Decision No. 208-C-A-2009

May 13, 2009

COMPLAINT by Gábor Lukács against Air Canada.

File No. M4120-3/08-50408

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Introduction and issues

[1] Gábor Lukács filed a complaint with the Canadian Transportation Agency (Agency) alleging that certain Air Canada terms and conditions of carriage relating to baggage liability and acceptance of baggage specified in the carrier's International Passenger Rules and Fares Tariff, CTA(A) No. 458 (Tariff) are unreasonable.

[2] The tariff, convention and statutory extracts relevant to this Decision are set out in Appendix A.

[3] There are seven issues:

1. Is Rule 55(C)(12) of the Tariff, as it relates to liability for loss of or damage to baggage, consistent with Article 17(2) of the Montreal Convention (Convention)?
2. Does Rule 55(C)(12) of the Tariff, as it relates to liability for delay in delivery of baggage, accurately reflect Article 19 of the Convention?
3. Does Article 26 of the Convention apply to Rule 55(C)(12) of the Tariff and, if so, what effect does Article 26 have if any part(s) of Rule 55(C)(12) is/are determined to be inconsistent with the Convention?
4. Is Rule 55(C)(12) of the Tariff just and reasonable as required by subsection 111(1) of the Air Transportation Regulations, SOR/88-58, as amended (ATR)?
5. Are Rule 97(A)(3)(1) of the Tariff and Rule 97(A)(3)(2) of the Tariff as it relates to oversized baggage just and reasonable as required by subsection 111(1) of the ATR?
6. Does Rule 97(A)(3)(2) of the Tariff, as it relates to overpacked baggage, clearly set out Air Canada's terms and conditions respecting baggage that is unsuitable for acceptance for transportation, as required by paragraph 122(a) of the ATR?
7. Is Air Canada's signage relating to baggage liability consistent with Air Canada's obligations?

[4] As indicated in the reasons that follow, the Agency finds that:

1. Rule 55(C)(12) of the Tariff, as it relates to liability for loss of or damage to baggage, is not consistent with Article 17(2) of the Convention.
2. Rule 55(C)(12) of the Tariff, as it relates to liability for delay in delivery of baggage, does not accurately reflect Article 19 of the Convention.
3. Article 26 of the Convention applies to Rule 55(C)(12) of the Tariff and as that rule tends to relieve Air Canada from liability in a way that is contrary to the Convention, Rule 55(C)(12) of the Tariff is null and void.
4. Rule 55(C)(12) of the Tariff is not just and reasonable as required by subsection 111(1) of the ATR.
5. Rule 97(A)(3)(1) of the Tariff and Rule 97(A)(3)(2) of the Tariff as it relates to oversized baggage are not just and reasonable as required by subsection 111(1) of the ATR.
6. Rule 97(A)(3)(2), as it relates to overpacked baggage, of the Tariff fails to clearly set out Air Canada's terms and conditions with respect to baggage that is unsuitable for acceptance for transportation.
7. Air Canada's signage relating to baggage liability does not accurately reflect Air Canada's obligations set out in the Convention.

Preliminary matter

[5] During the pleadings, Air Canada revised Rules 55(C)(12) and (16) of the Tariff and filed the revised rules with the Agency to take effect February 13, 2009. As these revised rules of the Tariff constituted the core of Mr. Lukács' complaint, the Agency, in Decision No. LET-A-16-2009 dated February 3, 2009, suspended the Tariff revisions pending a decision respecting Mr. Lukács' complaint.

Evidence and submissions

[6] Mr. Lukács states that Air Canada has signs at its baggage claims offices stating that the carrier is not responsible for damage to protruding parts of baggage, such as straps, wheels, zippers and locks, and that a tariff provision identifies such baggage as unsuitable for acceptance for transportation. Mr. Lukács submits that these signs do not reflect the baggage liability assumed by air carriers under the Convention, and that these signs should therefore be removed. Mr. Lukács also submits that these signs create the false impression that passengers have no rights to claim compensation for a broad class of frequent types of damage to baggage, and discourage the travelling public from efficiently using the recourse put in place by Parliament to protect the travelling public, namely the Carriage by Air Act, R.S.C., 1985, c. C-26, which implements the Convention and other conventions governing liability.

[7] Air Canada submits that its signs are not misleading given that they reflect the liability assumed by the carrier in situations where other than the Convention applies, and indeed, in certain circumstances in which the Convention does apply.

[8] Mr. Lukács maintains that Air Canada's provisions relating to baggage liability found in Rule 55(C)(12) of the Tariff unreasonably relieve the carrier from all liability for baggage that is considered not to be acceptable for transportation by Rule 97(A)(3) of the Tariff.

