r v. BRAULT, 2014 QCCA 1577

Unofficial English Translation Toure c. Brault & Martineau inc. 2014 QCCA 1577 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-022116-115, 200-09-007853-127 (500-06-000546-107) (200-06-000136-112) DATE: August 26, 2014 CORAM: THE HONOURABLE YVES-MARIE MORISSETTE, J.A. MANON SAVARD, J.A. CLAUDE C. GAGNON, J.A. 500-09-022116-115 KERFALLA TOURE APPELLANT – Petitioner v. BRAULT & MARTINEAU INC. RESPONDENT – Respondent 200-09-007853-127 GISÈLE TREMBLAY APPELLANT – Petitioner v. AMEUBLEMENTS TANGUAY INC.

RESPONDENT – Respondent JUDGMENT [ 1 ] The appellant Kerfalla Toure appeals from a judgment of the Superior Court, District of Montreal (the Honourable Mr. Justice Louis-Paul Cullen), rendered on September 23, 2011 The appellant Gisèle Tremblay appeals from a judgment of the Superior Court, District of Quebec (the Honourable Mr. Justice Claude Bouchard), rendered on September 10, 2011.

Both judgments dismissed the appellants' respective motions for authorization to bring a class action against the respondents. [ 2 ] For the reasons of Gagnon, J.A., with which Morissette and Savard, JJ.A. agree, THE COURT : [ 3 ] DISMISSES the appeals, with costs. YVES-MARIE MORISSETTE, J.A. MANON SAVARD, J.A. CLAUDE C. GAGNON, J.A. Mtre David Bourgoin and Mtre Benoît Gamache BGA Avocats For the appellants

Mtre Nicholas Rodrigo and Mtre Jean-Philippe Groleau Davies Ward Phillips &Vineberg For Brault & Martineau Mtre Daniel O'Brien and Mtre Charles-Antoine Dorion O’Brien Avocats For Ameublements Tanguay Inc. Date of hearing: June 11, 2013 REASONS OF GAGNON, J.A. [ 4 ] The Court has before it two appeals that raise essentially the same issues. In court file 500-09-022116-115, the Superior Court of the District of Montreal (the Honourable Mr.

Justice Louis-Paul Cullen) rendered judgment on September 23, 2011, dismissing the appellant Kerfalla Toure's motion for authorization to bring a class action against the respondent Brault & Martineau Inc. ("B&M"). In court file 200-09-007853-127, the Superior Court of the District of Quebec (the Honourable Mr. Justice Claude Bouchard) rendered judgment on September 10, 2012, dismissing the appellant Gisèle Tremblay's motion for authorization to bring a class action against Ameublements Tanguay Inc. ("Tanguay"). 1.

BACKGROUND OF EACH ACTION Court file 500-09-022116-115 [ 5 ] On December 19, 2007, the appellant Kerfalla Toure bought a stove, hood, refrigerator, trim, cleaning kit and extended warranty from the respondent B&M for $3,785.95.

At the time, B&M was offering its customers either a tax-equivalent discount if they paid cash for their purchases or the possibility of paying for their purchase in 50 equal monthly payments without fees or interest, as indicated in the advertisement for this special offer, which stated the applicable terms: [ translation ] Sales terms and conditions for the [ translation ] "equal monthly payments without interest" financing program: minimum purchase of $499 before taxes required for electronic devices and $799 before taxes for furniture, mattresses, decorative accessories and household appliances.

Some designated items are excluded. Upon approval by Accord D's credit department, you will pay only the taxes at the time of purchase . The first monthly payment for the amount financed will be invoiced on the statement of account following your purchase. The equal monthly payments (included in the minimum payment due on the credit card) are established by dividing the amount financed by the number of months indicated in the special offer accepted. Interest will not be applied to the monthly payment if the minimum payment is made before the due date indicated on the monthly statement of account .

Failure to comply with these conditions will result in the annual interest applicable to the holder's credit card being charged on overdue amounts at the rate of 19.5% annually. There are no renewal or membership fees. Details in store. [Emphasis added.] [ 6 ] Rather than pay cash and benefit from a tax-equivalent discount, the appellant Kerfalla Toure opted for the financing plan and filled out a form titled [ translation ] "Financing and credit card application". This form bears the Desjardins and Brault & Martineau Inc. logos.

Kerfalla paid the amount equivalent to the taxes, $528.14, at once. [ 7 ] Use by the holder of the Brault & Martineau Inc.

