2021 QCCQ 8589, 2021 QCCQ 8589

Scholars at Your Service c. Benzouak 2021 QCCQ 8589 COURT OF QUÉBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division No: 500-32-708650-199 DATE: August 25, 2021 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ SCHOLARS AT YOUR SERVICE Plaintiff v.

Rym BENZOUAK Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff, SCHOLARS AT YOUR SERVICE INC. (doing business under the name Scholars at your Service ), sues the Defendant Rym Benzouak on a statement of account (P-1) for the amount of $ 3,061 allegedly owed as a “Current Account Balance” pursuant to a Franchise Agreement dated February 22, 2018 (P-2) [ 2 ] The statement of account takes the form of a profit and loss statement for the business carried out by Ms.

Benzouak over the summer season of 2018, consisting in providing painting residential services to consumers. Because Scholars at your Service handled the accounting of this business and managed funds on behalf of Ms. Benzouak, the statement of account shows income, expenses and net income.

Among the expenses are the amounts payable under the Franchise Agreement, chiefly a monthly Franchise Fee amounting to $ 3,000 and royalties to the franchisor of 24% of the gross revenue of $ 8,894, amounting to $ 2,134.78. [ 3 ] These amounts, when added to a fee for a “Fall Protection Course” $ 280 and “Insurance and Administration 4%” bring the total “Other expenses” i.e. amounts claimed by the Franchisor to $ 5,770. 58. When deducted from the business’ “Net Ordinary Income” the “Net Income” is a loss of $ 2,458.59.

The Plaintiff adds a net amount of Advances, Tax on Franchise Deposit, QST Credit Due and Warranty holdback bringing the Current Account Balance to the amount claimed: $ 3,061.83. [ 4 ] In other words, the Painting business that the Defendant carried out over the summer of 2018 as a Scholars at your Service franchisee, would result not only in no income for her efforts, but a loss payable to the Franchisor, essentially because of the fixed and variable franchise fees. [ 5 ] Ms.

Benzouak contests the claim alleging essentially that the economic advantages to the two parties were weighted disproportionately in favour of the Plaintiff and should be reduced (article 1604 C.C.Q.), that the Franchise Agreement, an adhesion contract (article 1379 C.C.Q.) contained abusive clauses allowing the Franchisor to obtain excessive costs and profits, penalising her while she made nothing.

She alleges that the disproportionate disadvantage she suffered goes against the requirements of good faith. (article 1437 C.C.Q.) [ 6 ] She also makes a counter claim for the annulment, the resolution or the resiliation of the contract, with a condemnation of $ 0.01. When asked by the Court for an explanation of this one-cent claim, she explained, as is set out in the first line of her cross claim, that she does not ask for an amount of money.

In the context, the Court understands that, in the restitution or reduction of obligations that the Court would order as the remedy for the nullity of the contract or its resolution or resiliation, that she would owe no amount to the Plaintiff and no amount would be payable to her. Issues [ 7 ] To resolve this conflict and establish the state of account between the parties, the Court must provide the answer to the following issues: 1. What amount, if any, is owed by the Defendant to the Plaintiff? 2.

Should the contract between the parties be annulled, resolved or resiliated or the obligations of the Defendant pursuant to it reduced, and if so by what amount. The Court’s conclusion

[ 8 ] The Court concludes that the Defense case is well founded, for the reasons set out below. Factual analysis [ 9 ] In the winter of 2018, Rym Benzouak, 19 years of age, was a student at Concordia University in her second year at the John Molson School of Business [ 10 ] She sought, for the summer of 2018, an internship to gain some hands-on business experience. She became aware of a program called the “business development program” advertised at Concordia.

The program was described as a “student internship program to provide undergraduate students with the opportunity to build their résumé and gain marketable skills by teaching them how to run a business”. [ 11 ] A sign-up sheet was passed around in one of her classes and she signed up. A representative who was also a Concordia student called to give her a description of the program and set up an interview. She perceived the program as a course, with hands on experience. [ 12 ] She was selected for an info session. The session was held at McGill University.

She learned that the actual productive painting work would be performed by employees who would receive thorough training. She was eligible for the program despite having no professional experience because she would be given thorough coaching, information and guidance. [ 13 ] In addition to information given orally, she received a colour-glossy brochure entitled “ Program Detail Package/Learn how the BDP has helped hundreds of students across Canada setup and run their own business over 10 years”.

