2016 QCCA 1496, 2016 QCCA 1496

Gagnon c. Bell Mobilité inc. 2016 QCCA 1496 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-024747-149 , 500-09-024748-147 (500-06-000496-105) DATE: September 20, 2016 CORAM: THE HONOURABLE PAUL VÉZINA, J.A. NICHOLAS KASIRER, J.A. DOMINIQUE BÉLANGER, J.A. 500-09-024747-149 DENIS GAGNON APPELLANT - plaintiff v. BELL MOBILITY INC. RESPONDENT - defendant 500-09-024748-147 BELL MOBILITY INC. APPELLANT – defendant v.

DENIS GAGNON RESPONDENT – plaintiff JUDGMENT [ 1 ] The parties appeal from a judgment of the Superior Court, District of Montreal (the Honourable Francine Nantel), rendered on September 3, 2014, which allowed the representative’s class action in part and ordered Bell Mobility to pay the members $991,316 in damages, plus tax, interest, and the additional indemnity from January 5, 2010. [ 2 ] For the reasons of Bélanger, J.A., with which Kasirer, J.A. agrees, and for the reasons of Vézina, J.A., THE COURT : [ 3 ] DISMISSES the appeal of Bell Mobility Inc., with legal costs. [ 4 ] For the reasons of Bélanger, J.A., with which Kasirer, J.A. agrees, THE COURT : [ 5 ] DISMISSES the appeal of Denis Gagnon, with legal costs. [ 6 ] For other reasons, Vézina, J.A., would have allowed Denis Gagnon’s appeal, with legal costs, and increased the damages awarded against Bell Mobility Inc. from $991,316 to $10 million.

PAUL VÉZINA, J.A. NICHOLAS KASIRER, J.A. DOMINIQUE BÉLANGER, J.A.

Mtre David Bourgoin Mtre Benoît Gamache BGA Avocats, S.E.N.C.R.L. For Denis Gagnon Mtre Marie Audren Mtre Emmanuelle Rolland Borden Ladner Gervais Mtre Valérie Beaudin Beaudin & Associates – Bell Canada, Legal Department For Bell Mobility Inc. Date of hearing: April 19, 2016 REASONS OF VÉZINA, J.A. [ 7 ] Up until 2010, Bell Mobility Inc. provided wireless telephone services to the members of the class represented by Mr. Gagnon.

Afterwards, he instituted a class action seeking reimbursement of the termination fees paid by members who exercised their right to resiliate by ending their contracts before they expired. [ 8 ] The trial judge allowed the action in part and ordered Bell to reimburse the class $1 million. [1] She refused, however, to award punitive damages. [ 9 ] Bell appeals and asks for the class action to be dismissed.

The representative also appeals, asking for the award of damages to be increased to $12 million, plus $1 million in punitive damages. [ 10 ] The relevant facts are not disputed. [ 11 ] The members of the class share the following: - they entered into a fixed-term contract with Bell; - they then received a discount on the purchase price of a mobile telephone; - they resiliated their contracts before the contracts expired; and - they therefore paid the amounts stipulated in the “Cancellation Fee” clause. [ 12 ] Members could obtain the same telephone services from Bell at the same rate with open-ended contracts, but only fixed-term contracts entitled them to a discount, which varied according to whether the customer selected a 12, 24, or 36-month contract. [ 13 ] Bell’s [ translation ] “discount-related costs” amounted to $236.

They included the discount itself, plus other costs related to entering into the contract. This is, of course, an average, as the judge rightly pointed out: [ translation ] [54] The data the two experts used were approximate and based on averages. Their task would otherwise have been impossible. [ 14 ] Bell collected Cancellation Fees from the class members amounting to $21.3 million. [ 15 ] This is the Cancellation Fees clause from the Bell Mobility Service Agreement: Cancellation Fee: The fee payable by you if your service is terminated before the expiry of your Term of 12, 24 or 36 months.

The Cancellation Fee is the greater of (i) $100 or (ii) $20 per month remaining in the Term upon termination, to a maximum of $400. … ... To the extent that you have selected an agreement with a committed term, you agree that the cancellation fee set out above represents a reasonable pre-estimate of Bell Mobility’s damages [2] in the event that you do not complete your committed term. … Further on, the contract refers to the Bell Terms and Conditions of Wireless Service , which contain the same stipulation plus the following point:

The ETF … are a genuine pre-estimate of damages Bell will incur due to the early termination of the Services and not a penalty. [ 16 ] The debate focuses primarily on (

a) Bell’s claim that the Cancellation Fees clause is not abusive and should therefore be applied, and (

b) the representative’s claim that the trial judge failed to take into account that Bell’s injury decreases monthly. The judgment [ 17 ] The judge outlined the facts relating to the service agreements and the discounts, as explained by Bell’s chief financial officer: - the two options available to customers: an open-ended or fixed-term contract: [ translation ] [19] The first option: a monthly agreement that can be resiliated at any time without [Cancellation Fees].

This choice entails no discount on the device used because customers pay the list price or supply the device themselves. [20] The second option: an agreement ... by which customers commit to Bell for a period of 12, 24, or 26 months. In consideration, subscribers receive a discount on the wireless device but must pay [Cancellation Fees] in the event of early termination. - The advantage for Bell: stable and predictable revenue: [ translation ] [21] The latter option is undeniably the most advantageous for Bell because it offers the benefit of more stable and predictable revenue.

To encourage customers to choose this option, a discount on the purchase of a wireless device is offered. In some cases, like that of [the representative,] Mr. Gagnon, the discount corresponds to the full price of the device. - the connection between the discount and the term of the contract: [ translation ] [22] [The chief financial officer] recognizes that the discount on the device is based on the term of the contract. The longer the term, the greater the discount. He notes, however, that customers are offered the same monthly rates, whether or not they have contracts.

Thus, the discount on the device is not recovered through a higher monthly rate. - the discount as a marketing cost: [ translation ] [24] According to [the chief financial officer], the contract as devised by Bell’s marketing department is advantageous for both contracting parties.

Bell ensures predictable short- and medium-term revenue, and customers receive considerable discounts on wireless devices that become their property once the contract is signed. [ 18 ] The judge then discussed the customer’s right to resiliate and the amounts due upon exercising this right. [ 19 ] First, she cited the relevant Civil Code provisions:

Art. 2125. The client may unilaterally resiliate the contract even though the work or provision of service is already in progress. … Art. 2129. Upon resiliation of the contract, the client is bound to pay to the contractor or the provider of services, in proportion to the agreed price, the actual costs and expenses, the value of the work performed before the end of the contract or before the notice of resiliation and, as the case may be, the value of the property supplied, where it can be put into his hands and used by him.

For his part, the contractor or the provider of services is bound to repay any advances he has received in excess of what he has earned. In either case, each party is liable for any other injury that the other party may have suffered. Art. 2125. Le client peut, unilatéralement, résilier le contrat, quoique la réalisation de l’ouvrage ou la prestation du service ait déjà été entreprise. … Art. 2129.

Le client est tenu, lors de la résiliation du contrat, de payer à l’entrepreneur ou au prestataire de services, en proportion du prix convenu, les frais et dépenses actuelles, la valeur des travaux exécutés avant la fin du contrat ou avant la notification de la résiliation, ainsi que, le cas échéant, la valeur des biens fournis, lorsque ceux-ci peuvent lui être remis et qu’il peut les utiliser. L’entrepreneur ou le prestataire de services est tenu, pour sa part, de restituer les avances qu’il a reçues en excédent de ce qu’il a gagné.

