SUPREME COURT OF CANADA
Citation: Richard v. Time Inc., 2012 SCC 8, [2012] 1 S.C.R. 265 |
Date: 20120228 Docket: 33554 |
Between:
Jean-Marc Richard
Appellant
and
Time Inc. and Time Consumer Marketing Inc.
Respondents
Official English Translation
Coram: McLachlin C.J. and LeBel, Deschamps, Fish, Abella, Charron and Cromwell JJ.
Joint Reasons for Judgment: (paras. 1 to 217) |
LeBel and Cromwell JJ. (McLachlin C.J. and Deschamps, Fish, Abella and Charron JJ. concurring) |
Richard v. Time Inc., 2012 SCC 8, [2012] 1 S.C.R. 265
Jean‑Marc Richard Appellant
v.
Time Inc. and Time Consumer Marketing Inc. Respondents
Indexed as: Richard v. Time Inc.
2012 SCC 8
File No.: 33554.
2011: January 18; 2012: February 28.
Present: McLachlin C.J. and LeBel, Deschamps, Fish, Abella, Charron and Cromwell JJ.
on appeal from the court of appeal for quebec
Consumer protection — Prohibited business practices — False or misleading representations — Court of Appeal finding that merchant’s representations would not mislead consumer “with average level of intelligence, scepticism and curiosity” — Test for determining whether general impression given by representation constitutes prohibited practice — Consumer Protection Act, R.S.Q., c. P‑40.1, ss. 218, 219, 228, 238(c).
Consumer protection — Prohibited business practices — Recourses — Conditions for exercising recourses — Conditions that apply where consumer seeks, under s. 272 of Consumer Protection Act, to have court sanction violations of Title II of that Act — Consumer Protection Act, R.S.Q., c. P‑40.1, ss. 2, 253, 272.
Consumer protection — Prohibited business practices — Recourses — Consumer seeking compensatory and punitive damages under s. 272 of Consumer Protection Act — Conditions for awarding damages and criteria for determining their quantum — Consumer Protection Act, R.S.Q., c. P‑40.1, s. 272 — Civil Code of Québec, S.Q. 1991, c. 64, art. 1621.
In his mail, R received an “Official Sweepstakes Notification” (the “Document”) in the form of a letter supposedly signed by the manager responsible for the sweepstakes. Along the edge of the letter were boxes printed in colour, some of which, because they referred to Time magazine, could lead the recipient to infer that it was from T and TCM. In the Document, which was written in English only, several exclamatory sentences in bold uppercase letters, whose purpose was to catch the reader’s attention by suggesting that he or she had won a cash prize of US$833,337, were combined with conditional clauses in smaller print, some of which began with the words “If you have and return the Grand Prize winning entry in time”. In addition, the back side of the letter informed R that he would qualify for a $100,000 bonus prize if he validated his entry within five days. The mailing also contained a reply coupon and a return envelope on which the official rules of the sweepstakes appeared in small print. The reply coupon also offered R the possibility of subscribing to Time magazine. As well, the rules stated that a winning number had been pre‑selected by computer and that the holder of that number could receive the grand prize only if the reply coupon was returned by the deadline. If the holder of the pre‑selected winning number did not return the reply coupon, the rules explained, the grand prize winner would be selected by random drawing among all eligible entries, that is, everyone who had returned the reply coupon, and each participant’s odds of winning would then be 1:120 million. Convinced that he was about to receive the promised amount, R immediately returned the reply coupon that was in the envelope. In doing so, he also subscribed to Time magazine. R began regularly receiving issues of the magazine a short time later, but the cheque he was expecting was a long time coming. He contacted T and TCM, which informed him that he would not be receiving a cheque, because the Document had not contained the winning entry for the draw and was merely an invitation to participate in a sweepstakes. They also informed him that the manager who had signed the letter did not exist; the name was merely a “pen name”.
R filed a motion to institute proceedings in which he asked the Quebec Superior Court to declare him to be the winner of the cash prize mentioned in the Document and to order T and TCM to pay compensatory and punitive damages corresponding to the value of the grand prize. The Superior Court allowed the action in part. It held that the Document contravened Title II of the Consumer Protection Act (“C.P.A.”) on prohibited business practices and that the civil sanctions provided for in s. 272 C.P.A. were accordingly available. The judge set the value of the moral injuries suffered by R at $1,000 and fixed the quantum of punitive damages that were also awarded to him at $100,000.
The Court of Appeal allowed the appeal of T and TCM and concluded that they had not violated the C.P.A. First, T and TCM had not violated s. 228 C.P.A. by failing to indicate clearly in the Document that R might not be the grand prize winner. Moreover, using the name of a fictitious person as the signer of the Document did not contravene s. 238(c) C.P.A., since it did not have the potential to mislead consumers about the merchant’s identity. Finally, there were no false or misleading representations in the Document, as it would not mislead a consumer “with an average level of intelligence, scepticism and curiosity”. The Court of Appeal set aside the award of compensatory and punitive damages.
Held: The appeal should be allowed in part.
Per McLachlin C.J. and LeBel, Deschamps, Fish, Abella, Charron and Cromwell JJ.: The analytical approach chosen by the Court of Appeal for establishing the general impression conveyed by the advertisement of T and TCM was inconsistent with the test adopted by the legislature. According to s. 218 C.P.A., which guides the application of all the provisions of Title II concerning prohibited business practices, to determine whether a representation constitutes such a practice, it is necessary to consider the “general impression” given by the representation and, where appropriate, the “literal meaning” of the words used in it. In the case of false or misleading advertising, the general impression is the one a person has after an initial contact with the entire advertisement, and it relates to both the layout of the advertisement and the meaning of the words used. It is analysed without considering the personal attributes of the consumer who has instituted proceedings against the merchant. To be consistent with the legislature’s objective of protecting vulnerable persons from the dangers of certain advertising techniques, the general impression test must be applied from the perspective of the average consumer, who is credulous and inexperienced and takes no more than ordinary care to observe that which is staring him or her in the face upon first entering into contact with an entire advertisement. Considerable importance must be attached not only to the text, but also to the entire context, including the way the text is displayed to the consumer. Defining the average consumer as having “an average level of intelligence, scepticism and curiosity” is inconsistent with the letter and the spirit of s. 218 C.P.A. A court asked to assess the veracity of a commercial representation must engage, under s. 218 C.P.A., in a two‑step analysis that involves — having regard, where appropriate, to the literal meaning of the words used by the merchant — (1) describing the general impression that the representation is likely to convey to a credulous and inexperienced consumer; and (2) determining whether that general impression is true to reality. If the answer at the second step is no, the merchant has engaged in a prohibited practice.
In this case, the average consumer, after first reading the Document, would have been under the general impression that R held the winning entry and had only to return the reply coupon to initiate the claim process. The Document’s strange collection of affirmations and restrictions was not clear or intelligible enough to dispel the general impression conveyed by the most prominent sentences. Even if it did not necessarily contain any statements that were actually false, the fact remains that it was riddled with misleading representations within the meaning of s. 219 C.P.A. Furthermore, the contest rules were not all apparent to someone reading the Document for the first time. These are important facts that T and TCM were required to mention. As a result, T and TCM also violated s. 228 C.P.A. However, the use by T and TCM of a “pen name” in their advertising material did not amount to a violation of s. 238(c) of the C.P.A., as the Document contained no false representations concerning their status or identity. It can be understood from a single reading that the Document was from them and that they did not claim to have a particular status or identity that they did not actually have.
Subject to the other recourses provided for in the C.P.A., a consumer can institute proceedings under s. 272 C.P.A. to have the court sanction a failure by a merchant or a manufacturer to fulfil an obligation imposed on the merchant or manufacturer by the C.P.A., by the regulations made under the C.P.A. or by a voluntary undertaking. Where a merchant or a manufacturer fails to fulfil an obligation to which s. 272 C.P.A. applies, the consumer can claim a contractual remedy, compensatory damages and punitive damages, or just one of those remedies. It will then be up to the trial judge to award the remedies he or she considers appropriate in the circumstances. However, the sanction available under s. 272 for failing to fulfil an obligation must be imposed in accordance with the principles governing the application of the C.P.A. and, where applicable, the rules of the general law. In particular, legal interest under that provision depends on the existence of a contract to which the Act applies, since s. 2 C.P.A. establishes the basic principle that a consumer contract must exist for the Act to apply, except in the specific case of the penal provisions. The recourse is therefore available only to natural persons who have entered into a contract governed by the Act with a merchant or a manufacturer.
The presumption of fraud provided for in s. 253 C.P.A. does not delimit the scope of s. 272 C.P.A. or govern the principles that underlie the application of that section. Rather, it provides consumers with additional protection in situations in which they do not wish or are not able to exercise a recourse under s. 272 C.P.A. Similarly, s. 217 C.P.A., which provides that the fact that a prohibited practice has been used is not subordinate to whether or not a contract has been made, is not intended to govern the conditions under which the recourses provided for in s. 272 C.P.A. are available and can be exercised. It relates only to the existence of a prohibited practice and authorizes the Director of Criminal and Penal Prosecutions to enforce the Act on a preventive basis, in keeping with the legislature’s intention.
For the contractual remedies provided for in s. 272 C.P.A. to be available, a consumer does not have to prove fraud and its consequences on the basis of the ordinary rules of the civil law, since, given the influence that prohibited practices can have on a consumer’s decision to enter into a contractual relationship with a merchant, a prohibited practice in itself constitutes fraud within the meaning of art. 1401 of the Civil Code of Quebec (“C.C.Q.”). As well, a merchant or manufacturer who is sued cannot raise a defence based on “fraud that has been uncovered and is not prejudicial”. The recourse provided for in s. 272 C.P.A. is based on the premise that any failure to fulfil an obligation imposed by the Act gives rise to an absolute presumption of prejudice to the consumer. Proof that one of the statutory contractual obligations that are set out primarily in Title I of the Act has been violated entitles a consumer, without having to meet any additional requirements, to obtain one of the contractual remedies provided for in s. 272. A consumer who wishes to benefit from this presumption in order to have a court sanction the use by a merchant or a manufacturer of practices prohibited by Title II of the Act must prove the following: (1) that the merchant or manufacturer failed to fulfil one of the obligations imposed by Title II of the Act; (2) that the consumer saw the representation that constituted a prohibited practice; (3) that the consumer’s seeing that representation resulted in the formation, amendment or performance of a consumer contract; and (4) that a sufficient nexus existed between the content of the representation and the goods or services covered by the contract. This last requirement means that the prohibited practice must be one that was capable of influencing a consumer’s behaviour with respect to the formation, amendment or performance of the contract. Where these four requirements are met, the contract so formed, amended or performed constitutes, in itself, a prejudice suffered by the consumer, and the consumer is entitled to demand one of the contractual remedies provided for in s. 272 C.P.A.
The recourse in damages provided for in s. 272 C.P.A. is not dependent on the specific contractual remedies set out in s. 272(a) to (f). It must nevertheless be exercised in accordance with the rule concerning the legal interest required to institute proceedings under s. 272 and is subject to the general rules of Quebec civil law. In addition, a claim for extracontractual compensatory damages is available, since fraud committed during the pre‑contractual phase is a civil fault that can give rise to extracontractual liability. Where the recourse in damages provided for in s. 272 C.P.A. is available to a consumer, his or her burden of proof is therefore eased, regardless of whether the recourse is contractual or extracontractual in nature, because of the absolute presumption of prejudice that results from any unlawful act committed by the merchant or manufacturer. This presumption means that the consumer does not have to prove that the merchant intended to mislead. A consumer to whom the irrebuttable presumption of prejudice applies has also succeeded in proving the fault of the merchant or manufacturer for the purposes of s. 272 C.P.A.
In this case, R has discharged his burden of proving a sufficient nexus between the prohibited practices engaged in by T and TCM and his subscription contract with them. R subscribed to Time magazine after reading the documentation T and TCM had sent him, and the trial judge found that he would not have subscribed to the magazine had he not read the misleading documentation. As a result, the Document is deemed to have had a fraudulent effect on R’s decision to subscribe to Time magazine. The conduct of T and TCM that is in issue constitutes a civil fault that triggers their extracontractual liability.
There is no reason to interfere with the trial judge’s finding that the fault of T and TCM caused moral injuries to R or with her award of $1,000 for those injuries. T and TCM have not shown that she erred in assessing the evidence or in applying the legal principles with regard either to their liability or to the quantum of damages.
Furthermore, consumers can be awarded punitive damages under s. 272 C.P.A. even if they are not awarded contractual remedies or compensatory damages at the same time. Because s. 272 C.P.A. establishes no criteria or rules for awarding punitive damages, such damages must be awarded in accordance with art. 1621 C.C.Q. and must have a preventive objective, that is, to discourage the repetition of undesirable conduct. The award must also be consistent with the objectives of the C.P.A., namely to restore the balance in the contractual relationship between merchants and consumers and to eliminate unfair and misleading practices. Violations by merchants or manufacturers that are intentional, malicious or vexatious, and conduct on their part in which they display ignorance, carelessness or serious negligence with respect to their obligations and consumers’ rights under the C.P.A. may result in awards of punitive damages. However, before awarding such damages, the court must consider the whole of the merchant’s conduct at the time of and after the violations.
An award of punitive damages was justified in this case, but the amount of $100,000 awarded by the trial judge should be varied. Although the trial judge did not err in finding that T and TCM had sent many mailings in Quebec to a large number of consumers and that these promotional sweepstakes had enabled them to sell many new subscriptions, she did err in considering the Charter of the French language and the patrimonial situation of T and TCM when assessing the appropriate quantum of punitive damages. T and TCM had intentionally violated the C.P.A. in a calculated manner in this case, and that violation was capable of affecting a large number of consumers, whereas nothing in the evidence indicates that, after R complained, T and TCM took corrective action to make their advertising clear or consistent with the letter and spirit of the C.P.A. This is an aggravating factor. On the other hand, the impact on R of the fault committed by T and TCM remains quite limited, though, it is true, not negligible, and R’s attitude contributed to the proportions this case has ultimately assumed. Nevertheless, the fact that the amount of the award of compensatory damages is small favours awarding a significant amount of punitive damages. An amount of $15,000 suffices in the circumstances to fulfil the preventive purpose of punitive damages, underlines the gravity of the violations of the Act and sanctions the conduct of T and TCM in a manner that is serious enough to induce them to cease the prohibited practices in which they have been engaging, if they have not already done so.
Costs in the Superior Court and the Court of Appeal will be taxed in accordance with the tariffs applicable in those courts. However, R will have his costs in the Supreme Court of Canada on a solicitor and client basis because of the importance of the issues of law he raised.
Cases Cited
Distinguished: Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130; Vorvis v. Insurance Corporation of British Columbia, [1989] 1 S.C.R. 1085; Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595; approved: Nichols v. Toyota Drummondville (1982) inc., [1995] R.J.Q. 746; Québec (Procureur général) v. Distribution Canovex Inc., [1996] J.Q. no 5302 (QL); Option Consommateurs v. Brick Warehouse, l.p., 2011 QCCS 569 (CanLII); Tremblay v. Ameublements Tanguay inc., 2011 QCCS 3078 (CanLII); Turgeon v. Germain Pelletier Ltée, [2001] R.J.Q. 291; Beauchamp v. Relais Toyota inc., [1995] R.J.Q. 741; Lambert v. Minerve Canada, compagnie de transport aérien inc., [1998] R.J.Q. 1740; disapproved: Ata v. 9118‑8169 Québec Inc., 2006 QCCS 3777, [2006] R.J.Q. 1883; Lafontaine v. La Source d’eau Val‑d’Or inc., 2001 CanLII 10566; Jabraian v. Trévi Fabrication Inc., 2005 CanLII 10580; Santangeli v. 154995 Canada Inc., 2005 CanLII 32103; Martin v. Rénovations métropolitaines (Québec) ltée, 2006 QCCQ 1760 (CanLII); Darveau v. 9034‑9770 Québec inc., 2005 CanLII 41136; considered: Riendeau v. Brault & Martineau inc., 2007 QCCS 4603, [2007] R.J.Q. 2620, aff’d 2010 QCCA 366, [2010] R.J.Q. 507; referred to: Prebushewski v. Dodge City Auto (1984) Ltd., 2005 SCC 28, [2005] 1 S.C.R. 649; R. v. Colgate‑Palmolive Ltd., [1970] 1 C.C.C. 100; Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23, [2006] 1 S.C.R. 824; Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, [2011] 2 S.C.R. 387; Mattel, Inc. v. 3894207 Canada Inc., 2006 SCC 22, [2006] 1 S.C.R. 772; R. v. Imperial Tobacco Products Ltd., [1971] 5 W.W.R. 409; P.G. du Québec v. Louis Bédard Inc., 1986 CarswellQue 981; Adams v. Amex Bank of Canada, 2009 QCCS 2695, [2009] R.J.Q. 1746; Marcotte v. Banque de Montréal, 2009 QCCS 2764 (CanLII); Marcotte v. Fédération des caisses Desjardins du Québec, 2009 QCCS 2743 (CanLII); Chrysler Canada Ltée v. Poulin, 1988 CanLII 1001; A.C.E.F. Sud‑Ouest de Montréal v. Arrangements alternatifs de crédit du Québec Inc., [1994] R.J.Q. 114; Centre d’économie en chauffage Turcotte inc. v. Ferland, [2003] J.Q. no 18096 (QL); 9029‑4596 Québec inc. v. Duplantie, [1999] R.J.Q. 3059; Boissonneault v. Banque de Montréal, [1988] R.J.Q. 2622; Service aux marchands détaillants ltée (Household Finance) v. Option Consommateurs, 2006 QCCA 1319 (CanLII); Chartier v. Meubles Léon ltée, 2003 CanLII 7749; Kingsway Financial Services Inc. v. 118997 Canada inc., 1999 CanLII 13530; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401; de Montigny v. Brossard (Succession), 2010 SCC 51, [2010] 3 S.C.R. 64; Béliveau St‑Jacques v. Fédération des employées et employés de services publics inc., [1996] 2 S.C.R. 345; Gastonguay v. Entreprises D. L. Paysagiste, 2004 CanLII 31925; Mathurin v. 3086‑9069 Québec Inc., 2003 CanLII 19131; Systèmes Techno‑Pompes inc. v. Tremblay, 2006 QCCA 987, [2006] R.J.Q. 1791; Champagne v. Toitures Couture et Associés inc., [2002] R.J.Q. 2863; Quebec (Public Curator) v. Syndicat national des employés de l’hôpital St‑Ferdinand, [1996] 3 S.C.R. 211; Landry v. Quesnel, [2002] R.J.Q. 80; Provigo Distribution inc. v. Supermarché A.R.G. inc., 1997 CanLII 10209; Genex Communications inc. v. Association québécoise de l’industrie du disque, du spectacle et de la vidéo, 2009 QCCA 2201, [2009] R.J.Q. 2743; Fondation québécoise du cancer v. Patenaude, 2006 QCCA 1554, [2007] R.R.A. 5; Voltec ltée v. CJMF FM ltée, [2002] R.R.A. 1078; Procureur général du Québec v. Boisclair, [2001] R.J.Q. 2449; Augustus v. Gosset, [1996] 3 S.C.R. 268; Lambert v. Macara, [2004] R.J.Q. 2637; Finney v. Barreau du Québec, 2004 SCC 36, [2004] 2 S.C.R. 17.
