2018 QCCQ 7535, 2018 QCCQ 7535

HAR Financing Inc. c. Fraser-Stephenson 2018 QCCQ 7535 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-702699-176 DATE: October 15, 2018 ______________________________________________________________________ BEFORE THE HONOURABLE ENRICO FORLINI, J.C.Q. ______________________________________________________________________ H.A.R. FINANCING INC. Plaintiff v. AVIA FRASER-STEPHENSON Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] H.A.R.

Financing Inc. (“HAR”) claims $930 from Avia Fraser-Stephenson, representing 10 unpaid monthly installments which it alleges are owed pursuant to a contract of sale entered into by itinerant merchant which was assigned to HAR [ 2 ] Mrs. Fraser-Stephenson contests the claim and argues that she stopped making the monthly payments because the good she purchased is defective and no longer functions properly. She also argues that the contract she entered into does not comply with the Consumer Protection Act. Issues

a) Was Mrs. Fraser-Stephenson justified in stopping the monthly payments payable under the Itinerant Sale Agreement?

b) Does the Itinerant Sale Agreement comply with the requirements of the Consumer Protection Act (R.S.Q., c. P-40.1)? Context [ 3 ] Just Pure Inc. (“Just Pure”) is a company which sells residential drinking water purification systems. Some of these sales are realized through itinerant merchants [ 4 ] Plaintiff HAR is a financing company with ties to Just Pure. [ 5 ] Mrs. Fraser-Stephenson and her spouse, Floyd Stephenson, are consumers within the meaning of the Consumer Protection Act . [ 6 ] On July 13, 2013, Mr. Stephenson and Mrs.

Fraser-Stephenson purchased a Just Pure drinking water purification and distribution system (“ Just Pure Water System” ) from Just Pure through an itinerant merchant for a purchase price of $2,413.32 (taxes and shipping included) (“ Itinerant Sale Agreement” ) [1] . They paid a deposit of $96 on the signing of the contract, leaving a balance of price of $2,317.32. [ 7 ] On the same day, Mr. and Mrs.

Stephenson entered into a variable credit agreement (“ Variable Credit Agreement” ) with HAR pursuant to which HAR extended them credit of up to $2,317.32 and they in turn agreed to pay to HAR the balance of the purchase price ($2,317.32) of the Just Pure Water System over 35 monthly installments of $93 starting on August 22, 2013. [2] [ 8 ] The debt owed by Mrs. Fraser-Stephenson to Just Pure was assigned to HAR. [ 9 ] The Just Pure Water System is a machine which is installed on a residence’s plumbing system.

The water is filtered and then dispensed from a floor standing unit as either hot, cold or room temperature water. [ 10 ] In October 2015, Mr. and Mrs. Stephenson stopped making the monthly payments under the Variable Credit Agreement because they claim that the Just Pure Water System had not been functioning properly for several months and Just Pure was no longer responding to their service calls. [ 11 ] Except for the April and May 2016 installment payments, Mr. and Mrs. Stephenson have not made any payments to HAR since October 2015 and thus are in default of ten payments.

[ 12 ] By demand letter dated July 7, 2017, HAR reminded Mrs. Fraser-Stephenson that she was in default of her obligations and enjoined her to remedy this. [3] [ 13 ] Neither Mrs. Fraser-Stephenson nor Mr. Stephenson remedied the breach. [ 14 ] On August 21, 2017, HAR filed an Application with the Court of Québec, Small Court Division against Mrs. Fraser- Stephenson seeking payment of $930. Mr. Stephenson is not a party to the lawsuit. Analysis and Decision

a) Was Mrs. Fraser-Stephenson justified in stopping the monthly payments payable under the Itinerant Sale Agreement? [ 15 ] It is admitted that Mrs. Fraser-Stephenson has failed to make 10 monthly payments to HAR totalling $930. However, she argues that she was justified in stopping the payments because the Just Pure Water System stopped functioning and no one responded to her service calls. [ 16 ] Mrs. Fraser-Stephenson’s contestation calls into play the principle codified in

article 1591 of the Civil Code of Québec ( C.C.Q .) which is a remedy that allows a party to a contract to withhold its own performance accompanied by a right to ward off a claim for such performance unless and until the other party has duly performed its obligations under the contract. [ 17 ] Thus, to succeed in her contestation, Mrs.

Fraser-Stephenson has the burden of proving that the Just Pure Water System was not fit for the purpose for which it was intended (art. 37), or that it failed to meet the durability requirement imposed by the Consumer Protection Act (art. 38) or alternatively, that there was a breach of the conventional warranty included in the Itinerant Sale Agreement. [4] [ 18 ] HAR argues that it had no knowledge of Mrs. Fraser-Stephenson’s complaints concerning the state of the Just Pure Water System, and in any event, as it did not sell the product but merely financed it, it cannot be responsible for a defective product.

