Canada: "Buy Now; Pay Later": Leon's Furniture Ordered To Pay Moral And Punitive Damages

Last Updated: September 6 2017
Article by Noah Boudreau, Martin Sheehan and Camille Duguay

In a decision on the merits in the course of a class action, rendered on July 31, 2017 (PDF), Justice Marc-André Blanchard of the Superior Court ordered Leon's Furniture ("Leon's") to pay $162,918 in compensatory damages, $703,800 in moral damages and $1,000,000 in punitive damages.1

In June 2012, Option Consommateur was authorized by the Superior Court to institute a class action on behalf of any person having purchased goods or services from Leon's in Quebec under its "Buy now, pay later" financing program who was subsequently charged an annual fee or any other amount.2

Option Consommateur alleged that Leon's advertising was false or misleading because it gave the impression that the consumer would not have to pay any fees during the financing, while in fact a $21 annual fee was charged. 

The $21 Annual Fee 

Leon's advertised two financing plans, one with no payments and no interest, and the other with equal payments and no interest.

The Superior Court found that Leon's advertising as a whole gave the general impression that the client would benefit from no fee credit for a given period. The use of expressions such as "Pay absolutely nothing!", "Not even the taxes!" was considered misleading under sections 218 and 2193 of the Consumer Protection Act ("CPA"), given that the consumer must subsequently pay a $21 annual fee.

Leon's called its credit provider, CitiFinancial Canada, Inc., in warranty ("CITI") concerning the fee. In 2008, CITI informed Leon's that it would begin charging an annual fee of $21 starting May 1, 2009.  The Court noted that since Leon's advertising made no mention of any membership fees, Leon's was nonetheless liable and had to refund consumers the fee, for a total amount of $162,918. The Court, however, ordered CITI to indemnify Leon's for the full amount given that CITI knew the nature of Leon's contracts, i.e., contracts in which the consumer pays nothing or only pays predetermined fixed amounts. CITI, therefore, could not have been unaware that by requiring that consumers pay this fee, it misrepresented the very essence of the financing agreement.

The Judge's Discretion With Respect to Moral Damages

Option Consommateur asked the Court to reduce the obligations of each member towards Leon's by $100, or in the alternative, to award damages in the same amount. The Court held that there was no legal basis for the reduction, but that the members could nonetheless obtain this amount in damages under section 272 of the CPA.4

Surprisingly, contrary to what the Court of Appeal recently stated in Vidéotron c. Union des consommateurs,5 Justice Blanchard concluded that the quantum of damages should be left to the discretion of the Court. The consumer benefits from an absolute presumption of prejudice once it is established that the merchant engaged in a prohibited practice, as stated by the Supreme Court of Canada in Richard v. Time.6 According to the Superior Court, a pragmatic approach should be taken when assessing the quantum of damages in class actions in general, and more specifically, when it involves a law with a social objective such as the CPA. This approach allows the Court to infer that where there is prejudice for only some of the group members, there is prejudice for the group as a whole. Justice Blanchard acknowledged that this approach was contrary to the one adopted by the Court of Appeal in the recent decision of Vidéotron, in which the consumer was required to prove damages and the causal connection before being compensated under section 272 of the CPA, but the Court considered itself bound by the Time decision.

The Superior Court found that all of the members who testified expressed anger and frustration and felt deceived by Leon's advertising. The Court, therefore, exercised its discretion and awarded each class member $100 for moral damages, for a total of $703,800.

Punitive Damages

Leon's was also ordered to pay $1 million in punitive damages. According to the Court, Leon's advertising strategy was based on a systematic breach of the relevant CPA provisions. In the Court's view, this repeated breach, despite multiple class actions against Leon's in recent years, deserved an exemplary punishment. As a result, the Court granted $400,000 in punitive damages to consumers who were charged an annual fee of $21, and $600,000 for the larger number of consumers who were exposed to Leon's misleading advertising.

Moral Damages for All?

This judgment fuels the debate concerning whether the consumer, when benefiting from an absolute presumption of prejudice, must prove damages and a causal connection with the merchant's breach. In light of this decision, and given that a class action can include several thousand consumers, the courts may be inclined to grant moral damages to every member where only certain consumers testify to the frustration caused by the merchant's prohibited practice. It will be interesting to follow the subsequent decisions of the courts, who will have to try and reconcile this decision with the Court of Appeal's decision in Vidéotron regarding the requirement that the consumer prove prejudice and a causal connection. Note that we will also have to see if the decision will be appealed by Leon's.


1 Option consommateurs c. Meubles Léon ltée, 2017 QCCS 3526

2 Option Consommateurs c. Meubles Léon ltée, 2012 QCCS 2839

3 218. To determine whether or not a representation constitutes a prohibited practice, the general impression it gives, and, as the case may be, the literal meaning of the terms used therein must be taken into account.

219. No merchant, manufacturer or advertiser may, by any means whatever, make false or misleading representations to a consumer.

4 272. If the merchant or the manufacturer fails to fulfil an obligation imposed on him by this Act, by the regulations or by a voluntary undertaking made under section 314 or whose application has been extended by an order under section 315.1, the consumer may demand, as the case may be, subject to the other recourses provided by this Act,

(a)   the specific performance of the obligation;

(b)   the authorization to execute it at the merchant's or manufacturer's expense;

(c)   that his obligations be reduced;

(d)   that the contract be rescinded;

(e)   that the contract be set aside; or

(f)   that the contract be annulled,

without prejudice to his claim in damages, in all cases. He may also claim punitive damages.

5 2017 QCCA 738 ("Vidéotron").

6 Richard v. Time, 2012 SCC 8 ("Time").

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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