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Consumer Protection (Ontario) Law - General CPA Law
Chapter 6 - Unfair Practices
(01 July 2013)- Overview
(a) Practice Note
(b) About Unfair Practices
- False, Misleading or Deceptive Representations
(a) 'False', 'Misleading' and 'Deceptive' Distinguished
(b) The 'False, Misleading or Deceptive' Example List
- Unconscionable Representations
(a) Overview
(b) Intention and Negligence
(c) The Unconscionability Factor 'List'
- Renegotiation under Duress Against Consumer Property Held
- Remedies for Unfair Practices
(a) Overview
(b) Rescission and Restitution, Where Possible
. Overview
. All Collateral Agreements Also Rescinded
. No Causality Requirements
. Are Restitutary Duties Mutual?
(c) Alternative Remedy Where Return of Goods and Services to Supplier Not Possible
(d) Damages in Any Event
(e) Exemplary and Punitive Damages
(f) Notice Requirements
. Overview
. Notice Requirements
. Service of Notice
. When Right to Sue Accrues
. Court Waiver of Notice
(g) Civil Court Proceedings
. Overview
. Parole Evidence Rule Excepted
. Liability Amongst Multiple Parties
- Parties to an Unfair Practice
(a) Overview
(b) Suppliers
(c) Agents
(d) Employees
(e) Corporations
(f) Sole Proprietorships and Partnerships
(g) Corporate Directors and Officers
(h) Mistake and Fraud
(i) Advertising Logistical Support Excepted
(j) Manufacturers
- Administrative Orders and Unfair Practices
1. Overview
(a) Practice Note
"Unfair practices" are a specific type of overarching consumer law violation, typically more serious than non-compliance with the 'general' CPA rights provisions discussed in Ch.5 ["General Consumer Rights"], Ch.7 ["General Civil Remedies"] or in the sector-specific chapters (eg. motor vehicle repair, credit repair, etc). Likewise, most procedures and remedies for "unfair practices" are unique to the "unfair practices" regime [CPA 91], including: remedies available, notice provisions, parties and so on.
However that does not mean that a consumer facing one fact situation must elect between the general and the 'unfair practices' regime when pursuing a remedy, as the two are not mutually exclusive. Readers should consider their particular fact situation from both the general and the unfair practices (this chapter) perspectives to fully explore their remedial oppourtunities.
(b) About Unfair Practices
The Consumer Protection Act (CPA) prohibits particular market behaviours which it calls "unfair practices" [CPA 17(1,2)]. These provisions are not limited in application just to suppliers, and in fact most of them relate to behaviour engaged in before a contract is formed, by people trying to sell things to consumers.
While the term 'practices' suggests a broad range of supplier behaviour, in fact they are almost entirely limited to 'false, misleading or deceptive' and otherwise unconscionable representations (advertising or communications) [CPA 14].
The CPA defines a "representation" as follows:CPA s.1 "representation" means a representation, claim, statement, offer, request or proposal that is or purports to be,
(a) made respecting or with a view to the supplying of goods or services to consumers, or
(b) made for the purpose of receiving payment for goods or services supplied or purporting to be supplied to consumers; While clause (a) ["made ... with a view to the supplying of goods or services to consumers"] is plainly broad enough to capture most advertising-type statements, clause (b) is often overlooked for it's potential application to bill collection activities. While I explore that latter potential more fully in my Isthatlegal.ca Collection Agencies (Ontario) Legal Guide, Ch.7: The CPA and Collection Practices, the main thrust of the present chapter is on the 'advertising' side of unfair practices.
The single non-representation form of an unfair practice is discussed in s.4, below ("Renegotiation under Duress Against Consumer Property Held").
This predominant concern with 'false, misleading or deceptive representations' locates the 'unfair practices' CPA regime within the larger family of 'false advertising' law which is manifest at the federal level in the much-underused Competition Act.