Statutes and Regulations Cited
Act respecting access to documents held by public bodies and the protection of personal information, R.S.Q., c. A‑2.1, s. 167.
Act respecting prearranged funeral services and sepultures, R.S.Q., c. A-23.001, s. 56.
Charter of human rights and freedoms, R.S.Q., c. C-12, s. 49.
Charter of the French language, R.S.Q., c. C‑11.
Civil Code of Québec, S.Q. 1991, c. 64, art. 1386, 1387, 1388, 1401, 1407, 1412, 1621, 1899, 1902, 1968.
Combines Investigation Act, R.S.C. 1985, c. C-23, s. 52(4).
Competition Act, R.S.C. 1985, c. C-34, s. 52(4).
Consumer Protection Act, R.S.Q., c. P-40.1, ss. 1(e), 2, 6.1, Title I, 8, 9, 54.1, Title II, 216, 217, 218, 219, 220 to 251, 228, 238, 253, Title IV, 261, 262, 271, 272, 277, 290, 310, 314, 316.
Consumer Protection Act, S.Q. 1971, c. 74.
Petroleum Products Act, R.S.Q., c. P-30.01, s. 67.
Trade‑marks Act, R.S.C. 1985, c. T-13.
Tree Protection Act, R.S.Q., c. P-37, s. 1.
Authors Cited
Baudouin, Jean‑Louis. “Rapport général”, dans Travaux de l’Association Henri Capitant des amis de la culture juridique française, t. 24, La protection des consommateurs. Paris: Dalloz, 1975, 3.
Baudouin, Jean‑Louis, et Patrice Deslauriers. La responsabilité civile, 7e éd., vol. I, Principes généraux. Cowansville, Qué.: Yvon Blais, 2007.
Baudouin, Jean‑Louis, et Pierre‑Gabriel Jobin. Les obligations, 6e éd. par Pierre‑Gabriel Jobin avec la collaboration de Nathalie Vézina. Cowansville, Qué.: Yvon Blais, 2005.
Belobaba, Edward P. “Unfair Trade Practices Legislation: Symbolism and Substance in Consumer Protection” (1977), 15 Osgoode Hall L.J. 327.
Couture, Luc‑André. “Rapport sur la protection du consommateur au niveau fédéral en droit pénal canadien”, dans Travaux de l’Association Henri Capitant des amis de la culture juridique française, t. 24, La protection des consommateurs. Paris: Dalloz, 1975, 303.
Dallaire, Claude. “La gestion d’une réclamation en dommages exemplaires: éléments essentiels à connaître quant à la nature et l’objectif de cette réparation, les éléments de procédure et de preuve incontournables ainsi que l’évaluation du quantum”, dans Congrès annuel du Barreau du Québec (2007). Montréal: Service de la formation continue, Barreau du Québec, 2007, 71.
Dumais, Claude‑René. “Une étude des tenants et aboutissants des articles 271 et 272 de la Loi sur la protection du consommateur” (1985), 26 C. de D. 763.
L’Heureux, Nicole. Droit de la consommation, 5e éd. Cowansville, Qué.: Yvon Blais, 2000.
L’Heureux, Nicole. “L’interprétation de l’article 272 de la Loi sur la protection du consommateur” (1982), 42 R. du B. 455.
L’Heureux, Nicole, et Marc Lacoursière. Droit de la consommation, 6e éd. Cowanswille, Qué.: Yvon Blais, 2011.
Lebeau, Françoise. “La publicité et la protection des consommateurs” (1981), 41 R. du B. 1016.
Lluelles, Didier, et Benoît Moore. Droit des obligations. Montréal: Thémis, 2006.
Masse, Claude. Loi sur la protection du consommateur: analyse et commentaires. Cowansville, Qué.: Yvon Blais, 1999.
Nahmiash, Laurent. “Le recours collectif et la Loi sur la protection du consommateur: le dol éclairé et non préjudiciable — l’apparence de droit illusoire”, dans Développements récents sur les recours collectifs. Cowansville, Qué.: Yvon Blais, 2004, 75.
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APPEAL from a judgment of the Quebec Court of Appeal (Chamberland, Morin and Rochon JJ.A.), 2009 QCCA 2378, [2010] R.J.Q. 3, SOQUIJ AZ-50590237, [2009] J.Q. no 15288 (QL), 2009 CarswellQue 12570, reversing a decision of Cohen J., 2007 QCCS 3390, [2007] R.J.Q. 2008, SOQUIJ AZ-50442262, [2007] Q.J. No. 7531 (QL), 2007 CarswellQue 6654. Appeal allowed in part.
Hubert Sibre, Annie Claude Beauchemin and Jean‑Yves Fortin, for the appellant.
Pascale Cloutier and Fadi Amine, for the respondents.
English version of the judgment of the Court delivered by
LeBel and Cromwell JJ. —
I. Introduction
[1] This appeal arises out of an advertising campaign that undoubtedly did not turn out as intended. The central issues in the case are whether the respondents, by mailing a document entitled “Official Sweepstakes Notification” (the “Document”) to the appellant, engaged in a practice prohibited by the Consumer Protection Act, R.S.Q., c. P‑40.1 (“C.P.A.”), and, if so, whether the appellant is entitled to punitive and compensatory damages under s. 272 C.P.A. To decide these issues, the Court must, inter alia, define the characteristics that are relevant to the determination of whether a commercial representation is false or misleading, as well as the conditions for exercising the recourses in damages provided for in s. 272 C.P.A.
[2] In concrete terms, the appellant is appealing a judgment in which the Quebec Court of Appeal denied his claim for damages on the basis that the content of the Document did not violate any of the provisions of the C.P.A. (2009 QCCA 2378, [2010] R.J.Q. 3). The Court of Appeal’s main reason for denying the claim was that the Document would not mislead a consumer [translation] “with an average level of intelligence, scepticism and curiosity” (para. 50). In this Court, the appellant argues that the criteria used by the Court of Appeal to define the average consumer for the purposes of the C.P.A. undermine certain of the foundations of Quebec consumer law. He is therefore asking this Court to reject that definition, find that the Document is misleading and award him punitive damages equivalent to nearly $1 million.
[3] For the reasons that follow, we agree with the appellant that the Document contains representations that contravene the C.P.A.’s provisions concerning prohibited business practices. We also agree with him that the Court of Appeal’s definition of the “average consumer” is inconsistent with the objectives of the C.P.A. and must therefore be rejected. Finally, we would allow his claim for compensatory and punitive damages, but only in part.
II. Origin of the Case
[4] On August 26, 1999, the appellant, Jean‑Marc Richard, found the Document in his mail. It was in English only and was in the form of a “letter” addressed to him and signed by Elizabeth Matthews, Director of Sweepstakes. Along the edge of the letter were various boxes printed in colour, some of which, because they referred to Time magazine, could lead the recipient to infer that it was from the respondents. The Document began with a sentence that immediately caught the reader’s attention:
OUR SWEEPSTAKES RESULTS ARE NOW FINAL: MR JEAN MARC RICHARD HAS WON A CASH PRIZE OF $833,337.00!
[5] However, a closer look at the Document reveals that this passage was part of a two‑part sentence that read as follows:
If you have and return the Grand Prize winning entry in time and correctly answer a skill‑testing question, we will officially announce that
OUR SWEEPSTAKES RESULTS ARE NOW FINAL: MR JEAN MARC RICHARD HAS WON A CASH PRIZE OF $833,337.00!
[6] This opening sentence clearly illustrates the technique used in the writing and layout of the Document: several exclamatory sentences in bold uppercase letters, whose purpose was to catch the reader’s attention by suggesting that he or she had won a large cash prize, were combined with conditional clauses in smaller print, some of which began with the words “If you have and return the Grand Prize winning entry in time”. For example, the Document identified the appellant as one of the latest sweepstakes winners and stated in large print that payment of his cash prize had been authorized. However, the heading “LATEST CASH PRIZE WINNERS”, under which the appellant’s name appeared, was preceded by the following sentence in small letters: “If you have and return the Grand Prize winning entry in time, our new list of major cash prize winners will read as follows”.
[7] This same writing technique was used elsewhere in the letter, as several prominent sentences intended to boost the recipient’s enthusiasm were combined with inconspicuous conditional clauses. It will be helpful to reproduce some passages from the Document to better illustrate the specific features of this technique:
If you have and return the Grand Prize winning entry in time and correctly answer a skill‑testing question, we’ll confirm that
WE ARE NOW AUTHORIZED TO PAY $833,337.00 IN CASH TO MR JEAN MARC RICHARD!
. . .
. . . And now that we’ve been authorized to pay the prize money, the very next time you hear from us if you win, it will be to inform you that
A BANK CHEQUE FOR $833,337.00 IS ON ITS WAY TO —— ST!
. . .
. . . The truth is, if you hold the Grand Prize winning number,
YOU WILL FORFEIT THE ENTIRE $833,337.00 IF YOU FAIL TO RESPOND TO THIS NOTICE!
[8] Along with these many references to the “Grand Prize winning entry”, the Document assigned the appellant a “Prize Claim Number” that was to be used for identification purposes when the entries were validated. In addition, the back side of the letter informed the appellant that he would qualify for a $100,000 bonus prize if he validated his entry within five days. It then referred to various benefits the appellant could have if he decided to subscribe to Time magazine at the same time as he validated his entry. All this information was set out as follows in the Document:
YOU’LL QUALIFY FOR A $100,000.00 BONUS IF YOU RESPOND WITHIN 5 DAYS!
. . .
YOU’LL RECEIVE A FREE GIFT: THE ULTRONICTM PANORAMIC CAMERA & PHOTO ALBUM SET!
. . .
YOU’LL ALSO RECEIVE TIME AT UP TO 74% SAVINGS!
. . .
. . . And if you hold the Grand Prize winning entry,
A BANK CHEQUE FOR $833,337.00 IN CASH WILL BE SENT TO YOU VIA CERTIFIED MAIL — IF YOU RESPOND NOW!
[9] To show more clearly what the Document looked like, we have reproduced it in its entirety in an appendix to these reasons. For now, suffice it to say that the Document’s visual content and writing style are central to the issue of whether the mailing of the Document constitutes a prohibited practice within the meaning of the C.P.A.
[10] In addition to the Document, the mailing received by the appellant contained a reply coupon entitled “Official Entry Certificate” and a return envelope on which the official rules of the sweepstakes appeared in small print. The reply coupon also offered the appellant the possibility of subscribing to Time magazine for a period ranging from seven months to two years. As well, the official rules stated that a winning number had been pre‑selected by computer and that the holder of that number could receive the grand prize only if the reply coupon was returned by the deadline. If the holder of the pre‑selected winning number did not return the reply coupon, the rules explained, the grand prize winner would be selected by random drawing among all eligible entries, that is, everyone who had returned the reply coupon, and each participant’s odds of winning would then be 1:120 million.
[11] The appellant testified that he had carefully read the Document twice the day he received it and had concluded that he had just won US$833,337. The next day, he took the Document to work to ask a vice‑president of the company he worked for, whose first language was English, whether he had understood the Document correctly. The vice‑president agreed that the appellant had just won the grand prize referred to in the Document. Convinced that he was about to receive the promised amount, the appellant immediately returned the reply coupon that was in the envelope. In doing so, he also subscribed to Time magazine for two years, and this entitled him to receive a free camera and photo album, as was indicated on the back of the Document.
[12] The appellant received the camera and photo album a short time later. He also began regularly receiving issues of the magazine. However, the cheque he was expecting was a long time coming. Believing that he had been patient enough, he decided to call Elizabeth Matthews at Time Inc. to inquire about the processing of his cheque. After leaving a few messages to which he received no reply, the appellant was finally able to speak with a representative of the marketing department of the respondent Time Inc. in New York. He then learned that he would not be receiving a cheque, because the Document mailed to him had not contained the winning entry for the draw. During the telephone conversation, Time Inc.’s representative told the appellant that the Document was merely an invitation to participate in a sweepstakes. The appellant was also informed that Elizabeth Matthews did not exist; the name was merely a “pen name” used by the respondents in their advertising material.
[13] The appellant replied that the Document clearly announced that he was the prize winner. His protests got him nowhere. The respondents flatly refused to pay him the amount he was claiming.
[14] On September 29, 2000, the appellant filed a motion to institute proceedings. He first asked the Quebec Superior Court to declare him to be the winner of the cash prize mentioned in the Document. He argued that the Document was an offer to contract within the meaning of art. 1388 of the Civil Code of Québec, S.Q. 1991, c. 64 (“C.C.Q.”), and that he had accepted the offer by returning the reply coupon. He accordingly asked the court to order the respondents to provide him with the skill‑testing question and pay him the grand prize amount. In the alternative, he asked the court to order the respondents to pay compensatory and punitive damages corresponding to the value of the grand prize (A.R., vol. I, at p. 53).
III. Judicial History
A. Quebec Superior Court (2007 QCCS 3390, [2007] R.J.Q. 2008, Cohen J.)
[15] Cohen J. began by considering the contractual portion of the claim. She found that the parties had not entered into a contract and accordingly refused to order payment of the prize claimed by the appellant.
[16] Cohen J. then considered the appellant’s claim for damages, which was based on alleged violations of the C.P.A. She held that the convoluted style of the offer contravened Title II of the C.P.A. on prohibited business practices. She wrote the following:
The very same “conditional” wording which enabled Time to avoid the argument that a contract was formed or that it undertook unconditionally to pay $833,337 to Mr. Richard, illustrates the contention that this document was specifically designed to mislead the recipient, that it contains misleading and even false representations, contrary to the clear wording of article 219 of the Consumer Protection Act . . . . [Emphasis in original; para. 34.]
[17] Cohen J. reached this conclusion on the basis of the general impression conveyed by the Document. Referring to s. 218 C.P.A., she stated that the Document gave the general impression that the appellant had won the grand prize. In her view, the general design of the Document thus amounted to a false or misleading representation within the meaning of s. 219 C.P.A.
[18] Cohen J. added that the Document contained two false representations. First, its signer, Elizabeth Matthews, did not exist, so she could not have “certified” the content of the Document, contrary to what was stated. That fiction was in clear contravention of ss. 219 and 238 C.P.A., since it gave an imaginary person a particular status or identity (para. 38). Next, the fact that the appellant might not be the grand prize winner had been withheld from him by the respondents or, at the very least, had been “buried in a sea of text” with the expectation that his enthusiasm would induce him to subscribe to Time magazine (para. 39). In Cohen J.’s opinion, the failure to reveal such an important fact was contrary to s. 228 C.P.A. She summed up her view on the presence of false or misleading information in the Document as follows: “It is patently obvious to any reader that the mailing from Time was not only false and incomplete, it was specifically designed to be misleading, both in the words chosen, the size of the conditions or disclaimers and their ambiguity, especially to a person who is not reading in his or her mother tongue” (para. 40).
[19] Cohen J. added that she did not need to determine whether the appellant had actually been misled by the content of the Document (para. 49). To hold that a commercial representation is a practice prohibited by the C.P.A., it is sufficient for a court to find that the average consumer, that is, one who is credulous and inexperienced, could be misled:
There can be no doubt here that the unsolicited publicity sent to Mr. Richard indeed had the capacity to mislead if viewed through the eyes of the average, inexperienced French‑speaking consumer in Quebec. In any event, the testimony of Mr. Richard made it clear that he would never have read the subscription portion of the document had the misleading representations not been present, making it obvious that his paid subscription to Time Magazine was a direct result of these misleading representations in the present case. [para. 49]
[20] According to Cohen J., the respondents’ advertising strategy, as revealed by the content of the Document, involved the use of practices prohibited by Title II of the C.P.A. As a result, the civil sanctions provided for in s. 272 C.P.A. were available.
[21] Relying on the principles adopted by the Quebec Court of Appeal in Nichols v. Toyota Drummondville (1982) inc., [1995] R.J.Q. 746, Cohen J. stated that, in certain circumstances, punitive damages can be awarded under s. 272 C.P.A. in the absence of prejudice to the consumer, that is, even if compensatory damages are not awarded at the same time (para. 55). In any event, she found that the evidence in the record showed that the appellant had suffered moral injuries — difficulty sleeping and embarrassment in his relations with the people around him — as a result of the respondents’ refusal to pay him the grand prize (para. 57). Cohen J. set the value of those moral injuries at $1,000.
[22] Next, Cohen J. stated that it was appropriate in this case to award the appellant punitive damages in addition to the compensatory damages. On the issue of the quantum of punitive damages, she added that art. 1621 C.C.Q. required the court to consider all the circumstances, including the debtor’s patrimonial situation and the gravity of the debtor’s fault. In discussing the gravity of the fault, Cohen J. held that the respondents had failed to fulfil the obligations imposed on them by the C.P.A. by sending “thousands of these false and misleading mailings to francophone consumers in Quebec” (para. 59). She added that the respondents had also violated the Charter of the French language, R.S.Q., c. C‑11, by sending the appellant advertising material in English only (para. 64). In her view, such a violation of the Charter of the French language could be taken into consideration in assessing the quantum of punitive damages awarded under s. 272 C.P.A. (para. 66).
