Commercial Litigation and Dispute Resolution Blog

Bell Mobility’s slogan may ring hollow for some Canadians in light of the Ontario Court of Appeal’s decision in Sankar v. Bell Mobility Inc., 2016 ONCA 242, which will likely end the $200-million class action involving as many as one million Canadians. In reasons issued April 4, 2016, the Court upheld the decision of the motions judge who, on a summary judgment motion, found that Bell’s practice of reclaiming unused balances on prepaid cards was not a breach of contract and dismissed the claim. The decision is noteworthy because the class action was dismissed on a summary judgment motion (rather than after a full trial) and because of the way the Court determined what documents formed the contract between the parties.

The class proceeding involved Bell’s pre-paid cellular phone services and the “fate” of the balance remaining in a customer’s account when a customer failed to “top up” the account before the end of its “active period.” One of the main common issues in the class action was whether the prepaid cards expired on the last day of their active period or if they expired the day after. Bell’s practice was to claim any unused funds the day after the end of the active period. For example, if the active period ended on June 30, and the customer had not purchased a top-up in order to extend their active period, Bell would claim any remaining prepaid funds on July 1. The plaintiffs claimed that their contract with Bell required Bell to wait until the second day after the end of the active period before claiming any remaining funds (i.e. July 2).

The motions judge found that at the time it entered into contracts with its customers, Bell intended and customers understood, that the agreement would expire at the end of the active period and unused funds would be reclaimed by Bell after that time unless the account was topped up before it expired. One of the main grounds of appeal was that the motions judge improperly relied on material beyond the initial agreements customers entered into when they purchased these cards to interpret the contract between Bell and its customers.

The Court found that the motions judge was entitled to rely on documents such as the PIN receipts customers received when they topped up their account, phone cards, brochures and websites in addition to the initial agreements customers entered into and that all these documents formed part of the contract between Bell and its customers. The Court made it clear that there is a difference between considering the factual matrix surrounding the formation of a contact and considering the documents that make up the contract itself. In its decision, the Court noted that “it is not uncommon in modern contracts, including contracts made partly on ‘paper' and partly on the internet, for contract terms to be found in several ‘documents’” and that “where parties enter into interrelated agreements, the court is required to look at all those agreements to determine their construction.”

Although the appellant argued that the motions judge should have considered communications Bell sent customers after they purchased prepaid cards, but before they expired because these were misleading, and suggested customers had an additional day after the end of the activation period to top-up their accounts, the Court found that “these communications were not part of the factual matrix surrounding the formation of the contract” and that “at their highest” were post-contractual representations. While these communications might be relevant for a misrepresentation claim, they were not relevant for the contractual claim that had been certified as a common issue.

Given the manner in which the Court determined what documents formed the contract between Bell and its customers, the Sankar decision may be increasingly significant in light of the rise in internet-based components of service agreements that begin with a customer signing a traditional paper-based agreement.

With thanks to Alexandra Hughes for her assistance.