Dans l’un et l’autre cas, chacune des parties est aussi tenue de tout autre préjudice que l’autre

partie a pu subir. [ 20 ] Noting that the right to resiliate is not of public order, she found that the class members did not waive the right when they agreed to the Cancellation Fees clause, that they validly exercised the right through early termination, and that, in so doing, they bound themselves under

article 2129. She wrote: [translation] [29] Customers may even waive [the right to resiliate], but they must do so clearly and unequivocally. The waiver may even be tacit if the clauses of the contract are clear and inconsistent with the strict application of articles 2125 or 2129 C.C.Q. … [34] In light of the above, the Court finds that there is no indication whatsoever of any waiver of the right to unilateral resiliation as set out in

article 2125 C.C.Q. But, the members are thus bound to pay Bell the heads of claim set out in

article 2129 C.C.Q. [ 21 ] That said, she did not further address the Cancellation Fees clause and relied on

article 2129 to determine the amounts the members owed Bell after resiliating their contracts. She wrote: [ translation ] [37] Customers who exercise their right of unilateral resiliation are bound to pay the costs and expenses incurred by the service provider and are liable for “any other injury that the other party may have suffered”. [ 22 ] She excluded anticipated profits for the post-resiliation period from the [ translation ] “injury [Bell] may have suffered”.

She wrote: [ translation ] [38] [The chief financial officer] stated on several occasions at the hearing that the injury Bell suffered upon early termination by the customer is the loss of anticipated revenue until the end of the term. [39] The case law is clear that the term “injury” does not include loss of anticipated profit by the contracting party. [3] The term “injury” must be interpreted narrowly, since

article 2129 C.C.Q. is a provision that derogates from the jus commune . [40] ... future earnings, of which the company is deprived, are excluded from such compensation. [41] Moreover, the notion of “injury” in paragraph 3 of

article 2129 C.C.Q. must be limited to that which directly results from resiliation. [ 23 ] She concluded: [ translation ] [40] In this case, the discount granted on the wireless device represents the actual injury Bell suffered... [ 24 ] She then moved on to the [ translation ] “quantification of this actual injury”. [ 25 ] She rightly limited the reimbursement to those who had paid fees:

[ translation ] [60] ... the class is defined as “persons who were invoiced [Cancellation Fees]” and not “persons who paid [Cancellation Fees]” ... [61] The Court cannot order Bell to reimburse [Cancellation Fees] to members who did not pay them despite being invoiced. [ 26 ] To give effect to this decision of the judge and to avoid any confusion, the definition of the class will be modified by replacing [ translation ] “All persons ... who were invoiced ... termination fees...” with [ translation ] “All persons … who paid termination fees”. [ 27 ] She found that Bell’s claim exceeded the value of its injury by $13: [ translation ] [53] According to [Bell’s expert], the average claim for [Cancellation Fees] is $249, while Bell’s discount-related costs vary between $226 and $246 (rounded figures), for an average of $236.

In other words, the members who paid termination fees would have paid, on average, $13 more than Bell is allowed to claim under

article 2129. [ 28 ] She counted 76,225 members who had paid Cancellation Fees. [ 29 ] She therefore ordered Bell to reimburse 76,225 times $13, or just under $1 million: [ translation ] [62] Only the members who paid [Cancellation Fees] are entitled to reimbursement of the amount exceeding the actual injury Bell suffered, or a sum total of $991,316. [ 30 ] In so doing, the judge applied the [ translation ] “compensatory principle”, which Cornu defines as follows: [4] [ translation ] A maxim of liability and insurance law, a rule of public order whereby the value awarded as compensation must repair all damage but only the damage – the true function of compensation – without impoverishing or enriching the victim.

For example, in damage insurance matters, the insurance can never entail a profit for the insured, since the amount of injury suffered by the insured represents the upper limit of the compensation due by the insurer in the event of a loss. [ 31 ] Bell recognizes this principle, stating in the Cancellation Fees clause that the fees are “a reasonable pre-estimate” and a “genuine pre-estimate” of the injury incurred by Bell, “not a penalty”. [ 32 ] It is important to note here that the judge’s conclusion implies that in all cases the value of Bell’s injury corresponds to the discount-related costs, regardless of whether termination takes place at the beginning, middle, or end of the contract.

She justifies the invariability of the injury as follows: [ translation ] [57] … [the representative’s expert] amortized the cost of the discount over the average number of months remaining in the contract, while the uncontradicted testimonial evidence was that the monthly rate reflects no amortization of the discount. [ 33 ] The representative submits that this conclusion is flawed, arguing that it is clear that Bell’s injury decreases over time which, it seems to me, makes sense.

This is the subject of Issue B here. [ 34 ] In addition, the judge rejected the following without much discussion: - that the Cancellation Fees constitute a penal clause: [ translation ] [33] It is not appropriate here to characterize the [Cancellation Fees] clause as “penal” since the definition in paragraph 1 of the Bell Terms and Conditions of Wireless Service indicates that the [Cancellation Fees] are an estimate of the injury, not a penalty.

Consequently, the Court cannot find that [ translation ] “customers expressed a desire not to avail themselves of the right to unilateral resiliation on pain of paying an indemnity”: [ translation ] 1417. [ [5] ] ... The fact that the penal clause indicates payment of an amount in penalty in the event of a customer’s unilateral resiliation of the contract is not a sufficient or determinative indication justifying a finding that there was an explicit and unequivocal waiver because, in many cases, customers are unaware of the right set out in

article 2125 C.C.Q. - that this clause is abusive: [ translation ] [63] Given the Court’s conclusion regarding articles 2125 and 2129 C.C.Q. , it is not necessary to develop the arguments concerning

article 1437 and s. 8 CPA in any detail. [64] The Court finds that Bell has not violated these provisions because the members have not suffered any excessive or unreasonable

disadvantage contrary to the requirements of good faith, and the consumer’s obligation is not excessive, harsh or unconscionable. - that the legislative amendments subsequent to the claim period are relevant: [ translation ] [65] As for the plaintiff’s argument based on the enactment of the new provisions of the Consumer Protection Act , the Court does not agree.

Although the legislator undoubtedly intended to better circumscribe the widespread practices of telecommunications service providers and promote greater contractual justice, the provisions have no impact on the outcome of this case. [ 35 ] Finally, she ordered collective recovery, which is not challenged on appeal. A- Is the Cancellation Fees clause abusive? [ 36 ] Bell maintains that it is entitled to all the amounts it collected under the Cancellation Fees clause on the grounds that the members waived the contract resiliation regime provided by articles 2125 and 2129 C.C.Q.

Bell adds an alternative ground: if the members did retain their right to resiliate under

article 2125, they at least waived the possibility of using

article 2129 to assess the indemnity for the injury Bell suffered by agreeing to substitute the Cancellation Fees clause for that provision. [ 37 ] These two grounds are based on the premise that the provisions in articles 2125 and 2129 C.C.Q. are not of public order and the parties may derogate from them, which the judge rightly recognized. (

a) The waiver of articles 2125 and 2129 C.C.Q. [ 38 ] According to Bell, the members waived the right to resiliate under

article 2125: first by choosing a fixed-term contract as opposed to an open-ended contract, and second by selecting the term of their contract from the 12, 24 or 36-month options Bell offered. This waiver results from the fact that the members are informed of the fees payable in the event of termination.

Bell asserts that this is an established fact, citing the trial judge who wrote: [ translation ] “the contract spells it out”. [ 39 ] The full quote is more enlightening: [ translation ] [32] Clearly, the members who signed the contract knew that in the event of unilateral resiliation they would be asked to pay [Cancellation Fees]; the contract spells it out.

