DRAFT 11.11.02, 4R
THE CONSUMER PROTECTION STATUTE LAW
AMENDMENT ACT, 2002
SUBMISSION ON BILL 180
TO THE ONTARIO LEGISLATIVE ASSEMBLY
AND TO
THE COMMITTEE ON FINANCE AND ECONOMIC AFFAIRS
by
Jacob S. Ziegel
Professor of Law Emeritus, University of Toronto
Vaughan E. Black
Lewtas Professor of Commercial Law, Osgoode Hall Law School, York University
Anthony J. Duggan
Professor of Law, University of Toronto
Thomas G. W. Telfer
Associate Professor of Law, University of Western Ontario
2
TABLE OF CONTENTS
Pages
Main Submissions …………………………………. 3
Appendix:
1. Separate Observations by Professor Duggan .…. 17
2. Separate Observations by Prof Telfer …………… 25
3. Letters to the Hon. Tim Hudak by Prof. Ziegel …. 37
4. Biographical Notes on Submitters ……………..... 40
3
I
INTRODUCTION
1. We welcome this opportunity to appear before the Committee to make this
submission with respect to Bill 180. Bill 180 is a very important but also very
complex bill dealing with consumer protection issues in Ontario.
2. We only became aware of Bill 180 after it was given first reading in the Ontario
Legislative Assembly at the end of September. Although our interests as teachers and
researchers in commercial and consumer law are, or should be, well known to the
Ministry of Consumer and Business Services (MCBS), none of us were invited by the
Ministry to give our views on the bill, individually or collectively, whether this year
on in earlier years. Nor, to the best of our knowledge, were any of the other Ontario
University teachers of commercial and consumer law consulted by the Ministry about
the bill.
3. On October 22, Professor Ziegel wrote to the Hon. Tim Hudak, Minister of Consumer
and Business Services, offering his services in setting up a roundtable discussion of
Bill 180 between the Ontario teachers and the Ministry's staff.1 Prof Ziegel faxed the
Minister a further letter on October 282 after he became aware that second reading of
the bill was imminent urging that adequate time be allowed interested outside parties
1
See Appendix for the contents of this letter. There was a precedent for this offer
since Prof Ziegel had arranged a similar roundtable meeting in the early 1990s to discuss
a draft consumer protection bill prepared during the David Peterson administration.
2
Also reproduced in the Appendix.
4
to make submissions on the bill. Regrettably, as of this date, the Minister has not
responded to either of Prof. Ziegel's letters. We recite these facts because they
contradict the Minister's statement during the second reading debate on Bill 180 that
the Ministry's staff had consulted widely on the bill while the bill was being drafted.
II THE SCOPE OF OUR SUBMISSIONS
4. Because of the lack of advance notice of Bill 180 and, given our teaching and other
commitments, the time constraints imposed on us after second reading of the bill was
begun on October 29, we have only been able to give Bill 180 a very cursory review.
For this and other reasons, we have decided to limit our collective observations to
highlighting in Part III of this Submission our principal concerns with the bill.
Appendix 1 of this Submission contains individual and more technical observations
on various parts of the bill by Professor Duggan and Professor Telfer. Again we
emphasize that these observations are not meant to be exhaustive and are intentionally
limited to the topics referred to. The observations do however convey the flavour of
important ambiguities, omissions and other weaknesses that permeate many parts of
the proposed new Consumer Protection Act. The time constraints imposed on us also
prevented other Ontario teachers of commercial and consumer law from joining us in
this Submission and in sharing the work of analyzing the bill's provisions. This too is
a matter for keen regret and again points to a serious democratic deficit in
consultations on Bill 180.
5
III OUR PRINCIPAL CONCERNS
5. Schedule A of Bill 180, enacting the Consumer Protection Act 2002 ("New CPA"),
contains many new and expanded features that should benefit consumers if (and it is
an important if) they are enforced in practice. With this caveat, we welcome these
changes. The new features include the merger of the provisions previously appearing
in the Business Practices Act in the new CPA, the extension of the Act to services
(though not all services), the inclusion of leasing agreements for goods, the regulation
of contracts for Future Performance Agreements, the introduction of minimum
standards for the conclusion of internet contracts, and the strengthening of consumer
remedies for breach of the Act.
6. However, in our view, these positive features are offset by the following important
omissions, ambiguities, and other weaknesses in the new CPA:
(a) Implied Warranties and Conditions. Bill 180 continues (s.9(3)) the provision in
the existing CPA precluding sellers of goods from excluding the implied
warranties and conditions in the Sale of Goods Act. However, there appears to be
nothing in Bill 180 to stop a seller from eviscerating the implied warranties by
limiting the buyer’s remedies for breach of a warranty or by imposing onerous
conditions for replacement of a defective product.
6
Even more important is the fact that the implied warranties and conditions do not
apply to the manufacturer of the goods unless there is privity of contract between
the manufacturer and the retail buyer. Recourse against the retailer may be
worthless if the retailer has gone out of business or lacks the resources to make
good warranty claims, and in any event it is appropriate that the manufacturer
should carry the major burden of satisfying warranty claims since the retailer is
only a conduit pipe for the distribution of the goods.
Another significant gap is that the implied warranties and conditions do not enure
for the benefit of members of the buyer’s family or recipients of a gift purchase.
For example, if a father takes his family out for dinner and the food is
contaminated the father will be entitled to sue for breach of the condition of
fitness of the food. The other members of the family will not be able to sue in
warranty unless they can show that the father was acting as agent for the family
members – an unrealistic assumption in many cases. These and other issues were
examined by the Ontario Law Reform Commission in its Report on Consumer
Warranties and Guarantees prepared by the Commission in 1972 at the request of
the Ontario government. Many of the recommendations were subsequently
adopted by the Ontario government in the Consumer Product Warranties Bill 110,
1976.