[23] Furthermore, Cohen J. stated that the sweepstakes advertising method was quite lucrative for the respondents. She noted that, although the quantum of punitive damages should not convey the impression that the court in this case was using those damages to indirectly uphold the contractual portion of the appellant’s claim, the quantum nonetheless had to reflect the deterrent function of such damages and take the respondents’ patrimonial situation into account. Exercising her judicial discretion, she fixed the quantum of the punitive damages awarded to the appellant at $100,000, which corresponded to the value of the “Bonus” prize to which the appellant would have been entitled if he had had the winning entry and returned the reply coupon within five days.
[24] Cohen J. further ordered, again exercising her judicial discretion, that the costs awarded to the appellant be calculated on the basis of the value of the action “as instituted”, namely $1,250,887.10, thus enabling the appellant to be reimbursed a portion of his judicial and extrajudicial costs, including the fees paid to his attorneys (para. 73).
B. Quebec Court of Appeal (2009 QCCA 2378, [2010] R.J.Q. 3, Chamberland, Morin and Rochon JJ.A.)
[25] Both parties appealed the Superior Court’s decision. The Quebec Court of Appeal, in reasons written by Chamberland J.A., allowed the respondents’ appeal and dismissed the incidental appeal. It thus dismissed the appellant’s recourse in damages in its entirety, but without costs because of the nature of the case and the novelty of the issues (para. 53).
[26] The Court of Appeal began by dismissing the appellant’s incidental appeal with respect to the payment of the prize. That conclusion is no longer being challenged. The principal issue concerned the award of compensatory and punitive damages against the respondents.
[27] The Court of Appeal held, contrary to the respondents’ argument, that the C.P.A. was applicable in this case. Chamberland J.A. pointed out that s. 217 C.P.A. clearly states that the fact that a prohibited practice has been used is not subordinate to whether or not a contract has been made (para. 25). He added that in any event, the parties had in fact formed a contractual relationship by means of the offer to participate in a sweepstakes and the acceptance of that offer in the form of the return of the reply coupon (para. 26).
[28] Following those initial findings, the Court of Appeal concluded that the respondents had not violated the C.P.A. First, in its view, the respondents had not violated s. 228 C.P.A. by failing to indicate clearly in the Document that the appellant might not be the grand prize winner (para. 28).
[29] Next, the Court of Appeal held that using the name of a fictitious person, Elizabeth Matthews, as the signer of the Document did not contravene s. 238(c) C.P.A. The use of a “pen name” did not on its own have the potential to mislead consumers about the merchant’s identity and was simply intended to [translation] “personalize” the mailings (para. 29).
[30] Finally, Chamberland J.A. disagreed with Cohen J.’s view that the Document contained false or misleading representations contrary to s. 219 C.P.A. The Court of Appeal stated that it could not conclude that the Document might give the average Quebec consumer the general impression that the recipient was the grand prize winner (paras. 49‑50). The court was not even critical of the respondents’ conduct:
[translation] With respect, I see eye‑catching text in the documentation sent to the [appellant], but I do not see any misleading, underhanded or deceitful statements. I even suspect that the [appellant], a well‑informed businessman who worked locally and internationally in both French and English, understood the sweepstakes and his chances of winning perfectly well from the very start. [para. 51]
[31] According to the Court of Appeal, there were no false or misleading representations in the Document. Although the court seemed to acknowledge that the Document’s eye‑catching headings might initially convey the impression that the appellant had just won the grand prize, it expressed the view that a careful reading of the Document was sufficient to dispel that impression. It is, in a word, up to consumers to be suspicious of advertisements that seem too good to be true. For these reasons, the Court of Appeal set aside the award of compensatory and punitive damages against the respondents.
IV. Analysis
A. Issues
[32] This appeal raises the following issues:
1. What is the proper approach in Quebec for determining whether an advertisement constitutes a false or misleading representation for the purposes of the Consumer Protection Act?
2. In the absence of a contract referred to in s. 2 C.P.A., can a consumer exercise a recourse in damages under s. 272 C.P.A.?
3. What are the conditions for exercising the recourse in punitive damages provided for in s. 272 C.P.A.?
4. Should punitive damages be awarded in this case and, if so, what criteria should be considered in determining their quantum?
B. Review of the General Objectives of Consumer Law and the Structure of the C.P.A.
[33] For the purposes of this appeal, this Court must interpret certain core components of the legal scheme established by the C.P.A. As we mentioned above, we must define the characteristics of the prohibition against certain advertising practices and the conditions for exercising the recourse provided for in s. 272 C.P.A. where that prohibition has been violated. For this, a brief review of the objectives of modern consumer law and the origins of that law in Quebec and Canada will be helpful.
(1) Rise of the Consumer Society and Its Impact on the Normative Environment of Consumer Protection
[34] Historically, the Canadian consumer protection legislation was originally focused on protecting consumers from [translation] “abuses of power” by merchants (L.‑A. Couture, “Rapport sur la protection du consommateur au niveau fédéral en droit pénal canadien”, in Travaux de l’Association Henri Capitant des amis de la culture juridique française, vol. 24, La protection des consommateurs (1975), 303, at p. 307).
[35] Preserving a competitive economic environment remained central to Canadian consumer protection mechanisms until the mid‑20th century. Consumer protection remained indirect in nature: for example, federal legislation was focused more on regulating the Canadian economy at a structural level than on directly protecting consumers’ interests (see J.‑L. Baudouin, “Rapport général”, in Travaux de l’Association Henri Capitant des amis de la culture juridique française, vol. 24, La protection des consommateurs (1975), 3, at p. 4).
[36] With the rise of the consumer society after World War II, however, new concerns came to the fore with respect, in particular, to the increased vulnerability of consumers (N. L’Heureux and M. Lacoursière, Droit de la consommation (6th ed. 2011), at pp. 1‑4).
[37] Changes in the marketplace led to the realization that consumers needed to be better protected. In fact, the liberalization of markets favoured the emergence of systems focused more on protecting consumers (see Baudouin, at pp. 3‑4; see also Prebushewski v. Dodge City Auto (1984) Ltd., 2005 SCC 28, [2005] 1 S.C.R. 649, at para. 33).
[38] Both the Parliament of Canada and the Quebec legislature tried to resolve the problems raised by the new consumer society. Within the Canadian constitutional framework, Parliament and the legislatures have all played important — and often complementary — roles in this regard. We will not dwell here on the measures adopted by Parliament. Instead, we will be focusing on the Quebec legislation and on how it has developed.
[39] The rise of the consumer society called attention to the limits of the general law in Quebec, as in the other Canadian provinces. In Quebec, the contractual fairness model based on freedom of contract, consensualism and the binding force of contracts seemed increasingly unsuited to ensuring real equality between merchants and consumers. When the Quebec legislature first became involved in this area, its goal was to develop a new model of contractual fairness based on a scheme of public order that would be an exception to the traditional rules of the general law (see Baudouin, at p. 5).
[40] Quebec consumer law has essentially centred around two successive consumer protection statutes enacted in 1971 and 1978, which were subsequently supplemented by the inclusion of certain provisions of public order in the Civil Code of Québec. The first Consumer Protection Act (S.Q. 1971, c. 74) applied only to contracts involving credit and distance contracts, and did not deal separately with business practices. In reality, advertising was regulated only indirectly by means of a legal fiction incorporating its content as a term of the resulting contract. Within just a few years after the first Act came into force, it had become obvious that the solution adopted by the legislature needed to be reviewed.
[41] Today’s Consumer Protection Act establishes a much more elaborate legal scheme than the previous version did. Its enactment reflects the Quebec legislature’s desire to extend the protection of the C.P.A. to a broader range of contracts and to explicitly regulate certain business practices that are considered fraudulent as regards their effect on consumers. In practical terms, the Act is divided into seven titles that reflect the main concerns of Quebec consumer law. Title I, “Contracts Regarding Goods and Services”, contains provisions whose primary purpose is to restore the contractual balance between merchants and consumers. Title II, “Business Practices”, identifies certain types of business conduct as prohibited practices in order to ensure the veracity of information provided to consumers through advertising or otherwise.
[42] These two main titles are supplemented by, among others, Title IV, which sets out the civil and penal recourses that can be exercised to sanction violations of the Act by merchants. Aside from the recourse provided for in s. 272 C.P.A., on which this appeal is focused, the main recourses are as follows: a demand by a consumer for the nullity of a contract (s. 271 C.P.A.), a penal proceeding instituted by the Director of Criminal and Penal Prosecutions (s. 277 C.P.A.) and an application for an interlocutory or permanent injunction by the Attorney General of Quebec, the president of the Office de la protection du consommateur (“Office”) or a legal person that is a consumer advocacy body (ss. 290, 310 and 316 C.P.A.). The president of the Office may also negotiate a voluntary undertaking by a merchant to comply with the Act (s. 314 C.P.A.).
(2) Protection Against False or Misleading Advertising
[43] The measures to protect consumers from fraudulent advertising practices are one expression of a legislative intent to move away from the maxim caveat emptor, or “let the buyer beware”. As a result of these measures, merchants, manufacturers and advertisers are responsible for the veracity of information they provide to consumers and may, should such information contain falsehoods, incur the civil or penal consequences provided for in the legislation. As Judge Matheson of the Ontario County Court explained in R. v. Colgate‑Palmolive Ltd., [1970] 1 C.C.C. 100, a case involving federal law, the maxim caveat venditor is now far more appropriate to describe the merchant‑consumer relationship. In an oft‑cited judgment, he wrote the following:
This legislation is the expression of a social purpose, namely the establishment of more ethical trade practices calculated to afford greater protection to the consuming public. It represents the will of the people of Canada that the old maxim caveat emptor, let the purchaser beware, yield somewhat to the more enlightened view caveat venditor — let the seller beware. [p. 102]
(3) Protection Against False or Misleading Representations in the C.P.A.
[44] One of the main objectives of Title II of the C.P.A. is to protect consumers from false or misleading representations. Many of the practices it prohibits relate to the veracity of information provided to consumers. Section 219 C.P.A. sets out this objective in very clear language. It provides, quite generally, that no merchant, manufacturer or advertiser may make false or misleading representations to a consumer by any means whatever. The word “representation” is defined in s. 216 C.P.A. as including an affirmation, behaviour or an omission. Section 219 C.P.A. is supplemented by prohibitions relating to certain specific types of representations (ss. 220 to 251 C.P.A.).
[45] Section 218 C.P.A. guides the application of all these provisions of Title II. It explains the approach to be used to determine whether a representation is to be considered a prohibited practice. Its wording is based to a large extent on that of s. 52(4) of the Combines Investigation Act, R.S.C. 1985, c. C-23, a slightly different version of which can now be found in s. 52(4) of the Competition Act, R.S.C. 1985, c. C‑34. Section 218 C.P.A. reads as follows:
218. To determine whether or not a representation constitutes a prohibited practice, the general impression it gives, and, as the case may be, the literal meaning of the terms used therein must be taken into account.
[46] The analytical approach provided for in s. 218 C.P.A. requires the consideration of two factors: the “general impression” given by a representation and the “literal meaning” of the words used in it. We will review the requirements of each of these two factors.
[47] The phrase “literal meaning of the terms used therein” does not raise any interpretation problems. It simply means that every word used in a representation must be interpreted in its ordinary sense. The purpose of this part of s. 218 C.P.A. is to prohibit merchants from raising a defence based on a subtle, technical or convoluted meaning of a word used in a representation. The legislature’s intention was thus that the meanings given to words used in representations be the same as their meanings in everyday life.
[48] What is meant by the expression “general impression” requires further explanation, however. Although there have been few cases on this point, the courts seem in some recent decisions to have established more explicit principles from which a predominant interpretation can be drawn.
[49] One of these principles that has recently been developed more clearly by the Quebec courts relates to the abstract nature of the analysis of the general impression given by a representation. Influenced by Professor L’Heureux’s comments on this point, the courts now seem to accept, as did the courts below in the instant case, that the “general impression” conveyed by a representation must be analysed in the abstract, that is, without considering the personal attributes of the consumer who has instituted proceedings against the merchant. (See Québec (Procureur général) v. Distribution Canovex Inc., [1996] J.Q. no 5302 (QL) (C.Q. (Crim. & Pen. Div.)), at paras. 39‑40; Option Consommateurs v. Brick Warehouse, l.p., 2011 QCCS 569 (CanLII), at paras. 71‑73; N. L’Heureux, Droit de la consommation (5th ed. 2000), at p. 347. See also Tremblay v. Ameublements Tanguay inc., 2011 QCCS 3078 (CanLII), at para. 97; and L’Heureux and Lacoursière, at pp. 489‑90.)
[50] This approach is consistent with the spirit of the C.P.A., whose main objective is to protect consumers. The courts must therefore be able to sanction any representation that, from an objective standpoint, constitutes a prohibited practice. Whether a commercial representation did or did not cause prejudice to one or more consumers is not relevant to the determination of whether a merchant engaged in a prohibited practice within the meaning of Title II of the C.P.A. The C.P.A. is concerned not only with remedying the harm caused to consumers by false or misleading representations, but also with preventing the distribution of advertisements that could mislead consumers and possibly cause them various types of prejudice.
[51] In sum, this is the objective being pursued in requiring that an abstract analysis be conducted under s. 218 C.P.A. This approach takes account of the concrete impact that advertising can have on consumers in their everyday lives. Professor Claude Masse has written the following on this subject:
[translation] Commercial advertising often plays on the general impression that may be conveyed by an advertisement and even on the literal meaning of the terms used. Information in advertisements is transmitted quickly. Advertising relies on the image and the impression of the moment. This general impression is often what is sought in advertising. By definition, consumers do not have time to think at length about the real meaning of the messages being conveyed to them or about whether words are being used in their literal sense. The content of advertising is taken seriously in consumer law. Consumers do not have to wonder whether or not the promises made to them or the undertakings given are realistic, serious or plausible. Merchants, manufacturers and advertisers are therefore bound by the content of messages actually conveyed to consumers. [Emphasis added.]
(Loi sur la protection du consommateur: analyse et commentaires (1999), at p. 828)
[52] The use of the general impression test of s. 218 C.P.A. reflects how, in practice, consumers are very frequently led to exercise their freedom of choice. The question thus becomes how the courts are to determine the general impression conveyed by a commercial representation. The parties have taken very different positions in this Court on the interpretation of this concept.
[53] The appellant basically argues that the general impression conveyed by a written advertisement must be assessed contextually, that is, by considering both the writing style and the choice of words. He submits that the approach required by s. 218 C.P.A. does not involve considering the words used in an advertisement in isolation from the medium in which they are used. In other words, the appellant contends that the general impression is based both on the layout of an advertisement and on the meaning of the words used.
[54] The respondents counter that the general impression test must not be likened to an “instant impression” test. They argue that the general impression is not the instant impression conveyed by an advertisement’s layout and that the courts cannot dispense with a careful reading of a written advertisement. The respondents therefore submit that s. 218 C.P.A. requires an analytical approach that emphasizes the text of an advertisement rather than its layout.
[55] In our opinion, the respondents are wrong to downplay the importance of the layout of an advertisement. It must be remembered that the legislature adopted the general impression test to take account of the techniques and methods that are used in commercial advertising to exert a significant influence on consumer behaviour. This means that considerable importance must be attached not only to the text but also to the entire context, including the way the text is displayed to the consumer.
[56] However, the respondents are right to say that the general impression referred to in s. 218 C.P.A. is not the impression formed as a result of a rushed or partial reading of an advertisement. The analysis under that provision must take account of the entire advertisement rather than merely of portions of its content. But it is just as true that the analytical approach required by s. 218 C.P.A. does not involve the minute dissection of the text of an advertisement to determine whether the general impression it conveys is false or misleading. The courts must not approach a written advertisement as if it were a commercial contract by reading it several times, going over every detail to make sure they understand all its subtleties. Reading over the entire text once should be sufficient to assess the general impression conveyed by a written advertisement, and it is that general impression that will then make it possible to determine whether a representation made by a merchant constitutes a prohibited practice.
[57] In sum, it is our opinion that the test under s. 218 C.P.A. is that of the first impression. In the case of false or misleading advertising, the general impression is the one a person has after an initial contact with the entire advertisement, and it relates to both the layout of the advertisement and the meaning of the words used. This test is similar to the one that must be applied under the Trade‑marks Act, R.S.C. 1985, c. T-13, to determine whether a trade‑mark causes confusion (Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23, [2006] 1 S.C.R. 824, at para. 20; Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, [2011] 2 S.C.R. 387, at para. 41).
[58] We cannot therefore accept the distinction proposed by the respondents between “instant impression” and “general impression”. In actual fact, the respondents are asking this Court to apply a standard much more exacting than that of the first impression. This conclusion flows necessarily from their position on the application of the general impression test to the facts of the case at bar. To explain why their advertising strategy does not contravene Title II of the C.P.A., they state that the “documents . . . were in the possession of [the appellant] for a lengthy period of time and [that he] was able to read them carefully on several occasions before sending in the Official Entry Certificate” (R.F., at para. 46 (emphasis added)).
[59] We will now consider the approach taken by the Court of Appeal in this case in light of the principles discussed above regarding the analytical approach required by s. 218 C.P.A. With respect, the Court of Appeal seems, in our view, to have favoured an approach that does away with the need to ascertain the general impression conveyed by the Document and replaces it with an opinion resulting from an analysis. In substance, this approach involved dissecting the Document to isolate and connect parts of sentences to reveal the “real message” it conveyed (paras. 45‑48). This led the Court of Appeal to attach excessive importance to the parts of the Document containing phrases such as “[i]f you have and return the Grand Prize winning entry” and “if you hold the Grand Prize winning number” (A.R., vol. II, at p. 59). In so doing, it departed from the general impression test provided for in s. 218 C.P.A.
[60] This dissection of the text by the Court of Appeal resembles the classical civil law approach to contract analysis and strays from the determination of the general impression the entire advertisement conveys to a consumer. Furthermore, the purpose of Title II of the C.P.A. is to make merchants responsible for the content of their advertisements on the basis of the general impression the advertisements convey. By adopting so exacting a standard in s. 218 C.P.A., the legislature intended to ensure that consumers could view commercial advertising with confidence rather than suspicion. Thus, the objective of the current legislation is to enable a consumer to assume that the general impression conveyed by an advertisement is accurate and not the opposite. In sum, the analytical approach chosen by the Court of Appeal for establishing the general impression conveyed by the respondents’ advertisement was inconsistent with the general impression test adopted by the legislature.
(4) Consumer in Issue in Title II of the C.P.A.