The clause does not, however, refer in any way to a waiver of the right to unilaterally resiliate the contract. [ 40 ] The representative replies that the evidence reveals that there was no waiver, as the judge observed: [ translation ] [34] ... the Court finds that there is no indication whatsoever of any waiver of the right to unilaterally resiliate set out in

article 2125 C.C.Q. [ 41 ] Admittedly, the members knew what to expect, but this fact in no way implies a waiver of the right to resiliate, on the contrary. [ 42 ] Simply reading the clause reveals that Bell explicitly recognized – not once, but twice – the customer’s right to resiliate the contract, that is to cancel it before expiry of the term: Cancellation Fee: The fee payable by you if your service is terminated before the expiry of your Term of 12, 24 or 36 months. … … the cancellation fee set out above represents … in the event that you do not complete your committed term. … [ 43 ] Bell’s ground is without merit.

The judge’s conclusion should be upheld. [ 44 ] The full quote leads us to Bell’s alternative argument: [ translation ] [34] ... the Court finds that there is no indication whatsoever of any waiver of the right to unilaterally resiliate set out in

article 2125 C.C.Q. [Therefore], the members are required to pay Bell the heads of claim set out in

article 2129 C.C.Q. [ 45 ] According to

article 2129, the service provider has three relevant heads of claim: (1) the value of the services provided; (2) the value of the “property supplied”; (3) the “injury that the [provider] may have suffered”. [ 46 ] The first head of claim does not pose a problem since the monthly invoices from Bell were paid in full. As for the value of “the property supplied”, it is the subject of a ground raised by the representative, addressed below.

Finally, regarding the third head of claim, Bell submits that the value of the [ translation ] “injury suffered” could be pre-determined contractually. [ 47 ] On this point, Bell introduces an important nuance to the debate by arguing that the lack of a waiver of the right to resiliate under

article 2125 does not necessarily mean that the indemnity must be determined under

article 2129 because, by signing the contract, the members agreed to a predetermined indemnity. Bell developed this ground in its factum:

[translation] With respect, the trial judge erred in law by making the application of the [Cancellation Fees] clause contingent on the waiver of theright to unilaterally resiliate the contract under

article 2125 C.C.Q. Even if we must accept the trial judge’s conclusion that there was no waiver under

article 2125 …, at the risk of repeating ourselves, thefact remains that

article 2129 C.C.Q. is also suppletive law. Consequently, there is nothing preventing the parties from agreeing inadvance on the amount of the indemnity owing in the event of unilateral resiliation or from stipulating terms that differ from those in thestatute. [48] Bell cites Professors Didier Lluelles and Benoît Moore:[6] [translation] Where the right to revoke concerns a contract in which the capacity to resiliate is suppletive to the will of the parties, there is nothingpreventing the contracting parties from establishing a termination fee: ...

In particular, where the law makes resiliation contingent uponthe payment of an indemnity without setting a fixed amount, there is nothing stopping the parties from setting the amount of theindemnity in advance ...

This can be the case in a contract ... for services... [49] Bell refers to various judgments that decided: [translation] ... that a clause contractually setting out the indemnity owing in the event of unilateral resiliation casts aside the limits established byarticle 2129 C.C.Q., despite the lack of waiver of the right to resiliate under 2125 C.C.Q.* _______ * Construction Jag inc. v. 9055-2274 Québec inc., (QC CS), REJB 2002-32199 at paras. 50–52, 61 (Sup. Ct.);Superior Energy Management v. Para-Net buanderie et nettoyage à sec inc., 2012 QCCS 7122, at paras. 16–20; Service de lingeMirabel inc. v.

Orientech inc., (QC CQ), REJB 2002-35576 at paras. 21–26 (C.Q.); Unifirst Canada ltée v. SalaisonAlpha ltée, EYB 2010-171998 at paras. 19–24; Services Matrec inc. v. 9051-8929 Québec inc., EYB 2005-100208 at para. 31 (C.Q.). [50] The representative did not respond to this ground. [51] I share Bell’s opinion on this point. [52]

Article 2125 establishes the right to resiliate in favour of the customer, and

article 2129 indicates the amounts payable uponexercising this right, including an indemnity “for any other injury the other party may have suffered”. [53] Of course, if the client waives the right to resiliate, there can be no question of the consequences of exercising this right, whichis then non-existent. If the customer retains the right, however, there is nothing preventing a prior agreement on the potential indemnityto be paid to the service provider. [54] In short, if the parties set aside

article 2125, they also set aside

article 2129. The corollary, however, is not true: if they do notset aside 2125, they may nevertheless set aside 2129, in whole or in part. [55] In my view, that is what happened here and the judge, who found that there was no waiver of the right to resiliate under article2125 C.C.Q., could not extrapolate from this finding to infer that the [translation] “members are required to pay Bell the heads of claimset out in

article 2129 C.C.Q.” She should instead have found that the “Cancellation Fees” clause amended one of the heads of claim ofarticle 2129 by replacing it with a predetermined indemnity for the injury Bell suffered. [56] It remains, however, that such a clause in a contract of adhesion must be validly stipulated, which will not be the case if it isabusive. (

b) Is the Cancellation Fees clause abusive? [57] Here is the relevant Civil Code provision:

Art. 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 not in 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. Art. 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. [ 58 ] In its factum, Bell writes: [ translation ] Thus, although Bell Mobility’s contract is a contract of adhesion, subscribing customers have many choices, including an open-ended contract that can be resiliated at any time.

Obviously, customers are aware that, by opting instead for a term of 12, 24 or 36 months, they will lose their ability to resiliate at will – without this waiver, the very idea of choosing between different terms is meaningless. In such circumstances, early termination thus constitutes a breach of the contractual commitment. Therefore, the [Cancellation Fees] clause, which sets out the penalty for this breach, is a penal clause within the meaning of

article 1622 C.C.Q. [ 59 ] This excerpt begins with Bell’s recognition that its agreement is a contract of adhesion. [ 60 ] As for the rest of the first paragraph, while it is true that the customer could choose the term of the commitment from the three offered by Bell, it is obvious that, once the choice was made, the contract to be signed included the same Cancellation Fees, stipulated by Bell in the same terms, without any possibility of discussion. [ 61 ] This is a contract of adhesion and, therefore, according to

article 1437 C.C.Q. , if this clause is abusive, the obligation may be reduced. [ 62 ] In the second paragraph, Bell characterizes the clause as “penal”. If that is true, does it change anything? [ 63 ] This is the applicable Civil Code provision: Art. 1622. A penal clause is one by which the parties assess the damages in advance, stipulating that the debtor will suffer a penalty if he fails to perform his obligation. … Art. 1622.

La clause pénale est celle par laquelle les parties évaluent par anticipation les dommages-intérêts en stipulant que le débiteur se soumettra à une peine au cas où il n’exécuterait pas son obligation. … [ 64 ] We have already seen that the judge rejected this characterization: [ translation ] [33] It is not appropriate here to characterize the [Cancellation Fees] clause as “penal” since the definition in paragraph 1 of the Bell Terms and Conditions of Wireless Service indicates that the [Cancellation Fees] are an estimate of the injury, not a penalty. … [ 65 ] In its factum, Bell comments on this statement: - It argues that it contains an error: [ translation ] In this respect, the trial judge erred in refusing to characterize the [Cancellation Fees] clause as a “penal clause” simply because the clause indicates that the [Cancellation Fees] are a “genuine pre-estimate of the damages … and not a penalty”.