However, for undisclosed reasons, the then administration decided not to proceed
with the bill. The OLRC recommendations have been implemented, in whole or in
7
part, in Saskatchewan and New Brunswick. Similar provisions appear in the New
Zealand consumer protection legislation and the Australian Trade Practices Act
and are referred to in the Appendix to this Submission in the separate
observations of Professor Duggan and Professor Telfer. With respect to Quebec,
the Supreme Court of Canada held in General Motors Products of Canada Ltd. v.
Kravitz [1979] 1 SCR 790 that under the Quebec Civil Code a manufacturer’s
warranty liability runs with the goods and also enures for the benefit of a retail
buyer. It will therefore be seen that current Ontario law lags seriously behind
statutory developments in sister jurisdictions in recognizing modern
merchandizing realities despite the 30 year old recommendations of the OLRC.
(b) Implied Warranties in Motor Vehicle Repairs and related Issues. Motor vehicle
repairs are a major source of consumer complaints. In our view, the provisions in
Part VI of Bill 180 do not go nearly far enough to address the complaints. A three
months/5000 km warranty (whichever comes first) (s.59(1))) is quite inadequate
for major repairs running into the hundred of dollars.3 Similarly, many consumers
do not know they are entitled to receive a written estimate of the cost of repairs.
Even if they know of the entitlement, it may help them little if the vehicle has
broken down and is in need of immediate repairs to make the vehicle mobile
3
It is true that s.59(1) of Bill 180 also provides that the warranty in s.59 is in
addition to the rights conferred on the consumer under s.9. Presumably the intended
reference is to s.9(1) of Bill 180. However, s.9(1) only provides that a supplier is deemed
to warrant that the services supplied under a consumer agreement are of reasonable
acceptable quality. The test of “reasonable acceptable quality” does not address the issue
of the duration of a warranty under s.9 (1) or under the implied warranties and conditions
8
again. Again, in our experience, the cost of parts used in repairs is often
exorbitant and much above the retail price at which comparable parts are
available from Canadian Tire or other automotive stores. In our view, a much
more proactive stance is required from the MCBS if consumers are to be
effectively protected against gouging by unscrupulous garage repair shops.
(c) Internet Contracts. This is a burgeoning area of merchandizing contracts and all
the evidence points to further rapid growth in the volume of electronic commerce
throughout North America and beyond. Bill 180 requires such contracts to be in
writing and precludes enforceability of the contract unless the consumer has
affirmatively adopted the contract (e.g., by clicking a box) (s.38). We welcome
these requirements. However, these protective measures do not apply to changes
in the terms of an existing electronic contract which may appear on a website
without the consumer being given advance warning of the changes.4 The Public
Interest Advocacy Centre (PIAC) in Ottawa has advised us that they have
received many complaints from Sympatico users about website contract changes
involving sharp increases in user fees for high volume users without receiving
prior direct notice of the increases. Without wishing to adjudicate the merits of
the complaints, we agree with the PIAC that a supplier should be required to give
better warning of prospective changes in an agreement than simply showing the
changes on a website.
in the Sale of Goods Act, and presumably this aspect will be governed by s.59(1) of Bill
180.
9
(d) Choice of law and forum clauses. Recent Ontario case law5 shows that internet
providers are now regularly resorting to such clauses to prevent consumers from
litigating in the regular courts or, in the case of non-Ontario suppliers, from suing
in Ontario. Bill 180 makes a commendable effort to address the problem but, in
our view, the provisions in s.7 do not go far enough. First, it is not clear that they
preclude a contract from providing that Washington state law (to use an actual
example) shall govern the contract even though the consumer is located in
Ontario. Second, s.8(1), only provides that an exclusionary term in the contract
cannot prevent a consumer from bringing action in the Superior Court of Justice
of Ontario. Thus, seemingly, it is alright for the contract to exclude access to the
Small Claims Court. Litigating in the SCJ is prohibitively expensive and well
beyond the capacity of all but a tiny section of the consumer community. In our
view, the section should simply provide that a contractual provision is invalid if it
precludes the consumer from bringing an action before an Ontario court or other
adjudicative agency, without designating the particular court or agency.
(e) Credit Agreements. Like so many other parts of the new CPA, Part IV contains a
congery of problems. We list, non-exhaustively, a few of them.
(1) As Prof Duggan points out in his observations (infra Appendix 1), many of
the key provisions refer to future regulations “as prescribed”. This, in effect, gives
4
See the important decision of Mr Justice Nordheimer in Kanitz v. Rogers Cable
Inc. (2002) 58 O.R. (3d) 299.
5
See e.g., Rudder v. Microsoft Corp. (1999) 2 C.P.R. (4th) 474.
10
the Ministry officials carte blanche to legislate subjectively with little public
accountability and minimal consultation with non-industry sources. We speak
with the benefit of precedents. As part of the truth-in-credit movement of the
1960s, the original CPA required advertisements mentioning credit terms to
disclose all the relevant terms, not just those that were an enticement to
consumers to buy or lease (e.g., “no downpayment”, or “no interest payments for
the first year”) without disclosing the total cost of the credit or lease to
consumers.6 The disclosure requirements were meant to ensure that consumers
appreciated the cost of buying on credit or leasing before the consumer committed
herself. Nevertheless, this important safeguard was dropped from the CPA
Regulations a few years ago — in response, we may be sure, to pressure from the
credit industry (2) The new CPA makes no attempt to regulate unsolicited credit
cards and the extension of credit to debtors without the means to repay. This is a
serious problem. The number of consumer bankruptcies in Canada has quadrupled
over the past twenty years from around 20,000 a year to around 80,000. Trustees
in bankruptcy, in their reports to creditors and the bankruptcy court, regularly
report that a major cause of the bankruptcy was the consumer’s use of too much
credit and the consumer’s lack of budgetary skills. Inexplicably, s.64 seriously
aggravates the problem by providing that a consumer is liable for using an
unsolicited credit card even though s.13(1) of the new CPA provides that the
recipient of unsolicited goods is not liable for use, misuse or disposition of the
goods. In our view, there is absolutely no justification for distinguishing between
6
One of us actually gave evidence at the time before a committee of the Ontario
11
unsolicited goods or services and unsolicited credit cards. If there is to be a bias it
should be in favour of protecting recipients of unsolicited credit cards.