Circumstances of the Execution of the Itinerant Sale Agreement and the Variable Credit Agreement [ 19 ] A few days prior to July 13, 2013, Armand Bosnakyan, a representative of Just Pure, called Mrs. Fraser-Stephenson to ask whether they could meet at her residence to discuss the sale of a Just Pure Water System. She accepted. [ 20 ] Mr. Bosnakyan, in addition to being a representative of Just Pure and HAR, also has ownership interest in both companies. [ 21 ] On July 13, 2013, Mr. Bosnakyan and an unnamed other representative of Just Pure attended Mrs. Fraser-Stephenson’s residence. Mr.

Stephenson was also present. [ 22 ] Mr. Bosnakyan extolled the virtues of the Just Pure Water System and Mrs. Fraser-Stephenson and her spouse agreed to purchase it. Two contracts were entered into by the parties on July 13. Itinerant Sale Agreement [ 23 ] Mr. and Mrs. Stephenson signed the Itinerant Sale Agreement with Just Pure. [ 24 ] The contract is drafted in French and bears the title ‘’Contrat de vente conclu par un vendeur itinerant’’. It includes the itinerant merchant’s permit number, states that is entered into at Mrs. Fraser-Stephenson’s residence, and is signed by her and Mr.

Stephenson. [ 25 ] This contract constitutes a contract entered into by an itinerant merchant as it was entered into elsewhere than at Just Pure’s establishment or office and is thus governed by sections 55 and ff . of the Consumer Protection Act . [ 26 ] The Agreement also contains the following conventional warranties : Garantie du système d’eau Juste Pure Inc. • La garantie de votre système Juste Pure Inc couvre les défauts de fabrication pour une période de un (1) an sur pièces et main- d’œuvre, ainsi que les pièces électrique pour l’acheteur initial. • Toutes autres pièces (sauf électrique) sont garanties pour une période de 15 ans.

Afin de faire honorer cette garantie, le propriétaire du système d’eau a la responsabilité d’entretenir correctement le système. La garantie sera nulle en cas de mauvaise utilisation. Variable Credit Agreement [ 27 ] Mr. and Mrs. Stephenson also entered into a Variable Credit Agreement with HAR. The agreement provides that HAR extends them credit for $2,317.32, which they agree to repay over 35 monthly installments of $93. [ 28 ] The Variable Credit Agreement is in French and is entitled “Contrat de credit variable” and refers to

section 125 of the Consumer Protection Act . It is a contract of variable credit according to the Consumer Protection Act and is notably governed by sections 66 to 130 of the Act . [ 29 ] The Just Pure Water System was installed at Mr. and Mrs. Stephenson’s residence approximately one week after July 13, 2013.

Defective Just Pure Water System [ 30 ] Mrs. Fraser-Stephenson asserts that the Just Pure Water System stopped functioning properly barely three months after its installation. She adds that although the machine was repaired at the time, it malfunctioned repeatedly thereafter and Just Pure never bothered to repair it despite her service calls. [ 31 ] Mr. Stephenson wholly corroborated Mrs. Fraser-Stephenson’s testimony. [ 32 ] Three months after the installation of the Just Pure Water System machine, it no longer dispensed hot water. [ 33 ] Mrs. Fraser-Stephenson called Mr.

Bosnakyan and he dispatched a repairman who fixed the problem. [ 34 ] A few months later, the same problem resurfaced. She contacted Mr. Bosnakyan again and he suggested that she try to repair the machine herself, which she was unable to do. [ 35 ] Ultimately, no one from Just Pure ever came to fix the hot water dispensing component of the Just Pure Water System. Since the spring 2014, the machine does no longer dispense hot water. [ 36 ] In addition, the Just Pure Water System leaks and causes water to flood Mrs.

Fraser-Stephenson’ apartment. [ 37 ] In one such episode which occurred during the summer 2014, the Stephenson family had left their apartment for a week-end trip and upon their return, they discovered that the machine had leaked and the water infiltrated in the apartment below. [ 38 ] Despite calling Mr. Bosnakyan numerous times to ask him to send someone to repair the Just Pure Water System, no one has come to fix the leak problem. HAR admits that Mr. Bosnakyan is a busy person and is often unavailable as he travels frequently. [ 39 ] Because the machine continues to leak, Mrs.

Fraser-Stephenson disconnects the machine from the plumbing system when the family leaves the apartment for extended periods. [ 40 ] In September 2015, fed up with a lack of service from Just Pure, Mrs. Fraser-Stephenson stopped the monthly payments due to HAR beginning with the October payment. Except for payments made in April and May 2016, no payments have been made to HAR since. [ 41 ] Mr. Stephenson’s and Mrs. Fraser-Stephenson’s testimony with respect to the defective Just Pure Water System is not contradicted.

No one from Just Pure was called to rebut their testimony. [ 42 ] HAR’s representative explains that HAR is a financing company and purchases the sales contracts entered into by Just Pure with consumers. HAR has no knowledge of how the Just Pure Water System works nor does it have the capacity to fix this product if a consumer calls to complain. [ 43 ] When HAR is informed by a consumer that a Just Pure Water System malfunctions, it asks Just Pure to try to fix the problem. However, there is line of no communication between Just Pure and HAR with respect to complaints lodged by consumers. [ 44 ] Hence, since Mrs.