[9] Air Canada submits that the Tariff contains a provision that provides that "the liability rules set out in the Convention are fully incorporated herein and shall supersede and prevail over any provisions of this tariff which may be inconsistent with those rules". Air Canada maintains that given this provision, any allegation that the Tariff is inconsistent with the Convention is ill-founded.

[10] Mr. Lukács argues that allowing provisions in tariffs that are inconsistent with the Convention impairs the ability of the travelling public to benefit from the Convention because these inconsistencies create confusion as to their rights.

[11] Air Canada submits that it is not unreasonable for an air carrier to refuse to carry items that it considers to be unsuitable for carriage, noting that such refusal is consistent with industry practices. Air Canada also submits that Article 17(2) of the Convention permits carriers to escape liability for damage to baggage resulting from the inherent defect, quality or vice of such baggage. Air Canada asserts that the notion of inherent defect, quality or vice must be interpreted in the context of the suitability of baggage given the normal risks associated with carriage by air. Air Canada maintains that the characteristics of the articles that the carrier classifies as "unsuitable" under Rule 97(A)(3) of the Tariff affect the ability of the baggage to sustain the normal risks associated with handling during carriage by air. Air Canada submits that, as such, the articles are unsuitable for travel, and accordingly, Air Canada is entitled to limit its liability with respect to such articles.

[12] Mr. Lukács contends that most baggage have one or more of the characteristics set out in Rule 97(A)(3), and that to accept Air Canada's argument that these characteristics represent an "inherent defect, quality or vice" would imply that the majority of baggage used by most passengers is unsuitable.

[13] Mr. Lukács also argues that to invoke Article 17(2) of the Convention, there must be a causal relationship between the inherent defect, quality or vice of the baggage and the damage to such baggage, and that even when this relationship exists, the carrier is exempt from liability only to the extent that the damage is the result of the inherent defect, quality or vice of the baggage.

[14] Mr. Lukács further contends that the exoneration under Rule 55(C)(12) of the Tariff from liability for the loss or delay in delivery of baggage that is not considered acceptable for transportation under Rule 97(A)(3) is inconsistent with Article 17(2) of the Convention. Mr. Lukács also submits that under Article 19 of the Convention, Air Canada may only avoid liability for damage occasioned by delay in delivery of baggage if the carrier proves that extenuating circumstances caused the delay. Mr. Lukács acknowledges that delays due to security measures taken by organizations external to the air carrier are beyond the control of the carrier, and therefore fall within the scope of Article 19 of the Convention. However, Mr. Lukács emphasizes that delays of this kind are unrelated to the inherent defect, quality or vice of the baggage.

Analysis and findings

[15] The Agency's jurisdiction with respect to an air carrier's international tariff is set out in section 111 and paragraph 122(a) of the ATR, which permits the Agency to determine, respectively, whether a term or condition of carriage as published or filed by an air carrier is just and reasonable and not unduly discriminatory, and whether the carrier clearly states its terms and conditions.

1. Is Rule 55(C)(12) of the Tariff, as it relates to liability for loss of or damage to baggage, consistent with Article 17(2) of the Convention?

[16] By virtue of the Carriage by Air Act, the Convention has the force of law in Canada and governs the liability limitations for loss, damage, or delay of baggage applicable to international carriage by air.

Air Canada's Tariff provision incorporating the Convention by reference

[17] Air Canada submits that a provision appearing in its Tariff incorporates the Convention by reference, and that such provision provides that, in the event of inconsistencies between the Tariff and the Convention, the latter shall prevail. Air Canada maintains that this provision effectively means that the Tariff cannot be considered to be contrary to the Convention.

[18] Pursuant to paragraph 122(a) of the ATR, an air carrier must clearly state its terms and conditions in a tariff, and pursuant to subsection 110(4) of the ATR, an air carrier must apply the terms and conditions of carriage specified in its tariff. The Agency is therefore of the opinion that, to the extent possible, an air carrier's tariff should be a stand-alone document, requiring no reference to other documents to determine the rights and obligations associated with carriage. The Agency is also of the opinion that to promote and protect the interests of both consumers and carriers, in situations where it is clear that there are inconsistencies between provisions in tariffs, or between tariffs and referenced documents, such situations must be addressed, and the inconsistencies corrected.

Liability for loss of baggage

[19] Rule 55(C)(12) of the Tariff provides, in part, that Air Canada shall not be liable for the loss of any property which is not acceptable for transportation in accordance with Rules 97, 100 and 105 of the Tariff or for any other loss or damage of whatever nature resulting from any such loss or damage or from the transportation of such property.