(3) Bill 180 makes no attempt to address the continuing problem of very high
interest charges on credit cards (18% - 30% are the prevailing rates). This
acquiescence persists even though interest rates have dropped dramatically over
the past two years and interest paid on savings deposits is often 1% or less. (The
interest paid on Canada Savings bonds this past year amounted to 1.8%).
Similarly, (4) Bill 180 makes no attempt to address the vulnerability of low
income consumers in ‘pay day’ and other subprime loan transactions.7
(5) Section 78 of new CPA dealing with the ‘assignment’ (sic) of negotiable
instruments in credit transactions conflicts with Part V of the Bills of Exchange
Act and is in any event redundant in light of the BoE provisions. Further, section
79, which provides that the assignee of chattel paper takes subject to a consumer’s
defences, is in conflict with s.18(2)(b), which states the opposite. In our view,
s.79 enunciates the correct policy and s.18(2)(b) should be deleted.
(f) Consumer’s Private Law Remedies. Part IX of the new CPA deals with this topic
although there appears to be some overlap with earlier parts of the Act. In any
event, however well intentioned, we find the provisions quite unrealistic. Most
consumers cannot afford to litigate and cannot afford to retain a lawyer except
where very substantial amounts are involved, in which case a contingency fee
legislature considering adoption of these requirements.
7
For details of the current problems, see Panel Discussion: Alternative Credit
Market (2001) 35 Can. Bus. L.J. 325-418.
12
arrangement may be possible. Astonishingly, as we have previously remarked,
s.95 appears to restrict consumers’ judicial recourse to action in the Superior
Court of Justice. Once again the Small Claims Court has been sent into purdah.
This is such an egregious drafting error that it throws into serious doubt the
Ministry’s grasp of the realities of private consumer redress in Ontario.
(g) Public law redress and powers of the Director. Part X is probably the single most
important feature of the new Act. The Director is armed with a wide array of
administrative powers to intercept and enjoin false, misleading, illegal and
unconscionable conduct in the market place. These powers already appear in the
existing Business Practices Act. In our view, if conscientiously used, they could
do more to protect Ontario consumers in the market place than most other
provisions in the new CPA. Unfortunately, up to now, the record of enforcement
has been dismal. Prof WAW Neilson, formerly of the Osgoode Hall Law School,
and subsequently British Columbia’s first deputy minister of Consumer Affairs,
examined Ontario’s record in detail in an article in (1981) 19 Osgoode Hall Law
Journal 153. He found conspicuous underuse of the Director’s powers and noncompliance by the Director with some of the then Act’s record keeping
provisions. Similar conclusions were reached by Prof. Belobaba in a
comprehensive article in (1977) 15 Osgoode Hall Law Journal 327.
So far as we can tell there has been no improvement in the Ministry’s
enforcement record since then. Jason Goodman, a third year student assistant to
Prof Telfer at the University of Western Ontario, made a recent search of the
13
Ministry’s website and found no references to enforcement activity under the
Business Practices Act. Nor were we able to obtain any more information by
telephoning the Ministry. The headline on page 1 of the November 2, 2002 issue
of The Toronto Star sums up the current position graphically: “Toronto a hotbed
for phone fraud”.8 The Ministry’s own statistics corroborate the evidence of a
lack of enforcement commitment and unwillingness to commit even moderately
adequate resources. In fiscal year 2000-2001, the funds allocated to the
Consumer Protection and Public Safety/Business Standards Branch of the MBCS
only amounted to $8 million; the figure was increased to $9 million in the 20012002 budgetary allocations but still amounts to less than a dollar a year per
person for Ontario’s 11 million people. The Ministry’s Annual Statistics for 2001
also show that in 2001 the Ministry only opened and investigated 226 cases and
only secured restitution arranged through Ministry mediation of $135, 997. This
is a trivial amount considering the size of Ontario’s economy and the fact that the
Ministry is responsible for the administration of no less than 167 different Acts.9
(Restitution orders made by Ontario courts (we are not told which) amounted to
another $158,036.)
8
The Toronto Star, November 9, reported that many of the telemarketing shops
appeared to have closed down as the result of its exposé. An observer may ask why it
needed an undercover newspaper investigation to reveal the scope of the current
fraudulent activities and why the Ministry’s staff, the RCMP or the Metropolitan police
could not have done the same job much earlier.
9
The MCBS is in fact a major profit centre for the Ontario government.
Unfortunately, in time at our disposal, we have not been able to locate the Ministry’s
revenues for the past few years to document this fact.
14
We wish to make it clear that we do not fault the Ministry’s staff for this wholly
inadequate enforcement record nor do we suggest that this Government’s record
is worse than its predecessors. However, this is small comfort to the many
thousands of Ontario consumers who have legitimate complaints. It is easy to
adopt bountiful legislation; the acid test lies in an administration’s willingness to
put its money where its mouth is.
(h) Ministry’s Low Profile and Absence of Effective Outreach Programme. The
Ministry’s inadequate resources and poor enforcement record are part of a much
wider problem. The Ministry has a very low public profile and even well educated
consumers have difficulty identifying any of the many Acts administered by the
Ministry.10 Yet the need for an adequately funded, highly motivated and highly
audible public voice is at least as great in this area of economic life as it is in the
many other areas serviced by the Ontario government. It is in fact greater because
consumers are a very diffused group, because there is no effective nongovernmental consumers’ organization in Ontario, and because the Ontario
consumer is no match for the well funded, well organized and powerfully
connected industry groups representing all the major industries in Ontario. To
reverse the imbalance, we urge inter alia:
10
One of us recently asked his upper year commercial and consumer law class how
many of the students had previously heard of the Business Practices Act, the Act being a
fundamental building blocker in Ontario’s Consumer Protection structure. Almost none
of the students replied affirmatively.