Indeed,

article 1622 C.C.Q. defines a penal clause as “one by which the parties assess the damages in advance…” - It cites commentary: [ translation ] In this sense, as Jean-Louis Baudouin and Pierre-Gabriel Jobin explain, [ translation ] “the amount established under the penal clause represents contractual damages which are simply substituted for damages determined by the court”: Jean-Louis Baudouin & Pierre- Gabriel Jobin, Les obligations , 7th ed. (Cowansville, Que: Yvon Blais, 2013) at No. 791. - Its penal clause is [ translation ] “compensatory”:

The statement in the [Cancellation Fees] clause merely specifies that the [Cancellation Fees] are purely compensatory and contain no comminatory (i.e., purely punitive) aspect. (On the distinction between a compensatory penal clause and a comminatory penal clause see Jean-Louis Baudouin and Pierre-Gabriel Jobin, Les obligations , 7th ed. (Cowansville, Que.: Yvon Blais, 2013) at No. 153.) [ 66 ] In short, according to the authors cited, there is such a thing as a penal clause without a penalty: [7] [ translation ] In France, the case law and commentary distinguish compensatory and comminatory penalties.

Essentially, the former merely provide compensation for the injury suffered, in an amount agreed to in advance; the penalty is thus equal to the approximate amount of damages that the victim would obtain in compensation if there were no such clause. This type of clause is a conventional assessment, made in advance, of the injury that would result from a potential breach of contract.

Comminatory penalties, however, seek not only to compensate for this injury but also to punish an uncooperative contracting party; in such cases, the penalty greatly exceeds the quantum of the damages the victim would receive if there were no penal clause. [ 67 ] In my view, [ translation ] “compensatory penalties” seem to correspond to the definition in

article 1622 C.C.Q. , but I will leave this question to others who might be interested in studying it in more depth. [ 68 ] For my purposes, I note that under

article 1623 C.C.Q. , “the amount of the stipulated penalty may be reduced ... if the clause is abusive”. This brings us back to a consideration of the Cancellation Fees clause. [ 69 ] As drafted by Bell, this clause recognized the existence of the customers’ right to resiliate the contract but determines the indemnity as though the customers had defaulted on their obligations, leading to the resolution of the contract.

Here, “right” and “default” are contradictory, and “resiliation” and “resolution” are antithetical and their effects irreconcilable. [ 70 ] We have already discussed Bell’s recognition of the customers’ right to resiliate and the fact that they did not waive this right. [ 71 ] Moreover, Bell includes in the Cancellation Fees the anticipated profits for the period between the date of the resiliation and the end of the contract.

The judge noted this: [ translation ] [38] [The chief financial officer] stated on several occasions at the hearing that the injury Bell suffered upon early termination is the loss of the anticipated revenue until the end of the term. [ 72 ] Bell reiterates as much in its defence (emphasis added): [ translation ] These costs to acquire or retain customers include the [discounts] granted on devices or services, the commissions paid by Bell Mobility to its representatives upon the sale of devices, and marketing costs incurred for the sale of devices to customers; Bell Mobility’s infrastructure investments, administration fees, and loss of profits must also be accounted for when assessing the damage Bell has suffered as a result of the resiliation ... of fixed-term contracts. [ 73 ] The rule is well known: “Every person has a duty to honour his contractual undertakings” (art. 1458, para. 1 C.C.Q. ).

Where a person fails in this duty, the creditor may obtain the resolution of the contract (art. 1590 para. 2 C.C.Q. ) and be compensated for its loss, including the profit included in the price of the contract. See

article 1611 C.C.Q .: Art. 1611. Les dommages-intérêts dus au créancier compensent la perte qu’il subit et le gain dont il est privé. … Art. 1611. The damages due to the creditor compensate for the amount of the loss he has sustained and the profit of which he has been deprived. … [ 74 ] By way of exception to this general rule, the right to resiliate contracts of successive performance allows customers to liberate themselves from future commitments.

If doing so requires customers to pay an indemnity equal to that payable for a failure to meet their obligations, however, they are not liberated and the right to resiliate is illusory. [ 75 ] Members who resiliate their contracts fulfill their obligations entirely. They pay the monthly fee until the date of resiliation after which point the obligation to do so ceases. They cannot be faulted for failing to execute an obligation that has been extinguished. [ 76 ] To put it more simply, the price of the service provided by Bell includes its costs and its profit.

Under the contract, customers are bound to pay this price, but resiliation frees them from this obligation and they are no longer required to pay either the entire price or the

part corresponding to the profit. [ 77 ] Certainly, the resiliation of a contract means that Bell loses a customer and is deprived of the profit it had anticipated for the rest of the term. But this loss results from the exercise of a right and not the failure to perform an obligation. The customer “honoured his undertakings” (art. 1458 C.C.Q. ) for as long as was required; there was no “failure” to meet an obligation, and there was no default to justify a claim for damages (art. 1607 C.C.Q .). [ 78 ] The judge was also right to exclude Bell’s anticipated profit from the indemnity, basing herself on, inter alia , Pelouse Agrostis Turf . [8]

[ 79 ] Here are a few excerpts from that judgment, per Forget J.A. (emphasis in the original): - the same issue concerning “injury” under

article 2129: [ translation ] [5] Customers availing themselves of

article 2125 C.C.Q. to resiliate a contract of enterprise or for services without a valid reason are, under

article 2129 C.C.Q. , liable for “any other injury that the other party may have suffered”. Does this injury include the loss of future profits, in particular the profit expected from the resiliated contract? - the parties made the same submissions: [ translation ] [17] According to counsel for Agrostis, a restrictive

interpretation of the word “injury” in

article 2129 C.C.Q. makes it pointless for a service provider to sign a contract: why sign a fixed-term contract if the customer can end it at any time and pay only for the part of the contract that has been performed? [18] According to counsel for Balmoral, a liberal

interpretation of “injury” in

article 2129 C.C.Q. renders

article 2125 C.C.Q. meaningless: a customer who exercises the right conferred by this provision would be in the same situation as one who commits a contractual fault by resiliating the contract without just cause. - the [ translation ] “historical context” distinguishing resiliating customers from defaulting debtors: [ translation ] [27] Mtre Gaudet [9] rightly drew the same conclusion in his article: [ translation ] ... It is reasonable to believe that, given the historical context of the issue, this absence is significant and that if the legislature had had wanted to modify the

interpretation of the law, it would have said so more clearly. In fact, the abandonment of the explicit wording to this effect that had been proposed by the Office de Révision and included in the draft bill suggests that the legislator ultimately decided not to go in that direction and thus not to treat customers who resiliate [ translation ] “like debtors who do not fulfill their obligations”. That is all the more plausible since, after all, treating the beneficiary of a right as someone who has no right is rather paradoxical. - the [ translation ] “literal

interpretation” of an injury [ translation ] “already” suffered: [ translation ] [29] The first paragraph of

article 2129 C.C.Q. limits the claim to the time elapsed before the end of the contract or before the notice of resiliation. In the third paragraph, it appears that the legislator wished to specify that, in addition to the value of the services already rendered or the work already performed, the contractor or service provider can claim for injury already suffered. It should also be noted that the verb is used in the past tense. [31] Moreover, if the word “injury” were given its broadest meaning, it would be necessary to conclude that the first paragraph of

article 2129 C.C.Q. is pointless. - the [ translation ] “purposive construction” favouring the customer: [ translation ] [33] At first, a comparative reading of articles 2125 and 2129 reveals that the legislator intended to favour the customer over the contractor or service provider. This approach is hardly surprising in an era marked by an increased consideration for consumers, who are generally (but not always) in less advantageous positions than their co-contractants.

