Court File and Parties

COURT FILE NO.: CV-18-00589374 DATE: 20180911 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

TRAVELBRANDS INC. Plaintiff – and – BRAMALEA TRAVEL CENTRE INC Defendant

Counsel: Doug Bourassa, for the Plaintiff Joseph Figliomeni and Angela Kwok, for the Defendant

HEARD: July 25, 2018

LEDERER J.

Introduction

[1] This is a motion for summary judgement. The parties agree that, despite the fact that the application was commenced by the plaintiff, the court is authorized to order judgement in favour of the defendant. Both parties seek judgement in their favour.

Facts

[2] The plaintiff, Travelbrands Inc., is a wholesaler of travel products and services. The defendant, Bramalea Travel Centre Inc., is a travel agency. Bramalea and Travelbrands have been doing business together for more than 10 years. Bramalea purchased travel products from Travelbrands and sold them to others. This case concerns the purchase and sale of airline tickets. Among those to whom Bramalea sold tickets was an entity referred to in the material as ThermoKing. Its legal status: was it a corporation, partnership, sole proprietorship or just a business name was not referred to. Through an email from an apparent representative of ThermoKing, Bramalea was introduced to Walter De La Vega who was identified as a ThermoKing representative from Spain. I say the email came from an “apparent” representative of ThermoKing because, while the author identifies herself as “the TK dealer here in Ontario”, the email signature identifies her as “Office Manager, Checker Flag Leasing Inc.” [1] Why it was necessary for the writer of the email to identify herself as “the dealer” is unclear. ThermoKing had been a client of Bramalea for 10 years and had used its services on numerous occasions. [2]

[3] Subsequent to the email, Walter De La Vega gave instructions to make bookings for a number of customers and provided Bramalea with credit card information supposedly from those clients. Bramalea used those credit card numbers to make bookings with Travelbrands. The credit card numbers were passed on to the airline. The credit card numbers were not accepted and the credit card company refused to make the requisite payments. By the time this was known, the airline tickets had been issued and used. As a result, the cost of the tickets was “charged back” by the airline to Travelbrands. In the meantime Travelbrands had invoiced Bramalea expecting that the payment would be made through the credit card numbers that had been provided when the bookings were made. The total amount of the “chargebacks” was $312,964.10 which included commissions that Travelbrands had paid to Bramalea. The record contains some variation as to the amount represented by these commissions. The parties agree that the outstanding commissions paid to Bramalea should be valued at $23,084.07.

[4] The bookings which are the source of these chargebacks all arose during the period between August 3, 2017 and September 28, 2017. The representatives of Bramalea say that it was not until the second week of September, 2017 that they were notified of the chargebacks in relation to the commission amounts derived from the bookings made at the request of Walter De La Vega. He was advised immediately. Later in September, Bramalea was advised that there were chargebacks on the airline ticket amounts as well. On September 28, 2017 Bramalea stopped making bookings for Walter De La Vega. [3]

[5] Travelbrands disputes this understanding of when Bramalea became aware that there were problems with payments made through the credit card numbers that had been supplied. Its counsel pointed to an email dated August 25, 2017 sent by the Accounts Receivable Co-ordinator of Travelbrands to the president of Bramalea advising that one of the credit card numbers “looked like” a “fraud card”. [4] Bramalea provided “replacement credit card payments” but they were also rejected. Thereafter, Travelbrands “advised Bramalea each time a Charge Back occurred.” Further credit card numbers were provided by Bramalea “…on at least 6 occasions”. Payment was not forthcoming. [5]

[6] The significance of the difference is plain. The orders for tickets commenced on August 3, 2017. [6] It was only on September 29, 2017, after being advised that there were chargebacks on the airline ticket amounts (not just the commissions), that Bramalea advised Walter De La Vega that it could no longer accept credit card numbers as payment. Bramalea would require payment by wire transfer to its bank account prior to any further bookings being made. [7] The majority of the bookings made at the request of Walter De La Vega were made after August 25, 2017. If Bramalea had acted earlier it could have avoided much of the loss.

[7] Both Bramalea and ThermoKing contacted Walter De La Vega and advised him of the need to wire transfer funds to Bramalea to pay for the tickets that had been delivered and used. Walter De La Vega did not respond. Subsequently it was discovered that Walter De La Vega did not work for ThermoKing. [8] The President of Bramalea reported these events to the Peel Regional Police identifying them as demonstrative of a fraud and Bramalea as the victim of that fraud. [9]

Analysis

[8] As perceived by Travelbrands (the plaintiff and moving party) it was asked to provide the tickets by its long-term customer Bramalea. It delivered them as requested. It invoiced Bramalea. The method of payment (cash, wire transfer or through credit cards) was immaterial to Travelbrands.

[9] As understood by Bramalea, it was a “middleman”. It obtained the bookings and passed them on to the purchaser. It arranged the payment consistent with common practice.

