On September 14, 2009, the Québec Court of Appeal rendered a much anticipated and seminal consumer law class action decision in Contat v. General Motors of Canada Limited (GMCL) and General Motors Acceptance Corporation of Canada Limited (GMAC). The Court of Appeal effectively dismissed Mr. Contat’s motion for leave to institute a class action, with costs, thereby endorsing the first instance decision of Justice Sylviane Boresntein, J.S.C., which had been rendered on August 7, 2007.

The proposed class action concerned alleged vehicle price rebates which were only offered to customers who paid in full. Mr. Contat argued that such rebates amounted to an additional cost of credit for customers who instead opted to finance the purchase of vehicles, as they were not eligible for such rebates. He further alleged that this additional cost of credit was neither disclosed in GM vehicle advertisements, or consumer vehicle finance contracts assigned to GMAC, thereby contravening Sections 70 and 225 of the Québec’s Consumer Protection Act (C.P.A.). Mr. Contat sought a refund of the "lost" rebate, damages of $1,000 and punitive damages of $1,000 for himself and on behalf of all Québec purchasers and lessees of GM vehicles since November 1999. Given the number of consumer contracts and range of rebates allegedly offered since 1999, the theoretical amount of the proposed class action exceeded one billion dollars.

GMCL and GMAC argued in first instance and in appeal that the rebates did not amount to an additional cost of borrowing since financed customers obtained essentially the same rebates, albeit in the form of suppressed interest rates. Hence, there was no real additional cost of borrowing given the reduced interest rates (often 0%) concurrently offered to financed customers.

GMCL and GMAC also argued that Mr. Contat’s cross-examination had revealed that he had been advised of the rebate before electing to finance his vehicle at an APR of 0.9% for five years. He had freely relinguished the rebate in favour of a low subsidized financing rate. Hence, even though the contract did not disclose the rebate as additional credit charge, Mr. Contat had not been misled by any advertisement or contractual omission, and had suffered no damages whatsoever. GMCL further argued that the alleged cost of credit non-disclosures could only be sanctioned pursuant to Section 271 of the C.P.A., which specifically permitted merchants to raise a defense based on the absence of consumer prejudice.

The Court of Appeal first held that, prima facie, the alleged omission could have given rise to an "arguable" dispute on the merits. Yet, it dismissed the proposed class action since it was clear that Mr. Contat had suffered no loss whatsoever. In so doing, the Court set aside Mr. Contat’s contention that the contractual and advertising non-disclosure was sanctioned by Section 272 of the C.P.A. and could give rise to punitive relief even in the absence of consumer prejudice. It distinguished its earlier Household Finance Company decision[1] and instead concluded that the alleged credit charge non-disclosure offence clearly fell within the ambit of Section 271 of the C.P.A., as argued by GMCL and GMAC. Hence, the Court of Appeal concluded that Mr. Contat had failed to establish any veritable loss, which was a sine qua non condition for liability and the plausible cause of action class certification test of Article 1003b) of the Code of Civil Procedure (C.C.P)

The Court of Appeal also held that Mr. Contat failed to meet the adequate representative test of Article 1003d) of the C.C.P. since his own claim was unfounded. Mr. Contat’s claim could thus not serve as the representative anchor on which rested the entire class endeavor. The Court reaffirmed its findings in Bouchard v. Agropur[2] on this point.

Finally, the Court ruled that Mr. Contat had failed to meet the common issues test of Article 1003a) of the C.C.P. The proposed class in truth included three sub-groups: (1) consumers who financed the purchase of vehicles (2) consumers who paid in full and received the rebate and (3) consumers who entered into a long-term lease with an option to purchase. The Court noted that the proposed recourse on behalf of purchasers who paid in full was incoherent since they paid no credit charges and were not misled by any advertised finance offers. Long-term lease customers were not subject to the same cost of credit provisions of the C.P.A. and were in a distinct juridical situation. Thus, the proposed class was anything but homogeneous. While the Superior Court had the power to redefine or divide the proposed class, it was not asked or provided with any factual evidence necessary to do so. Hence, Judge S. Borenstein had not erred when choosing not to exercise her discretion in this regard.

This case will have an immediate impact on a number of mirror class action recourses pending against other automotive companies. As well, the Court’s findings regarding the dichotomy between Sections 271 and 272 of the C.P.A. should hopefully attenuate Quebec class counsels’ appetite for consumer class petitions based on non-prejudicial violations of the C.P.A. The decision could also well assist various banks in overturning the recent Superior Court Marcotte[3] decision which held that the undisclosed currency conversion fees were credit charges and gave rise to the remedies of Section 272 of the C.P.A. That case is now pending in appeal.