Moreover, this significant departure from the principles of the binding force of contracts (art. 1434 C.C.Q. ) is justified in this type of contract, particularly in matters involving the provision of services, which often involve a personalized aspect and consequently make it difficult to continue relations between the parties when the bond of trust no longer exists. [34] If customers have to pay for the loss of a potential profit, it is hard to see what benefit they receive from

article 2125 C.C.Q. … [36] We must not lose sight of the fact that, in cases of unilateral resiliation, customers are exercising a strict right conferred by

article 2125. It is inconceivable to think that these customers should be placed in the same situation as those who commit a contractual fault by resiliating the contract without just cause. [37] Commentators* have noted that a termination fee resulting from the exercise of a right must be distinguished from the indemnity for liability arising from the failure to perform an obligation. _____ - and the unequivocal conclusion: [ translation ]

[39] I am therefore of the opinion that the appellant was not entitled to claim damages equal to its loss of profit. ... [ 80 ] Bell could have known that the [ translation ] “injury suffered” did not include anticipated profits, since the judgment in Pelouse Agrostis [10] was rendered in 2003. [ 81 ] By including post-resiliation profits in its Cancellation Fees clause, Bell distorted the contract of service of successive performance, which by nature may be resiliated, transforming the customer’s privilege to terminate an obligation into [ translation ] “an obligation of performance by equivalence” (arts. 1607 et seq .

C.C.Q.). [ 82 ] Not only did Bell depart from the law, it also frustrated the intention of the legislature. Whereas the legislative intent was to [ translation ] “favour the client over the service provider”, [11] the effect of the clause is to favour Bell which, as a result of the resiliation, no longer provides the service but pockets the profits.

This reversal of the situation to the detriment of the client is abusive. [ 83 ] In short, customers must indemnify Bell because resiliation causes Bell to suffer an injury, but this injury does not result from the extinction of customers’ obligations through the exercise of their right to resiliate, and the corresponding indemnity for the injury should not include future profits. [ 84 ] In fact, the injury Bell suffered results from the initial discount conferred, as the judge stated: [ translation ] [40] In this case, the discount granted on the wireless device represents the actual injury Bell suffered, because future earnings, of which the company is deprived, are excluded from the indemnity. [ 85 ] To conclude on Issue A, the Cancellation Fees clause is abusive and the “obligation arising from it may be reduced” (art. 1437 C.C.Q .). [ 86 ] The judge was therefore right to order reimbursement of part of the Cancellation Fees collected by Bell on the basis of this clause. [ 87 ] Furthermore, I would dismiss Bell’s appeal, with costs. [ 88 ] This leads us to the representative’s appeal, in which he argues that the $1 million reimbursement is insufficient and should be increased to $12 million because the judge failed to take into account that the injury Bell suffered decreased on a monthly basis.

B- Bell’s injury decreased from month to month (

a) The injury is time-dependant [ 89 ] A review of the facts will provide a better understanding of the nature and extent of Bell’s injury when customers resiliate their contracts. [ 90 ] Initially, the class members received a discount on the price of a mobile telephone. According to the evidence, the [ translation ] “discount-related cost” averaged $236 per member. What profit did Bell receive in exchange? [ 91 ] For Bell, this cost represented a marketing expenditure aimed at attracting new customers and securing their loyalty, or in other words, ensuring their commitment to services for a fixed period.

In its defence, it states: [ translation ] These costs to acquire or retain customers include the [discounts] granted on devices or services, the commissions paid by Bell Mobility to its representatives upon the sale of devices, and the marketing costs incurred for the sale of devices to customers; [ 92 ] It is easy to see that, given the realities of competition, Bell incurs various expenditures to secure new customers, advertising being one and discounts being another.

Bell in fact defines the discount as an “Investment to Acquire Customer”. [ 93 ] In its factum, it explains that the purpose of this investment is to ensure revenue: [ translation ] Fixed-term contracts represent greater revenue stability and predictability for Bell Mobility. That is why Bell Mobility offers a discount on the purchase of a new wireless device as an incentive to enter into a fixed-term contract.

The size of the discount varies according to the Committed Service Period agreed to by the customers. ... [ 94 ] Acquiring new customers is easy, because incentive discounts are granted at the same time as the contracts are signed. [ 95 ] Cultivating loyal customers is harder. Of course, the service agreement might be binding for 12, 24, or 36 months, but the fact that a customer may cancel it at will at any time makes the term uncertain. If resiliation occurs, Bell loses the return on its investment. [ 96 ] The loss of this investment is what constitutes Bell’s injury.

The judge wrote that [ translation ] “the discount granted on the wireless device constitutes the actual injury Bell suffered”. On this point, I agree. [ 97 ] The investment is proportionate to the term of the contract: $60 for 12 months, $100 for 24 months, and $150 for 36 months.

[ 98 ] There is no doubt that Bell intends to recover this investment through profits generated by providing services for the term of the contract. [ 99 ] If the customer does not resiliate the contract, Bell achieves its objective, recovering all of its investment and suffering no injury. If the resiliation occurs in the last month, the objective is nearly achieved and the injury is minimal. If, on the other hand, it occurs in the first months, there is a near total lack of recovery. [ 100 ] In addition, the judge’s statement that [ translation ] “the discount constitutes the injury” must be qualified.

It is actually the failure to recover the investment – the discount-related costs – that constitutes Bell’s injury. [ 101 ] At the risk of repeating myself, Bell’s injury is inversely proportionate to customer loyalty. If customers remain [ translation ] “loyal” till the end, everything is fine for Bell. If they are [ translation ] “loyal” for only a part of the term, things are a little less fine.

And if they are [ translation ] “disloyal” and cancel at the beginning of the contract, things are not fine at all. [ 102 ] It is important to note again that the Cancellation Fees clause itself stipulates that the fees decrease from $400 to $100 according to the number of months elapsed at the time of resiliation. This is a recognition that the injury decreases over time. [ 103 ] Yet the judge did not understand it this way.

After establishing that [ translation ] “Bell’s discount-related costs” were $236, she decided that Bell was entitled to receive this entire amount, regardless of when the contract was cancelled, because: [ translation ] [57] … [the representative’s expert] amortized the cost of the discount over the average number of months remaining in the contract, while the uncontradicted testimonial evidence was that the monthly rate reflects no amortization of the discount. [ 104 ] With respect, I do not agree.

Regardless of whether Bell accounts for its investment as a general cost under a separate entry as an Investment to Acquire Customer or under some other heading, it recovered this cost from the monthly rates paid by its customers. Although the [ translation ] “monthly rate reflects no amortization”, the fact remains that Bell’s injury caused by the resiliation of the contract depended on when resiliation took place. The accounting treatment of this investment expenditure does not change this reality. [ 105 ] Because Bell’s injury decreased over time, the corresponding indemnity should be reduced proportionately.

Bell must reimburse more than the $1 million awarded in the judgment, which failed to take into account the decrease in the injury. [ 106 ] I would therefore allow the representative’s appeal, with costs. (

b) What is the rate of decrease of the injury? [ 107 ] According to the representative, Bell’s injury decreases equally and proportionately from one month to the next, and the indemnity should therefore decrease at the same rate, namely, 2.8% per month for a 36-month contract. [ 108 ] Under the contract, the Cancellation Fees decrease at different rates in three stages: no decrease for the first 15 months, an equal and proportionate decrease of 5% per month for the next 15 months, and finally, no decrease during the last six months. [ 109 ] Depending on which of the two rates of decrease is applied, the Cancellation Fees, which begin at $236, differ significantly from month to month.

For example, if the contract is resiliated in the 15th month, the fees are still $236 according to the three-stage

schedule in the contract, but are reduced to $137 under the proportional rate. By the 30th month, the fees are lower but still $120, as opposed to $40. [ 110 ] Nothing in the evidence explains how Bell’s injury decreases in stages corresponding to the rate set out in the Cancellation Fees clause.

Bell has not discharged its burden of proof on this point. [ 111 ] On the contrary, it is clear that the monthly rate paid by customers ensures a profit for Bell as of the first month, enabling it to recover a part of its discount-related costs every month, month after month. [ 112 ] The discount on the purchase of the telephone is $60 for a 12-month contract, $100 for a 24-month contract, and $150 for a 36- month contract. It is clear that, by the time a 12-month contract expires, Bell has recovered its investment and has suffered no injury.