CPA "unfair practices" fall into three categories, each considered in turn in the next three sections below. These are:- false, misleading or deceptive representations [s.2; CPA 14(1)]
- unconscionable representations [s.3; CPA 15(1)]
- re-negotiation under duress [s.4; CPA 16]
The remaining sections of this chapter address the remedial and enforcement provisions that are unique to the 'unfair practices' regime.*** Note:
In what is now probably a spent (ie. obsolete) provision, the CPA continues the operation of the old Business Practices Act in relation to consumer transactions that occured before the 'new' CPA came in force 30 July 2005 under (then) Bill 180 [CPA s.19]. If you are dealing with an 'unfair practice'-like situation dating back that far, you should review that legislation.
2. False, Misleading or Deceptive Representations
(a) 'False', 'Misleading' and 'Deceptive' Distinguished
The three terms "false, misleading or deceptive" come from a mixed background of both civil and criminal law, and they can have different meanings in the two different contexts.
For instance, a representation may be 'false' or 'misleading' under the civil law but not criminal in that the person making the representation lacked any intention to lie or deceive when they made the representation (ie. it was an innocent mistake). Since the CPA is a civil regulatory statute, it is in this 'innocent' sense that those two terms operate here - ie. unless otherwise specified, there is no requirement that the respondent intended the prohibited result.
'Falsity' then, under this standard, is a relatively straightforward comparison between the literal representation made versus the facts about goods, services or contractual terms (ie. was the representation true or not?).
Similarly, the term 'misleading' focusses rather on what the consumer is led to believe, but does not require that the respondent intended to mislead the consumer. Most cases of examining 'misleading' representations will invoke judicial consideration of what the hypothetically 'reasonably-informed' person would come to believe when faced with the same representations. This is called an 'objective' standard, unlike a 'subjective' standard which focusses on what a particular individual thinks.
The term 'deceptive' is a bit more troublesome, because if we understand it in the sense of lacking intention - it is indistinguishable from the term 'misleading'. Principles of statutory interpreation do not tolerate generally two different terms meaning the same thing, particularly in such close quarters to each other, so it seems necessary to impute to the concept of 'deceptive' an added element of intention. Because of this, you can expect few consumer situations to require use of this stronger term, as the easier 'misleading' standard will almost always be adequate to the task.
That said, CPA law only infrequently adds an additional 'intent' requirement on top of 'false, misleading or deceptive', a statement which is true of it's offence prosecution provisions (Ch.11) as well [one exception is in s.3 below where intent is often an integral part of the 'unconscionability' form of 'unfair practices']. Those few exceptions are noted when they occur in this chapter, but they (like the 'deceptive' category) are redundant as those provisions of the CPA can be triggered
without any element of intention under the innocent 'false' or 'misleading' categories. At most evidence of intention to deceive (ie. fraud) is only relevant to the CPA for offence sentencing purposes and for punitive damage civil claims.
Of course, if a representation was made in an intentionally 'false, misleading or deceptive' manner then - in addition to falling under CPA application - it may also come under Criminal Code provisions (typically fraud), a topic which is beyond the scope of this present Isthatlegal.ca Consumer Protection (Ontario) Legal Guide.
In short, it will be adequate in almost all situations for consumers to disregard the intention behind the making of an allegedly 'false, misleading or deceptive' representation - indeed, why make more work for yourself in a legal situation than you have to? That said, if it is obvious and easy to prove, it will just make your case stronger.
(b) The 'False, Misleading or Deceptive' Example List
The CPA offers a list of general consumer situations which qualify as being "false, misleading or deceptive representations". These examples are not mutually exclusive, so it would not be surprising if some fact situations comfortably locate themselves within more than one of them [CPA 14(2)]. Neither are they exhaustive, which means that situations other than those listed could conceivably be found to be 'false, misleading or deceptive' as well.
These statutory examples follow below.- False or Misleading Representation Re Sponsorship or Nature of Goods or Services
"A representation that the goods or services have sponsorship, approval, performance characteristics, accessories, uses, ingredients, benefits or qualities they do not have."
