Decision No. 418-C-A-2011

November 30, 2011

COMPLAINT by Gábor Lukács against WestJet respecting liability and declarations of excess valuation for the domestic carriage of baggage.

File No.: 
M4120-3/11-01909

Introduction

[1] As the result of a complaint by Gábor Lukács, the Canadian Transportation Agency (Agency) ordered WestJet in Decision No. 483-C-A-2010 dated November 24, 2010 to:

  1. revise its tariff applicable to domestic services to provide for a limit of liability for the carriage of baggage at a level equivalent to that required under the Montreal Convention (currently 1131 Special Drawing Rights (SDR), or approximately CAD$1,800); and,
  2. provide for declarations of excess valuation at a reasonable supplementary charge.

[2] In response, WestJet revised Rules 7.6, Baggage Delays, and 7.7, Baggage Liability Limit, of its domestic tariff (Tariff), as set out in the Appendix.

[3] On March 27, 2011, Mr. Lukács filed a further complaint with the Agency alleging that paragraph (vi) of Rule 7.6, Baggage Delays, of the Tariff fails to comply with the order set out in Decision No. 483-C-A-2010. Mr. Lukács requests that the Agency substitute certain wording for Rule 7.6(vi).

[4] In its answer dated May 24, 2011, WestJet submitted a proposed revision to Rule 7.6(vi). Additional submissions were subsequently filed by the parties. On July 20, 2011, WestJet filed a new proposal involving another method of dealing with excess valuation in Rule 7.7 which, in WestJet's opinion, would allow WestJet to address certain fundamental problems associated with implementing Decision No. 483-C-A-2010.

[5] In Decision No. LET-C-A-83-2011, the Agency, among other matters, posed several interrogatories to WestJet respecting its new proposal. The Agency also ordered WestJet to submit the text of its proposed revision to Rule 7.7 respecting declarations of excess valuation.

[6] Mr. Lukács requests that he be awarded costs respecting his complaint filed on March 27, 2011.

Issues

  1. Is WestJet's proposed revision to Rule 7.6(vi) clear, and is that proposed revision not unreasonable?
  2. Is WestJet's proposal to apply a limit of CAD$3,000 for declarations of excess valuation, and a flat charge of CAD$10 to allow a passenger to receive compensation above WestJet's basic liability, up to the limit of CAD$3,000, not unreasonable?
  3. Is WestJet's proposed revision to Rule 7.7 respecting declarations of excess valuation clear, and is that proposed revision not unreasonable?
  4. Should costs be awarded to Mr. Lukács?

Tests to be Applied

[7] The Agency has formulated tests to determine whether a tariff provision is clear and is not unreasonable. These tests will be applied to the present matter.

Test for clarity

[8] In Decision No. 2-C-A-2001, Mr. H. v. Air Canada, the Agency first set out the test to be applied to determine the clarity of a tariff, stating that:

[...] the Agency is of the opinion that an air carrier's tariff meets its obligations of clarity when, in the opinion of a reasonable person, the rights and obligations of both the carrier and passengers are stated in such a way as to exclude any reasonable doubt, ambiguity or uncertain meaning.

[9] This test was most recently applied in Decision No. 316-C-A-2010, McKenzie v. West Wind.

Test for unreasonableness

[10] To assess whether a term or condition of carriage is "unreasonable", the Agency has traditionally applied a balancing test, which requires that a balance be struck between the rights of passengers to be subject to reasonable terms and conditions of carriage, and the particular air carrier's statutory, commercial and operational obligations. This test was first established in Decision No. 666-C-A-2001, Anderson v. Air Canada, and was most recently applied in Decision No. 291-C-A-2011, Lukács v. Air Canada.

[11] The terms and conditions of carriage are set out by an air carrier unilaterally without any input from passengers. The air carrier sets its terms and conditions of carriage on the basis of its own interests, which may have their basis in purely commercial requirements. There is no presumption that a tariff is reasonable.

[12] When balancing the passengers' rights against the carrier's obligations, the Agency must consider the whole of the evidence and the submissions presented by both parties and make a determination on the reasonableness or unreasonableness of the term or condition of carriage based on which party has presented the more compelling and persuasive case.

Positions of the Parties and Analysis

1. Is WestJet's proposed revision to Rule 7.6(vi) clear, and is that proposed revision not unreasonable?

Submissions

[13] In its submission dated May 24, 2011, WestJet proposed the following revised tariff provision, which it argues fully complies with Decision No. 483-C-A-2010:

7.6 Baggage Delays

If the baggage does not arrive on the same flight as the passenger, the airline will:

[...]