[61] The above discussion of the general impression concept leaves an important question unanswered: From what perspective should the courts assess the general impression conveyed by a commercial representation? Who is the consumer for the purposes of s. 218 C.P.A.? Answering this question is the second step of the analytical approach required by s. 218 C.P.A.
[62] In recent decisions, judges have commonly used the expression “average consumer” to describe the consumer in issue in Title II of the C.P.A. Of course, the average consumer does not exist, but is the product of a legal fiction personified by an imaginary consumer to whom a level of sophistication that reflects the purpose of the C.P.A. is attributed. In the case at bar, the crux of the issue is whether the level of sophistication of the average consumer conceptualized by the Court of Appeal is consistent with the objectives of the C.P.A.
[63] The appellant argues that the Court of Appeal erred in defining the average consumer as one with [translation] “an average level of intelligence, scepticism and curiosity” (para. 50). He submits that the Court of Appeal departed from the prevailing line of authority in Quebec, according to which the average consumer must be considered [translation] “credulous and inexperienced”. He adds that, by stressing the average consumer’s intelligence, scepticism and curiosity, the Court of Appeal proposed a new standard that could deprive many consumers of the protection of the C.P.A. (A.F., at para. 40).
[64] The respondents argue that the Court of Appeal did not change the definition of the average consumer. In their view, Chamberland J.A. simply pointed out that the average consumer, although credulous, is not completely unintelligent. He did not change the requirements of s. 218 C.P.A. (R.F., at paras. 28 and 32).
[65] The C.P.A. is one of a number of statutes enacted to protect Canadian consumers. The courts that have applied these statutes have often used the average consumer test. In conformity with the objective of protection that underlies such legislation, the courts have assumed that the average consumer is not very sophisticated.
[66] This Court’s decisions relating to trade‑marks provide a good example of this interpretive approach. In Mattel, Inc. v. 3894207 Canada Inc., 2006 SCC 22, [2006] 1 S.C.R. 772, the Court was asked to clarify the standard to be used by the courts to determine whether a trade‑mark causes confusion with a registered trade‑mark. Binnie J., writing for the Court, concluded that the average consumers protected by the Trade‑marks Act are “ordinary hurried purchasers” (para. 56). He explained that “[t]he standard is not that of people ‘who never notice anything’ but of persons who take no more than ‘ordinary care to observe that which is staring them in the face’” (para. 58).
[67] The general impression test provided for in s. 218 C.P.A. must be applied from a perspective similar to that of “ordinary hurried purchasers”, that is, consumers who take no more than ordinary care to observe that which is staring them in the face upon their first contact with an advertisement. The courts must not conduct their analysis from the perspective of a careful and diligent consumer.
[68] Obviously, the adjectives used to describe the average consumer may vary from one statute to another. Such variations reflect the diversity of economic realities to which different statutes apply and of their objectives. The most important thing is not the adjectives used, but the level of sophistication expected of the consumer.
[69] In applying the general impression test provided for in s. 218 C.P.A., the Quebec courts have traditionally used the words “credulous” and “inexperienced” to describe the consumer in issue in the Act, relying on R. v. Imperial Tobacco Products Ltd., [1971] 5 W.W.R. 409 (Alta. S.C., A.D.), to incorporate the “credulous and inexperienced person” concept into Title II of the C.P.A. (Masse, at p. 828). After the courts had referred to this concept occasionally in the 1980s and 1990s, including in P.G. du Québec v. Louis Bédard Inc., 1986 CarswellQue 981 (Ct. Sess. P.), the Quebec Court of Appeal rendered a landmark decision on this question in Turgeon v. Germain Pelletier ltée, [2001] R.J.Q. 291, in which it confirmed that the “credulous and inexperienced” consumer test is applicable in Quebec consumer law. Fish J.A., as he then was, wrote the following on this point:
[translation] As my colleague Gendreau J.A. pointed out in Nichols v. Toyota Drummondville (1982) inc., the Consumer Protection Act is a statute of public order whose purpose is to restore the contractual [balance] between merchants and their customers. The credulous and inexperienced person test must be used to assess the misleading nature of the advertising and business practices to which the Consumer Protection Act applies. [Emphasis added; para. 36.]
[70] Since then, trial courts in Quebec have followed Turgeon, including in several class actions based on the C.P.A. (see Riendeau v. Brault & Martineau inc., 2007 QCCS 4603, [2007] R.J.Q. 2620, at para. 149, aff’d by 2010 QCCA 366, [2010] R.J.Q. 507; Adams v. Amex Bank of Canada, 2009 QCCS 2695, [2009] R.J.Q. 1746, at para. 126; Marcotte v. Banque de Montréal, 2009 QCCS 2764 (CanLII), at para. 357; Marcotte v. Fédération des caisses Desjardins du Québec, 2009 QCCS 2743 (CanLII), at para. 257). In sum, it is clear that, since Turgeon, the “general impression” referred to in s. 218 C.P.A. is the impression of a commercial representation on a credulous and inexperienced consumer.
[71] Thus, in Quebec consumer law, the expression “average consumer” does not refer to a reasonably prudent and diligent person, let alone a well‑informed person. To meet the objectives of the C.P.A., the courts view the average consumer as someone who is not particularly experienced at detecting the falsehoods or subtleties found in commercial representations.
[72] The words “credulous and inexperienced” therefore describe the average consumer for the purposes of the C.P.A. This description of the average consumer is consistent with the legislature’s intention to protect vulnerable persons from the dangers of certain advertising techniques. The word “credulous” reflects the fact that the average consumer is prepared to trust merchants on the basis of the general impression conveyed to him or her by their advertisements. However, it does not suggest that the average consumer is incapable of understanding the literal meaning of the words used in an advertisement if the general layout of the advertisement does not render those words unintelligible.
[73] We must therefore find that the Court of Appeal changed the standard of the average consumer for the purposes of Title II of the C.P.A. and that its decision was incompatible with the C.P.A.’s objective of protecting consumers. In our opinion, defining the average consumer as having [translation] “an average level of intelligence, scepticism and curiosity” is inconsistent with the letter and the spirit of s. 218 C.P.A. Such a definition raises a number of problems.
[74] First, the words “average level of intelligence” suggest that the consumer the legislature wanted to protect in Title II of the C.P.A. is a consumer who has the same level of sophistication as the average person. As we mentioned above, consumer law does not protect consumers only if they have proven to be prudent and well informed. The C.P.A.’s general objective of protecting consumers means that the appropriate test is not that of the prudent and diligent consumer.
[75] Moreover, from a practical standpoint, this part of the definition proposed by Chamberland J.A. is not really compatible with the abstract analysis required by s. 218 C.P.A., since the use of a standard like that of the “consumer with an average level of intelligence” could lead the courts to adopt a test based on determining the level of sophistication of the consumer in question in a given case. Such a test would make it possible to exonerate a merchant who is lucky enough to be sued by a consumer of above‑average intelligence. The court’s role would then be to determine whether the consumer exercising the recourse was in fact misled rather than whether the advertisement in question constituted a false or misleading representation. This would decrease the level of protection provided to consumers by the C.P.A.
[76] Next, the words “average level of . . . scepticism” replace the general impression test with a test based on the opinion formed after a more thorough analysis. It invites the courts to assume that the average consumer must take concrete action to find the “real message” hidden behind an advertisement that seems advantageous. This analytical approach can only weaken the general impression test, since a sceptical person will be inclined not to believe an advertisement solely on the basis of the general impression it conveys. A sceptical person will doubt, ask questions and perhaps make his or her own inquiries. If, at the end of that process, the person concludes that the content of the advertisement is true to reality, his or her assessment will be based not on the general impression conveyed by the advertisement but on the concrete action he or she has taken.
[77] The above comments also apply to the “average level of . . . curiosity” the average consumer must be presumed to have, according to the Court of Appeal. With respect, the use of this expression rests on the same incorrect premise as does that with respect to the scepticism of the average consumer. A consumer with “an average level of . . . curiosity” will not be so stupid or naïve as to rely on the first impression conveyed by a commercial representation but will be curious enough to consider that impression more closely. He or she will try to determine whether the general impression conveyed by an advertisement is actually true to reality. On this point, we reiterate that the purpose of Title II of the C.P.A. is to make it possible for consumers to trust the general impression given by merchants in their advertisements. If this general impression is not true to reality, the advertisement in question constitutes a false or misleading representation and the merchant has engaged in a prohibited practice for the purposes of the C.P.A., regardless of whether the “real message” of the advertisement could be understood by analysing it in depth. In fact, the Court of Appeal’s interpretation of the average consumer concept is closer to that of the diligent person, which is neither mentioned in the Act nor in keeping with its spirit.
[78] For all these reasons, we cannot endorse the definition of the average consumer proposed by the Court of Appeal. In our opinion, the concept of the credulous and inexperienced consumer applied by the Quebec courts in the line of authority that prevailed before the judgment of the Court of Appeal in the instant case is more consistent with the Quebec legislature’s objective of protecting consumers from false or misleading advertising. A court asked to assess the veracity of a commercial representation must therefore engage, under s. 218 C.P.A., in a two‑step analysis that involves — having regard, provided that the representation lends itself to such an analysis, to the literal meaning of the words used by the merchant — (1) describing the general impression that the representation is likely to convey to a credulous and inexperienced consumer; and (2) determining whether that general impression is true to reality. If the answer at the second step is no, the merchant has engaged in a prohibited practice.
C. Consistency of the Court of Appeal’s Judgment with the C.P.A.
[79] What must now be determined is whether, in light of these principles, the Court of Appeal was right to reverse the trial judge’s finding that the Document contained representations that contravened certain provisions of Title II of the C.P.A. Cohen J. identified three violations of that Act. We will consider the alleged violations of ss. 219 and 228 C.P.A. together, since they concern different aspects of a single reality that cannot easily be separated from one another. We will discuss the alleged violation of s. 238(c) C.P.A. separately.
(1) Alleged Violation of Sections 219 and 228 C.P.A.
[80] Sections 219 and 228 C.P.A. read as follows:
219. No merchant, manufacturer or advertiser may, by any means whatever, make false or misleading representations to a consumer.
228. No merchant, manufacturer or advertiser may fail to mention an important fact in any representation made to a consumer.
[81] In the instant case, the alleged violation of s. 219 C.P.A. lay in the fact that the Document falsely stated that the appellant was the grand prize winner, while the alleged violation of s. 228 C.P.A. related specifically to the respondents’ failure to reveal in the Document that the appellant might not be the grand prize winner. These two allegations therefore raise the question whether a credulous and inexperienced consumer, after first reading the Document, would have been under the general impression that the appellant had won the grand prize or would instead have understood that the respondents were merely offering him an opportunity to participate in a contest with a minute chance of winning a cash prize.
[82] The “real message” the respondents wanted to convey by sending the Document must be explained here. The sweepstakes in issue was a contest in which only one person would win the grand prize. To receive the prize, the person had to have the winning entry, return the reply coupon by the deadline and correctly answer a skill‑testing question. Only one person had the winning entry, which had been selected before the mailings were sent. However, at the top of each recipient’s document, the word “claim” appeared, followed by a combination of numbers and letters. In the event that the pre‑selected winner failed to return the reply coupon, a draw would be held for the grand prize among all those who had returned it.
[83] According to the respondents, the average consumer would be capable of understanding the following after reading once through the documentation received by the appellant: (1) the appellant had received number GV1T7IU62; (2) that number was not necessarily the winning number; (3) if his number was not the pre‑selected number, his chances of winning were extremely small; (4) for him to have any chance of winning, the holder of the winning entry would have to fail to return his or her reply coupon, in which case a random draw would be held among all those who had returned their own reply coupons by the deadline; and (5) in such a case, the appellant’s odds of winning would be 1:120 million. The Court of Appeal accepted the respondents’ argument on this point (para. 49).
[84] With respect, we find it hard to understand how a credulous and inexperienced consumer could deduce all this after reading the Document for the first time. The first sentence that leaps off the page is the following one, written in bold uppercase letters:
OUR SWEEPSTAKES RESULTS ARE NOW FINAL: MR JEAN MARC RICHARD HAS WON A CASH PRIZE OF $833,337.00!
[85] The general impression conveyed by the Document is influenced by this sentence placed at the top of the Document. The average consumer would of course, assuming that he or she understood English, be capable of reading the words preceding that sentence: “If you have and return the Grand Prize winning entry in time and correctly answer a skill‑testing question, we will officially announce that”. However, it is unreasonable to assume that the average consumer would be particularly familiar with the special language or rules of such a sweepstakes and would clearly understand all the essential elements of the offer made to the appellant in this case. The Document’s strange collection of affirmations and restrictions is not clear or intelligible enough to dispel the general impression conveyed by the most prominent sentences. On the contrary, it is highly likely that the average consumer would conclude that the appellant held the winning entry and had only to return the reply coupon to initiate the claim process. Indeed, the Document did not state anywhere that a winner had been pre‑selected and that the appellant had received only a participation number. This information instead appeared on the return envelope that accompanied the Document, where the terms and conditions of the random draw were defined very vaguely in small print.
[86] Despite all the conditions laid down in the Document, on which the respondents placed great emphasis, a point was made in the Document of referring to the appellant as the sweepstakes winner. In the column on the left, he was listed with other winners — real or fictitious — and the entry contained the notation “PRIZE STATUS: AUTHORIZED FOR PAYMENT”. There were repeated indications that a cheque was about to be mailed to the appellant. He was also urged to put aside all his doubts and hurry to return the reply coupon, for otherwise he might lose everything! The reply coupon received by the appellant even referred to the number assigned to him as a “Prize Claim Number”, not as a contest participation number. It would be possible to continue this list of tricks used in writing and laying out the text for a long time.
[87] In our opinion, the trial judge did not err in finding that the Document was misleading. The Document conveyed the general impression that the appellant had won the grand prize. Even if it did not necessarily contain any statements that were actually false, the fact remains that it was riddled with misleading representations within the meaning of s. 219 C.P.A. Furthermore, the contest rules were not all apparent to someone reading the Document for the first time. These are important facts that the respondents were required to mention. As a result, the respondents also violated s. 228 C.P.A.
(2) Alleged Violation of Section 238(c) C.P.A.
[88] Section 238(c) reads as follows:
238. No merchant, manufacturer or advertiser may, falsely, by any means whatever,
. . .
(c) state that he has a particular status or identity.
[89] In our opinion, Chamberland J.A. rightly concluded that the respondents had not contravened s. 238(c) of the C.P.A. in this case. The Document contained no false representations concerning the respondents’ status or identity. It can be understood from a single reading that the Document was from the respondents and that they did not claim to have a particular status or identity that they did not actually have. As the Court of Appeal found, using a fictitious person, Elizabeth Matthews, as the signer of the Document did not constitute a prohibited practice under s. 238(c) C.P.A.
D. Recourse Provided for in Section 272 C.P.A.: Conditions for Exercising the Recourse and Criteria for Granting Remedies
[90] Our conclusion that the Document contained representations contrary to ss. 219 and 228 C.P.A. logically leads us to the question of the appropriate remedy in this case. The appellant submits that he is entitled to be awarded the equivalent of nearly US$1 million in punitive damages under s. 272 C.P.A. The respondents not only contend that he is not so entitled, but also deny that the recourse provided for in s. 272 C.P.A. can be exercised by a consumer to sanction a prohibited practice. This objection raised by the respondents revives a debate between Quebec authors that has been under way since the early 1980s and that this Court must now try to settle.
(1) Section 272 C.P.A. and Sanctioning Prohibited Practices
[91] Section 272 C.P.A. reads as follows:
272. If the merchant or the manufacturer fails to fulfil an obligation imposed on him by this Act, by the regulations or by a voluntary undertaking made under section 314 or whose application has been extended by an order under section 315.1, the consumer may demand, as the case may be, subject to the other recourses provided by this Act,
(a) the specific performance of the obligation;
(b) the authorization to execute it at the merchant’s or manufacturer’s expense;
(c) that his obligations be reduced;
(d) that the contract be rescinded;
(e) that the contract be set aside; or
(f) that the contract be annulled,
without prejudice to his claim in damages, in all cases. He may also claim punitive damages.
[92] For many years now, the Quebec courts have held that s. 272 C.P.A. can be applied to sanction prohibited practices used by merchants and manufacturers (see, inter alia, Chrysler Canada ltée v. Poulin, 1988 CanLII 1001 (C.A.); A.C.E.F. Sud‑Ouest de Montréal v. Arrangements alternatifs de crédit du Québec Inc., [1994] R.J.Q. 114 (Sup. Ct.); Beauchamp v. Relais Toyota inc., [1995] R.J.Q. 741 (C.A.); and Centre d’économie en chauffage Turcotte inc. v. Ferland, [2003] J.Q. no 18096 (QL) (C.A.)). Defendants in proceedings under s. 272 C.P.A., and in class actions in particular, nevertheless argued that this provision should not apply to allegations of violations of Title II of the Act (see, e.g., 9029‑4596 Québec inc. v. Duplantie, [1999] R.J.Q. 3059 (C.Q.)). But the Court of Appeal reiterated in Brault & Martineau that s. 272 does apply to such violations. In that case, Duval Hesler J.A. stated that [translation] “I believe it has been clearly established that sanctions for prohibited practices within the meaning of the CPA cannot be limited to the recourse provided for in s. 253 of that Act” (para. 40), that is, the recourses available in the general law.
[93] Despite this case law, the respondents argue that s. 272 C.P.A. does not apply to prohibited practices. They submit that the sole purpose of that provision is to sanction failures by merchants and manufacturers to fulfil the contractual obligations imposed on them by Title I of the C.P.A. According to the respondents, the use of a prohibited practice is an offence that can be sanctioned only under the C.P.A.’s penal provisions.
[94] The respondents rely on a view long advocated by Professor L’Heureux. In a former edition of her treatise entitled Droit de la consommation, she wrote the following at p. 358:
[translation] Moreover, section 272 does not constitute a sanction for prohibited practices, since such practices are not obligations imposed by the Act. It must be recognized that the business practices in question in Title II are, first and foremost, offences that are matters of directive public order . . . . They are prohibitions that are sanctioned mainly through penal proceedings.
(See also N. L’Heureux, “L’interprétation de l’article 272 de la Loi sur la protection du consommateur” (1982), 42 R. du B. 455.)