It can be safely inferred that, where the term is 36 months, Bell has recovered the equivalent of $60/$150, or 40%, after 12 months, and that its injury has therefore decreased accordingly. [ 113 ] The obvious is always difficult to prove.

Here, it seems obvious to me that for every month that passes where the customer pays the agreed-upon rate, Bell’s investment returns part of the expected profit and reduces the injury that would have resulted had resiliation taken place a month earlier. [ 114 ] In my view, Bell’s injury decreases in equal proportions from month to month, and this is the basis on which the overpayment should be calculated. C- Computation of overpayment (

a) First ground of the representative’s appeal

[ 115 ] The representative submits a first ground for reducing the $236 in discount-related costs by $23.62. In his view, this amount represents a [ translation ] “profit” that should not be included in the indemnity payable under

article 2129 C.C.Q. In his factum, he writes: [ translation ] As it is clear to the trial judge that loss of profit may not be awarded to the respondent, the amount of $23.62 should be subtracted from the $236 and added to the [amount to be reimbursed] of $13 per member, for a total of $36.62 and a collective recovery of $2,792,458.10, plus tax. [ 116 ] In its factum, Bell replies (emphasis in original): [ translation ] ... this ground of appeal is based on a flawed understanding of

article 2129 C.C.Q. and of the

interpretation of the case law whereby the notion of “injury suffered” does not permit a service provider to be compensated for future earnings on the remaining term of the service agreement of which it has been deprived because of [its] resiliation… [ 117 ] Bell is right on two fronts, namely, with respect to the principle that anticipated post-resiliation profits cannot be claimed, and the fact that the profit on the sale of the mobile device is prior to resiliation and not covered by this principle. (

b) Second ground of appeal [ 118 ] In support of his second ground, the representative refers to

article 2129: Art. 2129. Upon resiliation of the contract, the client is bound to pay … the provider of services, … the value of the property supplied, where it can be put into his hands and used by him. … Art. 2129. Le client est tenu, lors de la résiliation du contrat, de payer … au prestataire de services, … la valeur des biens fournis, lorsque ceux-ci peuvent lui être remis et qu’il peut les utiliser. … [ 119 ] He also adds that the devices are obsolete after 18 months, and that Bell therefore cannot claim the discount on the price of these devices. [ 120 ] The “property supplied” within the meaning of

article 2129 corresponds to the obligation of the service provider to supply the property necessary for the performance of the contract: Art. 2103. … le prestataire de services fournit les biens nécessaires à l'exécution du contrat, à moins que les parties n'aient stipulé qu'il ne fournirait que son travail. … Art. 2103. … the provider of services supplies the property necessary for the performance of the contract, unless the parties have stipulated that only his work is required. … [ 121 ] Clearly, the first criterion for customers being [ translation ] “bound to pay ... the value of the property supplied” is that the property belongs to the service provider at the time of resiliation, in which case customers will be required to pay only if they receive it from the service provider. [ 122 ] Here, the device belongs to the customer as soon as the service agreement is signed with Bell.

It therefore does not have to be returned on the date of resiliation. The device does not constitute “property supplied”. (

c) Different computations [ 123 ] These grounds now having been dismissed, the amount of $236, i.e., the discount-related cost, should be used to compute the overpayment in termination fees. [ 124 ] A comparison of the Cancellation Fees and their reduction in stages as charged and collected by Bell, with those that could have be legally charged and collected – i.e., a maximum of $236 with an even and proportionate rate of reduction – reveals that the former are 52% higher than the latter, resulting in an overpayment of $11.1 million. [ 125 ] If we accept the calculations of the expert for the representative, who takes into account the amount collected every year, the average number of months elapsed before resiliation, and other averages, the overpayment is $12 million. [ 126 ] If we repeat the formula the judge used but take into account the monthly reduction of the injury, we must subtract not the entire discount-related cost of $236 from the [ translation ] “average Cancellation Fee claim, [which] is $249”, but the average of this cost reduced on a monthly basis, which is $118, for an overpayment of $131, not $13, which, when multiplied by 76,255 members, equals an overpayment of $10 million. [ 127 ] The correct method for computing the overpayment is not obvious.

A comparison based on rates of reduction might be a little simplistic, but it provides a rough estimate. The calculations of the expert for the representative are sophisticated, and although he was not cross-examined, the judge took into consideration that his calculations were based on averages [ translation ] “of both prepaid and

postpaid services, while [Bell’s expert] adjusted the amount of the average discount by dividing it by the percentage of subscribers who received a discount on their device (postpaid), in accordance with the evidence adduced”.

This criticism appears to be justified. [ 128 ] Some of the figures accepted in the judgment are hard to reconcile: – if the total $81.3 million invoiced is divided by 293,289, the number of members, the result is an average invoice of $277, not $249, which means the overpayment was $41, not $13. – if the total $21.3 million collected is divided by $249, the average amount invoiced, the number of members comes to 85,500, not 76,255. [ 129 ] The representative bears the burden of proving his claim.

Without persuasive evidence of a higher amount, the lower amount will be accepted. [ 130 ] In light of all of the evidence, the amount of $10 million, established using the figures accepted by the judge, with the necessary correction, represents an accurate estimate of the overpayment. [ 131 ] Thus, in paragraph [76] of the disposition of the judgment, I would substitute [ translation ] “ten million dollars ($10,000,000)” for “$991,316”. D- Punitive damages [ 132 ] The judge refused to order Bell to pay punitive damages. I share her opinion. [ 133 ] The Civil Code states: 1621.

Where the awarding of punitive damages is provided for by law, the amount of such damages may not exceed what is sufficient to fulfil their preventive purpose. … 1621. Lorsque la loi prévoit l'attribution de dommages-intérêts punitifs, ceux-ci ne peuvent excéder, en valeur, ce qui est suffisant pour assurer leur fonction préventive. … [ 134 ] The 2010 amendments to the Consumer Protection Act , [12] which now govern termination fees, eliminated abusive overpayments in these cases.

The [ translation ] “preventive function” of an award of punitive damages is consequently moot. * * * [ 135 ] Ultimately, I would dismiss Bell’s appeal, with costs, and allow the representative’s appeal in part to modify the definition of the class: [ translation ] All natural and legal persons with less than fifty (50) employees, domiciled or having been domiciled in Quebec, who have paid contract termination fees to the respondent since January 1, 2007. and to amend the conclusion at paragraph [76] by substituting [ translation ] “ten million dollars ($10,000,000)” for “$991,316”. [ 136 ] I would uphold the rest of the disposition.

PAUL VÉZINA, J.A. REASONS OF BÉLANGER, J.A. [ 137 ] For slightly different reasons, I agree with Vézina, J.A.’s judgment dismissing Bell’s appeal.

I would, however, dismiss the appeal of the representative Denis Gagnon, and I would not intervene on the reimbursement quantum awarded to the class members. *** [ 138 ] This class action concerns the application of articles 2125 and 2129 C.C.Q. respecting service contracts of successive performance as these provisions applied to wireless telephone services prior to June 30, 2010. [ 139 ] On that date, the Consumer Protection Act [13] was revised and the amendments relating to contracts of successive performance and prepaid cards came into force.