(vi) After a 21 day delay, provide a settlement in accordance with the following rules:

  1. if no value is declared as per section 7.7, the settlement will be for the value of the delayed bag or 1131 SDRs, whichever is the lesser, and
  2. if value is declared per section 7.7, the settlement will be for the value of the delayed bag or the declared sum whichever is the lesser.

In any case the carrier may, in its sole discretion, issue a WestJet Travel Bank credit for claims in excess of the domestic tariff liability.

[14] Mr. Lukács submits that the proposed tariff provision is deficient in the following respects:

  1. the use of the term "delayed bag" in the provision could be construed as restricting the provision's scope, and should be replaced by the term "delayed item" or "delayed baggage."
  2. the proposed Rule 7.6(vi)a, although reasonable, significantly diminishes passengers' rights as compared to the existing Rule 7.6(vi), which provides for a settlement of 1131 SDR without the necessity of providing proof of value of baggage.
  3. the proposed Rule 7.6(vi)b is unreasonable as it requires even those passengers who have declared excess valuation to provide proof of the value of baggage. Mr. Lukács maintains that Article 22(2) of the Montreal Convention, the principle of which should be applied to this case, places the onus on the carrier to demonstrate that the value of baggage was less than the amount declared.
  4. the final paragraph of the proposed Rule 7.6(vi) is unacceptable because:
    • it is unclear whether the paragraph refers to the entire amount of a claim that exceeds the domestic tariff liability or the portion of a claim that exceeds such liability.
    • WestJet has no obligation to satisfy claims that exceed its liability, and therefore the provision does not belong in the Tariff.
    • given WestJet's practice of providing a significant portion of settlements by travel voucher, WestJet may attempt to use the provision to continue this practice, thereby circumventing Decision No. 483-C-A-2010.

[15] Mr. Lukács requests that the Agency:

  • disallow the proposed Rule 7.6(vi), and in particular, the final paragraph of that Rule; and,
  • substitute certain wording for Rule 7.6(vi) or with wording that the Agency finds appropriate.

Analysis

Clarity

[16] Mr. Lukács maintains that the use of the term "delayed bag", appearing in the proposed Rules 7.6(vi)a and b, could be construed as restricting the provision's scope. The Agency agrees with Mr. Lukács' submission. Furthermore, the Agency notes that the term "bag" is not defined in Rule 1.1, Definitions of the Tariff, and does not appear elsewhere in the Tariff, whereas the term "baggage" is defined in the Tariff, and is used exclusively elsewhere in that Tariff. In applying the clarity test set out above, the Agency finds that the use of the term "bag" in the proposed Rules 7.6(vi)a and b creates doubt and uncertainty as to the rights and obligations of WestJet and its passengers, that, therefore, the proposed Rules are unclear, and that the term "bag" should be replaced with the term "baggage."

[17] The final paragraph of the proposed Rule 7.6(vi) provides for the issuance of WestJet Travel Bank credits for claims "in excess of the domestic tariff liability." Mr. Lukács submits that the proposed text makes it unclear whether the paragraph refers to the entire amount of a claim that exceeds the domestic tariff liability or the portion of a claim that exceeds such liability. The Agency concurs with Mr. Lukács'submission.

[18] WestJet subsequently clarified in a response to an Agency interrogatory on this matter that the provision of WestJet Travel Bank credits is a discretionary benefit which WestJet may confer "in addition to full payment for cash liability."

[19] The Agency finds that the final paragraph of the proposed Rule 7.6(vi) as currently worded creates doubt and uncertainty as to the rights and obligations of WestJet and its passengers, and is, therefore, unclear. However, on the basis that WestJet has confirmed that the issuance of WestJet Travel Bank credits is in addition to, and not a substitution for payment of cash for other Tariff baggage liability, the Agency finds that clarity will be achieved by deleting at the end of that paragraph the words "for all claims in excess of the domestic tariff liability" and adding the substituted words "in addition to the compensation provided for in subparagraphs (vi)a and b."

Reasonableness

[20] Mr. Lukács takes exception to the requirement in proposed Rules 7.6(vi)a and b for passengers to provide proof of value of their baggage for settlements of claims. Mr. Lukács asserts that Article 22(2) of the Montreal Convention, the principle of which should be applied to this case, places the onus on the carrier to demonstrate that the value of baggage was less than the amount declared.

[21] In Decision No. LET-C-A-83-2011, the Agency stated that "WestJet, prior to compensating a claim for damage, is entitled to request and review proof of the damages suffered, but once reasonable proof has been filed, the onus is on WestJet to compensate to the maximum limit of liability unless it can prove that the damages are not claimable."

