the federal banking power.

The following comments of this Court in Canadian Western Bank are particularly applicable to the principle that s. 91(15) of the Constitution Act, 1867 does not give Parliament exclusive jurisdiction over all aspects of lending or currency conversion by banks: However, it must be repeated that just because Parliament can create innovative forms for financing does not mean that s. 91(15) grants Parliament exclusive authority to regulate their promotion. . . .

The rigid demarcation sought by the banks between federal and provincial regulations would not only risk a legal vacuum, but deny to lawmakers at both levels of government the flexibility to carry out their respective responsibilities. [Emphasis in original; para. 89.] [ 68 ] The Banks argue for exactly the type of amorphous, sweeping immunity that was rejected in Canadian Western Bank . Banks cannot avoid the application of all provincial statutes that in any way touch on their operations, including lending and currency conversion.

Provincial regulation of mortgages, securities and contracts can all be said to relate to lending in some general sense, and will at times have a significant impact on banks’ operations. However, as this Court concluded in Canadian Western Bank , this is not enough to trigger interjurisdictional immunity. The provisions of the CPA do not prevent banks from lending money or converting currency, but only require that conversion fees be disclosed to consumers. [ 69 ] The present appeals are distinguishable from COPA .

In addition to the directly relevant precedent on the federal aeronautics power, COPA also involved provincial statutory provisions that amounted to a blanket ban, under certain conditions, on an activity that fell within the core of the federal aeronautics power. As the Court pointed out, applying these provincial provisions would force Parliament to pass legislation to countermand the provincial rules, failing which the activity could not occur at all. The same is not true for the CPA provisions at issue here.

The disclosure and remedy provisions do affect how banks carry out a certain aspect of their activities, but as discussed above that effect does not amount to impairment. It is hard to imagine how these provisions would force Parliament to pass legislation to countermand them, failing which it would be impaired in its ability to achieve the purpose for which exclusive jurisdiction over banking was conferred. For these reasons, we conclude that the Court of Appeal was correct in holding that interjurisdictional immunity is not engaged.

D. The Doctrine of Paramountcy Does Not Apply [70] The Banks additionally argue that ss. 12 and 272 of the CPA are inoperative with respect to banks as a result of thedoctrine of federal paramountcy. Paramountcy is engaged where there is a conflict between valid provincial and federal law. In suchcases, the federal law prevails, and the provincial law is rendered inoperative to the extent of the conflict. Conflict can be established byimpossibility of dual compliance or by frustration of a federal purpose (Canadian Western Bank, at para. 73).

The Banks argue that theprovisions of the CPA frustrate the purpose of the federal banking scheme. [71] Even where it is possible to simultaneously comply with both federal and provincial laws, situations will arise whererequiring compliance with a provincial law will frustrate the purpose of a federal law. An example of this is Law Society of BritishColumbia v. Mangat, 2001 SCC 67, [2001] 3 S.C.R. 113. Mangat dealt with a federal scheme that empowered non-lawyers to appear fora fee before immigration tribunals for the purpose of promoting informal, accessible and expeditious hearings.

By contrast, a provinciallaw prohibited such paid appearances by non-lawyers. Even though forced compliance with the provincial law would not result in abreach of the federal law (as appearances by non-lawyers were not mandatory under the federal scheme), it would nonetheless clearlyfrustrate the federal purpose. [72] In Mangat, it was clear that the provincial law frustrated the purpose of the federal law as it precluded people fromever using the federal scheme for paid non-lawyers. However, care must be taken not to give too broad a scope to paramountcy on thebasis of frustration of federal purpose.

The mere fact that Parliament has legislated in an area does not preclude provincial legislationfrom operating in the same area, as stated by this Court in Canadian Western Bank, at para. 74: The fact that Parliament has legislated in respect of a matter does not lead to the presumption that in so doing it intended to rule out anypossible provincial action in respect of that subject.

As this Court recently stated, “to impute to Parliament such an intention to ‘occup[y]the field’ in the absence of very clear statutory language to that effect would be to stray from the path of judicial restraint in questions ofparamountcy that this Court has taken since at least O’Grady” (Rothmans, at para. 21). [73] As the party seeking to invoke paramountcy, the Banks bear the burden of proof and “must first establish thepurpose of the relevant federal statute, and then prove that the provincial legislation is incompatible with this purpose” (COPA, at para.66).

The Banks allege frustration of two federal purposes. The broader federal purpose, they say, is to provide for exclusive federalbanking standards. The second, narrower, purpose is to ensure that bank contracts are not nullified even if a bank breaches its disclosureobligations. [74] Before dealing substantively with the arguments, it is worth providing a brief overview of the relevant federal andprovincial regimes.

Consumer banking products are federally regulated under the Bank Act, the Cost of Borrowing (Banks) Regulations,SOR/2001-101, and the Financial Consumer Agency of Canada Act, S.C. 2001, c. 9, the latter creating the FCAC, the federal regulator.Consumer protection is provincially regulated in Quebec under the CPA by the Office de la protection du consommateur.

The CPA setsout general rules governing all consumer contracts, but also sets out rules relating to contracts of credit specifically in Division III ofChapter III of Title I of the Act (“Division III”). [75] Both Division III of the CPA, and the federal Bank Act and Cost of Borrowing (Banks) Regulations, provide detailedrules relating to the manner in which credit card charges must be computed, claimed, and disclosed. The two sets of rules are consistentwith one another.

Both regimes provide that “credit charges” (or “cost of borrowing” under the federal scheme) must be disclosed as partof the “credit rate” (or “interest rate” under the federal scheme). The FCAC has held that conversion charges are “non-interest charges”under the federal scheme which is consistent with their being “net capital” for the purposes of the CPA.

The provisions regulating thegrace period and the date on which interest begins to accrue are likewise consistent. [76] In light of our conclusion above that the conversion charge is net capital, none of these specific provisions inDivision III of the CPA need be considered in the context of the paramountcy issue. The Group B Banks complied with both theprovincial requirements found in the CPA and the federal requirements. The Group A Banks complied with the disclosure requirementsof Division III

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