Consumers may now cancel this type of contract on the condition that they send a notice to the merchant. The law now prohibits any stipulation that excludes the application of articles 2125 and 2129 C.C.Q. from contracts of enterprise or for services. [14] It also provides that where an economic inducement has been given by the merchant upon the signature of

a fixed-term contract, the termination indemnity may not exceed the value of the economic inducements determined by regulation; similarly, the indemnity decreases as prescribed by regulation. [15] [ 140 ] Therefore, the legislative amendments do not concern the class action before us. [ 141 ] Two questions must be asked in this case:

(1) Was there a waiver of the right to unilaterally resiliate the contract, set out in

article 2125 C.C.Q. ? and

(2) Was there a waiver of the application of

article 2129 C.C.Q. through the clause that determined the termination indemnity in advance? *** [ 142 ] In this case, Bell’s customers did not waive their right to resiliate the contract under

article 2125 C.C.Q . [ 143 ] The contract does not contain an explicit, clear or unequivocal waiver of the customer’s right to resiliate the contract for services. The fact that the contract sets out the indemnity Bell is to be paid in the event of unilateral resiliation is not sufficiently determinative to justify concluding that there was an explicit and unequivocal waiver. The opinion of Professor Vincent Karim is relevant in this respect: [ translation ] 1738. ...

The fact that the penal clause indicates payment of an amount in penalty if the customer unilaterally resiliates the contract is not sufficiently determinative to justify concluding that there was an explicit and unequivocal waiver because, in many cases, customers are unaware of the right to resiliate set out in this provision. ... Commentary and case law make it clear that the waiver of a right cannot be assumed and requires an unequivocally expressed intention on the part of the holder.

A fortiori , a court would be hard pressed to interpret an ambiguous penal clause imposed by the contractor or service provider as a waiver of the right to unilaterally resiliate, especially in a contract of adhesion. [16] [ 144 ]

Article 2129 C.C.Q. determines the indemnity that a service provider may receive if the client resiliates the contract unilaterally.

The principle adopted by the legislature provides that, in cases of resiliation, customers are bound to pay the service provider, in proportion to the agreed price, the actual costs and expenses, the value of the work performed, the value of the property supplied that cannot be returned, and any other injury that the service provider may have suffered. [ 145 ] Under the ETF clause, the parties determined in advance the amount of the indemnity owing to Bell in the event of resiliation.

Recall the clause in question: [ translation ] Early Termination Fee (or ETF): The fee you must pay us if we or you terminate the Services and/or this Agreement, before completing a Committed Service Period, or if you do not activate the Device within 45 days of its purchase date. The ETF is the greater of (i) 100$ [sic] or (ii) $20 per month remaining in the Committed Service Period on termination up to a maximum of $400. Other early termination fees may apply to special offers or promotions, as notified to you at or before the time you subscribe to the offer or promotion.

The ETF and these other early termination fees are a genuine pre-estimate of damages Bell will incur due to the early termination of the Services and not a penalty. [Verbatim reproduction.] [ 146 ] The judge decided that this clause was neither a penal clause nor a clear waiver of the application of

article 2129 C.C.Q. She nevertheless set aside the application of the clause, although she stated that she did not find it to be abusive. [ 147 ] This clause is an application of the third paragraph of

article 2129, in that the parties wished to anticipate the injury that Bell would suffer if the customer resiliated the contract. The parties did not set aside the application of

article 2129 C.C.Q. per se ; rather, they quantified in advance the injury that Bell would suffer in the event of unilateral resiliation. [ 148 ] We must now consider whether the application of

article 2129 C.C.Q. is mandatory when customers exercise their right to resiliate a contract for services under

article 2125. [ 149 ] There are two opposing theories. [ 150 ] Professors Lluelles and Moore, as well as certain judgments, state that there is nothing to prevent contracting parties from stipulating a termination fee even if one of the parties has the right to revoke the agreement. [17] [ 151 ] The other theory is supported by Professor Karim, who believes that the application of

article 2129 is a direct consequence of the application of

article 2125. Thus, the application of

article 2129 may be waived only if the customer first waived the right to unilaterally resiliate the contract under

article 2125. An advance assessment of damages should be taken into account in these cases only. [18] This is the approach chosen by the trial judge. [ 152 ] Vézina, J.A., for his part, chose the opposing theory, deciding that even if the customer has not waived the right to unilaterally resiliate (article 2125), he or she may nevertheless agree to a different termination fee from that set out in

article 2129. Consequently, he examined whether the clause concerning the anticipated injury is abusive within the meaning of

article 1437 C.C.Q. [ 153 ] I agree with Vézina J.A.’s position. The right to resiliate a contract without cause does not necessarily trigger the application of

article 2129. The right to determine damages in advance remains. [ 154 ] The reason I tend to favour this

interpretation is that articles 2125 and 2129 apply to a multitude of contracts governing legal

situations that differ greatly from one another. For example, these provisions govern both contracts of enterprise such as construction contracts entered into by mutual agreement, which often involve large amounts of money, and contracts of adhesion of successive performance, where the amounts are small but, as in this case, implicate thousands of persons.

Under these circumstances, there may be multiple reasons for exercising the right to unilateral resiliation, and the injury suffered by the service provider as a result of the resiliation can vary greatly from one contract to another. [ 155 ] In this context, the approach whereby the customer who enjoys the right to no-fault resiliation may nevertheless waive

article 2129 and agree to an early assessment of injury appears not only to be that adopted by the legislator but also the most appropriate approach for contracts by mutual agreement. I recognize, however, that Professor Vincent Karim’s theory is quite attractive in a contract of adhesion for successive performance. The difficulty is obvious in this case, where the judge, without striking the ETF clause, applied

article 2129 C.C.Q. The intervention of the legislature in 2010, however, settled this question. [ 156 ] Moreover, I agree with the trial judge that the ETF clause is not a penal clause because it does not seek to sanction a contractual fault within the meaning of

article 1622 C.C.Q. [19] As drafted, the clause constitutes “a genuine pre-estimate of damages Bell will incur due to the early termination of the Services and not a penalty”. Furthermore, characterizing this clause as “penal” cannot be reconciled with finding that the customer retained the right to unilaterally resiliate the contract.

As Professor Karim states, [ translation ] “... the party designated as beneficiary of the penal clause cannot claim the amount of liquidated damages established by the parties once the debtor is put in default of specific performance of his or her obligation and the failure to perform persists despite being put in default”. [20] [ 157 ] Because this is a contract of adhesion, the question becomes whether the clause is abusive and the obligation may be reduced, as per

article 1437 C.C.Q. : Art. 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 not in 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. Art. 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. [ 158 ] To decide whether a clause that departs from a legislative scheme is abusive, it is important to determine what customers are waiving when they undertake to indemnify the service provider in a manner that differs from that established by the legislator.

The validity of the clause must be assessed by taking into account the objectives established by the legislator through the enactment of articles 2125 and 2129 C.C.Q. A comparison between the contract and the jus commune is therefore required. [ 159 ] As Morissette, J.A. noted in Corporation d’Urgences-santé , [21] articles 2125 and 2129 C.C.Q. establish a unilateral resiliation regime that allows customers to terminate contracts for services at any time and without cause.

The right to resiliate unilaterally and without cause is subject to the general obligation to act in good faith. [ 160 ] Under the Civil Code of Lower Canada , the right to unilateral resiliation was limited to fixed-price contracts for the building of a work. The Civil Code of Québec expanded this right to all contracts of enterprise or for services, whether fixed-term or open-ended.

These provisions thus depart from the principle of the binding force of contracts and create a protective regime, [22] to say nothing of a protective regime of public order. [23] [ 161 ] This was in fact the finding in Pelouse Agrostis Turf Inc. v. Club de golf de Balmoral , to which my colleague Vézina, J.A. refers. The Court opted for a restrictive

interpretation of injury within the meaning of

article 2129, being of the view that customers who exercise the strict right to unilaterally resiliate a contract for services must not be placed in the same situation as customers who commit a contractual fault by raising an unfounded reason.