[20] Mr. Lukács submits that Rule 55(C)(12), insofar as it relates to liability for loss of baggage, is inconsistent with Article 17(2) of the Convention, which does not allow an air carrier to exempt itself from liability for loss of baggage.

[21] In Decision No. 227-C-A-2008, the Agency dealt with a similar issue and determined "...if a carrier accepts checked baggage for transportation and the checked baggage is under the care and control of the carrier, the carrier assumes liability for the baggage in the event of loss and damage, notwithstanding the carrier has not agreed to carry items...".

[22] The Agency therefore finds that Rule 55(C)(12) of the Tariff, as it relates to liability for loss of baggage, is not consistent with Article 17(2) of the Convention.

Liability for damage to baggage

[23] Rule 55(C)(12) of the Tariff provides, in part, that Air Canada shall not be liable for the damage of any property that is not acceptable for transportation in accordance with Rule 97 of the Tariff or for any other damage of whatever nature resulting from any such damage or from the transportation of such property.

[24] Mr. Lukács asserts that Rule 55(C)(12) relieves Air Canada from liability for damage to baggage, irrespective of whether the damage is unrelated to an inherent defect, quality or vice of the baggage, and that, as such, this rule is contrary to Article 17(2) of the Convention.

[25] The Agency finds that, to exempt a carrier from liability for damage to baggage under Article 17(2) of the Convention, there must be a causal relationship between the damage and an inherent defect, quality or vice of the baggage. As Rule 55(C)(12) is not formulated in a manner that establishes this relationship, the Agency finds that Rule 55(C)(12) of the Tariff, as it relates to liability for damage to baggage, is not consistent with the Convention.

2. Does Rule 55(C)(12) of the Tariff, as it relates to liability for delay in delivery of baggage, accurately reflect Article 19 of the Convention?

Liability for delay in delivery of baggage

[26] Rule 55(C)(12) of the Tariff provides, in part, that Air Canada shall not be liable for the delay in delivery of any property that is not acceptable for transportation in accordance with Rules 97, 100 and 105 of the Tariff.

[27] Air Canada maintains that the nature of certain baggage can cause a delay in delivery, even if Air Canada and its agents take all necessary measures to mitigate the delay.

[28] Mr. Lukács submits that whether baggage has an inherent defect, quality or vice is irrelevant to the matter of liability for delay in delivery, and that to avoid liability under Article 19 of the Convention, a carrier must demonstrate that it took all measures that could reasonably be required to avoid the delay.

[29] The Agency accepts Mr. Lukács' submission and notes that Rule 55(C)(12) fails to correctly represent that Air Canada's limitation with respect to liability only arises when it proves that the carrier and its servants and agents took all measures that could reasonably be required to avoid damage occasioned by any delay or that it was impossible for the carrier or its servants to take such measures.

[30] The Agency therefore finds that Rule 55(C)(12), as it relates to liability for delay in delivery of baggage, does not accurately reflect Article 19 of the Convention.

3. Does Article 26 of the Convention apply to Rule 55(C)(12) of the Tariff and, if so, what effect does Article 26 have if any part(s) of Rule 55(C)(12) is/are determined to be inconsistent with the Convention?

[31] As noted above, by virtue of the Carriage by Air Act, the Convention has the force of law in Canada and governs the liability limitations for loss, damage, or delay of baggage applicable to international carriage by air.

[32] Article 26 of the Convention states, in part, that any provision [of a carrier's tariff] tending to relieve a carrier of liability or to fix a lower limit than that which is laid down in the Convention is null and void.

[33] As noted above, the Agency finds that the provisions of Rule 55(C)(12) providing for a limitation of liability for Air Canada with respect to loss of and damage to baggage are not consistent with Article 17(2) of the Convention.

[34] As also noted above, the Agency finds that the provision of Rule 55(C)(12) providing for a limitation of liability for Air Canada with respect to delay in delivery of baggage is not consistent with Article 19 of the Convention.

[35] Accordingly, the Agency finds that all those provisions of Rule 55(C)(12) of the Tariff, which tend to relieve Air Canada of liability other than is provided for in the Convention, are null and void.

[36] When portions of a section of a contract are determined to be null and void, consideration has to be given as to whether the defective portions can be severed from the section and leave meaning to the remaining wording of the section. In this instance, the portions determined to be null and void constitute the substantive core of Rule 55(C)(12) and as a result Rule 55(C)(12) cannot stand with those portions removed.

[37] Therefore, pursuant to Article 26 of the Convention, the Agency finds that Rule 55(C)(12) of the Tariff, in its entirety, is null and void.