[95] Not all the authors agree with Professor L’Heureux’s view. A review of the literature published in Quebec on this question even suggests that it is a minority view. Some authors have taken the position that a literal reading of s. 272 C.P.A. does not support limiting the obligations to which it refers to certain specific “duties” imposed by Title I of the Act. In their opinion, the words “obligation imposed on him by this Act” apply to the obligations established in both Title I and Title II of the C.P.A. (see, inter alia, F. Lebeau, “La publicité et la protection des consommateurs” (1981), 41 R. du B. 1016, at p. 1039; C.‑R. Dumais, “Une étude des tenants et aboutissants des articles 271 et 272 de la Loi sur la protection du consommateur” (1985), 26 C. de D. 763, at p. 775; Masse, at p. 835; and D. Lluelles and B. Moore, Droit des obligations (2006), at p. 316).
[96] The most thorough critique of Professor L’Heureux’s view has come from Professor Pauline Roy. According to Professor Roy, to exclude the prohibitions set out in Title II of the C.P.A. from the application of s. 272 C.P.A. is to forget that in Quebec civil law, the failure to fulfil an obligation not to do something can trigger civil liability in the same way as the failure to fulfil an obligation to do something. For this reason, she does not believe that [translation] “the [legislature’s] choice of a negative wording to describe the obligation not to mislead and not to engage in unfair practices to induce consumers to enter into contracts can have the effect of depriving consumers of the civil recourses specifically provided for in the Consumer Protection Act” (P. Roy, Les dommages exemplaires en droit québécois: instrument de revalorisation de la responsabilité civile, doctoral thesis (1995), at p. 476).
[97] Professor Roy also advances arguments related to the general interest and the objectives of the C.P.A. If the contrary view were to prevail, she says, it would have to be concluded that the Quebec legislature intended to prevent consumers from claiming punitive damages from merchants or manufacturers who had engaged in practices prohibited by the Act. In her view, such an outcome would be inconsistent with the role the legislature intended for Title II of the C.P.A. She explains this as follows:
[translation] To accept that the recourse in exemplary damages is unavailable where merchants engage in prohibited practices would have consequences that the legislature certainly did not intend, especially given that such practices are generally fraudulent and often involve trifling amounts. Consumers are thus disinclined to sue, yet such conduct can, when all is said and done, be a significant source of profit for merchants. If an award of exemplary damages is unavailable, therefore, merchants will, given that the risk of being sued is minimal, keep a large share of the profits derived from their fraudulent conduct. It must be asked how it can be logical for a merchant who engages in fraudulent practices to be shielded from an award of exemplary damages even though such a sanction can be imposed on someone who violates the Act’s other provisions without any malicious intent. [Emphasis added; p. 476.]
[98] In our opinion, Professor Roy’s view on this point is persuasive. Section 272 C.P.A. begins with the following words: “If the merchant or the manufacturer fails to fulfil an obligation imposed on him by this Act”. It refers, without distinction, to obligations imposed “by this Act”. Read literally, this section thus requires that all the obligations merchants and manufacturers have under the C.P.A. be taken into account. This undoubtedly includes the obligations in Title II related to business practices. Therefore, the language of s. 272 C.P.A. does not support the distinction proposed by Professor L’Heureux between “obligations imposed by the Act” and “prohibitions”. If the legislature had intended the word “obligation” in s. 272 C.P.A. to mean something other than what it means in Quebec civil law, it would have said so. It must therefore be concluded that the legislature’s intention was that a civil sanction for prohibited practices would also be available under s. 272 C.P.A.
[99] This conclusion is consistent with the Quebec legislature’s general objectives in this area. The purpose of the C.P.A. is above all to purge business practices in order to protect consumers as fully as possible. To this end, the legislature has included in the C.P.A. administrative, civil and penal sanctions that jointly make up the Act’s enforcement mechanism. The interpretation advocated by the respondents in this case would greatly reduce the Act’s effectiveness by inappropriately limiting the role of consumers in ensuring the achievement of its objectives. From this standpoint, it is preferable to involve consumers, within a well‑defined framework, in the pursuit of the legislative objectives associated with the prohibition of certain business practices. The public interest is thus better served, since consumers can actively contribute to the enforcement of legislation that is designed to protect them and can make up for any inadequacies in government intervention (E. P. Belobaba, “Unfair Trade Practices Legislation: Symbolism and Substance in Consumer Protection” (1977), 15 Osgoode Hall L.J. 327, at pp. 356‑57).
[100] In our opinion, s. 272 C.P.A. establishes a legislative scheme that makes it possible, inter alia, to sanction prohibited practices by means of civil proceedings instituted by consumers. However, it is important that this be done in accordance with the principles governing the application of the C.P.A. and, where applicable, the rules of the general law. We will therefore now turn to the conditions for implementing this type of sanction.
(2) Legal Interest Under Section 272 C.P.A.
[101] Section 272 C.P.A. provides that “the consumer may demand, . . . subject to the other recourses provided by this Act”. This wording raises the following question: Does the consumer referred to in s. 272 C.P.A. have to be a natural person who has a contractual relationship with a merchant or a manufacturer?
[102] The C.P.A. does not expressly define the consumer as a natural person who has entered into a contract governed by the Act. According to s. 1(e) C.P.A., a consumer is “a natural person, except a merchant who obtains goods or services for the purposes of his business”. At first glance, therefore, it might be thought that the “consumer” referred to in s. 272 C.P.A. need not have a contractual relationship with a merchant or a manufacturer to be found to have the legal interest required to institute proceedings under that provision. This view appears to be reinforced by s. 217 C.P.A., which provides that “[t]he fact that a prohibited practice has been used is not subordinate to whether or not a contract has been made”. This is the gist of the position taken by the appellant on this question (transcript, at pp. 26‑27).
[103] This position is undeniably based on a large and liberal conception of the role of consumer protection legislation, and specifically that of s. 272 C.P.A. The case law of the Quebec Court of Appeal confirms that such a conception is necessary to fully achieve the legislature’s objectives in this area. For example, in Nichols, Gendreau J.A. noted that s. 272 C.P.A. must be [translation] “interpreted liberally in order to give full effect to this Act and ensure that it achieves its purpose in a manner consistent with the principles that underlie it, while at the same time complying with legal rules” (p. 750).
[104] However, even a large and liberal principle of interpretation cannot justify overlooking the rules that are laid down in the Act to govern its application. One of those rules is found in s. 2 of the Act, which determines the general scope of the C.P.A., providing that “[t]his Act applies to every contract for goods or services entered into between a consumer and a merchant in the course of his business”. Section 2 C.P.A. establishes the basic principle that a consumer contract must exist for the Act to apply, except in the specific case of the Act’s penal provisions. Professor Masse explains this as follows:
[translation] Generally speaking, five conditions must be met for the C.P.A. to apply:
1 – A contract must be entered into by the parties;
2 – One of the parties to the contract must be a “consumer”;
3 – One of the parties must be a “merchant”;
4 – The “merchant” must be acting in the course of his or her business; and
5 – The contract must be for goods or services. [p. 72]
[105] If ss. 1(e) and 2 C.P.A. are read together, it must be concluded that the recourse under s. 272 C.P.A. is available only to natural persons who have entered into a contract governed by the Act with a merchant or a manufacturer. A natural person who has not entered into such a consumer contract cannot be considered a “consumer” within the meaning of s. 272 C.P.A.
[106] The fact that advertising companies are not referred to in s. 272 C.P.A. also confirms that legal interest under that provision depends on the existence of a contract to which the Act applies. This legislative choice is no doubt attributable to the fact that advertisers have no contractual relationship with consumers, so they are not in a position to enrich themselves at the expense of consumers when they contribute to the use of prohibited practices. In this context, it is not surprising that the legislature has chosen not to make the recourse provided for in s. 272 C.P.A. available to hold advertisers liable to consumers for violations of the C.P.A.
[107] Contrary to the appellant’s arguments, the recourse provided for in s. 272 C.P.A. is therefore not available to a natural person who has not entered into a contract for goods or services to which the Act applies with a merchant or a manufacturer. In this sense, the fact that a natural person read a representation that constitutes a prohibited practice is not enough for that person to have the legal interest required to institute civil proceedings under that provision. As Professor Roy has noted, only a natural person who has been the “victim” of a prohibited practice can institute proceedings to have the practice sanctioned by a civil court (p. 474). To be clear, this means that a consumer must have entered into a contractual relationship with a merchant or a manufacturer to be able to exercise the recourse provided for in s. 272 C.P.A. against the person who engaged in the prohibited practice.
[108] Nevertheless, there is an important point with regard to legal interest that needs to be clarified. A consumer contract is not necessarily formed at the precise time when the consumer purchases or obtains goods or services. In Quebec civil law, a contract is formed when the acceptance of an offer to contract is received by the offeror (art. 1387 C.C.Q.). If a representation concerning goods or services constitutes an offer under civil law rules, it can be concluded, subject to the formal requirements imposed by the C.P.A. on the undertakings to which it applies, that a consumer contract is formed at the moment when a merchant or one of the merchant’s employees receives from a consumer the manifestation of his or her wish to accept that offer. However, s. 54.1 C.P.A. provides that every distance contract is deemed to be entered into at the consumer’s address. Although the consumer’s acceptance of the offer must always be assessed contextually, it remains distinct from the conclusion of the juridical operation envisaged by the parties (art. 1386 C.C.Q.). The performance of prestations does not coincide with, but rather results from, the formation of the contract.
[109] Despite the limits to which the recourse provided for in s. 272 are subject as a result of the rules on the legal interest required by the C.P.A., it must be borne in mind that the Act provides for other recourses for its enforcement.
[110] In the instant case, whether the sending of a reply coupon (or the receipt of the coupon by the respondents) resulted in the formation of a contract for participation in a sweepstakes could be debated at length. Was it impossible for a contract to be formed because there was no agreement on its object within the meaning of art. 1412 C.C.Q.? Did the parties enter into a contract and, if so, could it be annulled owing to the respondents’ fraud? At the very least, the parties entered into a contract for a subscription to Time magazine. In this Court, the respondents emphasized the fact that, according to the Superior Court, the appellant understood that participating in the sweepstakes and subscribing to the magazine were separate undertakings. When the question is whether a consumer has the interest required to institute proceedings under s. 272 C.P.A., however, the two undertakings are linked. Logically, one depends on the other. Moreover, a contract for a magazine subscription is a contract to which the C.P.A. applies. As a result, in these circumstances, the appellant had the interest required to take action against the respondents and his action was properly brought.
(3) Remedies Available Under Section 272 C.P.A.
[111] The recourse provided for in s. 272 C.P.A. must be exercised in accordance with the specific principles governing consumer law in Quebec and, where applicable, the general rules of the civil law. We must now explain how these principles relate to the application of s. 272 C.P.A.
(a) Contractual Remedies
[112] Subject to the other recourses provided for in the C.P.A., a consumer with the necessary legal interest can institute proceedings under s. 272 C.P.A. to have the court sanction a failure by a merchant or a manufacturer to fulfil an obligation imposed on the merchant or manufacturer by the C.P.A., by the regulations made under the C.P.A. or by a voluntary undertaking. The Court of Appeal has correctly confirmed that the recourse provided for in s. 272 C.P.A. is based on the premise that any failure to fulfil an obligation imposed by the Act gives rise to an absolute presumption of prejudice to the consumer. In Nichols, Gendreau J.A. stressed that [translation] “a merchant sued under s. 272 cannot have the action dismissed by raising the defence that the consumer suffered no prejudice” (p. 749). The recourse provided for in s. 272 C.P.A. thus differs from the one provided for in s. 271 C.P.A. Section 271 C.P.A. sanctions the violation of certain rules governing the formation of consumer contracts, whereas the purpose of s. 272 C.P.A. is not simply to sanction violations of formal requirements of the Act, but to sanction all violations that are prejudicial to the consumer (Boissonneault v. Banque de Montréal, [1988] R.J.Q. 2622 (C.A.)).
[113] There are basically two types of obligations that can result in a sanction under s. 272 C.P.A. if not fulfilled. First, the C.P.A. imposes a range of statutory contractual obligations on merchants and manufacturers that are set out primarily in Title I of the Act. Proof that one of these substantive rules has been violated entitles a consumer, without having to meet any additional requirements, to obtain one of the contractual remedies provided for in s. 272 C.P.A. As Rousseau‑Houle J.A. stated in Beauchamp, [translation] “[t]he legislature has adopted an absolute presumption that a failure by the merchant or manufacturer to fulfil any of these obligations causes prejudice to the consumer, and it has provided the consumer with the range of recourses set out in s. 272” (p. 744). It is up to the consumer to choose the remedy, but the court has the discretion to award another one that is more appropriate in the circumstances (L’Heureux and Lacoursière, at p. 621). Unlike s. 271 C.P.A., s. 272 does not permit the merchant to raise the defence that the consumer suffered no prejudice where violations of Title I are in issue (L’Heureux and Lacoursière, at p. 620; Service aux marchands détaillants ltée (Household Finance) v. Option Consommateurs, 2006 QCCA 1319 (CanLII)).
[114] Second, Title II of the C.P.A. imposes obligations on merchants, manufacturers and advertisers that apply to them regardless of whether a consumer contract referred to in s. 2 of the Act exists. Unlike the obligations imposed under Title I of the Act, which apply to the contractual phase, the prohibitions against certain business practices set out in Title II apply to the pre‑contractual phase. As Françoise Lebeau notes, Title II of the C.P.A. imposes on merchants, manufacturers and advertisers a duty to act honestly and an obligation to provide information during the period preceding the formation of the contract (p. 1020). The legislature’s objective with respect to business practices is clear: to ensure the veracity of pre‑contractual representations in order to prevent a consumer’s consent from being vitiated by inadequate, fraudulent or improper information.
[115] In the case of prohibited practices, some judges and authors have asserted that the contractual remedies provided for in s. 272 C.P.A. are available to a consumer only if the consumer has suffered prejudice as a result of an unlawful act committed by a merchant or a manufacturer (see Ata v. 9118‑8169 Québec Inc., 2006 QCCS 3777, [2006] R.J.Q. 1883). For advocates of this view, the contravention of a provision of Title II of the C.P.A. does not give rise to an irrebuttable presumption of prejudice, since s. 272 C.P.A. is intended only to sanction unlawful acts that have actually deceived a consumer (see also Lluelles and Moore, at p. 312). This view corresponds in substance to the position taken by the respondents in the case at bar (R.F., at para. 57).
[116] According to this approach, a court cannot award a consumer one of the contractual remedies provided for in s. 272 C.P.A. if the merchant, after publishing a misleading advertisement in the pre‑contractual phase, gave corrected information directly to the consumer just before they entered into the contract. Since such behaviour merely constitutes [translation] “fraud that has been uncovered and is not prejudicial”, it cannot give rise to these specific remedies (L. Nahmiash, “Le recours collectif et la Loi sur la protection du consommateur: le dol éclairé et non préjudiciable — l’apparence de droit illusoire”, in Développements récents sur les recours collectifs (2004), 75).
[117] In our opinion, this position minimizes the influence that misleading advertising can have on a consumer’s decision to enter into a contractual relationship with a merchant. It suggests that an advertisement cannot have a fraudulent effect if the consumer discovers that it is misleading a few minutes before entering into a contract with a merchant. This concept of “fraudulent effect” is too restrictive for the objectives of the recourse provided for in s. 272 C.P.A. to be achieved. It does not accurately reflect the way consumers are often invited to give their consent in such situations.
[118] To say that advertising can place consumers under a merchant’s influence is an understatement. Very often, advertising stimulates the interest of consumers and induces them to go in person to the merchant’s premises to learn more about the product or service being promoted. Their decision‑making process begins at that time: they consider purchasing a good or service on the basis of the representations made in the advertisement. And then the consumer becomes more vulnerable once he or she is on the merchant’s premises.
[119] In absolute terms, there is nothing reprehensible about a merchant’s use of representations and insistence to induce the customer to give in. Such acts are normal and inevitable in an economic system based on free competition. But this is not true where the consumer is lured by false or misleading advertising, even if the merchant “corrects” the information in a one‑on‑one discussion just before they conclude the contract. Of course, a rigid interpretation of the rules of contract formation may lead to the conclusion that the consumer’s consent is nonetheless free and informed if he or she discovers the misleading nature of an advertisement before entering into the contract. However, a view more in keeping with the social significance of the C.P.A. would lead to the conclusion that the consumer’s decision to enter into a contractual relationship with the merchant was fundamentally tainted by the misleading advertisement.
[120] It would be hard to deny that such a “correction” of misleading information often occurs late in the contract formation process. For example, the members of the group covered by the class action in Brault & Martineau learned that they had to pay the sales taxes only once they were at the cash, that is, after they had discussed the payment and financing terms with a salesperson and after a purchase order had been issued (Sup. Ct., at paras. 29‑30; see also Chartier v. Meubles Léon ltée, 2003 CanLII 7749 (Que. Sup. Ct.)). The correction might thus be made after the consumer has in fact consented to purchase the product in question. In such circumstances, the prohibited practice clearly plays a role in inducing the consumer to enter into a contractual relationship on the basis of misleading information.
[121] For this reason, the argument that s. 272 C.P.A. is intended solely to sanction prohibited practices that have actually resulted in fraud improperly underemphasizes the prejudice resulting from a violation of a provision of Title II of the Act. It effectively introduces a variable rule. On the one hand, in cases in which the presumption of fraud provided for in s. 253 C.P.A. applies, this rule would allow a merchant or a manufacturer to raise the defence that the consumer suffered no prejudice. Section 253 C.P.A. creates a presumption that, had the consumer been aware of certain prohibited practices, he or she would not have agreed to the contract or would not have paid as high a price. On the other hand, where the presumption does not apply, the rule would require consumers to fully prove the prejudice they have suffered. There is no reason why consumers should bear a higher burden of proof where the breach of a statutory obligation falls under Title II of the Act rather than under Title I and the presumption of s. 253 C.P.A. does not apply. Neither the wording of s. 272 C.P.A. nor the philosophy underlying the application of the Act warrants such a conclusion, which could also dangerously pave the way for acceptance of the concept of “bon dol” (harmless fraud) in consumer law. As we will explain below, this position is based on a misconception of the role of s. 253 C.P.A.