Visa credit card issued by the Fédération des Caisses Desjardins du Québec ("Desjardins") implies the holder's consent to the conditions in an agreement titled [ translation ] "Brault & Martineau contract extending variable credit", clause 6 of which provides, inter alia , that the holder undertakes to repay Desjardins for any purchases made with the card. [ 8 ] The appellant Kerfalla Toure argued that the tax-equivalent discounts offered to customers paying cash for their purchases are unstated credit charges paid at the time of purchase, in breach of the Consumer Protection Act (C.Q.L.R., c. 40.1, ("C.P.A."), the Civil Code of Québec , and the Interest Act (R.S.C. (1985) c.

I-15). He filed an application for authorization to bring a class action in which he described the group he intended to represent as follows: [ translation ] All natural persons who, since December 14, 2007, have purchased furniture in Quebec from a store under the respondent's banner using a financing plan issued by Desjardins (Accord

D) in the context of a special offer that was conditional on cash payments or of the "WE PAY BOTH TAXES FOR CASH" variety. [ 9 ] He therefore claims reimbursement of the unstated credit charges or, in the alternative, their reduction and a conclusion condemning B&M to pay punitive damages. Court file 200-09-007853-127 [ 10 ] On August 25, 2010, the appellant Gisèle Tremblay bought a laptop computer and a two-year extended warranty from the

respondent Tanguay for $924.90 plus taxes. She made this purchase while the respondent Tanguay was offering its customers the following special offer: [ translation ] "We pay both taxes or you make 50 equal payments", which had been advertised in newspapers along with a notice of applicable terms: [ translation ] ON ALL OUR MERCHANDISE, WITHOUT EXCEPTION: we will pay the equivalent of both sales taxes (QST and GST). Payable in cash. Credit cards accepted OR take advantage of our 50-instalment payment terms. All applicable taxes are due at the time of purchase (e.g.: cost of credit for 50 instalments is 5.83%).

All instalments are subject to approval by the Accord D Desjardins credit department. Outstanding instalments will accrue interest from the due date for payment at 19.5% per annum, which will be charged to the customer’s account on a monthly basis (e.g.: on a balance owing of $100, interest for 30 days will be $1.63). Cannot be combined with any other offer. Quebec-wide delivery. Some areas may be subject to charges.

Details in store. [Emphasis added.] [ 11 ] The appellant Gisèle Tremblay already had a Visa Desjardins credit card and therefore opted to finance her purchase through the Accord D Desjardins credit offer. She understood that because of this choice, she would not receive the discount equivalent to the GST and QST, but because she did not read the notice of terms applicable to the offer, she was expecting the amount corresponding to the taxes to also be spread over the 50 consecutive monthly payments. [ 12 ] Tanguay, however, demanded that she immediately pay the taxes totalling $119.08.

She paid this amount with her Visa Desjardins credit card. The price of the laptop computer ($924.90) was also charged to her credit card, and through the Accord D financing plan, became payable in 50 equal monthly instalments, with a 0% annual interest rate. [ 13 ] The appellant Gisèle Tremblay argues that the tax-equivalent discount upon cash payment is an unstated credit charge under the C.P.A. (C.Q.L.R. c. P-40.1) that could not be immediately claimed.

She therefore instituted a motion for authorization to bring a class action against the respondent Tanguay on behalf of a group composed of: [ translation ] All natural persons who, since July 20, 2008, have purchased furniture in Quebec from a store under the respondent TANGUAY's banner through a financing plan issued by Desjardins "Accord D" in the context of a special offer that was conditional to a cash payment or of the "WE PAY BOTH TAXES FOR CASH" variety. [ 14 ] She claims reimbursement of these credit charges or, in the alternative, their reduction, and seeks a conclusion condemning the respondent Ameublement Tanguay Inc. to pay punitive damages. 2.

TRIAL JUDGMENTS Court file 500-09-022116-115 [ 15 ] The judge dismissed the motion for authorization to bring a class action against the respondent B&M on the grounds that the criterion under

article 1003(

b) C.C.P. had not been met.