15
(i) the establishment of a government financed Consumer Advisory Council,
made up predominantly of non-industry representatives and experts, to advise the
Ministry on consumer policy and administration and enforcement of consumer
legislation,
(ii) much better publicity about the existing consumer protection legislation and
its enforcement;
(iii) additional powers in the new CPA entitling the Director to bring a substitute
or class actions on behalf of aggrieved consumers in the Ontario courts
comparable to the powers found in the Alberta Fair Trading Act and the British
Columbia Trade Practice Act, and authorizing the Licensing Appeal Tribunal to
make a restitution order in favour of consumers where an unfair trade practice has
been established;
(iv) entitling five or more consumers to require the Director to investigate
complaints concerning the conduct of a business falling under the Ministry’s
regulatory powers and requiring the Director to respond with a written report
within 90 days of the request;
(v) entitling consumer organizations, legal aid clinics, and consumer advocacy
centres in Ontario to bring an action in an Ontario court or file an application with
the Ontario Licence Appeal Tribunal for an injunction, cease and desist order and
restitutionary order arising out of the violation of the provisions of the Consumer
Protection Act;
(vi) the publication of well researched and documented reports by inside and
outside experts on consumer issues of current importance; and
16
(vi) sponsorship by the Ministry of consumer issues conferences and co-operation
with commercial and consumer law conferences and seminars held by the
faculties of law at Ontario Universities.
RESPECTFULLY SUBMITTED:
Jacob S. Ziegel
Vaughan E. Black
Anthony J. Duggan
Thomas G. W. Telfer
17
APPENDIX
1. MEMORANDUM BY PROFESSOR DUGGAN
Notes On Bill 180, Parts I-III, VII and VIII Of the Consumer Protection Act:
Interpretation and Application
(1) The definition of “consumer” in s.1 excludes a person who acts for mixed personal
and business purposes, even if the business purpose is only a small part of the mix (for
example, a doctor who buys a car mainly for personal use but who also does the
occasional house call).
Recommendation: change the definition to read: “means an individual acting
predominantly…”
(2) The expression “goods” is inappropriate and potentially misleading if the aim is to
catch all kinds of personal property (cf. s.1, “goods”). On the other hand, if the aim is to
catch only goods in the conventional sense, then the definition as it presently stands is too
broad.
Recommendation: clarify the definition (the definition of “goods” in the PPSA and the
definition in the SGA are possible alternative models).
(3) To say that “services” means anything other than goods is at best uninformative and
at worst potentially misleading because the definition is liable to catch things that are not
18
services in the conventional sense. The uncertainty is compounded by the uncertainty
surrounding the definition of “goods” For example, is money for the purposes of the Act
goods, services or neither? What about cheques? What about shares? The exceptions in
s.2 may avoid some of these questions but probably not all of them. Contrast the
definition of “services” in the Australian Trade Practices Act 1974, s.4(1):
‘services’ includes any rights (including rights in relation to, and interests
in, real or personal property), benefits privileges or facilities that are, or
are to be, provided, granted or conferred in trade or commerce, and
without limiting the generality of the foregoing, includes the rights,
benefits, privileges or facilities that are, or are to be, provided, granted or
conferred under:
(a) a contract for or in relation to:
(i)
the performance of work (including work of a professional nature)
whether with or without the supply of goods;
(ii)
the provision of, or the use or enjoyment of facilities for,
amusement, entertainment, recreation or instruction; or
(iii)
the conferring of rights, benefits or privileges for which
remuneration is payable in the form of a royalty, tribute, levy or
similar exaction;
(b) a contract of insurance;
(c) a contract between a banker and a customer of the banker entered into in the
course of the carrying on by the banker of the business of banking; or
(d) any contract for or in relation to the lending of moneys;
but does not include rights or benefits being the supply of goods or the
performance of work under a contract of service”.
Recommendation: clarify the definition of “services”, possibly along the lines of the
Australian TPA model.
Part III: Unfair practices
19
(1) Section 15 is limited to unconscionable “representations”. It does not catch
unconscionable conduct other than representations, for example, exploitation
(unconscientious dealing), undue influence or duress. Contrast the Australian Trade
Practices Act 1974, which refers to unconscionable conduct. It catches all forms of
conduct, not just representations, including the making of an unconscionable contract.
There are corresponding provisions in the Australian State fair trading laws: see
Halsbury’s Laws of Australia (Butterworth’s ), Volume 5, “Consumer Protection”).
Recommendation: expand s.15 to cover conduct other than representations.
(2) Section 18 limits the remedies for unfair practices to rescission or damages in lieu of
rescission together with any remedy that may be available in law. Contrast the Australian
Trade Practices Act 1974, which creates a range of statutory remedies for misleading
conduct and unconscionable conduct. For example, in the case of misleading conduct a
consumer can sue for an injunction (s.80), damages, (s.82) or a discretionary order (s.87).
In the case of unconscionable conduct, a consumer can sue for an injunction or a
discretionary order. Discretionary orders include an order setting aside a contract, an
order setting aside part of a contract and an order varying a contract or particular terms.
There are corresponding provisions in the Australian State fair trading laws: see
Halsbury’s Laws of Australia (Butterworths), Volume 5, “Consumer Protection”.
Recommendation: expand the range of remedies for unfair practices to include damages
and orders to set aside or vary part of a contract.
20
(3) Section 18 actions must be brought in the Superior Court of Justice: s.18(9). This
seems unduly restrictive from a consumer access to justice perspective. Contrast the
jurisdictional arrangements under the Australian State fair trading laws: Halsbury’s Laws
of Australia (Butterworths), Volume 5, “Consumer Protection”.
Recommendation: vest jurisdiction to hear s.18 matters in all the courts of the province,
subject to the usual jurisdictional limits.
(4) Section 18(2) provides for joint and several liability for unfair practices, but not
ancillary liability. Contrast the Australian Trade Practices Act 1974, s.75B. Among other
things, s.75B allows for claims to be brought against any director of a corporation who
was knowingly concerned in, or party to, misleading conduct or unconscionable conduct
engaged in by the corporation. The provision is particularly useful in the case of $2
companies.
Recommendation: include in s.18 provision for ancillary liability of directors and other
parties who may be complicit in unfair practices engaged in by a corporation.