4. Is Rule 55(C)(12) of the Tariff just and reasonable as required by subsection 111(1) of the ATR?

[38] In Decision No. 227-C-A-2008, the Agency found that when a provision of a tariff is null and void, the tariff provision cannot be just and reasonable as required by subsection 111(1) of the ATR.

[39] Accordingly, the Agency finds that Rule 55(C)(12) of the Tariff, being null and void, is not just and reasonable as required by subsection 111(1) of the ATR.

5. Are Rule 97(A)(3)(1) of the Tariff and Rule 97(A)(3)(2) of the Tariff as it relates to oversized baggage just and reasonable as required by subsection 111(1) of the ATR?

[40] Rule 97(A)(3) of the Tariff sets out certain articles that Air Canada considers to be unsuitable for acceptance for transportation, and for which the carrier assumes no liability under Rule 55(C)(12) of the Tariff. Among these articles are:

1. baggage with protruding parts such as, but not limited to feet, wheels, pull straps, pull handles, hanger hooks, loose flaps and/or pockets; and,
2. overpacked/oversized baggage.

[41] Air Canada submits that it is not unreasonable for an air carrier to refuse to carry articles that it considers to be unsuitable for carriage, and that Article 17(2) of the Convention permits carriers to escape liability for damage to baggage resulting from the inherent defect, quality or vice of such baggage.

[42] Mr. Lukács contends that most pieces of baggage have one or more of the characteristics set out in Rule 97(A)(3), and that to accept Air Canada's argument that these characteristics represent an "inherent defect, quality or vice" would imply that the majority of the baggage used by most passengers is unsuitable.

[43] The Agency acknowledges that an air carrier has the freedom to largely determine the baggage that will be accepted for transportation. However, as previously determined by the Agency in Decision No. 227-C-A-2008, and as noted above, if a carrier accepts checked baggage for transportation and the checked baggage is under the care and control of the carrier, the carrier assumes liability for the baggage in the event of loss and damage. The carrier can avoid liability only if the damage resulted from an inherent quality or defect of the baggage.

[44] The Agency finds that baggage with protruding parts and oversized baggage are not features that represent an inherent defect, quality or vice of the baggage, and that Article 17(2) of the Convention cannot be invoked to disavow liability for the baggage on the basis of such features alone. The protruding parts set out in Rule 97(A)(3)(1) of the Tariff are common to most baggage currently in use, and this baggage, as well as oversized baggage, do not involve elements that would necessarily contribute to the damage, loss or delay of this baggage.

[45] With respect to oversized baggage, the Agency notes that Air Canada, under certain conditions and subject to excess baggage charges, accepts for transportation baggage that exceeds the dimensions and/or weight associated with the free baggage allowance that is set out in the Tariff. In light of this, the Agency finds that, in and of itself, oversized baggage should not be considered as unsuitable for acceptance for transportation.

[46] Therefore, the Agency finds that Rule 97(A)(3)(1) and Rule 97(A)(3)(2), as it relates to oversized baggage, are not just and reasonable, contrary to subsection 111(1) of the ATR.

6. Does Rule 97(A)(3)(2) of the Tariff, as it relates to overpacked baggage, clearly set out Air Canada's terms and conditions respecting baggage that is unsuitable for acceptance for transportation, as required by paragraph 122(a) of the ATR?

[47] Rule 97(A)(3)(2) of the Tariff includes overpacked baggage as unsuitable for acceptance for transportation. The Agency notes that Rule 55(C)(16) of the Tariff provides that Air Canada is not liable for "damages or loss of baggage and contents resulting from overpacking for the style, size and quality of the luggage". The Agency finds that this provision indicates, reasonably, that Air Canada's liability with respect to overpacked baggage is dependent on the style, size and quality of the baggage. Subject to those qualifications, Air Canada will be liable for damage or loss of overpacked baggage. Given this liability, the Agency finds that the inclusion of overpacked baggage in Rule 97(A)(3)(2) as being unsuitable for acceptance for transportation, without qualification, creates ambiguity with respect to the application of Rule 55(C)(16) of the Tariff. This ambiguity within Rule 97(A)(3)(2) of the Tariff, as it relates to overpacked baggage, makes that portion of Rule 97(A)(3)(2) contrary to paragraph 122(a) of the ATR.

7. Is Air Canada's signage relating to baggage liability consistent with Air Canada's obligations?

[48] Paragraph 18 (b) of the ATR provides, in part, that air carriers providing a scheduled international service shall not make publicly any statement that is misleading with respect to the air service or any service incidental thereto.

[49] Given the other findings in this Decision, the Agency finds that Air Canada's signs describing Air Canada's baggage liability do not accurately reflect Air Canada's obligations under the Convention and are therefore misleading.