He stated that since there was no contract of credit between the appellant and the respondent, be it for a loan of money or extending variable credit, the respondent B&M had not breached the provisions of the C.P.A. on stating credit charges or calculating the credit rate. [ 16 ] Because the appellant did not argue that Desjardins failed to act in accordance with the respondent B&M’s representations respecting the Accord D financing plan, B&M could not be held liable for a breach of the obligations Desjardins took on exclusively on its behalf. [ 17 ] The judge was also of the view that, even assuming there was a contract of credit binding the appellant Toure to the respondent B&M and a breach of the rules applying to such agreements, there was no reason to order the sanction set out under

section 271 C.P.A. , since he had not suffered any harm as a result of the breaches alleged against the respondent. [ 18 ] Indeed, the appellant Toure acknowledged that he was able to make an informed decision regarding the respondent B&M's offers, which were properly explained to him at the time of purchase. [ 19 ] On another note, the amount received by the respondent B&M at the time of purchase ($528.14) cannot be considered interest because the very nature of interest is that it accrues over time, which is not the case here.

The respondent was therefore not subject to sections 2 to 5 of the Interest Act and articles 1565 and 2330 of the Civil Code of Québec .

Court file 200-09-007853-127 [ 20 ] In this file, the judge also concluded that the facts alleged did not appear to justify the conclusions sought. [ 21 ] Drawing on the judgment rendered a few months earlier in Toure, the judge was of the view that the appellant Gisèle Tremblay, who already had a Desjardins Visa credit card, needed only to seek Desjardins's authorization to take advantage of the Accord D financing plan to spread the cost of her purchase over 50 months without paying any fees or interest. [ 22 ] Thus, the respondent Tanguay did not enter into a contract of credit with the appellant, nor was it a party to the contract of credit entered into with Desjardins. [ 23 ] Because this agreement with Desjardins is a contract extending variable credit within the meaning of

section 118 C.P.A. , the

discount to which consumers are entitled by paying cash need not be taken into account in computing the credit rate according to the method set out in sections 91 and 92 C.P.A . [ 24 ] The judge found that the value of the cash discount not received by consumers who finance their purchase does not constitute interest subject to the Interest Act and the Civil Code of Québec . 3. SUBMISSIONS OF THE PARTIES [ 25 ] The appellants argue that they financed their purchases through loans of money that were charged to a variable credit account. By setting certain financing terms and collaborating closely with Desjardins, the respondents took

part in issuing credit to the appellants in a tripartite relationship. They are consequently, like Desjardins, subject to the requirements placed on credit providers by the C.P.A . [ 26 ] They allege that the cash discount is a credit charge that should have been stated and computed according to the C.P.A . Moreover, this cost of credit should be spread over the 50 instalments. Because they did not benefit from this time to pay the credit charges, they suffered prejudice that justifies reducing their obligations and awarding punitive damages under

section 272 C.P.A. or cancelling the credit charges under

section 271 C.P.A . [ 27 ] In the alternative, they submit that these charges constitute interest for which no rate has been fixed according to the Interest Act and the Civil Code of Québec and that it exceeds the statutory rate authorized in such circumstances. [ 28 ] The respondents argue that they are strangers to the contracts of credit entered into by the appellants and Desjardins and are not bound by them.

In the alternative, if the contracts are contracts extending variable credit, the cash discount given to the appellants need not have been taken into consideration in computing the credit rate stated by Desjardins. [ 29 ] They add that the absence, as in the present case, of allegations of willfulness to mislead, disregard for the C.P.A. , or otherwise unacceptable behaviour means that the sanctions under

section 272 C.P.A. do not apply. [ 30 ] The trial judges’ conclusion on the absence of prejudice is also fatal to the appellants' claims based on

section 271 C.P.A . [ 31 ] Finally, the respondents reiterate that interest is a charge for using money that accrues daily. This notion cannot include the value of a cash discount claimed in advance and in whole at the time of purchase. The discount, therefore, was not subject to sections 1 to 5 of the Interest Act and articles 1565 and 2330 of the Civil Code of Québec . 4. THE ISSUES [ 32 ] The appellants raise five questions that I would restate as follows: 1. Did the trial judges err in finding that the financing used by the appellants derives from a contract extending variable credit? 2.

Did the trial judges err in finding that the respondents were not parties to the contracts of credit entered into with Desjardins? 3. Did the trial judges err in finding that sections 271 and 272 C.P.A. did not apply to the class action suits brought by the appellants? 4. Did the trial judges err in finding that the appellants had not suffered prejudice? 5. Did the trial judges err in finding that the tax-equivalent cash discount was not interest governed by the Civil Code of Québec and the Interest Act ? 5.

