Executive Summary: Key Legal and Evidentiary Issues

• Scope and approval of a class action settlement under articles 590–593 C.p.c., including collective recovery and binding effect on all group members.
• Allocation of risk for damage to leased water heaters after storm Debby, and whether the event qualifies as force majeure relieving consumers from buy-out charges.
• Validity and application of HydroSolution’s lease termination and buy-out clauses, and whether the buy-out prices charged were abusive or lésionnaires in light of the heaters’ residual value.
• Impact of prior “retention” promotions and possible insurance indemnities on class members’ ability to recover, including arguments of prior transaction and double recovery.
• Assessment and approval of class counsel fees as a percentage of the global settlement, measured against the Code of ethics for lawyers and Quebec case law.
• Confidentiality of commercially sensitive settlement information and use of a sealing order to protect settlement-privileged financial data while still enabling judicial oversight.

Background and parties

This case arises from a proposed consumer class action in the wake of severe flooding caused by storm Debby, which struck Québec on 9 August 2024. The plaintiff, Emil Levkovsky, rented a water heater from HydroSolution for his residence. When the storm caused flooding, the rented heater was partially submerged. After Mr. Levkovsky notified HydroSolution of the damage, the company terminated his rental contract and invoiced him $599.48 as the residual “buy-out” value of the heater. HydroSolution took the position that this amount reflected the heater’s remaining value under the lease terms.
In response, Mr. Levkovsky filed an application on 16 September 2024 seeking authorization to institute a class action. His original proposed class was broad, covering all persons who had rented a water heater from HydroSolution. The defendants named in the proceeding are HydroSolution S.E.C., Enercare Recharge Limited Partnership and HydroSolution Ltée. The matter proceeded in the Class Actions Chamber of the Superior Court of Québec.

Allegations and legal framework

The plaintiff framed his claim squarely within consumer protection and contract law, against the procedural backdrop of a class action. He alleged that the damage to the heaters caused by the 9 August 2024 storm was the result of force majeure. Under the Quebec Consumer Protection Act (Loi sur la protection du consommateur, or L.p.c.), and specifically article 150.10, he argued that a lessor such as HydroSolution must assume the risk of such a force majeure event when it affects leased goods.
He further alleged that HydroSolution had represented to consumers that it would repair or replace rented heaters, so that charging a residual buy-out price after a flood was inconsistent with those representations. The plaintiff attacked the contractual termination and buy-out clause, arguing either that it did not apply on these facts, or, in the alternative, that it was contrary to mandatory protections in the L.p.c. He also asserted that the buy-out prices HydroSolution charged were abusive and lésionnaires when compared to the true residual value of the heaters.
On the basis of these allegations, the plaintiff sought significant relief on behalf of the proposed class: reimbursement of all rental instalments paid for the heaters, as well as compensatory and punitive damages. The claim therefore combined restitutionary and punitive remedies under consumer protection law, all advanced through the procedural vehicle of a class action.

Narrowed class and settlement negotiations

While the original application contemplated a very broad class, the negotiations between the parties led to a much narrower group definition tied specifically to storm Debby. In August 2025, the parties executed a settlement agreement (the Entente) to resolve the proposed class action. As part of that agreement, they redefined the group to include only persons who: (i) had rented a water heater from HydroSolution, (ii) whose heater was damaged by the storm around 9 August 2024, and (iii) who were billed buy-out charges by HydroSolution up to 1 July 2025.
On 15 August 2025, the Superior Court authorized the proposed class action for settlement purposes only, modified the class definition in line with the Entente, approved the form and content of the notice of the settlement approval hearing, set an opt-out deadline of 17 September 2025, and scheduled the approval hearing for 18 September 2025.
Notice was then disseminated extensively. HydroSolution and its co-defendants sent notices to 1,631 identified group members, either to their last known email address or by mail. Emails that bounced were followed by postal mailings. In parallel, class counsel sent notices to 682 individuals who had registered on their website, posted the notice on that website and ensured publication in the Registry of Class Actions. This combination of direct and public notice ensured group members were informed and had an opportunity to object or opt out.

