Quebec telecom company ordered to pay more than $3 million in punitive damages

A Quebec telecommunications firm, Vidéotron Inc., has been ordered to pay more than $3 million in punitive damages to consumers who were charged extra when the Internet service provider unilaterally modified the terms of their so-called “Extreme High Speed” service, held the Quebec Court of Appeal.

In a decision that examines the scope of contractual obligations, the appeal court held that a unilateral modification clause contained in the contract did not authorize Vidéotron to impose fees that “had not been agreed to in the initial contract or to modify goods and services described” in the contract. The unilateral clause in this case would have meant that consumers waived their rights conferred by sections 12 and 40 of the Quebec Consumer Protection Act (Act) – and that is prohibited by sections 261 and 262 of the Act.

The decision in Vidéotron c. Union des consommateurs, 2017 QCCA 738, will likely have an impact on contractual matters outside consumer protection matters, according to Bruce Johnston, a Montreal class action lawyer with Trudel, Johnston & Lespérance LLP.

“The decision clarifies a point that is important for consumer protection, which is the insertion of clauses that allow the provider of services to modify the contract at will,” explained Johnston. “The way the appeal court interprets the provision of the Consumer Protection Act relies also on section 1373 of the Civil Code of Québec, and the reasoning that they have on section 1373 would be applicable to any contractual law, not just in the context of consumer protection.”

In 2007, Vidéotron had more than 830,000 customers who subscribed to different Internet packages, including its extreme high speed service (EHS). EHS subscribers were allowed unlimited downloading until August 2007 when Vidéotron decided to impose a 100-gigabyte ceiling as of October 2007. Downloads over the limit were charged at $1.50 per gigabyte. According to Vidéotron, the change was required because 30 per cent of EHS subscribers consumed more than 100 gigabytes of data per month, much of it because of peer-to-peer sharing. That in turn, argued Vidéotron, slowed down network speed for the rest of its subscribers.

According to the consumers’ advocate group Union des consommateurs du Québec, which launched the class action on behalf of a representative plaintiff, approximately 34,000 Vidéotron Internet clients were affected by the unilateral policy change.

Heeding guidance from the Supreme Court of Canada in Richard v. Time 1 SCR 265, 2012 SCC 8, the appeal court noted that in a contractual relationship, the breach of an obligation set out in the Act triggers the application of an absolute presumption of harm to the consumer. If consumers want to claim compensatory damages under ordinary law, they must prove harm and establish the causal connection with the breach.

“The appeal court concluded that Vidéotron could not unilaterally modify an essential provision of the contract in question,” noted the Union. “The appeal court insists that consumers cannot renounce by contract or other means rights that were conferred to them by the Act, which is of public order.”

The appeal court ordered four out of the five classes in the class action different amounts, depending on the harm they suffered:

  • Subscribers who were slapped a fee for going over the 100 GB. According to figures provided by Vidéotron the company charged $1.2 million in over-limit charges;
  • Subscribers who kept on using the extreme high speed service in spite of the 100 GB download limits are entitled to a price reduction of $5 a month;
  • Subscribers who decided to opt for another Vidéotron internet service package who were initially charged an additional $30 a month for unlimited downloading (which was subsequently increased to $50 a month) are entitled to a $10 reduction in their monthly bill.
  • Consumers who either subscribed or renewed their subscription to the extreme high speed service between June 28, 2007 (the date when Vidéotron decided to put an end to unlimited downloading) and August 14, 2007 (the date that the firm began advising clients of the unilateral contractual change) are entitled to a compensation of $500.

In assessing and awarding punitive damages, the appeal court heeded once again guidance in the Time ruling, widely recognized as one of the most significant SCC decisions on consumer protection. The appeal court held that it is, as the SCC noted, “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.”

According to Johnston, that is a very important finding as it appears it may be the first time that the appeal court has followed this guidance in matters dealing with consumer protection. “If compensatory damages are not sufficiently dissuasive then you have to have a means that will work,” said Johnston. “If a company is forced to disgorge all of their profits, or most of their profits, then it may be less interesting for them to be careless towards respecting the law.”

Jean Saint-Onge, a Montreal class action lawyer with Lavery, has a somewhat different take on the decision. He believes that there is nothing significant in the decision except that it pays heed to the Time ruling.

On November 2015 Vidéotron lost a class action suit and was ordered to pay more than $7 million for improperly billing its television customers for a federal fund to improve local programming. Superior Court Justice Carole Hallée concluded that the Quebec firm misled consumers and deliberately overcharged, breaching the provincial consumer protection law.

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