Section 104.1 was among a number of amendments made to the Act in 2000 at the urging of the Commissioner in response to Air Canada's acquisition of Canadian Airlines.  It empowered the Commissioner to issue orders prohibiting a dominant carrier "from doing an Act or a thing that could, in the opinion of the Commissioner, constitute an anti-competitive Act or requiring the person to take steps that the Commissioner considers necessary to prevent injury to competition or harm to another person."  Section 104.1 expressly stated that the Commissioner "is not obliged to give notice to or receive representations from any person" before making such an order and, unlike other injunctive powers in the Act, it allowed him to issue orders on his own initiative without the necessity of obtaining prior judicial approval for the order.  Section 104.1 also provided that the orders, once issued, were effective for an initial period of twenty days and extendable, at the Commissioner's option, for one or two periods of thirty days each.  

According to the Commissioner, section 104.1 was necessary to allow him to respond in a timely fashion to potentially anti-competitive conduct by Air Canada. The unusual power was supported by some, but it was seen as heavy-handed and unnecessary by others, including the National Competition Law Section of the Canadian Bar Association, which criticized section 104.1 as "an unwarranted interference with due process" that raised "serious questions concerning its legality and constitutionality."

In October 2000, following a complaint to the Competition Bureau that Air Canada had engaged in conduct constituting an abuse of dominant position pursuant to section 79 of the Act, the Commissioner issued his first (and only) order under section 104.1 of the Act. 

In addition to an unsuccessful attempt by Air Canada to have the Competition Tribunal set aside the order, Air Canada commenced proceedings in the Quebec Superior Court, challenging the validity of section 104.1 itself.  While Air Canada's attempt to invalidate section 104.1 before the court of first instance did not succeed, its successful appeal means that section 104.1 has been declared inoperative on constitutional grounds.

As the Court noted in its decision, Air Canada's challenge relied on paragraph 2(e) of the Canadian Bill of Rights as well as section 96 and the preamble of the Constitution Act, 1867.  The Court, however, focused on the first of these arguments, which it decided in Air Canada's favour.

Paragraph 2(e) of the Canadian Bill of Rights provides as follows:

2. Every law of Canada shall, unless it is expressly declared by an Act of the Parliament of Canada that it shall operate notwithstanding the Canadian Bill of Rights, be so construed and applied as not to abrogate, abridge or infringe or to authorize the abrogation, abridgement or infringement of any of the rights or freedoms herein recognized and declared, and in particular, no law of Canada shall be construed or applied so as to

(e) deprive a person of the right to a fair hearing in accordance with the principles of fundamental justice for the determination of his rights and obligations.

According to Air Canada, section 104.1 of the Competition Act violated the rights protected by paragraph 2(e) by infringing the principles of natural justice audi alteram partem (the right to be heard) and nemo judex in sua causa (no person can judge a case in which he or she is party).

While Air Canada's arguments seized on the obvious due process deficiencies of section 104.1, the Commissioner and the Attorney General responded by denying that paragraph 2(e) applied at all and by further arguing that, even if it did, section 104.1 did not violate Air Canada's rights of fundamental justice in any event.  The Court, as noted below, had little difficulty rejecting the Commissioner's and the Attorney General's arguments.

As a preliminary matter, the Court examined the Commissioner's functions more generally under the Act, noting that, as head of the Competition Bureau, he is charged, "d'abord et avant tout" (first and foremost) with conducting inquiries respecting the application of the Act.  To this end, the Commissioner is given a number of powers, including the power, with prior judicial approval, to conduct searches and to compel the production of documents and written returns and the attendance of persons for examination under oath.  If, as a result of an inquiry, the Commissioner concludes that enforcement Action is warranted, he may refer the matter to the Attorney General for criminal prosecution or, in the case of civilly reviewable conduct, including abuse of dominance, he may apply to the Competition Tribunal for a remedial order, thereby assuming the role of prosecutor.

Viewed in this context, the Court characterized the Commissioner's section 104.1 power as "inhabituel" (unusual) and his overlapping roles as being ill-suited to the impartiality required of an adjudicator, especially given the "vaste" potential of the provision's reach.  The Court underscored the unusual nature of section 104.1 by comparing it to section 103.3 of the Act, which provides for the issuance of similar temporary orders on a general, rather than industry-specific basis.  In contrast to section 104.1, section 103.3, which was added to the Act in June 2002, requires that the Commissioner apply to the Competition Tribunal for such orders and provides that they have effect for an initial period of ten days.