It is common for manufacturers in particular to print labels or official-looking certificates on their products in an attempt to persuade the consumer that their products are independently judged to be of a high standard. While some of these are legitimate, many are issued by captive, in-house or industry-funded organizations - and some are just plain bogus.
- False or Misleading Representation Re Sponsorship or Affiliation of Supplier
"A representation that the person who is to supply the goods or services has sponsorship, approval, status, affiliation or connection the person does not have."
- False or Misleading Representation Re Quality of Goods or Services
"A representation that the goods or services are of a particular standard, quality, grade, style or model, if they are not."
This category resembles certain 'conditions and warranties' implied into consumer agreements by the CPA, and as well some imported into the CPA from the Sales of Goods Act. These are discussed in Ch.5, s.3: "General Consumer Rights: Warranties and Conditions Preserved".
- False or Misleading Representation Re Used Goods as New
"A representation that the goods are new, or unused, if they are not or are reconditioned or reclaimed, but the reasonable use of goods to enable the person to service, prepare, test and deliver the goods does not result in the goods being deemed to be used for the purposes of this paragraph."
This provision might apply to prevent a car dealer from claiming that a 'demo' (demonstration) car, driven by many successive prospective customers, is still new.
- False or Misleading Representation Re Degree of Use of Goods
"A representation that the goods have been used to an extent that is materially different from the fact.'
- False or Misleading Representation Re Reason for Availability of Goods or Services
"A representation that the goods or services are available for a reason that does not exist."
- False or Misleading Representation Re Prior Representation Re Goods or Services
"A representation that the goods or services have been supplied in accordance with a previous representation, if they have not."
Examples of this might be:
- a false or misleading representation that the goods or services are being supplied to the consumer in accordance with their prior request or order, when no such request or order was made by the consumer;
- a false or misleading representation that the goods or services being supplied are with features requested by the consumer, when no such request was made (eg. 'But you said you wanted it in green!').
Further, there is nothing in this category that requires that the previous representation be made by the consumer rather than a third party.
- Deceptive or Negligent Representation Re Availability of Goods or Services
"A representation that the goods or services or any part of them are available or can be delivered or performed when the person making the representation knows or ought to know they are not available or cannot be delivered or performed'"
This addresses situations where people try to sell goods or services that are not available in order to get a sale now, and then come up with delaying excuses later. In light of the next-following CPA example, this one must refer to the complete unavailability (that even waiting won't fix) of the goods or services.
Fitting to the nature of the falsity involved here, and unlike most 'unfair practices' this example does require a mental element of intention (ie.'knows'), or at least 'negligence' (ie. 'ought to know'), to be satisfied. The first is sometimes called a 'subjective' standard of knowledge (meaning from the perspective of the person themselves), and the second an 'objective' one (meaning from the hypothetical perspective of the average person).
Unlike most 'unfair practice' examples given in this list, there is no 'absolute liability' standard in this category (ie. satisfied by simple proof that the representation was made, even if it was innocent). Thus innocent mistakes will not invoke this category.
- False or Misleading Representation Re Timing of Availability
"A representation that the goods or services or any part of them will be available or can be delivered or performed by a specified time when the person making the representation knows or ought to know they will not be available or cannot be delivered or performed by the specified time."
Like the above example, this one requires either deception ('knows'), or 'negligence' (ie. 'ought to know'), to be satisfied. A mistaken representation made both innocently and without negligent would not invoke this example.
A fact example of this might be where goods were promised for delivery on a certain day when the seller knew that they were presently out-of-stock and that new stock was not expected to be delivered until after the date promised. The seller is motivated to close the sale and get the money now, and is prepared to fob the consumer off with excuses later.
A 'negligence' version of this could be where the seller simply never checked stock availability before assuring the consumer of a delivery date.
- False or Misleading Representation Re the Need for Repair or Replacement
"A representation that a service, part, replacement or repair is needed or advisable, if it is not."
This is self-evident. It is particularly applicable to motor vehicle repair, which is subject of a sector-specific chapter of that name. That chapter has specific provision for the return of replaced parts to the consumer so that they can see if they are indeed damaged or worn.