ANALYSIS [ 33 ] The debate between the parties concerns exclusively whether the class actions meet the requirements of paragraph 1003(

b) C.C.P. [ 34 ] The grounds raised by the appellants are basically identical and relate to (1) the characterization of the financing plan; (2) the respondents' involvement in the contract of credit; (3) the scope of sections 271 and 272 C.P.A. ; and (4) the characterization of the [ translation ] "discount equivalent to the two taxes" as “interest” for the purposes the Interest Act and the Civil Code of Québec . [ 35 ] In its recent judgment in Infineon Technologies AG , [1] the Supreme Court took that appeal as an opportunity to reiterate that, at the authorization stage, the court must ensure that the criteria of

article 1003 C.C.P. are met while keeping in mind the low evidentiary threshold required by this provision. [ 36 ] A broad application of the conditions for authorization responds to the wish to facilitate access to class action suits to meet the objectives of deterrence and compensation. [2] [ 37 ] Thus, the authorization procedure is not said to be a trial on the merits, but rather a filtering mechanism that serves merely to set aside frivolous claims to spare parties from having to defend against untenable claims. [ 38 ] At this stage, the facts alleged are assumed to be true, but it is imperative that they appear to justify the conclusions sought, which means that the allegations must be sufficiently specific to effectively support the recognition of the right claimed. [3]

[39] In this regard, my colleague Jacques Dufresne, J.A., pointed out that: [translation] While it is true that the authorizing judge must adopt a flexible analytical approach, the allegations of the motion must offer more thanmere generalizations. Indeed, the vaguer an allegation, the less apparent the facts and the greater the risk it runs of expressing not muchmore than opinion.

In short, allegations of fact must be sufficiently specific to effectively support the recognition of the right claimed,thereby allowing the authorizing judge to determine their sufficiency.[4] [40] The rest of the evidence on record, including the exhibits, sworn statements, and examinations on discovery, must also be takeninto account by the judge hearing the motion for authorization.[5] [41] The petitioner therefore has the onus of showing rather than proving.[6] The petitioner does not have to establish that the claimwill probably succeed but only that there is "an arguable case in light of the facts and the applicable law".[7] [42] In Trudel v.

Toronto-Dominion Bank, however, this Court concluded that a judge dealing with a pure question of statutoryinterpretation must rule at the authorization stage: [translation] [2] If an ordinary action is inadmissible because unfounded in law even when the facts alleged are assumed to be true, then so is aclass action. This is all the more so since the costs incurred for such actions are greater than those usually incurred. [3] This case concerns a pure question of statutory

interpretation. The trial judge assumed the facts to be true and found that thelegislative provisions could not support the

interpretation submitted by the plaintiff, that is, that the banks must assume preparation andregistration fees when publishing discharges for loans that are secured by a hypothecary charge. Because the facts were assumed to betrue, the judge not only could interpret the law in the exercise of her discretionary power, it was her duty to do so.[8] [43] In short, at the authorization stage, the review consists in ensuring that the motion and the evidence in the record show anarguable case. The authorizing judge has broad discretionary powers to assess the criteria under

article 1003 C.C.P., and their exercisecommands deference from the appellate courts: [translation] [34] The Quebec Court of Appeal, mindful of the importance of the motion judge’s discretion regarding the criteria set out in article1003 C.C.P., has stated on many occasions that its power to intervene in this regard is limited and that it must show deference to themotion judge’s decision. It will therefore intervene in an appeal from a decision on a motion for authorization to institute a class actiononly if the motion judge erred in law or if the judge’s assessment with respect to the criteria of

article 1003 C.C.P. is clearly wrong:Bouchard v. Agropur Coopérative, 2006 QCCA 1342, [2006] R.J.Q. 2349, at para. 42; Union des consommateurs v. Bell Canada, 2012QCCA 1287, [2012] R.J.Q. 1243, at para. 4546; Harmegnies v. Toyota Canada Inc., 2008 QCCA 380 at para. 2526; Union desconsommateurs v. Bell Canada, 2010 QCCA 351 at para. 23. [35] A class action may be authorized only if the four criteria of

article 1003 C.C.P. are met. If the motion judge errs in law or if hisor her assessment of any of the criteria of

article 1003 C.C.P. is clearly wrong, the Court of Appeal can substitute its own assessment, butonly for that criterion and not for the others.