[122] This interpretation also leads to strange results. The presumption in s. 253 C.P.A. does not apply to all prohibited business practices. For reasons of its own, the legislature has chosen to list the practices that are covered by the presumption of fraud established in that provision. Where s. 253 does not apply, a consumer claiming to be the victim of a prohibited practice would be able to sue under s. 272 C.P.A. but would have to use the rules of the Civil Code of Québec to justify the application of the contractual remedies in that section. If we disregard the question of punitive damages, the recourse provided for in s. 272 C.P.A. would thus be of no real use to the consumer. With this in mind, it cannot be assumed that the legislature intended the implementation of s. 272 to be subject to the application of s. 253 C.P.A.
[123] We greatly prefer the position taken by Fish J.A. in Turgeon, namely that a prohibited practice does not create a presumption that a merchant has committed fraud but in itself constitutes fraud within the meaning of art. 1401 C.C.Q. (para. 48). This position is consistent with the spirit of the Act and is also more consistent with the case law relating to failures to fulfil the obligations imposed by Title I of the Act. In our opinion, the use of a prohibited practice can give rise to an absolute presumption of prejudice. As a result, a consumer does not have to prove fraud and its consequences on the basis of the ordinary rules of the civil law for the contractual remedies provided for in s. 272 C.P.A. to be available. As well, a merchant or manufacturer who is sued cannot raise a defence based on [translation] “fraud that has been uncovered and is not prejudicial”. The severity of the sanctions provided for in s. 272 C.P.A. is not variable: the irrebuttable presumption of prejudice can apply to all violations of the obligations imposed by the Act.
[124] This absolute presumption of prejudice presupposes a rational connection between the prohibited practice and the contractual relationship governed by the Act. It is therefore important to define the requirements that must be met for the presumption to apply in cases in which a prohibited practice has been used. In our opinion, a consumer who wishes to benefit from the presumption must prove the following: (1) that the merchant or manufacturer failed to fulfil one of the obligations imposed by Title II of the Act; (2) that the consumer saw the representation that constituted a prohibited practice; (3) that the consumer’s seeing that representation resulted in the formation, amendment or performance of a consumer contract; and (4) that a sufficient nexus existed between the content of the representation and the goods or services covered by the contract. This last requirement means that the prohibited practice must be one that was capable of influencing a consumer’s behaviour with respect to the formation, amendment or performance of the contract. Where these four requirements are met, the court can conclude that the prohibited practice is deemed to have had a fraudulent effect on the consumer. In such a case, the contract so formed, amended or performed constitutes, in itself, a prejudice suffered by the consumer. This presumption thus enables the consumer to demand, in the manner described above, one of the contractual remedies provided for in s. 272 C.P.A.
(b) Compensatory Damages
[125] Where a merchant or a manufacturer fails to fulfil an obligation to which s. 272 C.P.A. applies, the consumer can ask the court for an award of compensatory damages. The respondents argue that the recourse in compensatory damages is available only if the court awards one of the contractual remedies provided for in s. 272(a) to (f) C.P.A. (R.F., at para. 72). This argument is without merit. Section 272 C.P.A. contains the words “without prejudice to his claim in damages, in all cases”. This phrase, which is in no way ambiguous, means that the recourse in damages, regardless of whether it is contractual or extracontractual in nature, is not dependent on the specific contractual remedies set out in s. 272(a) to (f). By using these words in s. 272 C.P.A., the legislature intended to leave consumers free to choose the sanctions they consider appropriate to repair any prejudice they suffer.
[126] Nevertheless, the independence of the recourse in damages provided for in s. 272 C.P.A. does not mean that there is no legal framework for exercising it. First of all, the recourse in damages, regardless of whether it is based on a breach of contract or a fault, must be exercised in accordance with the rule concerning the legal interest required to institute proceedings under that provision. Next, where a consumer chooses to claim damages from the merchant or manufacturer he or she is suing, the exercise of the recourse is subject to the general rules of Quebec civil law. In particular, an award of compensatory damages can be obtained only if the prejudice suffered can be assessed or quantified.
[127] The use by a merchant or a manufacturer of a prohibited practice can also form the basis of a claim for extracontractual compensatory damages under s. 272 C.P.A. A majority of the Quebec authors and judges who have considered this issue have taken the view that fraud committed during the pre‑contractual phase is a civil fault that can give rise to extracontractual liability (Lluelles and Moore, at p. 321; Kingsway Financial Services Inc. v. 118997 Canada inc., 1999 CanLII 13530 (Que. C.A.)). Proof of fraud thus establishes civil fault. However, because of the specific nature of the C.P.A., the procedure for proving fraud is different from the one under the Civil Code of Québec.
[128] This difference stems from the fact that, where the recourse provided for in s. 272 C.P.A. is available to a consumer, his or her burden of proof is eased because of the absolute presumption of prejudice that results from any unlawful act committed by the merchant or manufacturer. This presumption means that the consumer does not have to prove that the merchant intended to mislead, as would be required in a civil law fraud case. According to the interpretation proposed by Fish J.A. in Turgeon, a consumer to whom the irrebuttable presumption of prejudice applies has also succeeded in proving the fault of the merchant or manufacturer for the purposes of s. 272 C.P.A. The court can thus award the consumer damages to compensate for any prejudice resulting from that extracontractual fault.
(4) Issue of the Interplay Between Sections 253 and 272 C.P.A.
[129] However, the role of s. 253 C.P.A. in cases in which the recourse provided for in s. 272 C.P.A. is exercised raises an important issue of statutory interpretation. A brief review of some of the academic literature makes it apparent that there are a variety of viewpoints on this issue. Section 253 C.P.A. reads as follows:
253. Where a merchant, manufacturer or advertiser makes use of a prohibited practice in case of the sale, lease or construction of an immovable or, in any other case, of a prohibited practice referred to in paragraph a or b of section 220, a, b, c, d, e or g of section 221, d, e or f of section 222, c of section 224 or a or b of section 225, or in section 227, 228, 229, 237 or 239, it is presumed that had the consumer been aware of such practice, he would not have agreed to the contract or would not have paid such a high price.
[130] As we have seen, Professor L’Heureux has long maintained that the presumption provided for in s. 253 C.P.A. shows that s. 272 C.P.A. is not intended to be used to sanction prohibited business practices. In her view, consumers who claim to be victims of prohibited practices must instead turn to the general law or to ss. 8 and 9 C.P.A. to obtain a finding that their consent has been vitiated. Sections 8 and 9 C.P.A. read as follows:
8. The consumer may demand the nullity of a contract or a reduction in his obligations thereunder where the disproportion between the respective obligations of the parties is so great as to amount to exploitation of the consumer or where the obligation of the consumer is excessive, harsh or unconscionable.
9. Where the court must determine whether a consumer consented to a contract, it shall consider the condition of the parties, the circumstances in which the contract was entered into and the benefits arising from the contract for the consumer.
[131] Another view, voiced by Professors Lluelles and Moore among others, is that the presence of s. 253 C.P.A. at the end of Title II precludes the argument that the absolute presumption of prejudice applicable to violations of Title I also applies in the context of proceedings based on the use of a prohibited practice (Lluelles and Moore, at p. 312). The respondents rely on both of these views.
[132] In our opinion, these two positions are wrong in suggesting that the role of s. 253 C.P.A. can be considered solely in relation to the statutory recourse provided for in s. 272 C.P.A. There is no direct relationship between these two statutory provisions: each of them makes its own contribution to the achievement of the legislature’s social and legal objectives. The presumption of fraud provided for in s. 253 C.P.A. does not delimit the scope of s. 272 C.P.A. or govern the principles that underlie the application of that section; rather, it provides consumers with additional protection in situations in which they do not wish or are not able to exercise a recourse under s. 272 C.P.A. The primary purpose of s. 253 C.P.A. is to ease the burden of proof for consumers who choose to sue a merchant, a manufacturer or an advertiser under the ordinary rules of the general law. In such cases, s. 253 relieves consumers of the obligation to prove that the fraud was determinative in inducing them to give their consent. A rule of evidence such as this is helpful to consumers who want to sue advertisers under the general law, since they cannot take action against advertisers under s. 272 C.P.A.
[133] This conclusion is dictated not only by the characteristics of s. 272 C.P.A. itself, but also by the express reference in s. 253 C.P.A. to contracts relating to immovables. Although s. 6.1 C.P.A. provides that the provisions of Title II of the Act apply to such contracts, it is impossible to sanction prohibited practices involving immovables under s. 272 C.P.A. For this reason, aggrieved consumers will logically turn to the fraud provisions of the Civil Code of Québec (arts. 1401 and 1407 C.C.Q.). The whole rationale for the presumption provided for in s. 253 C.P.A. can therefore be found in this area (Turgeon, at para. 40).
[134] It must not be forgotten that the application of the C.P.A. is not dependent on the exercise of one of the civil or penal recourses for which it provides. The C.P.A. applies to any legal situation covered by s. 2 of the Act, and not solely to civil or penal proceedings instituted under the Act.
[135] For the purposes of this appeal, we need not extend the discussion of the relationship between s. 253 C.P.A. and s. 272 C.P.A. to include a review of ss. 8 and 9 C.P.A. This being said, the assertion that [translation] “[m]isleading advertising makes the recourse under sections 8 and 9 available, with or without the presumption of fraud of section 253”, may have to be approached with caution (L’Heureux, Droit de la consommation, at p. 235). In Quebec civil law, lesion and fraud are two different defects of consent. Fraud does not necessarily involve exploitation of the consumer and, as a result, lesion. In this respect, it is important that the C.P.A. be interpreted in accordance with general principles of civil law obligations.
(5) Role of Section 217 C.P.A.
[136] We must now clarify the role of s. 217 C.P.A., which provides that “[t]he fact that a prohibited practice has been used is not subordinate to whether or not a contract has been made”. The Court of Appeal suggested that this provision makes the C.P.A. applicable once a prohibited practice is used, regardless of whether a consumer contract is entered into as a result of that practice (para. 25). However, it is important not to confuse the question of the existence of a prohibited practice with the question of interest under s. 272 C.P.A.
[137] Title II of the C.P.A. prohibits certain types of representations made “to a consumer”. The definition of “consumer” in s. 1(e) of the Act might suggest that the provisions of Title II apply only where a consumer enters into a contract as a result of the use of a prohibited practice. However, the prohibitions relating to business practices also apply on a preventive basis, that is, before an unlawful representation dupes one or more consumers by fraudulently inducing them to enter into contractual relationships. This is why s. 217 C.P.A. exists: its purpose is to make it easier to sanction violations of the Act on a preventive basis by specifying that a merchant’s representation may constitute a prohibited practice even if none of the natural persons targeted by the advertisement entered into a contract as a result of the advertisement. It is enough that the advertisement target a [translation] “potential consumer” (L’Heureux and Lacoursière, at p. 489).
[138] Therefore, s. 217 C.P.A. relates strictly to the existence of a prohibited practice. It authorizes the Director of Criminal and Penal Prosecutions to enforce the Act on a preventive basis, in keeping with the legislature’s intention. As Professor Masse explains,
[translation] [t]his provision authorizes penal proceedings where provisions of Title II have been contravened but no contract has been entered into as a result of a violation of the C.P.A. It is as a result possible to prove that an advertisement is misleading and to institute penal proceedings against the offender even where no contract was entered into with one or more consumers as a result of the advertisement. [p. 827]
[139] The applicability of the penal provisions is governed by a specific rule: s. 277 C.P.A. provides that an offence is committed where, inter alia, a person contravenes the Act. This rule, which constitutes a departure from s. 2 of the Act, can be explained by the fact that penal proceedings are instituted in the general interest. Thus, the purpose of such proceedings is not to protect the private interests of one or more consumers, but to protect the public in general from business practices that may be misleading. On the other hand, the general rule set out in s. 2 C.P.A. necessarily applies where consumers apply for the protection of the Act (Masse, at pp. 28‑29), for example, when they seek to avail themselves of the recourses provided for in s. 272 C.P.A. Therefore, s. 217 C.P.A. is not intended to govern the conditions under which the recourses provided for in s. 272 C.P.A. are available and can be exercised. The principles that apply to s. 217 C.P.A. are different from those that apply to s. 272 C.P.A., and the two provisions have different roles in the scheme of the C.P.A.
(6) Application of the Principles to This Appeal
[140] The appellant has not asked for any contractual remedies in this case. He is instead seeking the equivalent of US$1 million in damages. Although his motion to institute proceedings is unclear in this respect, it became apparent as the case progressed that this amount is mainly for punitive damages and also includes an incidental amount for an extracontractual claim. We must begin by determining whether the appellant has established the respondents’ extracontractual liability on the basis of the principles discussed above.
[141] To establish the respondents’ extracontractual liability, the appellant had to show that they had engaged in a prohibited practice. He then had to prove that he had seen the representation constituting a prohibited practice before the contract was formed, amended or performed and that a sufficient nexus existed between the representation and the goods or services covered by the contract. If these facts were proven, the absolute presumption of prejudice would apply and the respondents’ extracontractual liability would be triggered for the purposes of s. 272 C.P.A. The appellant did prove this. We have already found that the respondents contravened ss. 219 and 228 C.P.A. Whether the appellant saw the representations in question does not present any problems, since it is common ground that he subscribed to Time magazine after reading the documentation the respondents had sent him. Finally, there is no doubt that a sufficient nexus existed between the content of the Document and Time magazine: not only did the Document promote the magazine directly, but the trial judge found that the appellant would not have subscribed to the magazine had he not read the misleading documentation (para. 49). As a result, we find that the appellant has discharged his burden of proving a sufficient nexus between the prohibited practices engaged in by the respondents and his subscription contract with the respondents. This means that for the purposes of s. 272 C.P.A., the Document is deemed to have had a fraudulent effect on the appellant’s decision to subscribe to Time magazine. The conduct of the respondents that is in issue constitutes a civil fault.
[142] The trial judge found that the respondents’ fault had caused moral injuries to the appellant and awarded him $1,000 in compensatory damages. In this Court, the respondents have not shown that the trial judge erred in assessing the evidence or in applying the legal principles with regard either to their liability or to the quantum of damages. There is no reason for this Court to interfere with those findings. The appeal will accordingly be allowed to restore this part of the trial judge’s judgment.
E. Did the Trial Judge Err in Awarding the Appellant Punitive Damages?
[143] In this part of our reasons, we must define the legal principles and tests that govern the admissibility of a recourse in punitive damages under s. 272 C.P.A. and the determination of the quantum of such damages. These questions of law will of course be considered on the basis of the trial judge’s findings of fact, unless palpable and overriding errors were made in assessing the facts (Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 25 and 37; H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401).
(1) Independent Nature of Punitive Damages
[144] The respondents argue in their factum that a claim for punitive damages under s. 272 C.P.A., like a claim for compensatory damages, is admissible only if one of the contractual remedies provided for in s. 272(a) to (f) is awarded at the same time (R.F., at para. 91). They submit that the trial judge erred in ordering them to pay punitive damages, because she had not awarded the appellant any of the remedies provided for in s. 272(a) to (f) C.P.A. In our opinion, the respondents’ argument is wrong in law and must fail.
[145] First of all, as with compensatory damages, we must take account of the actual wording of s. 272 C.P.A., which clearly states that consumers who exercise a recourse under that section “may also claim punitive damages”. As we explained above, this confirms that the legislature intended to allow consumers who exercise a recourse under s. 272 C.P.A. to choose between a number of remedies capable of correcting the effects of the violation of the rights conferred on them by the Act. Consumers who exercise the recourse provided for in s. 272 C.P.A. can therefore choose to claim contractual remedies, compensatory damages and punitive damages or to claim just one of those remedies. It will then be up to the trial judge to award the remedies he or she considers appropriate in the circumstances.
[146] Moreover, our interpretation is consistent with the one adopted by this Court in de Montigny v. Brossard (Succession), 2010 SCC 51, [2010] 3 S.C.R. 64. In that case, the Court stated that s. 49, para. 2 of the Charter of human rights and freedoms, R.S.Q., c. C-12 (“Quebec Charter”) creates an independent and distinct right to claim punitive damages. In its decision, the Court accepted (at para. 40) the opinion expressed by L’Heureux-Dubé J., dissenting in part, in Béliveau St‑Jacques v. Fédération des employées et employés de services publics inc., [1996] 2 S.C.R. 345, at para. 62, that the words “in addition” in s. 49, para. 2 of the Quebec Charter
simply mean that a court can not only award compensatory damages but can “in addition”, or equally, as well, moreover, also (see the definition of “en outre” in Le Grand Robert de la langue française (1986), vol. 6), grant a request for exemplary damages. The latter type of damages is therefore not dependent on the former. [Emphasis in original.]
According to LeBel J. in de Montigny, “[t]he solution adopted by L’Heureux‑Dubé J. seems in fact to be the appropriate one in cases where, as here, the imperative of preserving government compensation systems is not part of the legal context” (para. 42). These comments are also applicable in the instant case.
[147] Consumers can be awarded punitive damages under s. 272 C.P.A. even if they are not awarded contractual remedies or compensatory damages at the same time. This means that there was nothing to prevent the trial judge from ordering the respondents to pay punitive damages.
(2) General Criteria for Awarding Punitive Damages
(a) Heterogeneous Nature of the Criteria in Quebec Civil Law
[148] The respondents argue that, even if this Court finds that the appellant has the legal interest required to claim punitive damages, such damages cannot be awarded on the facts of this case. The respondents urge the Court to accept that an award of punitive damages under s. 272 C.P.A. is appropriate only if the conduct of the merchant or manufacturer was in bad faith or malicious (R.F., at para. 133). They rely in this regard on this Court’s reasons in several decisions rendered in cases concerning the common law: Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, Vorvis v. Insurance Corporation of British Columbia, [1989] 1 S.C.R. 1085, and Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595. In our opinion, this argument is wrong and must fail.
[149] To begin with, the decisions of this Court upon which the respondents rely were rendered in tort cases at common law. But the conditions for claiming punitive damages are approached very differently in Quebec civil law and at common law. At common law, punitive damages can be awarded in any civil suit in which the plaintiff proves that the defendant’s conduct was “malicious, oppressive and high‑handed [such] that it offends the court’s sense of decency”: Hill, at para. 196. The requirement that the plaintiff demonstrate misconduct that represents a marked departure from ordinary standards of decency ensures that punitive damages will be awarded only in exceptional cases (Whiten, at para. 36).
[150] In Quebec civil law, this test has not been adopted in its entirety. Punitive damages are an exceptional remedy in the civil law, too. Article 1621 C.C.Q. provides that they can be awarded only where this is provided for by law. The Civil Code of Québec does not create a general scheme for awarding punitive damages and does not establish a right to this remedy in all circumstances :
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.