Structure of the settlement benefits

The Entente tailored compensation to members’ differing situations, primarily based on whether they paid the buy-out invoice, whether they later entered into a new rental contract with HydroSolution, and whether they had received a promotional “retention” offer. The settlement was structured entirely as an “opt-out” collective recovery: eligible members would receive benefits automatically, without filing claim forms or submitting supporting documents.
First, members who had fully paid the buy-out invoice and were no longer HydroSolution customers would automatically receive a cheque for $200 sent to their last known residential address. There are 446 members in this category, for a total of $93,000 in compensation.
Second, members who had fully paid the buy-out invoice and subsequently signed a new rental contract with HydroSolution, but without receiving any promotion at that time, would also automatically receive a cheque for $200. There are 198 such members, with a total of $41,800 in compensation.
Third, members who had fully paid the buy-out and then signed a new rental contract while benefiting from a promotional “retention” offer would automatically receive a cheque for $100. This is the largest group, comprising 840 members and totaling $87,400.
Fourth, members who had paid only part of the buy-out invoice would receive a cheque for $100. There are 16 members in this situation, yielding $1,800 in total.
Fifth, members who had refused to pay the buy-out invoice at all—including the representative, Mr. Levkovsky—would receive a significant non-monetary benefit: a final release from HydroSolution, which agreed to renounce any claim it might otherwise have asserted against them for the unpaid buy-out amount. There are 131 members in this situation, and the defendants valued the economic cost of this waiver at $123,967.
In addition to these group-specific benefits, the defendants agreed to act as administrators of the settlement. They undertook to bear all administration expenses—such as the cost of notices, cheque issuance and delivery, and translation of the Entente and its schedules—on top of the amounts paid or waived for the benefit of class members. Those administrative outlays are not deducted from the compensation available to group members.

Court’s analysis of the settlement’s fairness

In assessing whether to approve the Entente, the court applied articles 590 and 593 of the Code of Civil Procedure and the established case law on class action settlements. The judge emphasized that the court’s role is to ensure that the settlement is fair, reasonable and in the best interests of the group, taking into account the objectives of class actions: judicial economy, access to justice and deterrence. The settlement need not be perfect—it is, by nature, the product of compromise—but should not be approved if serious and weighty reasons militate against it.
The court first looked at the terms and conditions of the Entente. It considered the automatic payment structure particularly favourable: members who paid or partially paid the buy-out invoice are not required to submit claims or documentation and will receive cheques sent directly to their homes. The distinctions between categories of members were found to be rational, reflecting whether they paid in full, benefited from a promotional retention offer, or only partially paid. The judge took into account confidential data on actual buy-out prices (filed under seal) and noted that, for certain categories, the refund represented close to 30% of the amounts paid, on average. Viewed against the litigation risks and the costs of pursuing expert evidence, the court considered these amounts to be significant.
The court then examined the probabilities of success if the class action had continued. It stressed that, even if authorization had been granted on the merits, the outcome was uncertain. No court had yet determined whether the 9 August 2024 storm qualifies as force majeure. The lease clauses invoked by HydroSolution to justify the buy-out charges appeared, at first glance, capable of applying. Moreover, any argument that the buy-out price was abusive or lésionnaire would hinge on proof of the true residual value of different heaters, an inherently contested and expert-heavy issue.
HydroSolution also held two substantial legal arguments that, if accepted, would have materially reduced or eliminated recovery for many members. First, nearly half of the class had signed new rental contracts with HydroSolution while receiving a promotional retention offer. HydroSolution intended to plead that these members had already transacted and compromised any claim to further reimbursement. Second, the court had authorized questioning of the representative about whether he received insurance compensation. HydroSolution intended to argue that members who had been indemnified by their insurers could not seek additional reimbursement or damages from HydroSolution, invoking concerns about double recovery. Both arguments were described as serious on their face.

Evidence, cost and delay considerations

The court underlined that taking the case through a full merits trial would have required substantial evidentiary resources. The parties would likely have needed expert evidence on whether the heaters remained functional and safe after being partially submerged, and on the proper method to calculate their residual value for the purposes of assessing whether the buy-out prices were abusive. The cost of this expert evidence would have been deducted from any eventual recovery, reducing the net benefit to the class.
Furthermore, the presence of arguments based on retention promotions and insurance payments created real uncertainty about whether a collective recovery could be ordered at all. If the court had required individual claims and assessments, class members might have needed to wait several years before any payment was made, undermining the access-to-justice and efficiency benefits of the class proceeding. In contrast, the settlement structure ensures relatively prompt, administratively simple payments or releases.

