Canada: Mixed Result: QCCA Yet Again Overturns QCSC's Decision To Dismiss Authorization Of Class Action, But This Time Only In Part

Union des consommateurs c. Magasins Best Buy ltée, 2018 QCCA 445 is the latest jurisprudence from the Quebec Court of Appeal ("QCCA") overturning denial of authorization of a class proceeding and confirming the generally low threshold for authorization of class actions in Quebec. However, this time, Justices Dutil, Savard and Rancourt confirmed at least part of the motion judge's decision and upheld denial of authorization regarding the alleged verbal misrepresentation claim.

The QCCA's decision also offers the first appellate treatment of two procedural questions under the new Quebec Code of Civil Procedure regarding rights of appeal and cross appeal where authorization is partially denied. The QCCA confirmed that (i) a petitioner can appeal a denial of authorization as of right even when authorization is only partially denied; and (ii) if appeal of a denial of authorization is brought by the petitioner, the respondent cannot cross appeal without leave from the QCCA.

BACKGROUND

The Union des consommateurs applied for authorization to institute a class action in relation to extended warranties sold to consumers by Best Buy. The Petitioner alleged that the extended warranties were "disproportionate" considering their cost relative to their actual value, and were even less advantageous than the basic legal warranty under the Consumer Protection Act ("CPA"). The Petitioner also alleged that Best Buy had made misleading representations about the warranties to its consumers.

QCSC DECISION

The motion judge refused authorization of the majority of the proposed class proceeding.

First, the judge found that the allegation that the extended warranties were not superior in value to the basic legal warranty under the CPA, and thus violated s. 35 of the CPA, was bound to fail. S. 35 of the CPA provides that "A warranty provided in this Act does not prevent the merchant or the manufacturer from offering a more advantageous warranty to the consumer." Relying on the QCCA's decision in Fortier c. Meubles Léon ltée, 2014 QCCA 195 ("Fortier"), the judge found that Best Buy's warranties were deemed to be more advantageous than the legal warranty under the CPA: Best Buy's warranties did not require proof of a latent defect and provided the consumer with additional "peace of mind".

Second, the motion judge denied authorization of the claim that the extended warranties amounted to an "objective exploitation" of the consumer under s. 8 of the CPA, notwithstanding the judge's finding that this claim was, in principle, not obviously frivolous, nor bound to fail. S. 8 of the CPA provides that "The consumer may demand the nullity of a contract or a reduction in his obligations thereunder where the disproportion between the respective obligations of the parties is so great as to amount to exploitation of the consumer or where the obligation of the consumer is excessive, harsh or unconscionable." The judge held that the peace of mind procured by a contractual warranty had a certain value that was impossible to quantify, thus making it impossible for the Court to ever establish disproportionality under s. 8 of the CPA.

Finally, the judge found a lack of sufficient evidence to establish that verbal misrepresentations had been made to more than one consumer (i.e. other than the class representative), which meant that there was no adequate proposed class in relation to these allegations.

The only part of the proposed class proceeding authorized by the judge was in relation to the alleged false representations made through written ads and expressed in the warranties themselves. The judge found that both a satisfactory class and claim under s. 219 of the CPA existed in that regard.

QCCA DECISION

The Union des consommateurs appealed the entire portion of the QCSC's decision denying authorization. Best Buy filed a cross appeal seeking to overturn authorization of the alleged written misrepresentation claim.

S. 35 CPA – Contractual Warranties

The QCCA found that the Petitioner's claim that Best Buy's extended warranties, which removed the vendor's legal obligation under the CPA to answer claims of latent defects, were not superior in value to the basic legal warranty under the CPA, and thus violated s. 35 of the CPA, ought to be determined by a judge hearing the case on the merits. Although Fortier confirmed that the benefit of a contractual warranty can indeed be "peace of mind", the QCCA held that it does not, in and of itself, mean that Best Buy's contractual warranties were more advantageous or preclude analysis of whether a particular extended warranty respects the legal requirements of the CPA, including of s. 35.

S. 8 CPA – Objective Exploitation

The QCCA clarified the legal analysis applicable to contractual warranties that allegedly exploit the consumer under s. 8 of the CPA and found that this claim should have been authorized.

The QCCA found that the motion judge erred in finding that the object of the contract included peace of mind, thus making the extended warranties inherently impossible to quantify, with the result that the claim of alleged exploitation could not be authorized. According to the QCCA, s. 8 of the CPA requires the court to examine the real object of the contract. Here, the object of the contract was, first and foremost, to provide a warranty to fix or replace the item, which is a service that can be readily quantifiable. Therefore, the class action should have been authorized based on s. 8 CPA.

Further, the QCCA noted that establishing "objective exploitation" under s. 8 CPA simply requires comparison of the real object of the contract offered to the price paid by the customer. There is no need to examine the circumstances and/or personality of the consumer in determining objective exploitation, and the motion judge thus erred in focusing his analysis on the peace of mind "subjective" value for the consumers.

Alleged Verbal Misrepresentations

The QCCA upheld the motion judge's decision to deny authorization of the verbal misrepresentation claim. The QCCA rejected the Union des consommateurs' argument that, because the dishonest business practices alleged against Best Buy were systemic in nature, misrepresentations made orally – and an adequate proposed class – could be inferred. The QCCA agreed with the motion judge's conclusion that there was "not one iota of proof" establishing that verbal misrepresentations about extended warranties had been made to anyone other than the Petitioner. The QCCA affirmed the motion judge's finding that, "Despite the low threshold of the Union's burden at the authorization stage, the latter fails to demonstrate the existence of a group and therefore does not meet this criterion with respect to this aspect of the application."

Cross Appeal

The QCCA upheld the motion judge's decision to authorize the class proceeding with respect to the claim of misleading written representations made in advertisements and in the warranties themselves.

The Court also held that, under the Quebec Code of Civil Procedure, (i) a petitioner can appeal a denial of authorization as of right even when authorization is only partially denied; and (ii) if appeal of a denial of authorization is brought by the petitioner, the respondent cannot cross appeal without leave from the QCCA.

OUR COMMENTS

This decision confirms that the QCCA remains consistent in its "low threshold" approach to authorization of class proceedings. Here, the QCCA authorized a wider range of claims than initially authorized by the motion judge. The QCCA did, however, refuse to authorize a verbal misrepresentations claim based on lack of evidence, a rare occurrence at this initial stage.

Generally, the decision provides a useful legal framework with which to analyze claims of extended warranties under the CPA, more specifically as they pertain to objective exploitation under s. 8 of the CPA, which according to the QCCA simply requires comparison of the real object of the contract offered to the price paid by the customer, without focusing on the consumer's subjective motives. The QCCA also recognized that extended warranties can in practice be more advantageous to consumer than the legal ones available under the CPA, if only for the peace of mind they bring, but the Court was careful to limit the application of the Fortier decision as a basis to deny authorization of claims under s. 8 of the CPA.

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