Mega International Commercial Bank (Canada) v. Canada (Attorney General), (2012) 407 F.T.R. 232 (FC)

• Judge: de Montigny, J.
• Court: Federal Court (Canada)
• Case Date: November 24, 2011
• Jurisdiction: Canada (Federal)
• Citations: (2012), 407 F.T.R. 232 (FC);2012 FC 407

Mega Intl. Com. Bk. v. Can. (A.G.) (2012), 407 F.T.R. 232 (FC)

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[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2012] F.T.R. TBEd. MY.039

Mega International Commercial Bank (Canada)

(appellant) v. Attorney General of Canada (respondent)

(T-459-11; 2012 FC 407; 2012 CF 407)

Indexed As: Mega International Commercial Bank (Canada) v. Canada (Attorney General)

Federal Court

de Montigny, J.

April 11, 2012.

Summary:

The 2010 amendments to the Cost of Borrowing (Banks) Regulations required all key information to be provided in information boxes at the beginning of applications and contracts for credit cards, loans and lines of credit. Mega International Commercial Bank (Canada) provided information boxes but deviated from the common format and language required by the Regulations. The Commissioner of the Financial Consumer Agency of Canada confirmed the finding of the Deputy Commissioner, that Mega had contravened ss. 6(2.1), (2.2) and (2.4) of the Regulations, and imposed an administrative monetary penalty of $12,500. Mega appealed.

The Federal Court dismissed the appeal and upheld the decision of the Commissioner.

Administrative Law - Topic 2266

Natural justice - The duty of fairness - What constitutes procedural fairness - [See both Administrative Law - Topic 2267 ].

Administrative Law - Topic 2267

Natural justice - The duty of fairness - Reasonable expectation or legitimate expectation - The Federal Court stated that "the duty of fairness is flexible and depends on an appreciation of the context of the particular statute and the rights affected. As such, several factors are relevant to determining the content of the duty of fairness, of which the legitimate expectations of the individual or corporation challenging the decision is only one among others. Of equal importance will be the nature of the decision being made and the process followed in making it, the nature of the statutory scheme and the terms of the statute pursuant to which the body operates, the importance of the decision to the individual or individuals affected, and the choices of procedure made by the agency itself" - See paragraph 33.

Administrative Law - Topic 2267

Natural justice - The duty of fairness - Reasonable expectation or legitimate expectation - The Cost of Borrowing (Banks) Regulations required all key information to be provided in information boxes at the beginning of applications and contracts for credit cards, loans and lines of credit - The Commissioner of the Financial Consumer Agency of Canada confirmed the finding that Mega International Commercial Bank (Canada) had contravened the Regulations - Mega appealed - An issue was whether the Agency failed to follow its established process of monitoring compliance to the Regulations and therefore breached its duty of procedural fairness - Mega argued that the Agency breached Mega's legitimate expectation that its publicized process would be followed - It relied on a letter that the Commissioner sent, which set out the process that the Agency intended to follow in assessing contraventions - The Federal Court found that the Agency followed the process it committed to follow in its letter - "I am unable to find any commitment by the Agency, either explicit or implicit, upon which Mega could rely in support of its expectation that it would have an opportunity to remedy any deficiencies in its information boxes, prior to the issuance of a Notice of Violation." - See paragraphs 27 to 32.

Administrative Law - Topic 2272

Natural justice - The duty of fairness - Circumstances or powers to which duty applies (incl. extent of duty) - Mega International Commercial Bank (Canada) appealed the decision of the Financial Consumer Agency of Canada, where by the Commissioner confirmed the finding of the Deputy Commissioner that Mega had contravened the Cost of Borrowing (Banks) Regulations - Mega made much of the fact that the Agency's decision had the potential to negatively impact its reputation - It contended that the stigma of violating a government statute was more damaging than a finding of liability as against an opposing party in an adversarial dispute - The Federal Court agreed with the Attorney General of Canada that corporations were not entitled to the same level of procedural fairness as individuals, and that tribunals charged with regulating economic activity were not held to the same standards as tribunals dealing with personal individual rights - Moreover, the Commissioner indicated in her decision that she did not intend to make her decision public, despite s. 31 of the Financial Consumer Agency of Canada Act permitting it - To some extent, any damage to Mega's reputation was self-inflicted - See paragraphs 34 to 36.