Reaction of class members and good faith of the parties

The judge considered the reaction of group members after the notice program. No member formally objected to the settlement. Only two members opted out, and one did so precisely because he had already been indemnified and recognized that he had no claim. One member wrote to express support for the Entente, while another wrote to criticize certain aspects—particularly the fact that members who had been indemnified by insurers would receive the same payments as those who had not, and that those who refused to pay the buy-out would benefit from a release. The court acknowledged these criticisms as legitimate, but concluded that they did not demonstrate that the settlement was unfair or unreasonable. Notably, the critic expressly stated that he wished to be bound by the settlement.
The court also noted the good faith of the parties and the arm’s length nature of the negotiations. There was no evidence of collusion, and the Fonds d’aide aux actions collectives submitted neutral observations without opposing the settlement. These factors supported a finding that the Entente was the product of genuine, adversarial bargaining.

Class counsel’s fees and professional obligations

A central issue was the approval of class counsel’s fees under article 593 C.p.c. and the ethical framework in the Code of ethics for lawyers. The Entente fixed class counsel’s global fees and disbursements at $115,000 plus taxes. The court highlighted several points in concluding that this amount was fair and reasonable.
First, the $115,000 represents 23.95% of the settlement amount. The court observed that this percentage falls well within the range generally accepted by Quebec courts for class actions—typically between 15% and 33%. Second, the amount is actually lower than the 30% success-based fee agreed upon between class counsel and the representative plaintiff in their original fee agreement. The court recalled that such agreements benefit from a presumption of validity and should be set aside only where their application would be unreasonable in the specific circumstances of the settlement.
Third, applying the multifactor test in the Code of ethics, the court noted counsel’s experience (approximately ten years, with a strong focus on class actions), the more than 250 hours devoted to this case, the complexity and importance of the matter, the risk taken in working without any guarantee of payment, and the advantage obtained for the class. In light of these factors, and given that the Fonds d’aide had already been fully reimbursed for the financial assistance it advanced, the court approved the fees and disbursements as proportionate and in the class’s interests.

Confidentiality order and settlement privilege

The judgment also addresses an ancillary but important issue: confidentiality of commercially sensitive information used to support settlement approval. The defendants sought an order allowing exhibit R-4, which lists the detailed buy-out amounts paid by each member and thereby reveals the residual value of HydroSolution’s leased equipment, to be filed under seal.
The court agreed that these data are confidential and, by origin, are protected by settlement privilege because they were compiled solely for negotiation and settlement purposes. In an ordinary individual dispute, such information and the content of the settlement would typically remain privileged and out of the public record. In the class action context, however, the Code of Civil Procedure requires that settlements be approved by the court, which in turn necessitates disclosure of information that would otherwise remain confidential.
Balancing the open-court principle against the public interest in fostering frank settlement negotiations, the court concluded that requiring such internal financial details to be publicly accessible would seriously undermine parties’ willingness to engage in candid settlement discussions in class proceedings. It held that there was a serious risk to this public interest, that no less intrusive measure (such as redaction) would adequately protect the information, and that the benefits of a sealing order outweighed its negative impact on transparency. Accordingly, the court authorized exhibit R-4 to be filed under seal, while making it accessible for consultation by group members at class counsel’s office.

Final orders and overall outcome

In its operative part, the court granted the application to approve the class action settlement and to approve class counsel’s fees and disbursements. It declared the Entente, including its preamble and schedules, to be a transaction within the meaning of article 2631 of the Civil Code of Québec and article 590 C.p.c., and held that it is fair, reasonable and in the true interests of the group members. The judgment orders that the settlement be binding on all parties and all group members, provides for collective recovery of their claims, and confirms that the compensation and releases described in the Entente fully satisfy the released claims against the released persons.
The court approved the notice of settlement approval, directed the parties to disseminate it in accordance with the Entente, required the defendants to provide an administration report to the court, the plaintiff, and the Fonds d’aide, and instructed them to apply for a closing judgment once administration is complete. It reserved the Fonds d’aide’s right to take a percentage from any residual balance in accordance with the applicable regulation, and confirmed that it would remain seized of the file until issuing a closing judgment. It also expressly authorized filing of exhibit R-4 under seal. Finally, it ordered that the judgment be rendered without court costs as between the parties.
From a practical standpoint, the successful side in this outcome is the plaintiff class represented by Mr. Levkovsky. Their negotiated settlement is fully approved; collective recovery is ordered; automatic payments and valuable waivers are confirmed; and class counsel’s fees and disbursements are sanctioned. The court identifies the total monetary value of the settlement, including the approved $115,000 in fees and disbursements for class counsel, as $480,188.25. The judgment does not, however, specify a separate, precise figure for the portion of that total going exclusively to class members, and it orders no additional taxable legal costs between the parties beyond the settlement itself.