As a result, [translation] “punitive damages must be denied where there is no enabling enactment” (J.-L. Baudouin and P. Deslauriers, La responsabilité civile (7th ed. 2007), vol. I, Principes généraux, at para. 1‑364; see also Béliveau St‑Jacques, at para. 20). The Quebec legislature thus intended to leave it to specific statutes to identify situations in which punitive damages can be awarded and, in some cases, establish the requirements for awarding them or rules for calculating them. Article 1621 C.C.Q. plays only a suppletive role by establishing a general principle for awarding such damages and by identifying their purpose.
[151] The legislature has thus retained greater flexibility in structuring specific schemes for awarding punitive damages. A review of Quebec legislation containing provisions that authorize awards of punitive damages confirms the flexibility and variability of the rules applicable to such damages in Quebec law. On the one hand, the enabling provisions take a variety of forms. Not all of them require proof that the act was malicious, oppressive or high‑handed, which is required at all times at common law. For example, a violation of s. 1 of the Tree Protection Act, R.S.Q., c. P‑37, automatically entails the payment of punitive damages. As well, art. 1899 C.C.Q., s. 56 of the Act respecting prearranged funeral services and sepultures, R.S.Q., c. A‑23.001, and, of particular relevance in this appeal, s. 272 of the C.P.A. do not explicitly require malicious or high‑handed conduct.
[152] On the other hand, the legislature does sometimes provide that malicious conduct or intentional fault must be proven in order to obtain punitive damages. Some examples are (1) s. 49 of the Quebec Charter (unlawful and intentional interference); (2) s. 167 of the Act respecting access to documents held by public bodies and the protection of personal information, R.S.Q., c. A‑2.1 (gross neglect or intentional infringement); (3) arts. 1968 and 1902 C.C.Q. (bad faith or harassment); and (4) s. 67 of the Petroleum Products Act, R.S.Q., c. P‑30.01 (abusive and unreasonable business practice). If the Hill test were applicable by default in Quebec civil law as proposed by the respondents (R.F., at paras. 133‑36), it would be very difficult to explain the legislature’s decision to insert the equivalent of that test into various statutes.
[153] Thus, unlike in the common law, there is no unified scheme for awarding punitive damages in Quebec civil law. Moreover, it cannot be argued that there is a traditional rule in Quebec civil law to the effect that only malicious misconduct can result in an award of such damages.
(b) Factors to Consider in Developing Criteria for Awarding Punitive Damages
[154] In this legislative context, in view of the silence of the Act, the criteria for awarding punitive damages must be established by taking account of the general objectives of punitive damages and those of the legislation in question.
[155] Article 1621 C.C.Q. itself requires that the general objectives of punitive damages be taken into account. It indicates that punitive damages are essentially preventive. Under it, the ultimate objective of an award of punitive damages must always be to prevent the repetition of undesirable conduct. This Court has held that the preventive purpose of punitive damages is fulfilled if such damages are awarded where an individual has engaged in conduct the repetition of which must be prevented, or that must be denounced, in the specific circumstances of the case in question (Béliveau St‑Jacques, at paras. 21 and 126; de Montigny, at para. 53). Where a court chooses to punish a wrongdoer for misconduct, its decision indicates to the wrongdoer that he or she will face consequences both for that instance of misconduct and for any repetition of it. An award of punitive damages is based primarily on the principle of deterrence and is intended to discourage the repetition of similar conduct both by the wrongdoer and in society. The award thus serves the purpose of specific and general deterrence. In addition, the principle of denunciation may justify an award where the trier of fact wants to emphasize that the act is particularly reprehensible in the opinion of the justice system. This denunciatory function also helps ensure that the preventive purpose of punitive damages is fulfilled effectively.
[156] The need to also consider the objectives of the legislation in question is justified by the fact that the right to seek punitive damages in Quebec civil law always depends on a specific legislative provision. As well, punitive damages in their current form are not intended to sanction generally every act prohibited by law. Rather, their purpose is to protect the integrity of a legislative scheme by sanctioning any act that is incompatible with the objectives the legislature was pursuing in enacting the statute in question. The types of conduct whose repetition needs to be prevented and the legislature’s objectives are determined on the basis of the statute under which a sanction is sought.
[157] In practice, to discharge its obligation to take the above‑mentioned objectives into account, the court must identify the types of conduct that are incompatible with the objectives the legislature was pursuing in enacting the statute in question and that interfere with the achievement of those objectives. Punitive damages can be awarded only for those types of conduct.
(3) Criteria for Awarding Punitive Damages Under Section 272 C.P.A.
[158] Under s. 272 C.P.A., punitive damages can be sought only if it is proved that an obligation resulting from the Act has not been fulfilled. However, s. 272 establishes no criteria or rules for awarding such damages. It is thus necessary to refer to art. 1621 C.C.Q. and determine what criteria for awarding punitive damages would suffice to enable s. 272 C.P.A. to fulfil its function.
[159] The objectives of the Act must therefore be identified to ensure that punitive damages will indeed meet the objectives of art. 1621 C.C.Q.
(a) Objectives of the C.P.A.
[160] The C.P.A.’s first objective is to restore the balance in the contractual relationship between merchants and consumers (Roy, at p. 466; L’Heureux and Lacoursière, at pp. 25‑26). This rebalancing is necessary because the bargaining power of consumers is weaker than that of merchants both when they enter into contracts and when problems arise in the course of their contractual relationships. It is also necessary because of the risk of informational vulnerability consumers face at every step in their relations with merchants. In sum, the obligations imposed on merchants and the formal requirements for contracts to which the Act applies are intended to restore the balance between the respective contractual powers of merchants and consumers (L’Heureux and Lacoursière, at pp. 26‑31).
[161] The C.P.A.’s second objective is to eliminate unfair and misleading practices that may distort the information available to consumers and prevent them from making informed choices (L’Heureux and Lacoursière, at pp. 479 et seq.). Most of the measures imposed by the legislature to achieve this objective are found in Title II of the C.P.A., which we discussed above.
[162] The legislature’s intention in pursuing these two objectives is to secure the existence of an efficient market in which consumers can participate confidently.
(b) Differences of Opinion Among Judges About the Criteria for Awarding Punitive Damages Under the C.P.A.
[163] The criteria to be applied in awarding punitive damages under the C.P.A. are not at all clear from the decisions of the Quebec courts. Sharply conflicting positions can be found both in the case law and in the academic literature. We will discuss these positions before proposing a test for implementing the recourse in punitive damages.
[164] According to one of these positions, proof of conduct that is intentional or in bad faith, or of gross fault or similar behaviour, is necessary. The Quebec Court of Appeal has rejected this approach for more than a decade now (see Lambert v. Minerve Canada, compagnie de transport aérien inc., [1998] R.J.Q. 1740 (C.A.), and, more recently, Brault & Martineau (C.A.), at para. 44). However, it would seem that some judges have nevertheless continued to require such proof (see, e.g., Lafontaine v. La Source d’eau Val‑d’Or inc., 2001 CanLII 10566 (C.Q.), at paras. 50‑51; Jabraian v. Trévi Fabrication Inc., 2005 CanLII 10580 (C.Q.), at para. 31; Santangeli v. 154995 Canada Inc., 2005 CanLII 32103 (C.Q.), at paras. 34‑35; Martin v. Rénovations métropolitaines (Québec) ltée, 2006 QCCQ 1760 (CanLII), at para. 75; Darveau v. 9034‑9770 Québec inc., 2005 CanLII 41136 (C.Q.), at para. 123).
[165] This position is inconsistent with the objectives of the C.P.A. The burden of proof it imposes would not contribute to changing the conduct of merchants and manufacturers. This interpretation of the Act would not encourage merchants and manufacturers to fulfil the obligations imposed on them by the C.P.A. Instead, it might suggest to them that they do not have to worry about complying with the Act as long as their violations are not particularly serious. L’Heureux and Lacoursière note that the requirement of bad faith could sterilize the implementation of the Act, so they propose a test based on conduct [translation] “that goes beyond what is normal” (p. 630).
[166] According to the second position, a finding that an obligation imposed by the C.P.A. has not been fulfilled is in itself sufficient to justify an award of punitive damages. Duval Hesler J.A. (as she then was) took this position in Brault & Martineau (C.A.):
[translation] In my opinion, and at the risk of repeating myself, the existence of an unlawful business practice, such as advertising that does not meet the requirements of the CPA, in itself justifies an award of punitive damages. [Emphasis added; para. 45.]
[167] This position lies at the other end of the spectrum of solutions contemplated by the courts. Such a strict, if not automatic, application of s. 272 C.P.A. is not necessary to achieve the legislature’s objectives.
[168] It is true that consumers should be encouraged to enforce their rights under the C.P.A. This does not necessarily mean that court proceedings must always be instituted for this purpose or that informal methods of dispute resolution cannot be considered first. It seems to us that the commencement of proceedings implies the failure of attempts by a consumer and a merchant or manufacturer to resolve their disagreement informally. The rule advocated by Duval Hesler J.A. would make an informal resolution less appealing and would encourage the indiscriminate judicialization of disputes that might have been resolved differently. Punitive damages would then be awarded in circumstances in which doing so would serve none of the objectives of the C.P.A. or of punitive damages generally.
[169] According to a third position, an award of punitive damages is justified where there is proof of a certain carelessness by a merchant or manufacturer with respect to the Act and the conduct it is supposed to prevent. As we shall see, however, the exact level of carelessness required to satisfy this test has been defined in various, inconsistent ways by authors and judges.
[170] The carelessness test is stated in its most basic form by Professor Masse:
[translation] For [punitive damages] to be awarded, therefore, it is sufficient that the merchant display carelessness with respect to the Act and the conduct it is supposed to prevent. [p. 1000]
[171] Quebec courts have adopted Professor Masse’s opinion in several judgments: Marcotte v. Fédération des caisses Desjardins du Québec, at para. 724; Gastonguay v. Entreprises D. L. Paysagiste, 2004 CanLII 31925 (C.Q.), at paras. 77‑79; and Mathurin v. 3086‑9069 Québec Inc., 2003 CanLII 19131 (Que. Sup. Ct.), at para. 18.
[172] In Systèmes Techno‑Pompes inc. v. Tremblay, 2006 QCCA 987, [2006] R.J.Q. 1791, the Quebec Court of Appeal opted for a test of carelessness that is serious enough to justify an award of punitive damages:
[translation] Finally, the most important aspect of exemplary damages is the prevention of similar conduct. Before awarding such damages, a court must assess the merchant’s conduct to determine whether it displays carelessness with respect to the consumer’s rights that is serious enough to justify imposing an additional sanction in order to prevent the conduct from being repeated.
It was this last objective of punishment and deterrence that the trial judge adopted as a basis for awarding exemplary damages. It can hardly be concluded that the appellant displayed malice and carelessness that were serious enough to justify an additional sanction. [Emphasis added; paras. 33‑34.]
[173] Similarly, in Champagne v. Toitures Couture et Associés inc., [2002] R.J.Q. 2863, Poulin J. of the Quebec Superior Court denied an award of punitive damages on the basis that there was little risk of the defendant acting carelessly again with respect to the application of the Act (para. 79).
[174] According to the Court of Appeal in Systèmes Techno‑Pompes inc. and the Superior Court in Champagne, a violation of the C.P.A. that results from mere carelessness by a merchant will not as a general rule suffice to justify an award of punitive damages. Although we accept this proposition in principle, it is our opinion that the decision to award punitive damages should also not be based solely on the seriousness of the carelessness displayed at the time of the violation. That would encourage merchants and manufacturers to be imaginative in not fulfilling their obligations under the C.P.A. rather than to be diligent in fulfilling them. As we will explain below, our position is that the seriousness of the carelessness must be considered in the context of the merchant’s conduct both before and after the violation. At this point, we will look more specifically at the types of conduct other than carelessness that are covered by the recourse in punitive damages provided for in s. 272 C.P.A.
(c) Criteria for Awarding Punitive Damages
[175] In establishing the criteria for awarding punitive damages under s. 272 C.P.A., it must be borne in mind that the C.P.A. is a statute of public order. No consumer may waive in advance his or her rights under the Act (s. 262 C.P.A.), nor may any merchant or manufacturer derogate from the Act, except to offer more advantageous warranties (s. 261 C.P.A.). The provisions on prohibited practices are also of public order (L’Heureux and Lacoursière, at pp. 443 et seq.).
[176] The fact that the consumer‑merchant relationship is subject to rules of public order highlights the importance of those rules and the need for the courts to ensure that they are strictly applied. Therefore, merchants and manufacturers cannot be lax, passive or ignorant with respect to consumers’ rights and to their own obligations under the C.P.A. On the contrary, the approach taken by the legislature suggests that they must be highly diligent in fulfilling their obligations. They must therefore make an effort to find out what obligations they have and take reasonable steps to fulfil them.
[177] In our opinion, therefore, the purpose of the C.P.A. is to prevent conduct on the part of merchants and manufacturers in which they display ignorance, carelessness or serious negligence with respect to consumers’ rights and to the obligations they have to consumers under the C.P.A. Obviously, the recourse in punitive damages provided for in s. 272 C.P.A. also applies, for example, to acts that are intentional, malicious or vexatious.
[178] The mere fact that a provision of the C.P.A. has been violated is not enough to justify an award of punitive damages, however. Thus, where a merchant realizes that an error has been made and tries diligently to solve the problems caused to the consumer, this should be taken into account. Neither the C.P.A. nor art. 1621 C.C.Q. requires a court to be inflexible or to ignore attempts by a merchant or manufacturer to correct a problem. A court that has to decide whether to award punitive damages should thus consider not only the merchant’s conduct prior to the violation, but also how (if at all) the merchant’s attitude toward the consumer, and toward consumers in general, changed after the violation. It is only by analysing the whole of the merchant’s conduct that the court will be able to determine whether the imperatives of prevention justify an award of punitive damages in the case before it.
(d) Summary of Principles
[179] The principles applicable to the recourse in punitive damages under the C.P.A. can be summarized as follows:
· The current rule in Quebec civil law is that punitive damages may be awarded only if there is a legislative provision authorizing them;
· Once an enabling legislative provision has been identified, the court must first determine whether the plaintiff has the interest required to claim punitive damages under that provision;
· The court is bound by any criteria for awarding punitive damages established in the enabling provision;
· If the conditions for awarding punitive damages or the criteria for assessing them are not set out in the enabling statute, the court must consider the general provisions of art. 1621 C.C.Q. and the objectives of the enabling statute;
· For this purpose, the court must identify the conduct that is to be sanctioned to discourage its repetition, having regard to the general objectives of punitive damages under art. 1621 C.C.Q. and the objectives the legislature was pursuing in enacting the statute in question. The court must determine (1) whether the conduct is incompatible with the objectives the legislature was pursuing in enacting the statute and (2) whether it interferes with the achievement of those objectives.
[180] In the context of a claim for punitive damages under s. 272 C.P.A., this analytical approach applies as follows:
· The punitive damages provided for in s. 272 C.P.A. must be awarded in accordance with art. 1621 C.C.Q. and must have a preventive objective, that is, to discourage the repetition of undesirable conduct;
· Having regard to this objective and the objectives of the C.P.A., violations by merchants or manufacturers that are intentional, malicious or vexatious, and conduct on their part in which they display ignorance, carelessness or serious negligence with respect to their obligations and consumers’ rights under the C.P.A. may result in awards of punitive damages. However, before awarding such damages, the court must consider the whole of the merchant’s conduct at the time of and after the violation.
F. Is the Appellant Entitled to Punitive Damages in This Case?
[181] The trial judge found that the respondents had intentionally violated the C.P.A. in a calculated manner:
The very same “conditional” wording which enabled Time to avoid the argument that a contract was formed or that it undertook unconditionally to pay $833,337 to Mr. Richard, illustrates the contention that this document was specifically designed to mislead the recipient, that it contains misleading and even false representations, contrary to the clear wording of [section] 219 of the Consumer Protection Act . . . . [Italics in original, underlining added; para. 34.]
[182] These findings contain no palpable and overriding errors. Accordingly, this Court would not be justified in changing them.
[183] These findings are fatal to the respondents’ defence in the circumstances of this case. The violations in issue were intentional and calculated. Moreover, nothing in the evidence indicates that, after the appellant complained, the respondents took corrective action to make their advertising clear or consistent with the letter and spirit of the C.P.A. On the contrary, the evidence suggests that they rejected his entire claim and proposed nothing. An award of punitive damages was therefore justified.
[184] For these reasons, we would allow the appellant’s recourse in respect of the claim for punitive damages. The appropriate quantum of damages remains to be determined.
G. What is the Appropriate Quantum of Damages in This Case?
[185] The trial judge fixed the quantum of the punitive damages payable by the respondents to the appellant at $100,000. The respondents challenge the fairness of this amount, arguing that the trial judge erred in several respects in determining the appropriate quantum of punitive damages. They submit that, if this Court upholds the trial judge’s decision to award punitive damages, the quantum should be reduced significantly.
[186] More specifically, the respondents criticize the trial judge for (1) speculating about the number of violations of the C.P.A. they had committed; (2) taking what she perceived as a violation of the Charter of the French language into consideration in her assessment of the gravity of their conduct; and (3) making inferences about their patrimonial situation without a sufficient factual basis.
[187] Finally, according to the respondents, the trial judge’s decision to fix the quantum of punitive damages at $100,000 was arbitrary. At paragraph 71 of her reasons, the trial judge stated that she had chosen that amount because it was the amount of the bonus prize the appellant had a chance to win in addition to the grand prize of US$833,337 if he validated his entry within five days after receiving the Document. The respondents seem to be arguing that it was irrational to fix the quantum at $100,000 in these circumstances.
(1) Role of Trial Courts
[188] This appeal highlights the problems trial judges face in calculating punitive damages. Although they have a discretion in this regard, they must exercise it judicially and must also, to the extent possible, comply with the practice established by the courts and consider all the specific circumstances of each case, bearing in mind the principles of deterrence, punishment and denunciation that underlie punitive damages.