[22] The Agency is of the opinion that it is reasonable to expect that evidence of the value of the loss, whether by means of receipts, affidavit attesting to the loss, or in some other manner, be submitted by the passenger. Once that evidence is submitted, the onus to deny that value shifts to the carrier but that does not absolve the passenger from submitting proof to support an amount claimed for compensation.

Summary

[23] In light of the foregoing, the Agency finds that the proposed Rule 7.6(vi), with the substitution of the term "bag" with the term "baggage" in Rules 7.6 (vi)a and b, and the clarification of the final paragraph as noted above, is clear and is not unreasonable.

2. Is WestJet's proposal to apply a limit of CAD$3,000 for declarations of excess valuation, and a flat charge of CAD$10 to allow a passenger to receive compensation above WestJet's basic liability, up to the limit of CAD$3,000, not unreasonable?

Submissions

[24] WestJet's initial response to the order in Decision No. 483-C-A-2010 to provide for declarations of excess valuation at a reasonable charge included a revision to Rule 7.7, as set out in the Appendix.

[25] During pleadings on the complaint filed by Mr. Lukács with respect to Rule 7.6, WestJet made a submission that applying the version of Rule 7.7 set out in Appendix A posed fundamental problems to WestJet.

[26] To address those problems and to promote certainty and efficiency, and provide an alternative to comply with Decision No. 483-C-A-2010, WestJet proposes to allow passengers to declare any amount up to CAD$3,000, subject to the payment of a flat charge of CAD$10.

[27] In particular, WestJet submitted the following proposed revised tariff provision in response to Decision No. LET-C-A-83-2011:

The passenger shall be entitled to make, in writing and at the time the baggage is handed over to the carrier, a special declaration of interest in delivery at destination. In any such case, the passenger shall be required to pay a supplementary sum. That sum shall be calculated as follows:

  1. The amount of the carrier's liability calculated in accordance with the parts of this Rule set out above shall be referred to as "basic carrier liability";
  2. No charge shall be payable on that part of the declared value which does not exceed basic carrier liability;
  3. For that part of the declared value which does exceed basic carrier liability, a charge of $10.00 shall be payable per declaration.

If the passenger makes such a declaration and pays the supplementary sum, carrier will be liable to pay a sum not exceeding the declared sum, unless it proves that the declared sum is greater than the passenger's actual interest in delivery at destination.

The passenger may declare a value in excess of the applicable liability limits for the checked baggage to a maximum total liability of $3,000 CAD.

[28] In support of its proposal, WestJet submits that its proposed maximum excess valuation of CAD$3,000 reflects market practice as well as directives issued by the Agency. WestJet points out that this amount is higher than the maximum excess valuation of CAD$2,500 applied by Air Canada, and is within the reasonable range of amounts applied by other major carriers. In this regard, WestJet identifies 11 air carriers with maximum excess valuations ranging from CAD$2,500 to US$5,000. WestJet maintains that to allow for unlimited liability would make WestJet an insurer of baggage for passengers, which represents an undue burden.

[29] Mr. Lukács submits that the imposition of a cap on declarations of excess value does not appear to be an industry standard, and that WestJet has failed to advance any arguments as to why the absence of a cap would affect WestJet's ability to meet its statutory, commercial and operational obligations. Mr. Lukács asserts that WestJet has misstated the maximum excess valuation of certain carriers, including Air Canada, and that there are other carriers (e.g., Brussels Airlines N.V./S.A. carrying on business as Brussels Airlines at approximately CAD$7,300) that allow declarations which are significantly higher than the declaration proposed by WestJet.

[30] Mr. Lukács maintains that if a cap is to be imposed, it should be proportional to the basic liability assumed by WestJet, i.e., the cap should be expressed in terms of a certain percentage (300 percent would be reasonable) or multiple of the basic liability.

[31] Mr. Lukács submits that the risks to which insurance companies are exposed are out of their control whereas the risk of damage to baggage is within the carrier's control by appropriate training and supervision of personnel.

[32] With regard to its proposal to apply a CAD$10 charge to declare excess valuation, WestJet maintains that passengers rarely declare excess valuation, and that as such, it is important that procedures relating to declarations be simple given the limited exposure of staff to those procedures.

[33] WestJet also states that at least one other major carrier, namely Delta Air Lines, Inc. carrying on business as Delta Air Lines, Delta and Delta Shuttle, applies a flat charge for declarations of excess value.