Candidate Selection Process Our recruitment system follows a rigorous, multiple step process that encompasses personality assessments, interviews and reference checks. We are looking for candidates that are honest, goal oriented, motivated and ambitious individuals who are committed to working hard and learning about entrepreneurship. Only top applicants will be offered a position to join the program and begin their entrepreneurial journey.

Coaching System, Goal Setting & Review Each entrepreneur will have the opportunity to develop their business skills throughout the season by following a one-on-one coaching system that encompasses classroom training, in person practice, field coaching, evaluations and feedback. After analyzing business metrics and completing the weekly GS&R call, coaches will provide guidance and counseling on the overall direction and strategy of the FM’s business.

Training Modules & Regional Conferences Once selected to join the program, candidates are provided with training modules covering basic and advanced topics in marketing, sales, estimating, product knowledge and production management to review prior to the program launch. Managers will get together in regional conferences where they will learn more about the business, meet fellow entrepreneurs and listen to engaging presentations. Business coaches will share their experiences on what it takes to become a successful entrepreneur while guest speakers provide additional insight on advanced topics.

Business Implementation Each Franchise Manager will be given a territory of operation and will be the exclusive representative for Scholars at Your Service for that location. Managers will oversee every aspect of the business including hiring employees, marketing implementation, sales management, business administration and production management. Business coaches will share expertise and assist managers in the operation of their franchise. [ 14 ] The financial examples given under the heading “Program Details” include charts showing typical project income, with Royalty and Profit percentages applied. Another

section shows fixed expenses. Perhaps more significant to a student prospect is the Manager Earning Model showing “Manager Revenu” of $ 75K and net profit of $ 15,000 and the “Top Performer Earnings Model’ showing “Top Performer Revenue of $ 125,000 and net profit of $ 322,250. [ 15 ] Ms.

Benzouak testified that she was convinced that the probable returns would be within the range of the manager earing model, a net of $ 15,000 and that of the top performer earnings model, $ 32,250. [ 16 ] Interested, of course, in the possibility of net earnings, which appeared to be substantial, she was also quite concerned about any possible loss and asked on more than one occasion about this point.

To her question “Can I lose any money doing this?” The answer was consistently, “not if you finish the program”. [ 17 ] The possibility of achieving this was supported by the “Travel Incentives & Rewards: Mexico Vacation”

section of the brochure, showing a happy group of young vacationers. Her understanding was that the revenues, based on the other numbers provided in this modeling were attainable for someone who finished the program. [ 18 ] After this interview she received an email from Nick Hamm, referring to himself as “Head Coach” attaching a copy of the agreement, asking her to “please review and let me know if you have any questions”. Nick Hamm, the founder and head of the company replied as others had to the question about the possibility of losing money,” Not if you finish the program.” The next step would be to

schedule a time to complete a final interview with him. [ 19 ] In fact, she met with a district manager at a coffee shop in the McGill campus and signed the agreement in February. (P-2). The document is dated February 22, 2018. She gave a cheque for $ 500 which she believed was start-up capital [1] .

[ 20 ] Then, after signing the agreement, she received a confirmation that she had been accepted, and received various documents to sign, notably a “demande d’inscription” to be registered as a business with the Quebec authority. Correspondence shows that his occurred around February 26, 2018. [ 21 ] She then attended a training session in March, of a theoretical nature. Meetings were held on the Concordia campus. [ 22 ] To learn how to estimate jobs, a group met at her house and it was used as an example of how to do estimates of interior painting.

No training was given concerning exterior painting work. [ 23 ] It was only after a few of these meetings that she learned in the week of March 16, 2018, to her surprise, that she would be “trained” in door to door sales.

She tagged along with another manager and had the dreadful experience of canvassing door to door, for several hours, looking for business. [ 24 ] Her belief had been that she was going to be trained as a manager in an existing business, including marketing, not that she would be doing door-to-door sales prospecting. [ 25 ] Taking another look at the contract she had signed, she realised that she was immediately liable for the Franchise Fee. This is an accurate reading of

Article 6 of the Franchise Agreement. She decided she should make the best of the situation and continued, hiring six painters and six sales persons. [ 26 ] Because of the date at which she was recruited, she had no sales in the order book, whereas Clause 5.6 of the agreement provided a

schedule for pre-season Sold Projects beginning February 1 for a total of $ 25,000 by May 1, this amount being a pre- requisite for the opening of a paint account and the beginning of summer production. [ 27 ] Despite having no sales booked, she followed her regional manager’s direction and opened the paint account. [ 28 ] As part of the training and coaching, she was told that she would be accompanied on her first quoting of a job by a person of experience.