Administrative Law - Topic 2272

Natural justice - The duty of fairness - Circumstances or powers to which duty applies (incl. extent of duty) - Mega International Commercial Bank (Canada) appealed the decision of the Financial Consumer Agency of Canada, where by the Commissioner confirmed the finding of the Deputy Commissioner that Mega had contravened the Cost of Borrowing (Banks) Regulations, and imposed an administrative monetary penalty - Mega argued in favour of a high duty of fairness because the decision of the Commissioner was final and the monetary penalty was akin to a criminal fine - The Federal Court disagreed - The Deputy Commissioner initially issued a Notice of Violation and granted Mega the opportunity to submit representations with respect to the violation, before the Commissioner issued her final decision - The Notice of Violation was not the equivalent of a finding of violation - The process followed by the Commissioner was consistent with ss. 22 and 23 of the Financial Consumer Agency of Canada Act - Also, the Commissioner did not resemble a court proceeding and was more akin to a regulatory/administrative process - Finally, Mega's argument that an administrative penalty was akin to a criminal fine was not supported by case law - The nature of the administrative process was, prima facie, for the protection of the public in accordance with Parliament's policy decision; Mega had not submitted any evidence or presented any argument to the contrary - See paragraphs 37 to 40.

Banks and Banking - Topic 1446

Liability of banks to customers - Duties of bank - Duty to inform or warn - The appellant Bank's information boxes did not contain all of the information contemplated by the Schedules of the Cost of Borrowing (Banks) Regulations, nor was the format of its boxes the same as the format set out in the Schedules - Section 6(1) of the Regulations stated that banks granting credit "must" provide borrowers with disclosure statements which included an "information box" setting out certain key information at the beginning of applications and contracts for credit cards, loans and lines of credit - The Bank appealed the decision of the Commissioner of the Financial Consumer Agency of Canada, that the Bank had contravened the Regulations - The Federal Court disagreed with the Bank's argument that the Regulations provided federally regulated federal institutions with discretion to decide on the formatting and content of their boxes - "Contrary to the permissive language used elsewhere in the Regulations, there is nothing permissive in ss. 6(2.1)(b) and 6(2.2)(b) ... The Schedules themselves are highly detailed and prescribed a particular form with specific information and terms. ... The Regulations go as far as specifying the font sizes, spacing, margins, etc. that must be used in the information boxes (s. 6(2.4)), and is a further indication that banks are expected to adhere to a prescribed protocol in order to ensure uniformity of presentation" - A strict reading of the Regulations was more consistent with the overriding purpose of the Act and the Regulations - As a result, the court found that the Commissioner's interpretation of the Regulations was reasonable - See paragraphs 41 to 47.

Banks and Banking - Topic 1446

Liability of banks to customers - Duties of bank - Duty to inform or warn - The appellant Bank's information boxes deviated from the common format and language required by the Cost of Borrowing (Banks) Regulations - The Bank appealed the decision of the Financial Consumer Agency of Canada, whereby the Commissioner confirmed the finding that the Bank had contravened the Regulations - The Bank argued that the Commissioner erred in law in concluding that harm had been caused to the Bank's customers, as there was no evidence that harm had occurred - The Federal Court agreed with the Attorney General of Canada that "this is a much too narrow interpretation of harm. The Regulations are akin to consumer protection provisions, and their purpose is to provide customers with better information regarding financial products offered by competing banks, so that they are in a position to make informed choices. As such, it can be presumed that harm is established whenever a bank does not adhere to the requirements of the Regulations ... The Regulations would lose much of their impact if harm had to be individualized and quantified, before a bank could be found in violation of its provisions. ... It is indeed significant that the relevant provisions of the Regulations do not list actual harm to consumers as an element of the offence. ... [W]henever a breach of the Regulations has been made, there is per se harm to the consumers" - See paragraphs 55 to 57.

Banks and Banking - Topic 1601

Liability of banks to customers - Defences - General - The appellant Bank appealed the decision of the Financial Consumer Agency of Canada, whereby the Commissioner confirmed the finding of the Deputy Commissioner that the Bank had contravened the Cost of Borrowing (Banks) Regulations - Relying on s. 28(2) of the Financial Consumer Agency of Canada Act, which preserved the common law principles of justification and excuse as defences to alleged violations, the Bank initially submitted, in its written representations, that it met the two-fold test of that defence - At the hearing, however, the Bank readily admitted that it could not rely on that defence, as its misinterpretation of the Regulations was an error of law and not an error of fact - The Federal Court stated that "[t]his is clearly the correct approach to take. Ignorance of the law cannot be an excuse" - See paragraphs 48 and 49.