An error relating to one criterion does not give the Court of Appeal carte blanche toreconsider all the other criteria to be met before the bringing of a class action may be authorized.[9] 5.1 Did the trial judges err in finding that the financing used by the appellantsderives from a contract extending variable credit? [44] The legal syllogism proposed by the appellants is based on the premise that the [translation] "50 equal monthly paymentswithout fees or interest" financing plan is a loan agreement charged to a variable credit account. [45] The contract of credit should then be considered a tripartite relationship in which Desjardins makes a loan of money to theappellants allowing them to complete their purchases and the respondents dictate some of the repayment terms such as the 50-monthterm, the amount of the equal monthly payments, and the fact that payment for the credit charges equivalent to the taxes owed on theirrespective purchases is due immediately. [46]

Section 1(

f) C.P.A. gives a very broad definition of the notion of "credit": 1. Dans la présente loi, à moins que lecontexte n’indique un sens différent, onentend par : ...

f) « crédit » : le droit consenti par uncommerçant à un consommateurd’exécuter à terme une obligation,moyennant des frais; 1. In this Act, unless the context indicatesotherwise, … (f) “credit” means the right granted by amerchant to a consumer to perform anobligation within a term in considerationof certain charges; [47] A contract is a contract of credit as soon as the merchant grants consumers the right to perform their obligation within a term inconsideration of certain charges;

[ 48 ]

Section 66 C.P.A. lists, without limitation, three types of contracts of credit: (1) contracts for the loan of money; (2) contracts extending variable credit; and (3) contracts involving credit. [ 49 ] In the case of a contract for the loan of money, the expression net capital means the amount actually received by the consumer or paid into or credited to his account by the merchant. In the case of a contract extending variable credit, it is the sum for which credit is actually extended. [10] [ 50 ] "Credit charges" are defined in

section 69 C.P.A. as the amount the consumer must pay under the contract in addition to the net capital in the case of a contract for the loan of money or a contract extending variable credit. [ 51 ] Credit charges are computed and established by taking various components into account such as the amount claimed in interest, [11] the administration charges [12] or membership fees, [13] and the value of the discount to which consumers are entitled if they pay cash. [14] [ 52 ] It is important to characterize the contract of credit, however, because the statutory and regulatory obligations incumbent upon the merchant will vary depending on whether the contract entered into with consumers is one extending variable credit or for the loan of money. [ 53 ] Indeed,

section 71 C.P.A. provides that credit charges must be stated in terms of dollars and cents and indicate that they apply to the entire term of the contract in the case of a contract for the loan of money or to the period covered by the statement of account in the case of a contract extending variable credit. [ 54 ] Also, when computing the credit rate and charges of a contract extending variable credit, as with a contract for a loan of money, the credit charge component that is the discount to which consumers are entitled if they pay cash need not be considered. [15] [ 55 ] The C.P.A. does not define a loan of money, but

article 2314 of the Civil Code of Québec provides the definition of a simple loan: 2314. Le simple prêt est le contrat par lequel le prêteur remet une certaine quantité d’argent ou d’autres biens qui se consomment par l’usage à l’emprunteur, qui s’oblige à lui en rendre autant, de même espèce et qualité, après un certain temps. 2314.

A simple loan is a contract by which the lender hands over a certain quantity of money or other property that is consumed by the use made of it, to the borrower, who binds himself to return a like quantity of the same kind and quality to the lender after a certain time. [ 56 ] Thus, a contract for a loan of money means that the lender gives or pays or credits a sum of money to the consumer, who undertakes to repay the same amount after a certain period of time. [ 57 ] The motion filed by the appellant Toure reveals little about the circumstances of the transaction that took place on December 19, 2007, besides the fact that he purchased articles from the respondent B&M and: [ translation ] 6.

The petitioner used the Accord D [ translation ] "purchase in 50 equal monthly payments without fees or interest" financing plan to pay for the entire invoice R-1, except for the taxes that were paid immediately, as appears from the remittance slip joined in support hereof under exhibit R-2; ... 9. The cost of the financing offered to the petitioner is therefore the amount of both taxes. 10. It is basically interest on a loan , which interest constitutes credit charges; [Emphasis added.] [ 58 ] For her part, the appellant Gisèle Tremblay indicates in her motion that: [ translation ] 6.

The petitioner paid the R-1 invoice, through the Accord D [ translation ] "purchase in 50 equal monthly payments without fees or interest" financing plan, for a total of $924.90. The taxes were in addition to this and amounted to $119.08. They were paid by credit card at the time of purchase, as appears from the letter confirming the transaction dated August 25, 2010, and from the Accord D transaction records joined in support hereof as exhibit R-2 en liasse ; ... 11.