- False or Misleading Representation Re Price Advantage
"A representation that a specific price advantage exists, if it does not."
A fact example of this would be a false or misleading representation that the goods or services are 'half regular price', when they are not - or perhaps a false "going out of business sale". Pricing gimmicks are numerous and will be as varied as the imagination of suppliers. Each should be examined for its truth and forthrightness.
- False or Misleading Representation Re Negotiation Authority
"A representation that misrepresents the authority of a salesperson, representative, employee or agent to negotiate the final terms of the agreement."
This is sometimes called 'double-dealing'. The idea is that the person that you initially deal with 'negotiates' to pull you to the highest price they can, and then at the end tells you that the 'deal' you think you have has to be 'approved by his boss' (or similar) - who usually never appears. The original person then comes back and tells you that their boss won't settle for less than 'X' dollars, which is invariably higher than what you thought you had a deal on. The goal of the technique is to both extract a higher price from you and to cause you to invest time and energy in the negotiation, time which you do not wish to have to re-expend somewhere else by walking away from the now-dubious 'deal'.
- False or Misleading Representation Re Rights in Event of False, Misleading or Deceptive Representations
"A representation that the transaction involves or does not involve rights, remedies or obligations if the representation is false, misleading or deceptive."
This example could apply if the supplier tells you that the sale is exempt from CPA or other legal protections when it is not. For reference, CPA-exempt economic sectors are listed in Ch.2 ["Exemptions from Coverage"], and most others are governed by the CPA's unfair practice provisions.
Similarly it could apply to a representation that the sale is protected by (positive) rights and remedies that do not exist in the contract. Though in that case the statement itself might be useful to compel the supplier to extend the rights they have represented, arguing that the 'false' representation became a new contractual consumer entitlement.
While traditional rules of evidence sometimes bar the admission of oral statements to vary the terms of a written contract (this is the often-excepted 'parole evidence' rule), this rule has been expressly excepted for civil claims based on unfair practices [see s.5(g) below: "Remedies for Unfair Practices: Civil Court Proceedings: Parol Evidence Rule Excepted"]. In any event a claim could also be grounded in the tort of negligent or fraudulent misrepresentation, arguing that the false representation induced the consumer to enter into the contract when they otherwise would not have.
- False or Misleading Representation Re Material Facts
"A representation using exaggeration, innuendo or ambiguity as to a material fact or failing to state a material fact if such use or failure deceives or tends to deceive."
A 'material fact' is one which is pivotal to your decision to make a purchase. For instance, if you require an electrical appliance compatible with a particular foreigh country's electrical system, but you get one only compatible with North American systems - that issue is 'material' to your purchase decision. The item is simply useless for your purpose, and you would not have purchased it had you known.
The additional of this 'material' requirement here distinguishes this form of unfair practice from what is generally known (and historically tolerated) as "puffery". This is a legal term of long-standing that tolerates typical extreme characterizations of goods or services features (eg. 'super-spectacular, humungous, fantastic, etc'). Such terms, amorphous by nature, will likely be tolerated by courts insofar as they relate to non-material (minor) features, and insofar as they are broad, relatively meaningless characterizations of the good or service as a whole.
That said, this is an area of advertising that hides many sins, and consumers should not be too accepting of such representations when they actually do induce them to purchase. An example of this might be where a consumer was induced to visit a particular out-of-town store to shop as the result of advertising for a 'super-fantastic blow-out sale', and ending up facing regularly-priced merchandise - thus wasting their valuable time and effort.
- Misrepresentation Re Purpose of Solicitation or Communication
"A representation that misrepresents the purpose or intent of any solicitation of or any communication with a consumer."
This is designed to catch sales contacts that purport to be something else. How many of us (I certainly have) have received telemarketing phone calls, asked immediately if this 'is a sales call', been told no - and then have the caller proceed to try to sell us something. Techniques here include purporting that the communication is to 'assess our utility expenses', 'conduct a survey', etc. The techniques rely on (the fast-diminishing category of) people being too polite to hang up and so keep talking to the seller. It is a particularly pernicious technique when applied to seniors and those with reduced critical faculties, and who are sometimes just plain lonely.