(5) Section 18(3) imposes a one year time limit for consumers to give notice. Contrast the
Australian Trade Practices Act 1974 which sets a 3 year limitation period for s.82
damages claims, a 3 year limitation period for s.87 orders relating to misleading conduct
and a 2 year limitation period for s.87 orders relating to unconscionable conduct.
21
Recommendation: consider extending the limitation period.
Part VII: Credit agreements
(1) Part VII uses the expressions “lender” and “borrower” to describe the parties to a
credit agreement. The expressions are misleading because the definition of “credit
agreement” in s.62 covers not just loan credit (loan of money) but also sale credit
(supplier credit agreement) as well. A supplier credit agreement is not a loan of money,
the supplier is not a lender and the customer is not a borrower in the conventional sense.
Recommendation: substitute the expressions “credit provider” and “debtor”, respectively.
(2) On a related note, s.62 says that “credit agreement” means a consumer agreement
under which a lender extends credit to a borrower and includes a loan of money and a
supplier credit agreement. This is tautologous because s.1 defines “loan of money” to
include credit that is made available to a consumer. In addition, the s.1 definition is
misleading because, while all loan contracts are credit agreements, not all credit
agreements are loan contracts (see above). Defining a loan of money to include credit is
like legislating for cats but defining cats to include dogs.
Recommendation: adopt the taxonomy other jurisdictions use (for example, the United
States, the United Kingdom and Australia), i.e.:
22
Credit
I
Credit agreement
I
Loan of money
Supplier credit agreement
(3) Section 66 sets out the consequences of non-disclosure in cases where: (1) the lender
fails to give the borrower a statement at all; and (2) the lender’s statement understates
amounts payable by the borrower under the agreement. There is no provision for the case
where the lender’s statement leaves out prescribed information or misstates information
other than an amount payable by the borrower. For example, s.66 in its present form
would not cover the case of a statement that leaves out the annual percentage rate and it
may not cover the case of a statement that misstates the annual percentage rate (on the
basis that the annual percentage rate is not an “amount[s] specified” within the meaning
of s.66(b)).
Recommendation: extend s.66 to cover all material errors and omissions in the statement.
(4) Many of the provisions in Part VII require compliance with “prescribed requirements”
or the supply to the borrower of “prescribed information”: for example, s.73
(representations), s.75 (initial disclosure statement) and s.76 (subsequent disclosures).
Without knowing what the prescribed requirements are, it is impossible to tell how these
provisions will work. For example, s.73 will presumably cover representations in
23
advertising, but it is impossible to tell from the provision itself whether lenders will be
subject to mandatory cost of credit disclosure requirements in advertising or whether their
obligations will be limited to the avoidance of misleading statements. Likewise, the
statute itself gives no clues as to what the initial disclosure statement must contain, what
it will look like and how it must be expressed. This makes it impossible to assess the
likely utility of the statement. Presumably the statement will have to disclose the annual
percentage rate, among other things, but the calculation of the annual percentage rate for
disclosure purposes is itself a matter that has been left for determination by the
regulations: see s.62, “annual percentage rate”.
(5) Section 75 provides for an initial disclosure statement, but there is nothing in Part VII
to say that the borrower must also receive a copy of the credit agreement itself. Without a
copy of the credit agreement, how is the borrower to determine the accuracy of the initial
disclosure statement?
Recommendation: provide for the borrower to be given a copy of the credit agreement.
Part VIII: Leasing
Like Part VII, the bulk of Part VIII depends on requirements to be prescribed by
regulation. This makes it impossible to tell from the statute itself what the regulatory
regime will finally look like. Section 85 provides for a disclosure statement but as in the
case of credit agreements, there is no provision for the consumer to receive a copy of the
lease agreement itself.
24
Tony Duggan
30 October 2002
25
2. Memorandum by Prof Telfer on Bill 180
The new provisions dealing with internet contracts, delayed delivery, unsolicited
services, and estimates are important additions. However, provisions dealing with
defective or poor quality goods have not been updated. Further the attempt to create an
implied term with respect to services has not gone far enough. The government has
missed a major opportunity to modernize provisions dealing with defective quality goods
and services. While purporting to modernize consumer protection law, Bill 180 in many
respects re-enacts many outdated parts of the existing Consumer Protection Act. The
government has failed to take into account major consumer law developments in other
jurisdictions.
Below are my comments on Bill 180. My comments are based upon my experience with
New Zealand consumer protection legislation. The New Zealand Consumer Guarantees
Act came into force in 1994 and was based upon a number of different sources.
Influences on the New Zealand legislation included the following:
1. Australian Trade Practices Act
2. Saskatchewan Consumer Products Warranties Act 1977
3. UK Supply of Goods and Services Act.
The Consumer Guarantees Act creates a number of mandatory statutory implied terms as
well as a comprehensive remedy regime which includes a direct cause of action against
manufacturers.
The Consumer Guarantees Act is enforced by private litigation.
However, where a supplier purports to contract out of the CGA, which is prohibited, the
Commerce Commission may prosecute the supplier for breach of the Fair Trading Act.
26
I have included references to relevant portions of the New Zealand legislation below.
1. Scope of the Consumer Protection Act.
s.2(1) Subject to this section, this Act applies in respect of all consumer
transactions if the consumer is located in Ontario or the person engaging
in the transaction with the consumer is located in Ontario when the
transaction takes place.
a) “Located in Ontario”
As a preliminary point, the term “located in Ontario is not defined”. This issue is
addressed in the main submission.
b) “Consumer Transactions” and “Consumer Agreements”
The new Consumer Protection Act only applies to “consumer transactions” which
includes a “consumer agreement”.
A consumer agreement “means an agreement between a supplier and a consumer in
which the supplier agrees to supply goods or services for a payment.”