[34] Mr. Lukács argues that WestJet's argument respecting simplicity lacks merit because:

  1. the proposed flat charge is contrary to the principle of proportionality;
  2. applying an increment-based charge does not affect WestJet's ability to perform its statutory, commercial and operational obligations, or alternatively, the impact is so minor as to outweigh a passenger's right to be subject to reasonable terms and conditions;
  3. Air Canada assesses an incremental charge; and,
  4. WestJet is unable to identify any other carrier that imposes a flat charge.

Analysis

[35] The Agency has historically been of the opinion that, generally, air carriers should have the flexibility to establish their own terms and conditions of carriage as they see fit, subject to legislative or regulatory constraints, including that of reasonableness.
[36] In this instance, a limit of CAD$3,000 for baggage liability compares favourably to many other carriers and, on that basis, it would appear to provide passengers with a reasonable limit of compensation.

[37] Mr. Lukács argues that an unlimited cap or a multiple, such as three times, of basic liability should be imposed on WestJet. He also submits that WestJet has shown no commercial or operational reasons why a higher limit should not be imposed by the Agency. However, the Agency, taking into account a relative comparison with other carriers in the industry, which the Agency considers not to be unreasonably low, is of the opinion that WestJet's proposal provides a reasonable term and condition of carriage for passengers. In this instance, it is not appropriate, nor necessary, for the Agency to test the upper limit of WestJet's liability against the effect of any such increased limit on WestJet's commercial or operational obligations.

[38] With respect to WestJet's proposed charge of CAD$10, the Agency agrees with WestJet's submission, and finds that the charge does not impose an unreasonable burden on passengers.

[39] Accordingly, the Agency finds that it is not unreasonable for WestJet to establish a limit of CAD$3,000 for declarations of excess valuation, and apply a flat charge of CAD$10 to allow a passenger to receive compensation above WestJet's basic liability, up to the limit of CAD$3,000.

3. Is WestJet's proposed revision to Rule 7.7 respecting declarations of excess valuation clear, and is that proposed revision not unreasonable?

Submissions

[40] WestJet submitted revised Rule 7.7, as set out in paragraph 27 above, for consideration by the Agency to determine whether that revision would satisfy the Agency's order in Decision No. 483-C-A-2010.

[41] Mr. Lukács did not comment on WestJet's proposed revised tariff provision.

Analysis

[42] WestJet's proposed tariff provision refers to WestJet's "basic carrier liability" without establishing what that liability represents in understandable terms. In the interest of clarity, and to ensure that passengers have a better understanding of WestJet's basic liability, the Agency is of the opinion that the tariff provision should indicate the approximate Canadian dollar amount of the liability assumed by WestJet. The inclusion of an approximate Canadian dollar amount for basic liability would also be consistent with the manner in which WestJet expresses its maximum total liability elsewhere in the proposed provision.

[43] The Agency is also of the opinion that the word "sum" as used in the second last paragraph of the proposed provision is associated with multiple meanings, which leads to a lack of clarity.

[44] The Agency is also of the opinion that, to clearly distinguish WestJet's basic carrier liability and its maximum total liability, the wording appearing in the last paragraph of the proposed tariff revision must be revised.

[45] Given the Agency's finding that WestJet's proposal to apply a limit of CAD$3,000 for declarations of excess valuation, and a flat charge of CAD$10 to allow a passenger to receive compensation above WestJet's basic liability, up to a limit of CAD$3,000, is not unreasonable, the Agency finds that the proposed revision to Rule 7.7 respecting excess declarations of excess valuation, as further revised and fully set out below in the Conclusion, would be clear and not unreasonable.

Conclusion

[46] The Agency orders WestJet, within 10 days from the date of this Decision, to revise its Tariff so as to include the following provisions:

Rule 7.6 Baggage Delays

If the baggage does not arrive on the same flight as the passenger, the airline will:

[...]

(vi) After a 21 day delay, provide a settlement in accordance with the following rules:

  1. if no value is declared per Rule 7.7, the settlement will be for the value of the delayed baggage or 1131 SDR (the "basic carrier liability" which is the approximate Canadian dollar equivalent of CAD$1,800), whichever is the lesser, and
  2. if value is declared per Rule 7.7, the settlement will be for the value of the delayed baggage or the declared sum, whichever is the lesser.

In any case, the carrier may, in its sole discretion, issue a WestJet Travel Bank Credit in addition to the compensation provided for in subparagraphs (vi)a and b.

Rule 7.7 Baggage Liability Limit

[...]

The passenger shall be entitled to make, in writing and at the time the baggage is handed over to the carrier, a special declaration of interest in delivery at destination (declared value). In any such case, the passenger shall be required to pay a supplementary charge, which shall be calculated as follows:

  1. No charge shall be payable on that part of the declared value which does not exceed basic carrier liability;
  2. For that part of the declared value which does exceed basic carrier liability, a charge of CAD$10.00 shall be payable per declaration.