In light of these factors, the Court proceeded to address, and reject, arguments put forward by the Commissioner and Attorney General denying the application of 2(e) of the Canadian Bill of Rights to section 104.1.  Among the arguments rejected by the Court were that:

paragraph 2(e) cannot be used to invalidate a subsequently enacted legislative provision;
• any rights of Air Canada affected by section 104.1 are economic in nature, which rights are not protected by paragraph 2(e) of the Canadian Bill of Rights;
• the rules of fundamental justice do not apply in the context of section 104.1, because the Commissioner is an administrative rather than a judicial official; and
• the rules of fundamental justice do not entitle Air Canada to a hearing prior to the issuance of an order, because such orders are of a temporary, non-final nature.
• More specifically, the Court rejected these arguments for reasons including:
• Canadian courts and tribunals, including the Supreme Court of Canada, have consistently recognized, for more than twenty-five years, that the Canadian Bill of Rights, which was enacted by Parliament in 1960 in the form a federal statute, is quasi-constitutional in nature and provides valid authority for declaring inconsistent federal statutes inoperative;
• The scope of rights protected by paragraph 2(e) is broad, including economic rights;
• While the Commissioner is an administrator, the power at issue has all of the characteristics of an injunction, affects the rights of several persons, involves the application of rules to specific individuals rather than the application of social and economic policy in the broader sense and provides for such a wide array of remedies, for periods of up to eighty days, that it is reasonable to expect that a person subject to such orders will have a right to be heard by an impartial adjudicator prior to their issuance; and
• while section 104.1 orders are temporary in the sense that they are for an interim period, such orders are "final" in that they have an immediate and direct impact, possibly of an irreparable nature, on the subject carrier, with the result that the rules of fundamental justice apply to such orders.

Having determined that paragraph 2(e) of the Canadian Bill of Rights applies to section 104.1, the Court then addressed whether section 104.1 offended the rules of natural justice invoked by Air Canada, namely nemo judex in sua causa and audi alteram partem. Again, the Court had little difficulty concluding that it did.  Given the Commissioner's dual role as investigator and prosecutor, the Court concluded that he lacks the requisite impartiality to act in a "judicial manner" in the issuance of section 104.1 orders.  Similarly, it seemed "évident" from section 104.1 that Air Canada could be subject to an order for as much as eighty days without the benefit of a hearing, thereby violating its right to be heard.

Finally, while paragraph 2(e) does not expressly provide for a "saving" mechanism whereby inconsistencies may be sustained on the basis of some reasonable justification, the Court accepted that such a mechanism may exist in exceptional circumstances.  In the case of section 104.1, however, the Court was not satisfied that such exceptional circumstances exist.  The Commissioner and Attorney General had submitted some evidence of urgency in support of the provision, but the Court was not satisfied by the evidence that the urgency (e.g., the potential for harm to a carrier competing with a dominant carrier "in a very short period of time" and depletion of its working capital "in days or weeks, not in months or years") was such as to preclude a court or specialized tribunal from issuing such orders.  Indeed, such entities deal with urgent matters on a daily basis, including the Competition Tribunal, which, as a result of the addition of section 103.3 of the Act, now enjoys a similar power to that contained in section 104.1, thereby evidencing Parliament's view that a specialized tribunal is in fact capable of fulfilling the function conferred upon the Commissioner by section 104.1.

The Quebec Court of Appeal's decision is a significant blow to the Commissioner, given the importance that he has publicly ascribed to section 104.1 following Air Canada's acquisition of Canadian Airlines.  At the same time, the existence of section 103.3 in the Act  means that he continues to have the ability to obtain orders of the sort provided for in section 104.1.  Such orders, however, must be obtained through an impartial adjudicator, namely the Competition Tribunal, and, while available on an ex parte basis, will be effective for an initial period of only ten days and extendable thereafter only on application to the Tribunal with notice to the affected carrier.  In short, the decision replaces the "unusual" power in section 104.1 of the Act with section 103.3 and its more conventional approach to the issue of interim injunctive relief.

To date, the Commissioner and the Attorney General have not indicated whether they intend to seek leave to appeal the decision to the Supreme Court of Canada.

[1] Stikeman Elliott LLP acted as counsel to Air Canada in this proceeding.

[2] The Court also addressed, albeit briefly, section 96 of the Constitution Act, 1867, concluding that it did not apply to section 104.1.