There is no protection in the Act for the recipient of gifts. Under the New Zealand
Consumer Guarantees Act, if “A” is the original purchaser of a television and gives the
television to “B”, the legislation permits “B” to have direct recourse against the original
supplier or manufacturer. The New Zealand Act would also imply terms of quality with
respect to gifts offered by the supplier to an original consumer.
c) “Consumer”
27
Under Bill 180, a consumer means an individual acting for personal, family, or household
purposes and does not include a person who is acting for business purposes.
The task of distinguishing between a consumer and a non-consumer transaction is not an
easy one. Clearly defined rules of broad application which can be easily understood by
consumers are more important than an open ended standard which requires judicial
interpretation.
If the new Consumer Protection Act is to be largely enforced by
consumers individually, or class actions, rather than by the Ministry then a clear
definition is vital.
I have set out below an extract from my article published in the New Zealand Business
Law Quarterly on this issue. It discusses four general methods of distinguishing between
consumer and non-consumer transactions.11
In the design of an appropriate consumer test four general models have emerged. The
tests all depend on a different means of excluding commercial transactions from the
statute.
1. Character of purchaser of goods and services. This technique would exclude
corporations, partnerships or a person carrying on business or trade.
2. Monetary amount of goods. The legislation may pose a monetary threshold.
All transactions below that threshold would be deemed to be a consumer
transaction regardless of form. Transactions above the threshold would be
determined on some other objective or subjective test.
28
3. Character of the goods or ordinary use test. The ordinary use test would
protect purchasers of goods that are ordinarily acquired for personal,
household or domestic use. Actual use or character of purchaser is irrelevant.
Thus a company that purchases a sofa of a kind ordinarily acquired for
personal use to locate in its office would be considered a consumer. An
individual buying an industrial circular saw for home use would be excluded.
4. Actual use or buyer’s purpose. A test focusing on the actual use, or buyer’s
purpose would exclude all transactions which were not for personal use or
consumption from the perspective of the actual consumer. Thus a couch
purchased for use in the dentist’s office would be excluded. An individual
buying an industrial circular saw for personal use would be included and
covered by the act.
Bill 180 combines model #1 with model #4. Only individuals qualify under Bill 180.
Further, Bill 180 will only apply to individuals “acting for personal, family or household
purposes and does not include a person who is acting for business purposes.”
The actual use or purpose test has broad application and will depend upon the consumer’s
subjective use. The general criticism that is usually offered with respect to this test is a
criticism from the suppliers’ perspective. Suppliers who sell goods or services almost
exclusively for commercial purposes suggest that the purpose test imposes unnecessary
burdens. A supplier may not know of the consumer’s purpose and the purpose test
requires the supplier to move from commercial terms of trade to terms of trade for
consumers for the few customers who purchase for personal or home use.
11
Telfer, “Defining a Consumer and the Right to Reject under the Consumer Guarantees Act 1993: the
Long Road to the Court of Appeal” (2001) 7 New Zealand Business Law Quarterly 3.
29
This is not a view that I share. Suppliers should be in a position to meet the standards in
the consumer context which would include the implied terms of quality.
However, suppliers may be unaware that an individual is purchasing for personal use and
may use commercial terms of trade which exclude implied terms and purport to exclude
consumer legislation. Signs posted or terms of trade may indicate that all terms of sale
are final. While s.9 of Bill 180 would make these terms void, and s.14(2)13 would
indicate that this is a false representation giving the consumer the right to rescind,
consumers will largely be unaware of these protections and may well believe that there is
no recourse in law because of the suppliers terms of trade.
The Ministry must effectively enforce the Unfair Practices provisions to ensure that
suppliers are not contracting out of the CPA. (see s.104). It is unlikely that consumers
will be in a position to challenge standard form terms of trade.
A more general concern emerges from the consumer perspective where a consumer
purchases goods for a mixed purpose i.e. both a business and personal use. The Bill does
not resolve this issue. Would there be merit to including a fixed monetary amount (model
#2) which would create a presumption of application where the transaction below a fixed
value?
30
Section 3, the anti-avoidance provision, might assist in determining the scope of the Act
but what is an “entity”. How does one weigh up the consumer’s subjective purpose with
the “substance of the transaction?”
d) Definition of Services
“Services means anything other than goods, including any service, right, entitlement or
benefit.”
See Professor Duggan’s criticism of this definition in the above memo.
Section 2(2) excludes a number of important services. While some service contacts are
explicitly excluded, the Act also excludes “prescribed professional services that are
regulated under a statute of Ontario.” Thus the scope of the Act with respect to service
providers may well be reduced by regulations to be proclaimed in the future.
In service transactions the problem of asymmetric information is likely to be even greater
than with respect to the supply of goods. Thus it is important for the Act to cover a broad
range of services.
The New Zealand Act Consumer Guarantees Act, for example, adopts a comprehensive
definition of services and specifically includes contracts for professional services:
“Service” means any rights, benefits, privileges, or facilities that are or are to be
provided, granted, or conferred by a supplier under any of the following classes of
contract:
(a) A contract for, or in relation to,---
31
(i) The performance of work (including work of a
professional nature), whether with or without the
supply of goods; or
(ii) The provision in trade of facilities for
accommodation, amusement, the care of persons or
animals or things, entertainment, instruction, parking,
or recreation:
(b) A contract of insurance, including life assurance and life
reassurance:
(c) A contract between a bank and a customer of the bank:
(d) Any contract for, or in relation to, the lending of money
or granting of credit, or the making of arrangements for the
lending of money or granting of credit, or the buying or
discounting of a credit instrument, or the acceptance of
deposits,--but does not include any rights, benefits, privileges, or
facilities that are or are to be provided, granted, or conferred
by the supplier by simply paying or crediting any money to the
consumer without the performance of any other task (other than
one that is merely incidental to the making of the payment or
credit):
2. Implied Terms in the Supply of Goods.
There is very little change from the existing CPA. The Bill simply adopts the implied
conditions and warranties from the Sale of Goods Act: s.9. Thus for example the implied
terms of correspondence with description, fitness for purpose and merchantable quality
found in the Sale of Goods Act would apply to consumer transactions under the new
CPA.