Fraser-Stephenson’s complaints concerning the machine were made only to Just-Pure, HAR had no knowledge of these complaints. [ 45 ] Essentially, HAR’s position amounts to stating that as a financing company, it has no obligation towards consumers if a product it finances malfunctions. [ 46 ] HAR’s position ignores the basic concepts of the Consumer Protection Act as it pertains to contracts made with itinerant merchants and the financing of contracts of sale. [ 47 ] According to the Consumer Protection Act , there is an interdependence between the financing agreement that is entered into under or in relation to a contract of sale by itinerant merchant, and the contract of sale, even if the identity of the merchants is different.

Section 62 of the Act treats the two contracts as part of one whole contract. [5] [ 48 ] In addition, according to s. 103 Consumer Protection Act , the assignee of a debt owed to a merchant is solidarily responsible with the merchant for the performance of the latter’s obligations towards the consumer up to the amount of the debt. [ 49 ] This means that in the present case, HAR, as assignee of Mrs.

Stephenson’s debt towards Just Pure (i.e., payment of the purchase price of the Water System), is solidary liable with Just Pure for the obligations of fitness for purpose (s. 37) and durability (s. 38) of the Consumer Protection Act as well as the conventional warranty of the Itinerant Sale Agreement. [ 50 ] The uncontradicted evidence establishes that the Just Pure Water System malfunctioned prematurely and was purchased from a merchant within the meaning of the Consumer Protection Act .

This triggers a presumption of liability of the merchant, which can be rebutted if the merchant proves that the consumer did not properly use the product, that a third party caused the malfunction, or that the malfunction was caused by force majeure . [6] [ 51 ] HAR did not rebut this presumption of responsibility. It adduced no evidence whatsoever with respect to these three grounds of defence. [ 52 ] Even if the presumption was not triggered, the Just Pure Water System is unfit for the purpose for which it was intended.

The repetitive failures of the Just Pure Water System establish that there has been a breach of sections 37 and 38 of the Consumer Protection Act .

[ 53 ] Since HAR failed to respect its obligation to deliver to Mrs. Fraser-Stephenson a product that complied with sections 37 and 38 of the Consumer Protection Act , Mrs. Fraser-Stephenson was justified in September 2015 to stop making her monthly payments as in doing so she was exercising her right under

article 1591 of the Civil Code of Québec . [ 54 ] Accordingly, HAR’s application against Mrs. Fraser-Stephenson will be dismissed for this reason alone.

b) Does the Itinerant Sale Agreement comply with the requirements of the Consumer Protection Act ? [ 55 ] While the Court does not need to decide this issue considering its decision on the issue above, the Court will nonetheless make the following observations since Mrs. Fraser-Stephenson did raise this grounds of defense at the trial. [ 56 ] The Itinerant Sale Agreement between Just Pure and Mr. and Mrs. Stephenson is a contract entered into with an itinerant merchant and is governed by sections 55 and ff. of the Consumer Protection Act . [ 57 ]

Section 58 paragraph 2 of the Act provides that the merchant must attach to the duplicate of the contract which he remits to the consumer ‘’ a Statement of consumer cancellation rights and cancellation form” in conformity with the model in

Schedule 1 of the Act.’’ [ 58 ] The purpose of this requirement is to inform the consumer that he/she may cancel at is discretion a contract entered into with an itinerant merchant within 10 days from the day on which he is remitted a copy of the contract. [7] [ 59 ] Itinerant Sale Agreement does not comply with this provision as it does not contain any statement of consumer cancellation rights. Mrs. Fraser-Stephenson adds that at no time when she discussed the contract with Mr. Bosnakyan did he ever mention that she had the right to cancel the contract. [ 60 ] Mrs.

Fraser-Stephenson was made to pay a deposit of $96 on the day she signed the Agreement. This payment violates s. 60 Consumer Protection Act as the law prohibits a merchant from receiving from the consumer a partial payment before the expiry of the ten days period during which the consumer may exercise his right to cancel the contract. [ 61 ] These 2 breaches of the Consumer Protection Act , could have been grounds for the nullity of the Itinerant Sale Agreement. However, since Mrs. Fraser-Stephenson does not ask the Court to set aside the contract of sale, the Court will not order its cancellation.

FOR THESE REASONS, THE COURT: [ 62 ] DISMISSES HAR Financing Inc.‘s Application; [ 63 ] DECLARES that Mrs. Avia Fraser-Stephenson was entitled not to make the monthly installment payments for the months of October, November, December 2015, January, February, March, June, July, August, and September 2016; [ 64 ] WITH COSTS of $100 to Mrs. Avia Fraser-Stephenson. __________________________________ ENRICO FORLINI, J.C.Q. Date of hearing: October 2, 2018