An exchange of electronic correspondence with “Umi” (D-2), shows him, on April 28, reneging on his promise to accompany her the next day to do two quotes, because he was accompanying another manager. “You’ll have to do them solo”. [ 29 ] She cancelled and re-scheduled. Umi reneged again on May 10 and was unavailable on May 23. She began doing quotes on her own, obtaining some guidance as she progressed. [ 30 ] On June 4, the day of her first job, Umi offered, at 10:04, to make a call, rather than actually be on the site as Ms.

Benzouak had expected. [ 31 ] The series of exchanges shows, circumstantially, that she was given very little attention by the regional manager who actually avoided helping her. [ 32 ] She was exempted, for personal reasons, from a training about painting technique. She had presumed that there would be painters she could hire that would have experience.

She testified that she never became competent herself as a painter and never obtained any real training. [ 33 ] There having been no training in outdoor painting, she and her team made major mistakes and, on more than one occasion, had to re-do work that had been done improperly. [ 34 ] Her misfortune was mitigated to some degree because a friend with painting experience came on board and took control of production at the end of the summer. [ 35 ] The accounting

summary (D-1) shows job income for the season of only $ 8,894. [ 36 ] She states that she did gain some goodwill from the summer’s work, as can be seen from some letters from satisfied customers (D-5) [ 37 ] The narrative of the summer’s events, which is not challenged by any evidence from the Defendant, was that of a gradual realisation that Scholars at Your Service provided little if any support in operations, from sales to production, the Franchisor’s input being the accounting and credit facilities to buy paint.

The franchisor took no significant risk and provided little support and coaching. [ 38 ] Equally significant is the stark contrast between what was described during the recruitment process and the actual reality of the situation. [ 39 ] The process was incorrectly characterised in the recruitment phases as in internship or a business development program for students. [ 40 ] The training, coaching, guidance and counselling were significantly oversold in the brochure under the heading “Learning to Produce & Training Employees” including representations that: we [Scholars at your Service] provide all training necessary to ensure you and your employees are prepared to follow through on quality production work.

In April, managers spend a weekend learning how to produce to prepare them for the production season. When the production season begins in May, business coaches work closely with the teams to ensure all employees are fully prepared and trained to complete quality work. [ 41 ] This was a very misleading representation. [ 42 ] Ms. Benzouak’s father, Abdelaziz Benzouak, was contacted by the recruiters as part of a process imposed on the candidate. His

understanding after undergoing the interview was that his daughter would learn from an entrepreneurial experience that would be an opportunity for her professional development.

He consented to her using educational savings to invest in the venture. [ 43 ] He was surprised as the summer progressed that his daughter was expected to provide a car, that she would have to do door-to- door sales, i.e. that the company did not have a client base, and that his daughter and her painters would not receive proper training. [ 44 ] He painfully witnessed his daughter losing an entire summer, being distraught and under stress and losing financially, not even making a minimum wage. [ 45 ] Ms.

Benzouak, bewildered by the process, realised from her experience that the sales figures and other projections in the brochure, especially the percentages given in the estimating of price, were the ideal numbers, but not realistic numbers. [ 46 ] She had bought into an unpaid painting job, as opposed to a guided and coached initiation into running a business. It was only because of the help of friends and family that she was able to mitigate her loss to some extent and to make the best of the situation. [ 47 ] Ms. Lim, representing the Plaintiff, mentioned in her testimony that she did not know about Ms.

