Due to some legal ramifications, the BC Civil Resolution Tribunal tossed out a case against WestJet and Swoop Airlines.
The applicants in the tribunal case, E.K. and M.K., claimed damages from WestJet due to a flight delay. E.K. and M.K. flew on a Swoop Airlines flight.
WestJet denied liability even though it owned Swoop because it is a separate legal entity. The concept of “piercing the corporate veil” played heavily in the case before it was ultimately dismissed.
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The corporate veil is essentially the legal separation between a company and its shareholders.
If you don’t remember Swoop, it was an ultra-low-cost airline, not unlike Flair Airlines. In the fall of 2023, it stopped serving customers and was integrated into WestJet’s mainline operation.
E.K. and M.K. were claiming a total of $1,510 under the Air Passenger Protection Regulations. Aside from WestJet making it clear they were a separate legal entity from Swoop, it also denied that M.K. and E.K. were entitled to any compensation.
The flight from Toronto to Kelowna was scheduled for Jan. 27, 2023, at 7:40 a.m. but didn’t depart until 3:09 p.m.
In July that same year, E.K. and M.K. emailed Swoop to request a refund. Swoop told them they were not entitled to one as the flight was delayed due to “an operational decision within its control for safety reasons.”
The Canadian Transportation Agency says, “If an airline delays or cancels a flight for reasons within its control, but required for safety, it does not have to compensate passengers.”
While the delay claim was dismissed, the legal specifics of this case revealed a lot about the airline industry and corporations. The tribunal examined several similar cases, including one involving Swoop and another between EmTwo Properties and Cineplex Canada.
In that case between EmTwo and Cineplex, it was concluded that the corporate veil would not be pierced “absent conduct akin to fraud.”
“The shareholder of a corporation, even a sole shareholder, is not liable for the debts of the company. It is a fundamental principle of corporate law that a parent corporation is not ordinarily liable for the obligations of its subsidiary,” the tribunal said.
The tribunal decision stated that M.K. and E.K. “cited many authorities to justify piercing the corporate veil in this dispute. Some of these were dated and not binding. Some were irrelevant. In any event, I find the relevant authorities cited are consistent with EmTwo. The element of conduct akin to fraud is required to pierce the veil. There is no allegation or proof of such conduct in this dispute.”
“So, I find that WestJet is not liable for Swoop’s obligations, even though it wholly owns Swoop,” it concluded.
Ultimately, the tribunal dismissed the case.