The government has missed an excellent opportunity to update the implied terms as they
relate to consumer transactions. Merchantable quality is not defined under the Sale of
32
Goods Act and its meaning can only be determined through a reading of many layers of
case law.
Merchantable quality, as it has been interpreted by the courts is not an
appropriate implied term of quality for consumers. .
Consumer protection legislation should include clearly defined terms with respect to
quality of goods. For example, the New Zealand Consumer Guarantees Act no longer
incorporates by reference the implied terms from the SGA. New Zealand consumers have
the benefit of more clearly defined implied terms of quality. The New Zealand Consumer
Guarantees Act provides
6. Guarantee as to acceptable quality — (1) Subject to section 41 of
this Act, where goods are supplied to a consumer there is a guarantee
that the goods are of acceptable quality.
(2) Where the goods fail to comply with the guarantee in this
section,--(a) Part II of this Act may give the consumer a right of redress
against the supplier; and
(b) Part III of this Act may give the consumer a right of redress
against the manufacturer.
7. Meaning of ``acceptable quality''---(1) For the purposes of section
6 of this Act, goods are of acceptable quality if they are as--(a) Fit for all the purposes for which goods of the type in question
are commonly supplied; and
(b) Acceptable in appearance and finish; and
(c) Free from minor defects; and
(d) Safe; and
(e) Durable,--as a reasonable consumer fully acquainted with the state and condition
of the goods, including any hidden defects, would regard as acceptable,
having regard to--(f) The nature of the goods:
(g) The price (where relevant):
(h) Any statements made about the goods on any packaging or label on
the goods:
(i) Any representation made about the goods by the supplier or the
manufacturer:
(j) All other relevant circumstances of the supply of the goods.
33
(2) Where any defects in goods have been specifically drawn to the
consumer's attention before he or she agreed to the supply, then
notwithstanding that a reasonable consumer may not have regarded the
goods as acceptable with those defects, the goods will not fail to
comply with the guarantee as to acceptable quality by reason only of
those defects.
(3) Where goods are displayed for sale or hire, the defects that are
to be treated as having been specifically drawn to the consumer's
attention for the purposes of subsection (2) of this section are those
disclosed on a written notice displayed with the goods.
(4) Goods will not fail to comply with the guarantee of acceptable
quality if--(a) The goods have been used in a manner, or to an extent which is
inconsistent with the manner or extent of use that a reasonable
consumer would expect to obtain from the goods; and
(b) The goods would have complied with the guarantee of acceptable
quality if they had not been used in that manner or to that
extent.
(5) A reference in subsections (2) and (3) of this section to a defect
means any failure of the goods to comply with the guarantee of
acceptable quality.
8. Guarantees as to fitness for particular purpose---(1) Subject to
section 41 of this Act, the following guarantees apply where goods are
supplied to a consumer:
(a) That the goods are reasonably fit for any particular purpose that
the consumer makes known, expressly or by implication, to the
supplier as the purpose for which the goods are being acquired
by the consumer; and
(b) That the goods are reasonably fit for any particular purpose for
which the supplier represents that they are or will be fit.
(2) Those guarantees do not apply where the circumstances show that--(a) The consumer does not rely on the supplier's skill or judgment; or
(b) It is unreasonable for the consumer to rely on the supplier's
skill or judgment.
(3) This section applies whether or not the purpose is a purpose for
which the goods are commonly supplied.
34
(4) Part II of this Act gives the consumer a right of redress against
the supplier where the goods fail to comply with any guarantee in this
section.
9. Guarantee that goods comply with description---(1) Subject to
section 41 of this Act, where goods are supplied by description to a
consumer, there is a guarantee that the goods correspond with the
description.
(2) A supply of goods is not prevented from being a supply by
description by reason only that, being exposed for sale or hire, they
are selected by a consumer.
(3) If the goods are supplied by reference to a sample or
demonstration model as well as by description, the guarantees in this
section and in section 10 of this Act will both apply.
(4) Where the goods fail to comply with the guarantee in this
section,--(a) Part II of this Act gives the consumer a right of redress against
the supplier; and
(b) Part III of this Act may give the consumer a right of redress
against the manufacturer.
3. Absence of Remedial Regime for Defective Goods
Bill 180 relies upon the implied terms of the Sale of Goods Act but does not purport to
create a comprehensive remedy regime where goods are defective. The Bill does prohibit
suppliers from forcing consumers into mandatory arbitration as well as preventing
suppliers from precluding class actions. However, is there anything in the Bill which
would prevent suppliers from somehow otherwise restricting a consumer’s remedies that
might be pursued in the courts?
35
Does breach of the implied terms of the SGA entitle a consumer to take advantage of
the cancellation procedures in Part IX? Part IX would not appear to address the
breach of implied terms under the SGA.
Does breach of the implied terms of the SGA entitle a consumer to request that a
credit card charge be reversed? Section 94 would not appear to cover breach of
implied terms of the SGA. Also s.95 would seem to preclude an action commenced
in the Small Claims Court. Again the NZ Consumer Guarantees Act contains a
comprehensive remedy regime tailored for consumers.
4. Absence of Direct Remedies Against Manufacturers.
In other jurisdictions, consumers are given direct cause of action against manufacturers.
This is absent from Bill 180. This is a major omission from the Bill and is addressed in
the main submission.
5. Implied Terms for Service Providers
This is an important addition to the Act. However, s9(1) does not go far enough with
respect to an implied term of quality. Section 9(1) provides that “the supplier is deemed
to warrant that the services supplied under a consumer agreement are of a reasonably
acceptable quality.”
Will there be breach of this standard when the service provider meets the generally
accepted industry standard for the particular type of service, which has been set by
36
industry codes of practice, or will the courts pay more attention to the views of the
consumer as to what is an acceptable level of service?
The general implied standard in s9(1) may be meaningless for a consumer unless the
particular purpose of the service contract is achieved. The more important implied term,
that services be fit for the particular purpose, is not included in the Bill.
The New Zealand Consumer Guarantees Act includes a guarantee that services will be fit
for a particular purpose that the consumer makes known to a service provider.