The contract made was for a loan of money since the petitioner cannot use the amount financed over 50 months to make everyday purchases, unlike a contract extending variable credit; 12. Indeed, Desjardins financed the purchase on August 25, 2010, with a loan of money granted to the petitioner at the respondent’s request and according to the terms it set; 13. It is noteworthy that the logos of Desjardins and the respondent appear on the petitioner's financing contract, as appears from the Accord D invoice joined in support hereof as exhibit R-5;

... 15. Because the petitioner did not pay cash for the purchase, she did not receive the discount equivalent to the value of both taxes (QST and GST); 16. This discount conditional on a cash payment, whether in the form of an amount equivalent to the taxes or other, is a cost of financing or credit, which is in fact admitted by the respondent in its advertisements, a few of which are joined in support hereof under exhibit R-4; 17.

They are credit charges and/or interest on a loan; [ 59 ] As soon as her membership application to the Accord D financing plan was approved, the appellant Tremblay had access to credit issued by Desjardins that she used to spread the repayment of the price of her purchases over 50 months according to the terms for the use of her credit card set out in the contract of credit binding her to Desjardins. [ 60 ] Having chosen not to take advantage of the cash discount, the taxes that were due upon completion of the sale were charged to the credit available on her Visa Desjardins card at the time. [ 61 ] As for the appellant Kerfalla Toure, at the time of his purchases, he filled out a form titled [ translation ] "Financing and credit card application" to obtain a Brault & Martineau credit card issued by Desjardins to take advantage of the Accord D financing plan.

He therefore gained access to credit extended by Desjardins that he used to pay for his purchases. [ 62 ] He then signed a remittance slip that included the following notice: [ translation ] The holder undertakes to repay the total amount appearing on this invoice to the issuer of the card in compliance with the agreement governing its use.

The holder requests that the credit limit be increased by an amount equal to the amount of this transaction. [ 63 ] Aside from the general assertion that this was a loan of money, the only transfer or giving of money referred to in the motion of the appellant Tremblay occurs between Desjardins and the respondent Tanguay. The exhibits filed and her examination did not support the existence of a loan of money granted by Desjardins. [ 64 ] The contract of credit binding the appellants to Desjardins provides that there are three ways in which cardholders may use the credit: (

a) to finance everyday purchases, with cash advances or a cheque; (

b) to finance a purchase to be repaid in equal and consecutive monthly payments determined at the time of purchase, for multiple equal payment purchases, for a payment past the due date, for a cash advance by equal payments or for an RRSP advance; (

c) in any other way determined by Desjardins. [ 65 ] The agreement also specifies that these ways of using the credit extended are subject to the limits set out in the statement of account for each category of financing. One of these limits may be increased, however, at Desjardins' sole discretion, following a review of the file of the consumer making such a request. [ 66 ] Ultimately, the contracts entered into by the appellants and Desjardins have the characteristics of what

section 118 C.P.A. defines as a contract extending variable credit, that is, one "by which credit is extended in advance by a merchant to a consumer who may avail himself of it, in whole or in part, from time to time, in accordance with the terms and conditions of the contract". [16] The statutory provision further specifies that this type of contract includes, among others, contracts for the use of credit cards, as in this case, or for a line of credit. [ 67 ] Beyond its title, the contract of credit made between the appellants and Desjardins respects all the requirements stated in the division of the C.P.A. dealing exclusively with contracts extending variable credit (ss. 118 to 130), and the provisions of the Regulation respecting the application of the Consumer Protection Act governing this specific type of contract [ss. 35 to 37 (mandatory particulars), 55 to 68 (computation of credit rate), 64 (disclosure of credit rate) and 69 (forfeiture of benefit of the term)].

It also includes the particulars required under

schedule 4 of the Act in the case of contracts extending variable credit. [ 68 ] This Court in fact characterized similar contracts as such in Brault & Martineau v. Riendeau , [17] Service aux marchands détaillants ltée (Household Finance) v. Option consommateurs , [18] Riendeau v. Hudson's Bay Company , [19] as did the Superior Court in Jadue v.