- Misrepresentation Re Purpose of Charge
"A representation that misrepresents the purpose of any charge or proposed charge."
This category both includes and exceeds the making of a charge for a good or service that was simply not provided (ie. simple mistake or fraud). Were it so limited, simpler language such as a "charge for a good or service not provided" would have sufficed.
It may include attempts by unscrupulous suppliers to impose 'extra charges' on top of the principal amount negotiated for, in a bald attempt to squeeze more money out of the consumer. They usually have banal characterizations such as 'transaction fees', 'administration fees', etc where no significant or unusual reason exists to justify such charges.
- False or Misleading Representation Re Benefits of Referring New Customers
"A representation that misrepresents or exaggerates the benefits that are likely to flow to a consumer if the consumer helps a person obtain new or potential customers."
This example is more revealing by what it implicitly tolerates than by what it prohibits. It implies that CPA law allows suppliers to contract with consumers for a benefit if the consumer refers other consumers to the supplier - as long there is no falsity, misleading or exaggerating element to the representation of the benefit or compensation.
3. Unconscionable Representations
(a) Overview
The CPA provides that [CPA 15(1)]:CPA 15(1) It is an unfair practice to make an unconscionable representation. The concept of 'unconscionability' is drawn from the common law of contracts, where it is used to justify rescission (cancellation) of the agreement or to excuse a party from particularly onerous 'unconscionable' terms. In the CPA 'unfair practice' regime it is applied to 'representations'.
While elements of the usual common law criteria for unconscionability (ie. duress, inequity, reduced capacity), are included in the similar unfair practice determination, the CPA once against offers a list for that purpose. This list [at (c) below] - unlike the similar list for 'false, misleading and deceptove' representations [s.2(b) above] - does not give examples, but rather offers the factors that are to be assessed when determining unconscionability.
(b) Intention and Negligence
Unlike the case with 'false, misleading and deceptive' representations [s.2 above], CPA law seems to prefer (though not demand) at least an element of negligence on the part of the supplier who creates the unconscionable situation, and will of course also be satified by proof of full intention. This conclusion is drawn from the preamble to the list of unconscionability factors [see (c) below], which reads [CPA 15(2)]:CPA 15(2)
Without limiting the generality of what may be taken into account in determining whether a representation is unconscionable, there may be taken into account that the person making the representation or the person's employer or principal knows or ought to know, ... These are concepts of subjective knowledge or intent ('knows') and objective knowledge ('ought to know', aka negligence or 'strict liability') discussed in s.2(a) above. A third category, allowed widely for 'false, misleading and deceptive' representations and sometimes called 'absolute liability' (where only the act of putting the consumer in the prohibited situation is required) is not expressly mentioned. However the above-quoted preamble plainly grants an adjudicator the discretion (ie. those factors "may be taken into account") to find unconscionability on this lower, absolute liability standard.
(c) The Unconscionability Factor List
In any event, the CPA list of factors to be assessed towards a finding of 'unconscionable' representation (and thus a CPA "unfair practice") is set out following [CPA 15(2)]:- Reduced Capacity
What I call "reduced capacity" occurs when the "consumer is not reasonably able to protect his or her interests because of disability, ignorance, illiteracy, inability to understand the language of an agreement or similar factors".
The basic question here is whether the consumer's capacity to 'know what they were getting into' was impaired in anyway. If so, the idealized 'market model' of free, informed actors interacting with each other to their mutual benefit fails and CPA intervention is warranted. Note that there is no requirement here that a consumer agreement was actually be entered into, just that a supplier representation, made intentionally or negligently, resulted in the vulnerability.
- Price Inequity
What I call "price inequity" occurs when, "the price grossly exceeds the price at which similar goods or services are readily available to like consumers".