If the passenger makes such a declaration and pays the supplementary charge, the carrier will be liable to pay a sum not exceeding the amount of the declared value, unless it proves that the amount of the declared value is greater than the passenger's actual interest in delivery at destination.

The passenger may declare a value in excess of basic carrier liability for the checked baggage to a maximum total liability of CAD$3,000.00, including basic carrier liability.

[47] The Agency also directs WestJet to clearly communicate to passengers, including providing information on WestJet's Web site and tickets/itineraries, what WestJet's approximate equivalent basic carrier liability is in Canadian dollars. The Agency further directs WestJet, on a regular basis, and at least once a year, to review the Canadian dollar amount WestJet quotes for basic carrier liability, and adjust that amount accordingly, as appropriate.

Costs

[48] Mr. Lukács submits that there are exceptional circumstances to award costs against WestJet in this case.

[49] As a general rule, costs are not awarded and the Agency's practice has been to award costs only in special or exceptional circumstances. In making such a determination, the Agency considers a combination of factors such as the nature of the application, the length and complexity of the proceeding, whether the Agency held an oral hearing, whether parties have acted efficiently and in good faith or if a party has incurred extraordinary costs to prepare and defend its application. The Agency finds that special or exceptional circumstances do not exist to warrant awarding of costs.


Appendix

Current Rule 7.6(vi) of the Tariff

7.6 Baggage Delays

If the baggage does not arrive on the same flight as the passenger, the airline will:

[...]

(vi) After a 21 day delay, provide a maximum settlement of 1131 SDRs (notwithstanding any declaration of excess valuation as outlined in section 7.7) In the Carriers (sic) sole discretion, it may issue a WestJet Travel Bank credit for claims exceeding the domestic tariff liability.

Current Rule 7.7 of the Tariff

7.7 Baggage Liability Limit

If the luggage does not arrive on the same flight as the passenger, the Carrier will take steps to deliver the luggage to the passenger's residence/hotel as soon as possible. The Carrier will take steps to inform the passenger on the status of the luggage and will ensure the passenger has their incidentals covered or an overnight kit as required. Compensation will be provided as per below.

Carrier liability for the loss of, damage to or delay in the delivery of any personal property, including baggage which are carried as checked baggage and goods, is limited to the sum of 1131 Special Drawing Rights as ordered by the Canadian Transportation Agency, except for mobility aids, unless the passenger at the time of presenting such baggage or goods for transportation, has declared a higher value and paid an additional charge in accordance with this Rule.

Regarding objects of which the passenger takes charge himself/herself the liability of the carrier is limited to 1131 Special Drawing Rights per passenger, including checked baggage and goods.

For the purpose of settlement of claims and in the event of an action against the carrier, any sum in Special Drawing Rights shall be converted into Canadian dollars by converting Special Drawing Rights into Canadian dollars at the rate established by the International Monetary Fund.

The rate for converting Special Drawing Rights into Canadian dollars shall be the rate prevailing on the date on which the amount of any damage to be paid by the carrier is ascertained by a court or, in the event a settlement is agreed between carrier and claimant, on the date settlement is agreed.

Carrier's liability will be calculated for each claim individually, based on the formula set out in this Rule.

If the passenger or charterer does elect to declare a higher value an additional charge shall be payable and the carrier's liability will not exceed the higher value declared. The additional charge shall be calculated as follows:

  1. The amount of the carrier's liability calculated in accordance with the parts of this Rule set out above shall be referred to as "basic carrier liability";
  2. No charge shall be payable on that part of the declared value which does not exceed basic carrier liability;
  3. For that part of the declared value which does exceed basic carrier liability, a charge shall be payable at the rate of CAD $1.00 for each CAD $100.00 or fraction thereof.

Whether the passenger or charterer declares value or not, in no case shall the carrier's liability exceed the actual loss suffered by the passenger. All claims are subject to proof of amount of loss.

In the case of damage or partial loss, the person entitled to delivery must complain to the carrier forthwith after discovery of the damage or partial loss, and, at the latest, within seven (7) days from the date of receipt of the baggage. In the case of delay, the complaint must be made at the latest within twenty one (21) days from the date on which the baggage has been placed at his disposal. In the case of loss the complaint must be made at the latest within 30 days from the date the baggage should have been delivered. Every complaint, whether for loss, partial loss, damage or delay, must be made in writing and must be dispatched within the times aforesaid. Failing complaint within the times aforesaid, no action shall lie against the carrier.

Member(s)

John Scott
Geoffrey C. Hare
J. Mark MacKeigan
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