Benzouak’s distress and that “we would have addressed it early on”. But the only contact Ms. Benzouak had with the enterprise was the regional manager, who was the person not providing the training, coaching and support in an adequate manner. [ 48 ] It is true that the contract states that there is no promise as to a specific profit. At the very end of the contract, under

Article 11, General and Miscellaneous we read: 11.3 No Guarantee of Success The Franchisee hereby acknowledges that: (

a) The Franchisor does not guarantee that the Franchisee will earn a specific profit from Franchised business; (

b) The Franchisor has given no assurance about the amount of revenue the Franchisee may earn from operating said Franchised business; (

c) The Profitability if the Franchised business will depend largely on Franchisee’s skill, energy and dedication. [ 49 ] These clauses do not negate the fact that the Franchisor, in the recruitment process, made several untrue and misleading representations to the effect that: -this was a business development internship for top candidates only; -all necessary training and coaching would be given; -there would be assistance in the operation of the franchise. [ 50 ] At the opening phases of the recruitment, there was no indication that this was a franchise arrangement, as opposed to an educational experience.

The psychology of the process was to induce the candidate to believe that she was in a selection process that would enable only top candidates would be offered a “position to join the program and begin their entrepreneurial journey”. [ 51 ] The adhesion contract that the candidate was asked to sign before knowing if she was accepted, contained a formula of a fixed franchise fee and a royalty on gross sales that, in Ms.

Benzouak’s case, provided for the entire summer’s efforts to be absorbed by fees which constituted an unreasonable portion of her gross sales, which were only a fraction of what she was led to believe were probable.

She believed the numbers shown in the examples were probable and signed the agreement before she learned that the only client base that scholars had in her exclusive territory would be the clients she found by making cold calls, door to door, and that the training and support that she herself would be receiving would be to “do them solo”. [ 52 ] When asked about the possibility of her losing money, she received the assurance that she would not, if she finished the program.

When she was told in no uncertain terms that she would be receiving all necessary support, she was not told that the person who was supposed to give this support would be capable of the disingenuous avoidance seen in the exchanges (D-2). [ 53 ] The result that Ms. Benzouak wishes to obtain by her contestation, to not lose money because she completed the program, is supported by both of the principles she raises. Firstly, she is entitled to the reduction of her obligations because of the excessive nature of the allocation of risk between herself and the franchisor, through the franchise fee and the royalty: 1379 .

Le contrat est d’adhésion lorsque les stipulations essentielles qu’il comporte ont été imposées par l’une des parties ou rédigées par elle, pour son compte ou suivant ses instructions, et qu’elles ne pouvaient être librement discutées. Tout contrat qui n’est pas d’adhésion est de gré à gré. 1379. A contract of adhesion is a contract in which the essential stipulations were imposed or drawn up by one of the parties, on his behalf or upon his instructions, and were not negotiable. Any contract that is not a contract of adhesion is a contract by mutual agreement.

1437 . La clause abusive d’un contrat de consommation ou d’adhésion est nulle ou l’obligation qui en découle, réductible. Est abusive toute clause qui désavantage le consommateur ou l’adhérent d’une manière excessive et déraisonnable, allant ainsi à l’encontre de ce qu’exige la bonne foi; est abusive, notamment, la clause si éloignée des obligations essentielles qui découlent des règles gouvernant habituellement le contrat qu’elle dénature celui-ci. 1437. An abusive clause in a consumer contract or contract of adhesion is null, or the obligation arising from it may be reduced.

An abusive clause is a clause which is excessively and unreasonably detrimental to the consumer or the adhering party and is therefore contrary to the requirements of good faith; in particular, a clause which so departs from the fundamental obligations arising from the rules normally governing the contract that it changes the nature of the contract is an abusive clause. [ 54 ] Secondly, the contract can be annulled or resiliated because of mistake as to the nature of the obligations, which was induced by the untrue and misleading representations made to her at the time of the formation of the contract during the recruitment phase we have described above. [ 55 ] These representations amount to “dol”.

The English expression “fraud” must be understood in the civil-law sense of “dol” i.e. not necessarily a fraud in the criminal sense, requiring the proof beyond a reasonable doubt of mens rea but rather a civil fraud, in this case statements that were misleading and deceptive in a process that was not transparent: 1398. Le consentement doit être donné par une personne qui, au temps où elle le manifeste, de façon expresse ou tacite, est apte à s’obliger. 1398. Consent may be given only by a person who, at the time of manifesting such consent, either expressly or tacitly, is capable of binding himself. 1400.