[10] The answer as to who bears the loss caused by the fraud evidently orchestrated by Walter De La Vega lies in an understanding of the legal relationship between the parties. The problem is that neither party produced a single case or any analysis that explained the relationship between a travel agent and a wholesale seller of travel services. The plaintiff suggested nothing more than it sold the tickets to the defendant and should be paid for them by the defendant. Having described itself as a middleman, the defendant went on to note that it had been defrauded by Walter De La Vega, had done nothing wrong and bore no liability. As the presiding judge I raised the concern that nothing was provided that would support an understanding of the legal relationship between the parties. Counsel for the plaintiff said nothing other than there was a contract albeit unwritten. Counsel for the defendant suggested his client was the agent of the plaintiff. There was no mention of the characteristics that would be demonstrative of such a relationship, whether they were satisfied and what the legal implications of such a relationship would be for the resolution of the case.

[11] This situation places the court in a difficult position. There is little that provides a legal foundation to either position and yet both parties are to be taken as having put their best foot forward.

[12] It is from this narrow perspective that I proceed.

[13] The plaintiff is a wholesale seller of services. The defendant is its customer. The plaintiff invoices the defendant signifying that it holds the defendant responsible for payment. The fundamental requirement of a contract (the exchange of consideration) has been met and its breach (the failure to pay) has been demonstrated.

[14] The defendant’s description of itself as a “middleman” does not change the nature of its relationship with the plaintiff. It buys tickets for resale. On this understanding, the difference over when the defendant learned of the fraud does not matter except to the extent that having been informed of the fraud through the email of August 25, 2017 the defendant could have avoided the loss associated with the 77 bookings made thereafter. [10]

[15] During the course of his submissions counsel for the defendant did propose that his client was the agent of the plaintiff. There is little if any evidence that would support such a conclusion. The term “agent” is used to describe all manner of common relationships. It has a colloquial meaning. The legal concept of “agency” is more limited. [11] The American Restatement of the Law of Agency provides a definition:

…the relationship which results from the manifestation of consent, by one person to another, that the other shall act on his behalf and subject to his control, and consent by the other so to act. [12]

[16] Agency is seen as “a consensual relationship” between the parties. [13] One party (the principal) consents to the other party (the agent) exercising authority on its behalf and the agent agrees to do so. There can be no “self-appointed agent”. [14] Generally, the entry into the relationship is mutual. [15]

[17] There is an element of control. The agent is subject to the control of the principal. The underlying characteristic is the authority of the agent, subject to that control, to affect the legal position of the principal:

Agency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal’s legal position by the making of contracts or the disposition of property. [16]

[18] As provided by the parties there is no evidence to support the presence of consent to an agency relationship by either party; no evidence, separate from that which would be consistent with a relationship of buyer and seller, that would suggest any authority for the defendant to affect the legal position of the plaintiff; and no evidence that would demonstrate any control of the defendant by the plaintiff.

[19] There is nothing that would justify a finding that the defendant was the agent of the plaintiff.

[20] In coming to this conclusion, I include any consideration of the delivery of the credit card numbers by Walter De La Vega to the defendant and through the defendant on to the plaintiff and by the passing on of those numbers from the plaintiff to the airline. It is the defendant that placed the order with the plaintiff. It is the defendant that was obliged to pay for the tickets. This is confirmed by the fact that it is the defendant to whom the plaintiff sent invoices. There is nothing to suggest that this was anything other than the normal practice with respect to orders the defendant placed with the plaintiff. The obligation to pay was the defendant’s; the means by which the obligation was met was a matter of choice. The credit card numbers were the means of payment. This does not change the fundamental responsibility to pay.

[21] There is no genuine issue requiring a trial. I award judgment in favour of the plaintiff.

[22] Having come to this conclusion there is no need to go further. Nonetheless, I believe it may be helpful if I say more.

[23] No one raised or mentioned the Travel Industry Act, 2002. [17]

[24] It defines “travel agent” to mean a person who sells, to consumers, travel services provided by another person. It defines “travel wholesaler” to mean a person who acquires rights to travel services for the purpose of resale to a travel agent or who carries on the business of dealing with travel agents or travel wholesalers for the sale of travel services provided by another person. Neither Bramalea nor Travelbrands was identified as being either a “travel agent” or a “travel wholesaler”. Even so, it appears clear that Bramalea is the former and Travelbrands the latter. The legislation forbids anyone from working as either a “travel agent” or as a “travel wholesaler” unless registered as such. [18]

[25] The Travel Industry Act, 2002 having defined “travel agent” and a “travel wholesaler”, the question remains as to whether the legislation has anything to say as to legal relationship between them. The parties did not refer to any case law that would assist in an examination of this question. In the case of Conquest Vacations Inc. (Re), 2010 ONSC 74280 this court made the following observation:

