A Canadian class action against WestJet Airlines, Swoop, Sunwing Airlines, Air Canada, and Air Transat hit a setback on Thursday. The Federal Court's Justice Michael Manson struck out the class action, saying Canada's Federal Court had no jurisdiction to hear it.

Janet Donaldson, a British Columbia resident, was leading a class action in the Federal Court. WestJet had canceled Ms Donaldson's April flight between Vancouver and New York. Ms Donaldson wanted to receive a refund of her prepaid form of payment but instead was offered a future credit against travel.

Canada's airlines have come under fire this year over their reluctance to refund tickets on canceled flights. That's is slowly turning around as airlines start responding to customer complaints about the matter.

The disgruntled passenger took a common-law argument to a statutory court

The class-action relied on common-law contracts of carriage [tariffs] rules as the source of the airlines’ obligations towards Ms Donaldson and others along for the ride in her class action.

More specifically, Ms Donaldson's lawyers argued that under the doctrine of frustration of contract, there is an entitlement to a refund to their original forms of payment. Alternatively, her lawyers argued that according to the express or implied terms of the tariffs, the complainants have a consumer right to a refund for unused air tickets when the airlines cannot provide services within a reasonable time.

That seems fair enough. As out of pocket passengers everywhere have argued this year, if an airline fails to provide a flight, they should provide a refund. But cash-strapped airlines want to hold onto the funds, usually offering credits or vouchers for future travel instead.

Canada's Federal Court had no jurisdiction to hear the complaint

Responding to Ms Donaldson's complaint, the airlines argued the Federal Court had no jurisdiction to hear the matter. The crux of the issue is that Canada's Federal Court is a statutory court. It can only exercise jurisdiction under a federal statutory grant of power. The airlines argued the case was simply a breach of contract claim between private parties. In the end, Justice Mason agreed and ruled in favor of the airlines;

"In this case, the Plaintiff is asking this Court to extend its jurisdiction beyond that which has been granted by law. This Court has jurisdiction to adjudicate air carriage disputes under the Montreal Convention, but this proceeding is outside the convention's scope.

"This case is not based on or recognized by any statute, regulation or applicable federal common law principle, it is plain and obvious that this Court has no jurisdiction, and the Statement of Claim ought to be struck without leave to amend."

A technical win, but a win nonetheless for Canada's airlines

The decision means disputes about airline refunds will need to be heard in Canada's provincial courts. Several class actions against Canada's airlines are quietly simmering away right now, most still in the provincial courts. Justice Mason's decision yesterday will help keep them there.

Airlines will welcome the ruling. Ms Donaldson's lawsuit did not impress Swoop, Sunwing Airlines, Air Canada, and Air Transat. Her (canceled) flight booking and the original dispute was with WestJet. Canada's airlines have consistently said they've been under extreme financial pressure this year. They argued spending millions paying out refunds would further imperil them. They've argued credit vouchers for future travel were a win-win solution for both the airlines and passengers.

Justice Mason didn't have much to say about that, even if it was the dispute's origin. This was a jurisdictional issue. It's a technicality, but in 2020, Canada's airlines will take any win they can get.