Conclusion

[50] Based on the above findings:

• The Agency, pursuant to paragraph 113(a) of the ATR, disallows the following terms and conditions of the Tariff as being unjust and unreasonable, thus being contrary to subsection 111(1) of the ATR:
  • Rule 55(C)(12);
  • Rule 97(A)(3)(1); and,
  • Rule 97(A)(3)(2), as it relates to oversized baggage.
• The Agency provides Air Canada with the opportunity to show cause, within forty-five (45) days from the date of this Decision, why the Agency should not require Air Canada:
  • to amend Rule 55(C)(12) of the Tariff to strictly represent Article 17(2) of the Montreal Convention;
  • to amend Rule 97(A)(3)(2) to read as follows: "overpacked baggage considering the style, size and quality of the baggage"; and,
  • to delete Rule 55(C)(16) of the Tariff in light of these proposed amendments.

[51] The Agency, pursuant to section 26 of the Canada Transportation Act, S.C., 1996, c. 10, orders Air Canada, within ninety (90) days from the date of this Decision, to remove or revise all signage which is not in compliance with the amended Tariff.

Members

• John Scott
• J. Mark MacKeigan

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Appendix A

Air Canada's International Passenger Rules and Fares Tariff, CTA(A) No. 458

Rule 55 - LIABILITY OF CARRIERS

(C) Limitation of liability

(12) Carrier shall not be liable for the loss, damage, or delay in delivery of any property which is not acceptable for transportation in accordance with rules 97, 100 and 105 or for any other loss or damage of whatever nature resulting from any such loss or damage or from the transportation of such property. This exclusion is applicable whether the nonacceptable property is included in the passenger's checked baggage with or without the knowledge of the carrier.

(16) Carrier is not liable for damages or loss of baggage and contents resulting from overpacking for the style, size and quality of the luggage, carrier does not accept liability for losses resulting from the use of cardboard boxes as checked baggage.

Rule 97 - ACCEPTANCE OF BAGGAGE

(A) General conditions of acceptance

Carrier will accept for transportation as baggage, such personal property as is necessary or appropriate for the wear, use, comfort, or convenience of the passenger for the purpose of the trip, subject to the following conditions:

The Montreal Convention

Article 17 - Death and injury of passengers - damage to baggage

(2) The carrier is liable for damage sustained in case of destruction or loss of, or of damage to, checked baggage upon condition only that the event which caused the destruction, loss or damage took place on board the aircraft or during any period within which the checked baggage was in the charge of the carrier. However, the carrier is not liable if and to the extent that the damage resulted from the inherent defect, quality or vice of the baggage. In the case of unchecked baggage, including personal items, the carrier is liable if the damage resulted from its fault or that of its servants or agents.

Article 19 - Delay

The carrier is liable for damage occasioned by delay in the carriage by air of passengers, baggage or cargo. Nevertheless, the carrier shall not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them to take such measures.

Article 26 - Invalidity of contractual provisions

Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in this Convention shall be null and void, but the nullity of any such provision does not involve the nullity of the whole contract, which shall remain subject to the provisions of this Convention

Air Transportation Regulations

Section 18

Every scheduled international licence and non-scheduled international licence is subject to the following conditions:

Subsection 110(4)

Where a tariff is filed containing the date of publication and the effective date and is consistent with these Regulations and any orders of the Agency, the tolls and terms and conditions of carriage in the tariff shall, unless they are rejected, disallowed or suspended by the Agency or unless they are replaced by a new tariff, take effect on the date stated in the tariff, and the air carrier shall on an after that date charge the tolls and apply the terms and conditions of carriage specified in the tariff.

Subsection 111(1)

All tolls and terms and conditions of carriage, including free and reduced rate transportation, that are established by an air carrier shall be just and reasonable and shall, under substantially similar circumstances and conditions and with respect to all traffic of the same description, be applied equally to all that traffic.

Section 113

The Agency may

1. suspend any tariff or portion of a tariff that appears not to conform with [...] section 111 [...] or disallow any tariff or portion of a tariff that does not conform with any of those provisions; and
2. establish and substitute another tariff or portion thereof for any tariff or portion thereof disallowed under paragraph (a).

Section 122

Every tariff shall contain

1. the terms and conditions governing the tariff generally, stated in such a way that it is clear as to how the terms and conditions apply to the tolls named in the tariff.

Canada Transportation Act

Section 26

The Agency may require a person to do or refrain from doing any thing that the person is or may be required to do or is prohibited from doing under any Act of Parliament that is administered in whole or in part by the Agency.