Canada: B.C. Court Denies Certification In Furniture Voucher Case

On November 8, 2013, the Supreme Court of British Columbia refused to certify a class action in connection with a "cashable voucher program" offered by United Furniture Warehouse ("UFW") stores in 2003-2004.

The motions judge in Marshall v. United Furniture Warehouse Limited Partnership held that the pleadings did not disclose causes of action for breach of warranty or negligence, and found that there was insufficient commonality or evidence to certify common issues relating to negligent misrepresentation and breach of the Business Practices and Consumer Protection Act ("BPCPA").

Background

Beginning in March 2003, customers purchasing furniture from UFW stores received vouchers for up to 100% of the value of the furniture. The vouchers were issued by Consumers Trust (an English entity unrelated to UFW) and could be redeemed for cash within a one-week period three years after the purchase date.

In theory, customers who bought furniture from UFW could get a large percentage – in some cases, 100% - of the purchase price back as a cash payment three years later. In practice, the voucher program relied on the expectation that many customers would not remember or would not follow all the steps to cash in their vouchers. A UFW brochure advertising the vouchers described them as a "financial memory test or challenge" for consumers.

In March 2004, the UFW chain was sold to a new corporate entity. The motions judge referred to the corporate defendant who originally owned UFW as "Old UFW" and to the acquirors as "New UFW". New UFW continued to offer the voucher program until October 2004.

In 2005, Consumers Trust went bankrupt, leaving many customers with vouchers that could no longer be redeemed. One of the putative representative plaintiffs filed a proof of claim in the Consumers Trust bankruptcy for $2,199.95, but received only $18.00. New UFW circulated a notice regarding this bankruptcy to customers. In 2006, as a "customer satisfaction measure," New UFW offered in-store credit for customers who had been issued vouchers either at Old UFW or New UFW stores. New UFW did not, however, offer to redeem the vouchers for cash.

The plaintiffs commenced a proposed class action on behalf of all persons who received cashable vouchers in connection with the purchase of goods and services from Old UFW and New UFW. Their key claim was that UFW had represented through in-store signage, written brochures, advertisements, sales talk, and through the text on the vouchers themselves, that UFW was responsible for ensuring that the vouchers would be paid out in cash.

Certification Denied

Fisher J. found that the certification criteria set out in s. 4(1) of the British Columbia Class Proceedings Act that there be an identifiable class and a suitable representative plaintiff were met. However, Her Honour found that some of the proposed causes of action were improperly pleaded and that the proposed common issues lacked either commonality or an evidentiary basis. Given that the plaintiffs' claims raised few common issues Fisher J. found that a class action was not the preferable procedure for the resolution of the claims and denied certification.

Causes of Action

Fisher J. found that the claims in breach of contract or breach of warranty, "successor" liability under the BPCPA, and negligence were all certain to fail.

The plaintiffs argued that UFW had warranted that it was responsible for redeeming the vouchers for cash. The voucher text, however, stated that "Consumers Trust is exclusively responsible for payment" and that the merchant had no such responsibility. Fisher J. concluded that the claim really sounded in negligent misrepresentation.

The plaintiffs also sought to hold New UFW liable under the BPCPA for the alleged deceptive acts or practices of Old UFW, on the basis that the definition of "supplier" under the BPCPA includes the successor of a supplier. Fisher J. held that the definition of a "supplier" in the BPCPA does not create general successor liability. New UFW could only be liable under the Act for the acts of Old UFW if it too had engaged or acquiesced in them. Otherwise, each supplier was responsible for its own acts or omissions.

In addition to pleading various negligent misrepresentations, the plaintiffs had also pleaded a claim in simple negligence, alleging failure to investigate the financial integrity of the voucher program. This claim raised the issue of whether a retailer has a duty of care to all potential customers to properly investigate the financial strength of an entity with whom it contracts to provide a sales promotion.

Fisher J. considered this claim an attempt to use tort law to obtain a form of insurance or warranty from the defendants that Consumers Trust would be able to pay out on the vouchers. Her Honour held that it was plain and obvious that liability in negligence for pure economic loss does not extend that far, referring in particular to cases that held that tort claims for economic loss are restricted to dangerous, not just defective, goods.

Common Issues

The principal common issues proposed by the plaintiffs related to whether the defendants had made negligent misrepresentations or engaged in "deceptive acts or practices" as defined in the BPCPA.

Fisher J. noted that whether an act is capable of being deceptive generally does not depend on the circumstances of the plaintiff and does not require individual inquiry. Nonetheless, the proposed issue lacked commonality because the plaintiffs alleged a long list of deceptive acts and practices arising from different sources and relating to different aspects of the voucher program and that different customers had been exposed to at different times.

Fisher J. also concluded that there was no common issue regarding damages under the BPCPA. Each plaintiff would have to prove that he or she incurred losses in reliance on a deceptive act or practice. Reliance could not be inferred on a class-wide basis given the variety of different alleged misrepresentations, and individual factors such as whether each plaintiff was ready, willing and able to present the voucher for redemption, and whether he or she would have bought the goods anyway. Nor could an aggregate damages award be made without proving each class member's damage or loss.

The number and variety of alleged representations was also a barrier to any common issue relating to breach of contract or breach of warranty, since the existence of the contract or warranty itself would depend on the written materials and ads seen by each class member. It was held that the common issues relating to negligent misrepresentation suffered from the same fatal flaw.

Conclusion

This case is another illustration of the general rule that class actions based on a specific representation made to an entire class have at times been certified, but claims based on a variety of representations made to different persons at different times are unlikely to raise common issues. The case also parallels the recent decision of the Court of Appeal for Ontario in Arora v. Whirlpool Canada LP in which it was held that there is no cause of action in negligence for economic loss from an item that is defective but not dangerous.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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