[189] Since this task requires trial judges to examine the facts carefully, the Court of Appeal must show considerable deference before varying the quantum of damages. It must not set aside a trial judge’s decision in respect of findings and inferences of fact related to the assessment of damages absent a palpable and overriding error (Housen, at paras. 1‑6, 10 and 25; H.L., at para. 53; Quebec (Public Curator) v. Syndicat national des employés de l’hôpital St‑Ferdinand, [1996] 3 S.C.R. 211, at para. 129; Landry v. Quesnel, [2002] R.J.Q. 80 (C.A.), at para. 31; C. Dallaire, “La gestion d’une réclamation en dommages exemplaires: éléments essentiels à connaître quant à la nature et l’objectif de cette réparation, les éléments de procédure et de preuve incontournables ainsi que l’évaluation du quantum”, in Congrès annuel du Barreau du Québec (2007), at p. 168).
[190] It should be borne in mind that a trial court has latitude in determining the quantum of punitive damages, provided that the amount it awards remains within rational limits in light of the specific circumstances of the case before it (St‑Ferdinand, at para. 125; Whiten, at para. 100). Appellate intervention will be warranted only where there has been an error of law or a wholly erroneous assessment of the quantum. An assessment will be wholly erroneous if it is established that the trial court clearly erred in exercising its discretion, that is, if the amount awarded was not rationally connected to the purposes being pursued in awarding punitive damages in the case before the court (St‑Ferdinand, at para. 129; Provigo Distribution inc. v. Supermarché A.R.G. inc., 1997 CanLII 10209 (Que. C.A.)). In our opinion, errors of this nature have been made in the case at bar, and they warrant the intervention of this Court in assessing the quantum of punitive damages.
(2) Trial Judge’s Assessment of the Quantum of Punitive Damages
[191] In her decision to award punitive damages, the trial judge began by noting that the respondents’ fault was of considerable gravity, since they had sent false and misleading advertisements to thousands of French‑speaking consumers in Quebec. The respondents sharply dispute this finding of fact by the trial judge. In their view, no evidence was adduced to support this finding, and the appropriate quantum of punitive damages should instead have been established on the assumption that only one advertisement was sent to only one consumer (R.F., at para. 109).
[192] This argument is untenable. William Miller, Director of Promotion Policy for the respondent Time Consumer Marketing Inc., himself testified that “[t]he sweepstakes are used to attract attention to our subscription promotions” (A.R., vol. II, at p. 4). He also explained in detail that Time Inc. had decided to send out direct mailings using several lists of names in order to increase subscriptions (A.R., vol. II, at p. 5). The mailings were personalized to attract the attention of consumers and invite them to subscribe to Time magazine (trial judgment, at para. 21; A.R., vol. II, at pp. 4 and 5). We infer from Mr. Miller’s testimony that the distribution of such mailings was not only a common practice for the respondents but was also done on a large scale. In light of this evidence, although the trial judge did not have evidence that could indicate the precise number of mailings, her finding cannot be characterized as wholly erroneous. In our opinion, the gist of her finding was that the respondents had sent many mailings in Quebec to a large number of consumers. The evidence supporting this finding was something she could properly consider in analysing the gravity of the respondents’ conduct in this case. The quantum of punitive damages cannot therefore be revised on this basis.
[193] The respondents also challenge the trial judge’s findings (1) that Time Inc. violated the Charter of the French language, in particular by sending out advertising material in English only (paras. 64‑65), and (2) that this violation had to be taken into consideration in determining the appropriate quantum. On this issue, the respondents are correct. It was not open to the trial judge to consider the Charter of the French language in assessing the appropriate quantum of punitive damages. The C.P.A. and the Charter of the French language are two separate statutes with distinct legislative objectives. Moreover, violations of the Charter of the French language are sanctioned pursuant to its own provisions.
[194] Finally, the respondents argue that the trial judge made palpable and overriding errors in her conclusions respecting their patrimonial situation. First of all, they submit that she erred in finding that William Miller, Director of Promotion Policy for Time Consumer Marketing Inc., had admitted in his testimony that the company “certainly [had] the capacity to pay the amount of US$833,337” (per Cohen J., at para. 24). A second submission the respondents make in this regard is that there was no basis in the facts for the trial judge’s finding that the evidence established that their advertising campaign was lucrative in terms of the subscriptions they generated. We are in partial agreement with the respondents on this point. In our opinion, the trial judge did in fact err in attributing to Mr. Miller an admission he had not actually made. On the other hand, we do not consider it unreasonable for her to find that the respondents’ advertising campaign was profitable.
[195] Where Mr. Miller’s testimony is concerned, we, like the respondents, were unable to find any admission in it that Time Inc. was capable of paying the amount of US$833,337 claimed by the appellant. Quite the contrary, it is clear from his testimony that at no time did Mr. Miller attempt to quantify the company’s assets or assess its ability to pay. Indeed, he said he was unable to do so because he was not part of the company’s financial team (testimony of William Miller, at p. 32, lines 2‑4). We believe it would be helpful to reproduce the relevant passage from Mr. Miller’s testimony on this point:
THE COURT:
[William Miller] admitted [that Time Inc.] did [use the advertising scheme at issue over the years]. Why don’t you ask him if Time is able to pay that amount if I would award the amount in the claim, the part of the claim which relates to moral and punitive damages?
[HUBERT SIBRE]:
Q. 338 Would Time be able to pay this amount? Would it have the solvency to pay this amount if ever condemned?
[A.] You know, I’m not part of the financial structure of the company so I really can’t comment on that. [Emphasis added; A.R., vol. II, at pp. 31‑32.]
[196] This passage speaks for itself. The trial judge’s finding that Mr. Miller had made an admission regarding Time Inc.’s ability to pay had no basis in the facts and constituted a palpable error. The trial judge was not therefore in a position to make, as she did, findings with respect to the respondents’ patrimonial situation on the basis of this testimony.
[197] However, our conclusion is quite different as to the trial judge’s finding that the respondents’ advertising campaign that led to this litigation was profitable. The respondents argue that it was not open to the trial judge to make this finding, (1) because all that had been proven was that a single consumer had purchased a single subscription, and (2) because the fact that Time Inc. had paid out more than US$1 million to winners of its sweepstakes in the year 2000 provided no information on its patrimonial situation in 2007 (the year of the trial judge’s decision in this case). In our view, these arguments are unconvincing. In Mr. Miller’s own words, the respondents had been organizing promotional sweepstakes in Canada and the United States since the mid‑1980s. He added that several hundred people had won amounts ranging from US$1,000 to $1,600,000 in these sweepstakes, the admitted purpose of which was to attract consumers’ attention to the respondents’ subscription promotions (testimony of William Miller, A.R., vol. II, at p. 4). We find it logical and reasonable, in light of the amounts paid out by Time Inc. and the number of years that the promotional sweepstakes have existed, to infer from the evidence, as the trial judge did, that these sweepstakes were lucrative in that they enabled Time Inc. to add significantly to its readership.
[198] When all is said and done, should this Court vary the amount of $100,000 awarded by the trial judge as punitive damages? In our opinion, it should. Although the trial judge did not err in finding that the respondents had sent many mailings in Quebec to a large number of consumers and that these promotional sweepstakes had enabled them to sell many new subscriptions, we consider that the errors she made had a by no means insignificant impact on her assessment. In light of those errors and the fact that the trial judge’s decision seems to have been influenced by the fact that the respondents had promised a $100,000 bonus in addition to the grand prize, we believe that it will be necessary to re‑assess the quantum of the punitive damages she awarded.
(a) Criteria for Assessing the Quantum
[199] An assessment of the quantum of punitive damages must start with art. 1621 C.C.Q., which sets out some guiding principles that are intended to bring greater consistency and objectivity to the assessment of such damages (J.‑L. Baudouin and P.‑G. Jobin, Les obligations (6th ed. 2005), by P.-G. Jobin with the collaboration of N. Vézina, at para. 912). Article 1621 C.C.Q. begins by stating that the amount awarded as punitive damages must never exceed what is necessary to fulfil their preventive purpose. The second paragraph of art. 1621 adds that the amount must be determined in light of all the appropriate circumstances, in particular (1) the gravity of the debtor’s fault, (2) the debtor’s patrimonial situation, (3) the extent of the reparation for which the debtor is already liable to the creditor and (4), where such is the case, the fact that the payment of the damages is wholly or partly assumed by a third person.
[200] The gravity of the fault is undoubtedly the most important factor (Genex Communications inc. v. Association québécoise de l’industrie du disque, du spectacle et de la vidéo, 2009 QCCA 2201, [2009] R.J.Q. 2743; Fondation québécoise du cancer v. Patenaude, 2006 QCCA 1554, [2007] R.R.A. 5; Voltec ltée v. CJMF FM ltée, [2002] R.R.A. 1078 (C.A.); Baudouin, Jobin and Vézina, at para. 912). It is assessed from two perspectives: the wrongful conduct of the wrongdoer and the seriousness of the infringement of the victim’s rights. According to Claude Dallaire, the courts consider the gravity of the conduct and its impact on the victim (pp. 127 et seq.). The analysis of the evidence will therefore be focused sometimes on the offender’s conduct and sometimes on the effect of that conduct on the victim (Procureur général du Québec v. Boisclair, [2001] R.J.Q. 2449 (C.A.), at paras. 9‑10). In either case, it must be borne in mind that a myriad of contextual factors can be taken into account in the analysis. If, for example, the evidence shows that the contract was abusive, that the merchant committed a fault and gained an undue competitive advantage by doing so, or that the consumers who were victims of the practice were particularly vulnerable, these facts will obviously be relevant to the assessment of the gravity of the fault.
[201] The second factor mentioned in art. 1621, para. 2 C.C.Q. is the debtor’s patrimonial situation, and its purpose is to ensure that the amount of the award is tailored to the offender’s situation in order to achieve the intended effect of the statute in question. Thus, the larger the debtor’s patrimony, the higher the award of punitive damages must be to ensure that the general objectives of such damages are achieved and to discourage any repetition. The reverse is also true where a debtor is of modest means. Obviously, even where an offender is extremely wealthy, the amount of the award must still be rationally connected with the purposes for which punitive damages are awarded in a particular case.
[202] The third factor mentioned in art. 1621, para. 2 C.C.Q., the extent of the reparation already awarded under other heads, is an analytical criterion that has been used frequently (St‑Ferdinand; Augustus v. Gosset, [1996] 3 S.C.R. 268; Lambert v. Macara, [2004] R.J.Q. 2637 (C.A.)). According to it, the court must not award punitive damages unless compensatory damages are not enough to discourage repetition either because their amount is too small or because they will have no impact on the debtor’s financial situation. However, this principle does not change the independent nature of punitive damages. Even if an award of compensatory damages is generous, it will not necessarily preclude an award of punitive damages.
[203] Finally, the purpose of the fourth factor mentioned in art. 1621, para. 2 C.C.Q. is to adjust the quantum of punitive damages on the basis of the total amount the debtor will have to pay personally. This assessment ensures that the amount of the award will actually have the intended effect on the offender. The amount may sometimes have to be varied where a third person is paying, since the objective of preventing repetition is then achieved through an intermediary. The person actually paying must thus be punished to motivate that person to encourage the wrongdoer to change his or her ways. Closely related to this consideration, another purpose of this factor is to evaluate the real utility of the second of the factors mentioned in art. 1621, para. 2 C.C.Q., namely the debtor’s patrimonial situation. Thus, where the debtor of the obligation will not personally be paying the amount of the award of punitive damages, there is no need to assess his or her patrimony to determine that amount.
(b) Other Criteria to be Considered
[204] Although art. 1621, para. 2 C.C.Q. lists various factors that are relevant in determining the appropriate quantum of punitive damages, the fact that this list is preceded by the words “all the appropriate circumstances” and “in particular” clearly indicates that the legislature intended that it be possible to consider other, unnamed factors as well. In our view, it will be helpful to mention a few of the factors we believe can be of assistance to trial courts in this regard. Some of them have already been referred to by the Quebec courts, while others, although taken from the common law, can also be applied within the framework of Quebec law in this area.
[205] First, where rights and freedoms guaranteed by the Quebec Charter have been interfered with, the courts have held that the identity and characteristics of a legal person established for a private interest can also be considered. The courts’ approach to the quantification of damages may therefore vary depending on whether the wrongdoer is a natural person, a legal person or a legal person established in the public interest. [translation] “It is easy to understand why the courts react unfavourably to antisocial conduct on the part of a legal person established for a private interest or a legal person established in the public interest that is greedy to make profits or to gain political or strategic advantages” (Dallaire, at pp. 131‑33).
[206] Also, in our opinion, it is perfectly acceptable to use punitive damages, as is done at common law, to relieve a wrongdoer of its profit where compensatory damages would amount to nothing more than an expense paid to earn greater profits while flouting the law (Whiten, at para. 72).
[207] Third, the civil, disciplinary or criminal history of the person guilty of a violation may be a relevant factor. The amount awarded against a wrongdoer who has committed a first offence and whose previous conduct has been exemplary may therefore differ from the amount awarded against one who has been involved in many serious prior offences (Whiten, at para. 69; Dallaire, at pp. 136‑42 and 164‑65).
[208] Finally, in addition to the fact that compensatory damages have been awarded, the trial court can, in determining the appropriate quantum of punitive damages in the civil proceedings before it, take account of any disciplinary, criminal or administrative penalties that have already been imposed as punishment for the offender’s conduct (Whiten, at para. 123). In appropriate circumstances, therefore, the quantum of punitive damages may be limited because such other penalties have already contributed to achieving the legislature’s objective of prevention.
[209] We note that the above factors must not be considered automatically by the trial court in every case. Their relevance will depend on the circumstances of the specific case. As well, these factors do not represent an exhaustive list of the considerations that are relevant to determining the quantum of punitive damages. Every relevant factor can be considered, provided that the purpose of the analysis remains the same: to ensure that the amount awarded as punitive damages is rationally proportionate to the objectives for which those damages are awarded in the case in question, having due regard to the specific circumstances of the case (Whiten, at paras. 74 and 111).
(3) Application to the Facts
[210] Where a court decides to award punitive damages, it must relate the facts of the case before it to the objectives that underlie such damages and ask itself how, in that particular case, awarding them would further those objectives. It must try to fix the most appropriate amount, that is, the lowest amount that would serve the purpose (Whiten, at para. 71). Even if we disregard the alleged violation of the Charter of the French language as an aggravating factor, the fact remains that the respondents’ conduct was serious and deliberate and that it was capable of affecting a large number of consumers. Moreover, even after the consumer complained about their misleading practices, there is no evidence that the respondents did anything to correct them. This must also be considered an aggravating factor.
[211] On the other hand, the impact of the respondents’ fault on the appellant remains quite limited, though, granted, not negligible. The appellant subscribed to Time magazine, began receiving it the following month and also received, as promised, a camera and photo album as a bonus. Moreover, he never asked to be reimbursed for the cost of the subscription to Time magazine on the basis of the misleading advertising material. As we have seen, he instituted a proceeding in which he alleged that the respondents were contractually bound to pay him $1,250,887.10, a claim which proved to be unfounded. Thus, the appellant’s attitude has contributed to the proportions this case has ultimately assumed.
[212] In a context in which a large number of consumers may have been victims of the prohibited practices engaged in by the respondents, we believe that the limited impact of the respondents’ fault on the appellant and the appellant’s attitude in this case are relevant factors in determining the amount that should be awarded as punitive damages.
[213] Where the respondents’ patrimonial situation is concerned, the information obtained at trial was insufficient to make any useful findings. The appellant tries to get around this lack of evidence by arguing that it was open to the trial judge to take judicial notice of the fact that the respondents were wealthy. His position is based on the facts that they belong to the TimeWarner conglomerate and that the wealth of that conglomerate is common knowledge. In our view, the appellant’s position is incorrect. The respondents and TimeWarner are distinct entities, and TimeWarner is not a defendant in this case. The criterion of the patrimonial situation set out in the second paragraph of art. 1621 C.C.Q. concerns the patrimony of one or more debtors, not of third persons. The patrimony of a third person can in principle be taken into account only if it is shown that this person will be wholly or partly assuming the payment of the damages (art. 1621, para. 2 C.C.Q.). The appellant has not proven this to be the case. It follows that the fact that the respondents belong to the TimeWarner conglomerate is of no assistance to the appellant in this case. Nevertheless, we would like to make it clear that the lack of evidence regarding the respondents’ patrimonial situation in no way means that they are immune from a possible award of damages. On the contrary, it means that this Court may properly render its decision without having to assess their actual financial capacity. The Court cannot assume that the respondents’ financial capacity would not permit them to pay an award set at an otherwise reasonable amount. Moreover, it must not be forgotten that the evidence showed that the prohibited practices engaged in by the respondents had been very profitable for them from a financial standpoint. In the circumstances of this case, this is a relevant factor to be considered in determining the quantum of punitive damages.
[214] Finally, the fact that the amount of the award of compensatory damages is small favours awarding a significant amount of punitive damages. At trial, the respondents were ordered to pay $1,000 in compensatory damages, and we propose to uphold that award. However, that amount is clearly inadequate to meet the preventive purpose of art. 1621 C.C.Q.
[215] Having regard to all the factors discussed above, we would reduce the punitive damages awarded to the appellant to $15,000. This amount suffices in the circumstances to fulfil the preventive purpose of punitive damages, underlines the gravity of the violations of the Act and sanctions the respondents’ conduct in a manner that is serious enough to induce them to cease the prohibited practices in which they have been engaging, if they have not already done so.
[216] The appellant has requested costs on the amount of his original action. In our view, this request is not justified. Costs in the Superior Court and the Court of Appeal will be taxed in accordance with the tariffs applicable in those courts. However, the appellant will have his costs in this Court on a solicitor and client basis because of the importance of the issues of law he raised before us (Finney v. Barreau du Québec, 2004 SCC 36, [2004] 2 S.C.R. 17).
V. Conclusion
[217] For the reasons set out above, the appellant’s appeal is allowed in part. The judgment of the Court of Appeal, in which it set aside the judgment of the Superior Court and dismissed the appellant’s action in damages against the respondents, is set aside. The Superior Court’s judgment is restored in part, as the respondents are ordered to pay the appellant $1,000 in compensatory damages and $15,000 in punitive damages, with interest from the date of service. The appellant is entitled to costs in the Superior Court and the Court of Appeal in accordance with the tariffs applicable in those courts, and on a solicitor and client basis in this Court.
APPENDIX
Appeal allowed in part with costs.
Solicitors for the appellant: Davis, Montréal.
Solicitors for the respondents: Miller Thomson Pouliot, Montréal.