The service provider is thus entitled to a termination fee as opposed to a compensatory indemnity. [ 162 ] It would be illogical to allow customers to unilaterally resiliate a contract without cause while also requiring them to pay amounts in excess of the actual injury suffered by the service provider. [ 163 ] In contrast, the ETF clause determines an injury that exceeds the actual injury Bell suffered as a result of the resiliation by $13 per customer, or at least this is what the judge concluded. [ 164 ] Although the trial judge did not apply

article 1437 C.C.Q. , she properly directed herself by assessing the actual injury Bell suffered and rightly found that the discount Bell granted to customers constituted its actual injury. [ 165 ] That being said, must we accept the principle whereby an ETF clause in a consumer contract or a contact of adhesion that determines an injury greater than that contemplated in

article 2129 is necessarily abusive? I do not believe so, or at least, not in every situation. Each case must be considered on its facts. [ 166 ] The assessment of the abusive nature of the clause should also take into account the economic balance between the parties and whether or not the clause is disproportionate. [24] The number of persons affected by the early termination clause is a factor that must be

considered when analyzing the economic balance between the parties. In this case, Bell invoiced $81 million in ETFs, ultimately collecting $21 million from 76,255 class members. In other words, the ETF invoices affected nearly 300,000 persons between 2007 and 2013. [ 167 ] In the context of this case, it is in my view reasonable to state that any financial obligation stipulated in the ETF clause that exceeds the discount given by Bell is too far removed from the “fundamental obligations arising from the rules normally governing the contract”.

Indeed, it should be recalled that customers benefited from the same plans and paid the same monthly rates for telephone service whether or not they received a discount on the purchase of the mobile telephone. [ 168 ] The clause is therefore abusive and the obligation may be reduced within the meaning of

article 1437 C.C.Q. because Bell exploited, not to say abused, its dominant position [25] and departed from generally accepted contractual practices. [26] [ 169 ] We must now determine the degree to which this is the case, which leads us to the appeal of the representative Gagnon. Should the discount on mobile telephones be amortized? [ 170 ] The appellant maintains that Bell’s injury decreases from one month to the next and that the average $236 per customer discount-related costs should also be depreciated monthly.

My colleague Vézina, J.A. agrees. [ 171 ] With respect, I differ in opinion with Vézina, J.A. on this issue. Here is why. [ 172 ] The standard for appellate intervention with respect to the trial judge’s findings of fact is well known: only a palpable and overriding error justifies interference.

Deference towards the assessment of testimonial evidence applies equally to all witnesses, be they ordinary or expert. [27] [ 173 ] The trial judge identified two reasons to set aside the representative’s calculations, which were supported by the expert Plante: [ translation ] [55] The difference between the experts’ tables can be explained in two ways: … [56] The first difference: Mr. Plante’s calculation of the average discount is based on the average cost for all of Bell’s customers, both prepaid and postpaid, while Mr.

Dippon adjusts the amount of the average discount by dividing it by the percentage of subscribers who received a discount on their devices (postpaid), in accordance with the evidence adduced. [57] The second difference: Mr. Plante amortized the cost of the discount over the average number of months remaining in the contract, while the uncontradicted testimonial evidence was that the monthly rate reflects no amortization of the discount. [58] Therefore, the Court prefers Mr. Dippon’s expert opinion because the parameters for Mr.

Plante’s quantification of the claim are erroneous. [59] Accordingly, the Court accepts Mr. Dippon’s “handset discount test” analysis. … [ 174 ] The representative’s argument is thus highly factual. [ 175 ] Not only did the judge correctly assess the probative value of the expert opinions on the record based on the [ translation ] “veracity of the factual premises supporting the expert’s opinion”, [28] but her findings are based on the evidence. The judge rejected some of the expert Plante’s conclusions because of the erroneous parameters he employed.

The representative has demonstrated no palpable and overriding error tainting this finding of fact. [ 176 ] The statement that the discount on the mobile telephones should be treated as a marketing expenditure therefore seems to be contrary to the evidence. [ 177 ] The evidence is clear: Bell does not recover the discount given to customers upon entering into the contract from the monthly rates which are the same for all customers.

It is therefore inaccurate to claim that the discount is reimbursed by customers as they make their monthly payments. [ 178 ] The judge summarized this evidence and decided as follows: [ translation ] [22] Mr. Vella recognizes that the discount on the device is based on the term of the contract. The longer the term, the greater the discount. He notes, however, that customers are offered the same monthly rates, whether or not they have contracts . Thus, the discount on the device is not recovered through a higher monthly rate. … [57] The second difference: Mr.

Plante amortized the cost of the discount over the average number of months remaining in the contract, while the uncontradicted testimonial evidence was that the monthly rate reflects no amortization of the discount . [Emphasis added.] [ 179 ] The testimony and report of the expert Dippon [29] confirm that the monthly rate does not reflect any amortization.

[ 180 ] The judge did not err in accepting this evidence. This finding is immune from interference on our part, as is the fact that she accepted the testimony of the expert Dippon over that of the expert Plante, since she explained her reasons for doing so clearly. [ 181 ] Moreover, Bell has thoroughly explained why the amount in the ETF clause decreased over time. The clause sought to compensate for the loss of future earnings, among other things. It was certainly not because customers compensated the discount through their monthly payments, which were the same for everyone.

This is the testimony of Mark Vella on this subject: A: The discount on the phone is what we give up front for a commitment for the person to stay for the contract term. Mtre DAVID BOURGOIN : Q: But the marketing and the commission on a subscriber who doesn’t have a subsidy on his handset will be the same, so he will not have Early Termination Fees for the other two (2) factors in your COA and COM?

A: So, I go back to the way I look at or we look at Early Termination Fees is based on the revenue to the remainder of the contract. [30] [ 182 ] The expert Dippon confirmed this evidence, stating that this was more than merely an accounting treatment, since the discount was in fact not recovered monthly: 57. Third, although Bill 60 calculates the maximum ETF by depreciating the handset discount, the Bill does not mandate or even suggest that mobile carriers depreciate this cost. In fact, the RCGT “Étude d’impact” recognizes that handset discounts are not being depreciated.

Depreciating handset discounts is also inconsistent with the actual accounting treatment of those costs. Bell Mobility, for instance, treats the handset discount as a current expense and the cost is recorded when it occurs. 58. Irrespective of the accounting treatment of these costs, the handset discount is not recovered on a monthly or any other basis as implied by Plaintiff’s model. A handset discount is an upfront cost and there is no specific recovery mechanism. Revenues received by Bell Mobility, such as the MRCs or the ARPUs, are independent of these discounts and thus contain no element of recovery.

Rather, Bell Mobility aims to recover all of its costs with all the revenues it receives from providing its services.

Consequently the concept of a partial recovery in the event a subscriber terminates early does not apply. [31] [ 183 ] The impact study [32] to which the expert Dippon refers was performed in 2009 by a team directed by the expert for the representative, Nicolas Plante, further to a mandate from the Office de la protection du consommateur to measure the financial impact on businesses and consumers of the amendments proposed in the revised statute. [ 184 ] The expert Plante’s mandate in this dispute was limited to validating the calculations proposed by counsel for the representative.

He was also declared an [ translation ] “expert in calculation”. His testimony reveals that it was counsel for the representative who set the parameters for the class action, [ translation ] “that is, only the non-amortized value of the discount on the device can be claimed as a termination fee”. [33] As the expert Plante stated, [ translation ], “I made no findings on that premise; it was the premise on which the table was created”. [34] [ 185 ] The judge therefore did not err in stating that the ETFs collected exceed the injury suffered by $13.

The average cost of the discounts conferred upon the signature of the contract is $236 per member, while the costs collected are on average $249. *** [ 186 ] I agree with the reasons of my colleague Vézina, J.A. respecting the representative’s other grounds. [ 187 ] I would therefore dismiss both appeals, with legal costs. DOMINIQUE BÉLANGER, J.A.