In short, was or is the price outrageous for what was being sold? Note again here that there is no requirement here that a consumer agreement was actually be entered into, just that a supplier representation embodies an extreme price disparity (ie. offered and accepted, or offered only).
- Lack of Utility of Purchase
What I call "lack of utility of purchase" occurs when "the consumer is unable to receive a substantial benefit from the subject-matter of the representation".
In other words, has (or would have) the consumer purchased something useless to them? Note again that there is no requirement here that a consumer agreement actually be entered into, just that a supplier representation, made intentionally or negligently, resulted - or would have resulted if relied upon - in the lack of utility.
- Impecuniosity
What I call "impecuniosity" occurs when, "there is no reasonable probability of payment of the obligation in full by the consumer".
In short, is the purchase - or would it be if made - beyond the financial means of the consumer? Again, note that there is no requirement here that a consumer agreement actually be entered into, just that a supplier representation resulted or would have resulted in the inability to fully pay for the purchase.
- Relative Inequity
What I call "relative inequity" occurs when "the consumer transaction is excessively one-sided in favour of someone other than the consumer".
Here the wording suggests either a completed consumer agreement - or at least highly-imbalanced negotiations, and requires significant inequity between the bargaining power of the consumer and that of anyone else (including the supplier).
- Absolute Inequity
What I call "absolute inequity" occurs when "the terms of the consumer transaction are so adverse to the consumer as to be inequitable".
This is very similar to 'relative inequity' (above), though it lacks the comparative element. Presumably it is satisfied by significant inequity to the consumer, without the need for a corresponding advantage on the other party.
- Materially Misleading Opinion
What I call "materially misleading opinion" occurs when "a statement of opinion is misleading and the consumer is likely to rely on it to his or her detriment".
Again, there is no requirement here that a consumer agreement actually be entered into, just that a supplier representation was made - in the form of an opinion - that was misleading and that the consumer did rely - or may have relied on it - to their detriment. A common legal interpretation of the term 'material' when applied to a representation or contract term is that it is a feature that was pivotal to the consumer's decision to purchase.
- Duress
What I call "duress" occurs when "the consumer is being subjected to undue pressure to enter into a consumer transaction."
There is no requirement here that a consumer agreement was actually be entered into, just that a supplier representation subjected the consumer to undue pressure to enter into a 'consumer transaction'. 'Duress' arises when a person is subject to fears or concerns which are not directly related to the transaction itself, which pressure them to engage in the transaction. A person being pressured into buying a car from a dealer who also employed their son or daughter (with an implicit threat that the child's job might depend on it) might be an example.
4. Renegotiation under Duress Against Consumer Property Held
In the only 'unfair practice' form that is not a representation, it is an unfair practice for anyone who is in custody or control of a consumer's property to use that fact as a threat against the consumer to renegotiate the terms of a consumer agreement [CPA 16].
Instances where someone might have custody or control of a consumer's property include those where property is taken as a 'trade-in' towards a new purchase, or where the performance of services requires that a consumer's property be held by a supplier for a time (eg. repair or modification). This is also the CPA provision involved in the much-publicized cases where movers hold people's household property in order to extort more money out of them, although in some cases that situation has been prosecuted as criminal extortion.
In many cases of a non-payment dispute the common law would entitle the possessor of the property to a lien against it (I don't spell them out here) - that is, it would legally recognize their right to hold the property as security towards payment of the 'debt'. This CPA provision makes such holding an unfair practice if the purpose is to change the contractual terms between the parties, which would include increasing price. So if a common law lien entitlement existed based on the originally-negotiated price, it would still be valid.
In cases where a lien is asserted based on the interpretation of a non-price contract terms, or a legitimate dispute over the calculation of price, this provision suffers from uncertainty in practice as the parties will not know whether the lien-holder is attempting to change the terms of the contract until such time as a court or other adjudicator tells the parties what their rights are.
The overall effect of this provision then is to make any attempt by a supplier to assert a lien over consumer property a risky venture, and to give them an incentive to resolve the matter through the courts as a debt or damage claim rather than to resort to any 'direct action' lien rights they may have.
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