29. Guarantee as to fitness for particular purpose---Subject to
section 41 of this Act, where services are supplied to a consumer there
is a guarantee that the service, and any product resulting from the
service, will be--(a) Reasonably fit for any particular purpose; and
(b) Of such a nature and quality that it can reasonably be expected to
achieve any particular result,--that the consumer makes known to the supplier, before or at the time of
the making of the contract for the supply of the service, as the
particular purpose for which the service is required or the result that
the consumer desires to achieve, as the case may be, except where the
circumstances show that--(c) The consumer does not rely on the supplier's skill or judgment; or
(d) It is unreasonable for the consumer to rely on the supplier's
skill or judgment.
37
3. Letters from Prof Ziegel to the Hon. Tim Hudak12
October 22, 2002
The Hon. Tim Hudak
Minister of Consumer and Business Services
Eaton’s Tower, 35th Floor
250 Yonge Street
Toronto M5B 2N5
Dear Mr Hudak,
Bill 180, 2002
A colleague at the Osgoode Hall Law School recently drew my attention to this
bill, which apparently he downloaded from a website. Although I have taught, written on,
and generally involved myself in both federal and provincial consumer matters for many
years, this was the first I had heard of this bill. I assume my colleagues at the other
Ontario law school were equally unaware of the bill.
12
These versions of the letters are taken from Prof Ziegel’s computer. The final
38
This troubles me. Even if the bill were only a consolidation measure it merits
review and public discussion by experts familiar with this branch of law. In fact, the bill
is much more since it also incorporates significant changes to the existing law. Apart
from this, Ontario’s consumer protection law, its operational impact and enforcement,
have not been reviewed for many years. In my view, the introduction of Bill 180 provides
an excellent opportunity for such a review.
I would therefore urge you to convene a roundtable meeting of Ontario consumer
law teachers for this purpose and to provide your officials with comments on the bill
itself. I should be happy to assist in the organization of such a seminar and to enquire
whether the facilities of our law school would be available for the meeting.
I look forward to your reply. With my best wishes,
Very sincerely,
Jacob Ziegel
Professor of law emeritus
October 28, 2002
Dear Mr Hudak,
versions, faxed out by his assistant, may have contained minor changes.
39
Bill 180.
I wrote you on October 22 urging review of this important bill by Ontario law
teachers knowledgable about consumer law and its operational aspects in Ontario.
I only became aware yesterday evening that the bill is to receive Second Reading
today. I respectfully urge that actual enactment of the bill be delayed pending full and
comprehensive public hearings, and study of the bill by Ontario consumer law teachers as
suggested in my earlier letter. There would be little point in conducting the study after the
bill is enacted since it is extremely unlikely that the Ontario government would be willing
to introduce further legislation in the light of any recommendations in the law teachers’
report. Some of the recommendations may well touch on the merits of consolidating the
existing legislation and the changes that should accompany a consolidating exercise.
I should be happy to discuss my recommendation with you, members of your
staff, and with staff members of the Premier’s Office.
Very sincerely,
Jacob Ziegel
Professor of law emeritus
40
4. Biographical Notes on Submitters
Professor Vaughan Black is a graduate of the Faculty of Law of the University of
Toronto (LL.B.) and the Faculty of Law of the University of California at Berkeley
(LL.M.).Since 1982 he has been a professor of law at Dalhousie Law School in Halifax.
He is currently the James L. Lewtas Visiting Professor of Commercial Law at Osgoode
Hall Law School in Toronto. He has published and taught in the area of commercial and
consumer law, and is the associate editor of the Canadian Business Law Journal.
Professor A.J. Duggan holds the Iacobucci Chair in Law at the University of
Toronto and is the Associate Dean of the Faculty of Law. He is also a Professorial Fellow
at the University of Melbourne. Before joining the University of Toronto Law Faculty in
1999 he held teaching positions in the Monash University Faculty of Law and the
University of Melbourne Faculty of Law (both in Melbourne, Australia). Professor
Duggan has written extensively on consumer law issues. He is the co-author of the
leading Australian text on consumer credit law and the author of the section
on "Consumer Protection" in Halsbury's Laws of Australia. He has served as a Small
Claims Tribunal referee in Victoria, Australia and for some years he was a member of the
Victorian Credit Licensing Authority. He has advised governments, financial
institutions and consumers on consumer protection and consumer credit related matters.
Professor Tom Telfer, B.A.(UWO); LL.B. (UWO); LL.M. (Duke); S.J.D.
(Toronto), is an Associate Professor of Law at the University of Western Ontario. Prior to
joining Western, Thomas Telfer was a member of the University of Auckland Faculty of
Law in New Zealand for eight years. His research and writing interests include the areas
of insolvency law, commercial law and consumer law. He is a co-editor of and
contributor to an important new work on consumer law entitled, International
Perspectives on Consumers’ Access to Justice to be published by Cambridge University
Press in 2003. He has published a number of articles on consumer law, including
consumer bankruptcy law and articles on the New Zealand Consumer Guarantees Act.
While in New Zealand he acted as a consultant to counsel on Consumer Guarantee Act
cases. This included work on the first appeal to be heard on the Act by the New Zealand
Court of Appeal. He also acted as a consultant to the New Zealand Ministry of Economic
Development on bankruptcy law reform.
Professor Jacob Ziegel is professor of law emeritus at the University of Toronto.
Professor Ziegel joined the University of Toronto in 1975 and retired in 1993. However,
he continues to be very actively involved in many areas of commercial and consumer
law. Prior to joining the University of Toronto Prof. Ziegel taught at the Osgoode Hall
Law School, McGill University and the University of Saskatchewan. Prof. Ziegel is the
editor in chief of the Canadian Business Law Journal and the convenor of the Annual
Workshop on Commercial and Consumer Law, a well established institution now in its
33rd year, which is held every October mostly at the University of Toronto. Prof. Ziegel
41
also served as research director for the Ontariol Law Reform Commission in its Report
on Consumer Warranties and Guarantees (1972) and Report on the Sale of Goods
(1979).