L’erreur vicie le consentement des parties ou de l’une d’elles lorsqu’elle porte sur la nature du contrat, sur l’objet de la prestation ou, encore, sur tout élément essentiel qui a déterminé le consentement. L’erreur inexcusable ne constitue pas un vice de consentement. 1400. Error vitiates the consent of the parties or of one of them where the error relates to the nature of the contract, to the object of the prestation or to any essential element that determined the consent. An inexcusable error does not constitute a defect of consent. 1401. L’erreur d’une partie, provoquée par le dol de l’autre

partie ou à la connaissance de celle-ci, vicie le consentement dans tous les cas où, sans cela, la

partie n’aurait pas contracté ou aurait contracté à des conditions différentes. Le dol peut résulter du silence ou d’une réticence. 1401. Error on the part of one party induced by fraud committed by the other party or with his knowledge vitiates consent whenever, but for that error, the party would not have contracted, or would have contracted on different terms.

Fraud may result from silence or concealment. [ 56 ] It would have been appropriate to give clear warning at the early stages that this was a risky business venture for the franchisee and that the franchisor’s commitments and risks were quite limited as well as a clear statement from the outset that it was a process whereby the Franchisee would have find the work, find the employees and even do the work herself, as opposed to managing it.

In answer to the question whether money can be lost by the candidate, a clear answer would have yes, and that she would be liable for the franchise fee and the royalty on gross sales, even if that meant making a business loss over the summer. Had Ms. Benzouak been given proper information, she would not have gone further with her application. [ 57 ] In the process of restitution, the Court has discretion in the manner in which the parties are made whole: 1699 .

La restitution des prestations a lieu chaque fois qu’une personne est, en vertu de la loi, tenue de rendre à une autre des biens qu’elle a reçus sans droit ou par erreur, ou encore en vertu d’un acte juridique qui est subséquemment anéanti de façon rétroactive ou dont les obligations deviennent impossibles à exécuter en raison d’une force majeure.

Le tribunal peut, exceptionnellement, refuser la restitution lorsqu’elle aurait pour effet d’accorder à l’une des parties, débiteur ou créancier, un avantage indu, à moins qu’il ne juge suffisant, dans ce cas, de modifier plutôt l’étendue ou les modalités de la restitution. 1699. Restitution of prestations takes place where a person is bound by law to return to another person the property he has received, either without right or in error, or under a juridical act which is subsequently annulled with retroactive effect or whose obligations become impossible to perform by reason of superior force.

The court may, exceptionally, refuse restitution where it would have the effect of according an undue advantage to one party, whether the debtor or the creditor, unless it considers it sufficient, in that case, to modify the scope or modalities of the restitution instead.

1700. Restitution of prestations is made in kind, but, if this is impossible or cannot be done without serious inconvenience, it may be made by equivalence. Equivalence is assessed as at the time when the debtor received what he is liable to restore. 1700. La restitution des prestations se fait en nature, mais si elle ne peut se faire ainsi en raison d’une impossibilité ou d’un inconvénient sérieux, elle se fait par équivalent.

L’équivalence s’apprécie au moment où le débiteur a reçu ce qu’il doit restituer. [ 58 ] In the present case, the dismissal of the Plaintiff’s action for the balance of account is as far as the Court may go, given that the Defendant has limited her cross-claim to that result.

BY THESE REASONS, THE COURT DIMISSES the Plaintiff’s claim; ALLOWS in part, the Defendant’s counter claim; DECLARES that, by the operation of restitution because of the annulment or resiliation of the Franchise Agreement between the parties or, alternatively, the reduction of its obligations, the balance of account between them is zero ($ 0); CONDEMNS the Plaintiff to pay the Defendant judicial costs of $ 206 for the “droits de greffe”. __________________________________ David L. Cameron, J.C.Q.

Date of hearing : May 4, 2021 [1] The contract was, incidentally not in compliance with the Charter of the French Language . This was not pleaded by the Defendant, but, given that French is the language that she is more comfortable in, there probably was prejudice by virtue of the fact that the contract was not written in French. She did not express her wish, in the contract or otherwise that the contract documentation be drawn up in a language other than French. 55. Les contrats d’adhésion, les contrats où figurent des clauses-types imprimées, ainsi que les documents qui s’y rattachent sont rédigés en français.

Ils peuvent être rédigés dans une autre langue si telle est la volonté expresse des parties. 55. Contracts pre-determined by one party, contracts containing printed standard clauses, and the related documents, must be drawn up in French. They may be drawn up in another language as well at the express wish of the parties. [1]