…The business of a travel wholesaler is to purchase travel services from providers, such as hotels and airlines and then sell them to consumers, usually through travel agents acting as the retailers… [19]

[26] The case dealt with an issue that arose in the context of the bankruptcy of Conquest Vacations Inc., a travel wholesaler. O. Reg. 26/05 provides that travel wholesalers are required to establish a trust to hold funds collected by the wholesaler from “customers for travel services.” [20] When the assignment in bankruptcy was made there were funds in various bank accounts which were labelled “trust accounts”. The issue was whether any of those funds were charged with a trust and pursuant to certain subrogation agreements stood to the credit of the Travel Industry Council of Ontario. [21] In the circumstances there was no trust created either by statute or by common law. For the purposes of this case, the question of interest is who the legislative scheme includes as “customers for travel services” purchased from a “travel wholesaler”. Is it restricted to the ultimate consumer, that is, the individual who made use of the ticket or does it include the person or entity that purchased it on her or his behalf? In Conquest Vacations Inc. (Re) the word “consumer” is used to distinguish the recipient of the travel service (in this case the airline tickets) from a travel agent which, as a retailer may purchase the service for resale to a consumer. On this understanding a “travel agent” is not a consumer.

[27] The Travel Industry Act, 2002 refers to both “consumers” and “customers” but it points to the same distinction recognized in the case. It includes the former as part of the definition of “travel agent”. As defined, a “travel agent” sells to a consumer (see para. [24] above). This suggests that in the normal course a travel agent is not a consumer. A travel agent could still be a customer. Neither the Travel Industry Act, 2002 nor O. Reg. 26/05 define the words “consumer” or “customer”. This being so, they should be taken to have their ordinary, everyday meaning. As I perceive it the words are different. A consumer makes use of a thing or service. A customer purchases it but may not use it. Things and services (in this case a ticket that entitles one to the use of a service) can purchased to be resold. It is on this understanding that a travel agent may be a customer but not a consumer. The identification of a travel agent as a customer tends to confirm the understanding that the travel agent is a purchaser (not an agent as the law provides) and liable for payment of the services provided to it.

[28] The Travel Industry Act, 2002 provides the Lieutenant Governor in Council with the authority to make regulations as to circumstances and rules dealing with the payment of claims to “customers” from the Travel Industry Compensation Fund. [22] The Fund is financed by registered travel agents and travel wholesalers in Ontario. It is administered by Travel Industry Council of Ontario [23] and offers the reimbursement of monies where travel services have been purchased through a “travel agent” or “travel wholesaler” and not provided. [24] O. Reg. 26/05 was promulgated pursuant to the authority provided by the Travel Industry Act, 2002 and, among other things, deals with the circumstances when a claim can be made for reimbursement from the Fund. In particular, it indicates when a “travel wholesaler” can make a claim in respect of a failing of a “travel agent”. Section 59(1) of the regulation begins:

A travel wholesaler is entitled to be reimbursed for money paid by the travel wholesaler to reimburse a customer for travel services paid for but not provided or to provide the customer with travel services for which the travel wholesaler has not been paid by the travel agent if…

[Emphasis added]

The section goes on to set conditions. Subsection 59(5) deals with payment by credit card:

The travel wholesaler is not entitled to be reimbursed for a payment made by credit card if the registrant who processed the payment did not obtain approval for the payment from the customer and from the card issuer, in advance, in accordance with the agreement between the card issuer and the registrant.

[29] This action is a claim at common law and not from the Fund but it does suggest that if the parties had followed the requirements for a claim from the Fund they would have avoided the problem they now confront.

[30] Finally, I point out that the Travel Industry Act, 2002 was amended in 2017. The amended legislation specifies that on a day to be named by proclamation of the Lieutenant Governor the definition of “travel agent”, and “travel wholesaler” will be repealed. At the same time the definitions of two new terms “travel sales person” and “travel seller” will be added. No proclamation having been made, I make no comment as to whether these or the other changes which accompany them would have any impact on the results in this case.

Conclusion

[31] I award judgment to the plaintiff in the amount of $312,964.10 plus pre-judgment and post-judgment interest pursuant to the Courts of Justice Act. [25]

Costs

[32] No submissions were made as to costs. If the parties are unable to agree I will consider written submissions as follows:

1. On behalf of the plaintiff within 15 days of the release of these reasons, such submissions to be no longer than 4 pages double spaced not including any Costs Outline, Bill of Costs or case law that may be provided.
2. On behalf of the defendants within 10 days thereafter, such submissions to be no longer than 4 pages double spaced not including any Costs Outline, Bill of Costs or case law that may be provided.
3. On behalf of the plaintiff, in reply, if necessary, within a further 10 days thereafter, such submissions to be no longer than 2 pages double spaced.

Lederer J. Released: September 11, 2018