Banks and Banking - Topic 1601

Liability of banks to customers - Defences - General - The 2010 amendments to the Cost of Borrowing (Banks) Regulations required all key information to be provided in information boxes at the beginning of applications and contracts for credit cards, loans and lines of credit - Mega International Commercial Bank (Canada) deviated from the common format and language required by the Regulations - Mega appealed the decision of the Financial Consumer Agency of Canada, whereby the Commissioner confirmed the finding that the Bank had contravened the Regulations - Mega argued that it had exercised due diligence, a defence pursuant to s. 28(1) of the Financial Consumer Agency of Canada Act - It claimed that: its chief compliance officer notified management at its four Canadian branches of the new requirements; it modified its existing information boxes; it developed and executed an implementation plan; and it ensured adequate translation in Chinese, the language of its clients - The Federal Court held that those steps fell "far short" of demonstrating due diligence, which entailed proof that Mega took all reasonable care to avoid committing the offence - There was no need for the Commissioner to discuss the defence of due diligence in its decision, once negligence had been established, since negligence amounted to a lack of due diligence - See paragraphs 50 to 54.

Consumer Law - Topic 8

General - Interpretation of legislation - [See both Banks and Banking - Topic 1446 ].

Consumer Law - Topic 245

Consumer contracts - General - Form requirements - Noncompliance - Consumer suffering no prejudice - [See second Banks and Banking - Topic 1446 ].

Consumer Law - Topic 2032

Contracts of credit - General provisions - Disclosure of interest rate - [See both Banks and Banking - Topic 1446 ].

Consumer Law - Topic 2040

Contracts of credit (incl. payday loans) - General provisions - Regulatory decisions (incl. standard of review) - The Commissioner of the Financial Consumer Agency of Canada confirmed the finding that the appellant Bank had contravened the Cost of Borrowing (Banks) Regulations - An issue was whether the Commissioner erred by failing to properly apply the defence of due diligence - The parties disagreed as to the applicable standard of review - The Bank submitted that the Commissioner had not developed any expertise in that common law defence, and it should therefore be reviewed on the standard of correctness - The Federal Court disagreed - "[T]he applicability of a defence of due diligence raises legal issues that cannot easily be separated from the factual issues. Such issues clearly attract deference", and were not of the kind that fell within any of the categories which attracted a standard of correctness - The Commissioner's decision in that respect did not involve a constitutional matter or an issue of general law of central importance to the legal system as a whole, and it did not purport to draw jurisdictional lines between two or more competing specialized tribunals - As a result, the issue had to be reviewed against the standard of reasonableness - See paragraph 26.

Consumer Law - Topic 8002

Offences (incl. non-compliance) - General - Remedies - General - The Cost of Borrowing (Banks) Regulations required all key information to be provided in information boxes at the beginning of applications and contracts for credit cards, loans and lines of credit - Mega International Commercial Bank (Canada) provided information boxes but deviated from the format and language required by the Regulations - The Commissioner of the Financial Consumer Agency of Canada reduced the penalty of $25,000 proposed by the Deputy Commissioner, to $12,500 - On this appeal, Mega submitted that the Commissioner erred in imposing an administrative monetary penalty on it - Relying on s. 20 of the Financial Consumer Agency of Canada Act, Mega argued that the Commissioner did not take into account the absence of harm, negligence, intention or prior violations - The Federal Court held that the Commissioner canvassed each of the foregoing factors in reaching her decision - The Commissioner reasonably determined that harm was done and that the Bank was negligent - She also came to the conclusion that Mega had no previous violations, it made a good faith effort to comply with the information box requirements and it was not their intention to be non-compliant - It was precisely because of her view that Mega's actions and the prejudice to financial consumers was not grievous, that she cut the penalty by half - "This kind of discretionary decision should not be reversed on appeal unless the reviewing court is convinced that it is not fit or clearly unreasonable. There is no basis to reach that conclusion in this case." - See paragraphs 58 to 60.

Consumer Law - Topic 8035

Offences - Strict liability - Defence of due diligence - [See second Banks and Banking - Topic 1601 ].

Cases Noticed:

Sketchley v. Canada (Attorney General), [2006] 3 F.C.R. 392; 344 N.R. 257; 2005 FCA 404, refd to. [para. 22].

Canadian Union of Public Employees et al. v. Ontario (Minister of Labour), [2003] 1 S.C.R. 539; 304 N.R. 76; 173 O.A.C. 38; 2003 SCC 29, refd to. [para. 22].

New Brunswick (Board of Management) v. Dunsmuir, [2008] 1 S.C.R. 190; 372 N.R. 1; 329 N.B.R.(2d) 1; 844 A.P.R. 1; 2008 SCC 9, refd to. [para. 24].