La Fédération des caisses populaires Desjardins . [20] [ 69 ] I am therefore of the view that the trial judge properly directed himself in law in finding that there was a contract extending variable credit and that the appellants' argument that it was a loan of money charged to a variable credit account is untenable. 5.2 Did the trial judges err in finding that the respondents were not parties to the contracts of credit entered into with Desjardins? [ 70 ] As previously stated, when Visa Desjardins credit card holders opted for the Accord D financing plan, they had access to a second credit limit that included repayment advantages that were not available when using the usual credit limit portion of the card. [ 71 ] Therefore, when the respondents used their Visa Desjardins credit card, the total value of their transactions with the respondents

was charged to two different credit accounts: one to repay the price of purchase in 50 equal and consecutive monthly payments without having to pay interest, and the other to pay the taxes that were due on the date indicated in their next monthly statement. [ 72 ] Under article 1564(2) C.C.Q. , any payments made by the appellants to the respondents with their Visa Desjardins credit card and accepted by the respondents had the effect of immediately releasing the appellants from any obligations they had toward the respondents and to create two new debts: [21] the appellants' debt to the financial institution issuing the card and an equivalent debt due by Desjardins to the respondents. [ 73 ] In this respect, the appellant Gisèle Tremblay alleges in her motion: [ translation ] 9.

In

summary, four (4) distinct operations were performed for the petitioner’s transaction on August 25, 2010: the purchase of a laptop computer, the payment to Tanguay by the petitioner of $119.08 for the taxes, financing for the amount of $924.90, and finally a payment to Tanguay by Desjardins in the amount of $924.90. 10.

When the petitioner purchased the laptop computer, it was the respondent that set the terms and conditions of the Accord D financing, such as the 50-month financing term, the amount of the monthly payments, the due date, and the tax-equivalent discount upon cash payment. [ 74 ] The remittance slips signed by the appellants bear a notice that is unequivocal as to the identity of the credit provider: [ translation ] The holder undertakes to repay the total amount appearing on this invoice to the issuer of the card in compliance with the agreement governing its use.

The holder requests that the credit limit be increased by an amount equal to the amount of this transaction. [ 75 ] The form titled [ translation ] "Financing and credit card application" completed by the appellant Kerfalla Toure adds that the credit card associated with the financing is issued at the sole discretion of Desjardins, whom the applicant authorizes to collect any personal information required to establish the applicant's solvency in the context of their business relationship. [ 76 ] The agreement governing the use of the credit cards held by the appellants furthermore provides that Desjardins may, at its sole discretion and upon notice, modify the provisions of the agreement, excepting the interest rate on purchases already made. [ 77 ] The argument submitted by the appellant Gisèle Tremblay whereby the respondents determined the amount of the payments she had to make over 50 months is without merit. [ 78 ] It is the value of the purchases that establishes the amount of the equal monthly payments.

The respondents' task was limited to simply dividing the purchase price by 50. It would have been more accurate to claim that the appellants themselves set the amount of their equal monthly payments by selecting articles sold at a certain price. [ 79 ] The appellants are right, however, to point out that the respondents advertised the possibility for their customers to finance their purchases over 50 months without having to pay any fees or interest.

It must be noted however that this advertisement indicates specifically that [ translation ] "instalments are subject to approval by the Accord D Desjardins credit department".

The notice also adds that Desjardins reserves the exclusive right to set the terms of financing. [ 80 ] An overall and objective look at this situation can lead only to the following conclusions: (1) the respondents, who sold the goods that were financed, were intermediaries between the purchasers of their products and the financing provider, Desjardins; (2) the appellants, who chose to finance their purchases, entered into a contract of credit with Desjardins. [ 81 ] Even if we assume that the respondents set some of the terms for Desjardins’s financing, they did not extend the appellants any credit. [ 82 ]

Article 1440 C.C.Q. provides that "the contract has effect only between the contracting parties; it does not affect third persons, except where provided by law”. [ 83 ] The appellants consider that the drafting of

section 116 C.P.A. demonstrates the legislature's intent to create an exception to this rule: 116.

The consumer who has used the net capital of a contract for the loan of money to make full or partial payment for the purchase or the lease of goods or the provision of services may, if the money lender and the merchant who is the vendor, lessor, contractor or service provider regularly work together with a view to the granting of loans of money to consumers, plead against the money lender any ground of defence that he may urge against the merchant who is the vendor, lessor, contractor or service provider. [ 84 ] I do not share this point of view.

This provision in no way attributes obligations to the merchant vendor similar to those statutorily imposed on a credit provider with whom he collaborates on a regular basis, Instead, it allows consumers to set up against their lender any defence that they could argue against the vendor who sold them the financed good. [ 85 ] Furthermore,

section 116 C.P.A. is of no assistance to the appellants because its scope is limited to loans of money and the contract entered into with Desjardins is a contract extending variable credit. [ 86 ] It follows that the respondents are not parties to the contract of credit entered into by Desjardins and the appellants and that they are not subject to the requirements of the C.P.A. with respect to disclosing and computing credit charges. [ 87 ] The trial judges properly directed themselves in law by concluding that the respondents were not parties to the contract

extending variable credit binding the appellants to Desjardins. [88] As I have found that the respondents did not breach the provisions of the C.P.A. regarding the disclosure of credit charges or thecomputation of the credit rate, it would be pointless to answer the questions raised by the appellants as to the application of the sanctionsset out under sections 271 and 272 of the C.P.A. and the existence of proof of the prejudice suffered. 5.3 Did the trial judges err in finding that the tax-equivalent cash discount was notan interest governed by the Civil Code of Québec and the Interest Act? [89] The appellants submit, in the alternative, that the amount received by the respondents in lieu of the cash discount constitutesprima facie interest on a loan that is governed by the requirements of sections 2 to 5 of the Interest Act and articles 1565 and 2330 of theCivil Code of Québec. [90] For their part, the respondents argue that they merely levied the federal and provincial taxes on the value of the purchases afterthe appellants declined the discount offer, and that the amount thus collected has nothing to do with interest. [91] In the case of the appellant Toure, Cullen J. found that a predetermined amount does not constitute an interest that, by its nature,accrues over time. [92] Bouchard J. decided the appellant Tremblay's argument regarding the payment of interest in these words: [translation] [58] In light of the absence of privity between the petitioner and the respondent Tanguay, as Tanguay is not a party to the contract ofcredit, the absence of breaches to the C.P.A., Interest Act, and Civil Code of Québec, and the absence of prejudice, the Court will notauthorize the class action.

The facts alleged do not appear to justify the conclusions sought. [93] Pointing out that

section 347 of the Criminal Code, which prohibits loan sharking, adopts a broader definition of interest, MajorJ. notes that in the common law, interest "usually" extends to charges imposed to keep or use sums of money and that it accrues on adaily basis; it does not include penalties.[22] [94] The Private Law Dictionary defines this notion in these words:[23] INTEREST n.] 1. (Obl.) Civil fruit produced by capital Occ. Art. 1077, 1785, 1786 C. C.; Interest Act R.S.C. 1985, c. I-15. Ant. Capital.

See also accruing interest, arrears, compound interest, conventional interest, legal interest, loan upon interest, simpleinterest, usurious interest. Fr. intérêt [95] For author Claude Masse, the notion of credit charges as used in the C.P.A. takes into account fixed charges that are notincluded in the more restrictive concept of interest rate: [translation] Credit charges are expressed in

section 72 C.P.A. as "credit rate" rather than an "interest rate", which is the expression used most often byconsumers but which is unreliable for establishing comparisons and stating the entire cost of credit, that is, those added on a daily basisaccording to the Supreme Court of Canada judgment in Ontario (Attorney General) v. Barfried Enterprises Ltd. (SCC),[1963] S.C.R. 570. Fixed charges – a partial list of which appears under

section 70 C.P.A. and which are not interest since they do notaccrue on a daily basis – are therefore taken into account under the notion of "credit rate" rather than "interest rate". The notion of "creditrate" is therefore broader, more complete, and therefore better to inform consumers of the actual extent of their obligation.

The merchantmust moreover report all the credit charges in terms of dollars and cents (s. 71 C.P.A.). [Emphasis added.] [96] I find, for my part, that the amount that must be paid at once by consumers who choose a financing plan instead of the discountreserved for those who pay cash certainly constitutes a component of the credit charges, as does the amount claimed in interest.

Since itis a fixed amount paid when the transaction is concluded, however, it does not accrue with the passage of time and is not interest. [97] That being the case, the argument that the value of such a discount, which does not benefit consumers who finance theirpurchase, is subject to the application of sections 2 to 5 of the Interest Act and articles 1565 and 2330 of the Civil Code of Québec iswithout merit. 6. CONCLUSION [98] Consequently, I would dismiss these two appeals. In my view, the actions that the appellants wished to bring do not meet thecriterion in paragraph 1003(

b) C.C.P. The appellants have entered into contracts extending variable credit with Desjardins that do notbind the respondents in any way.

[ 99 ] The respondents have not breached the C.P.A . provisions relating to contracts of credit. Finally, the alleged breaches to the Civil Code of Québec or the Interest Act in my view have no legal basis. CLAUDE C. GAGNON, J.A.