Alliance Pipeline Ltd. v. Smith, [2011] 1 S.C.R. 160; 412 N.R. 66; 2011 SCC 7, refd to. [para. 24].

Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817; 243 N.R. 22, refd to. [para. 27].

Congrégation des témoins de Jéhovah de St-Jérôme-Lafontaine (Village), [2004] 2 S.C.R. 650; 323 N.R. 1; 2004 SCC 48, refd to. [para. 29].

Gaw v. Commissioner of Corrections (Can.) (1986), 2 F.T.R. 122; 36 A.C.W.S.(2d) 1 (T.D.), refd to. [para. 29].

Martins v. Canada (Minister of Citizenship and Immigration), [2002] F.T.R. Uned. 113; 112 A.C.W.S.(3d) 556; 2002 FCT 189, refd to. [para. 29].

Basudde v. Canada (Attorney General) (2002), 222 F.T.R. 115; 2002 FCT 782, refd to. [para. 29].

Brunico Communications Inc. v. Canada (Attorney General) (2004), 252 F.T.R. 146; 2004 FC 642, refd to. [para. 29].

Genex Communications Inc. v. Canada (Attorney General) et al., [2006] 2 F.C.R. 199; 338 N.R. 268; 2005 FCA 283, refd to. [para. 32].

CIBA-Geigy Canada Ltd. v. Patented Medicine Prices Review Board, [1994] 3 F.C. 425; 77 F.T.R. 197 (T.D.), refd to. [para. 35].

Sheriff et al. v. Canada (Attorney General) (2006), 350 N.R. 230; 2006 FCA 139, refd to. [para. 35].

Martineau v. Ministre du Revenu national, [2004] 3 S.C.R. 737; 328 N.R. 48; 2004 SCC 81, refd to. [para. 40].

R. v. Wigglesworth, [1987] 2 S.C.R. 541; 81 N.R. 161; 61 Sask.R. 105; 24 O.A.C. 321, refd to. [para. 40].

R. v. Sault Ste. Marie (City), [1978] 2 S.C.R. 1299; 21 N.R. 295, refd to. [para. 48].

Résidences Majeau inc. v. Minister of National Revenue, [2010] N.R. Uned. 48; 2010 FCA 28, refd to. [para. 48].

Corporation de l'École Polytechnique v. Canada (2004), 325 N.R. 64; 132 A.C.W.S.(3d) 689; 2004 FCA 127, refd to. [para. 49].

Samson v. Minister of National Revenue, [2007] F.T.R. Uned. 650; 170 A.C.W.S.(3d) 67; 2007 FC 975, refd to. [para. 51].

Canada (Superintendant of Bankruptcy) v. MacLeod - see Laperrière v. MacLeod et al.

Laperrière v. MacLeod et al. (2011), 411 N.R. 174; 330 D.L.R.(4th) 311; 2011 FCA 4, refd to. [para. 51].

R. v. Raham (J.) (2010), 260 O.A.C. 143; 99 O.R.(3d) 241; 2010 ONCA 206, refd to. [para. 51].

R. v. Chapin, [1979] 2 S.C.R. 121; 26 N.R. 289, refd to. [para. 54].

Commissioner of Competition v. Premier Career Management Group Corp. et al., [2010] 4 F.C.R. 413; 395 N.R. 199; 2009 FCA 295, refd to. [para. 57].

Statutes Noticed:

Bank Act Regulations (Can.), Cost of Borrowing (Banks) Regulations, SOR/2001-101, sect. 6 [para. 21].

Cost of Borrowing (Banks) Regulations - see Bank Act Regulations (Can.).

Financial Consumers Agency of Canada Act, S.C. 2001, c. 9, sect. 3(2), sect. 20, sect. 22, sect. 24, sect. 28 [para. 21].

Financial Consumers Agency of Canada Act Regulations (Can.), Financial Consumer Agency of Canada Designated Violations Regulations, SOR/2002-101, sect. 2(a) [para. 21].

Financial Consumer Agency of Canada Designated Violations Regulations - see Financial Consumers Agency of Canada Act Regulations (Can.).

Counsel:

D. Lynne Watt, for the appellant;

John Syme, for the respondent.

Solicitors of Record:

Gowlings, Ottawa, Ontario, for the appellant;

Myles J. Kirvan, Deputy Attorney General of Canada, Ottawa, Ontario, for the respondent.

This appeal was heard at Ottawa, Ontario, on November 24, 2011, before de Montigny, J., of the Federal Court, who delivered the following reasons for judgment and judgment, dated April 11, 2012.