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Appellate Litigation

Damages are usually awarded by a court as a form of compensation for harm or loss suffered by the successful plaintiff; however, a court will occasionally award damages that serve a different purpose.  Punitive damages, for example, are sometimes awarded not to compensate the plaintiff but to punish the wrongdoer and deter others from engaging in similarly egregious behaviour.  While not common, punitive damages can significantly increase the amount payable by a defendant, and in some cases far exceed the amount of actual damage suffered by the plaintiff.  A recent example of a punitive damage award can be found in Baker v. Blue Cross, where the defendant insurer was sued after denying the plaintiff long-term disability benefits.  The plaintiff was successful and a jury awarded $220,604 for lost past benefits, aggravated damages of $40,000 for mental distress and $1.5 million in punitive damages.  

This blog post will explore consumer damages in relation to the Consumer Protection Act after the Ontario Superior Court of Justice deemed a defendant’s conduct “reprehensible” warranting a punitive damages award.

Aggrieved Consumer Seeks Modest Compensatory Damages But Significant Punitive Damages

In a recent case from the Ontario Superior Court of Justice, an award of punitive damages was made in a consumer protection context. While the amounts involved were modest, this case is particularly noteworthy as the decision highlights the risk to a business presented by the prospect of a punitive damages award, especially if the misbehaviour grounding that award involves multiple consumers who might pursue a class action.

Plaintiff Schedules In-Home Energy Assessment With Defendant

The plaintiff in Thompson v. Canadian Home Improvement Credit Corporation, commenced a lawsuit to recoup the money she paid to rent HVAC equipment promoted by the second defendant, a company carrying on business as “Ottawa Green Savings” (“OGS”).  She claimed a modest $988.65 in compensatory damages, together with other relief.  The plaintiff had been introduced to the defendants after responding to an advertisement on Facebook that offered free in-home energy assessments and rebates. When a representative of OGS contacted her to schedule an appointment, she was told that OGS could help homeowners apply for “Ontario Efficiency Rebates” and that OGS was associated with the Government of Ontario.  

An OGS representative subsequently visited her home and inspected her existing equipment to determine if she would qualify for rebates.  She was told by the representative that she would have to replace her water heater, air conditioner and furnace because they were “old and inefficient.” However,  she was told she would qualify for energy rebates from the Government of Ontario of $40 per month if she acquired new HVAC equipment from OGS.  She decided to replace the water heater and air conditioner.  

Plaintiff Not Provided With Full Contracts for New Equipment Rentals

The OGS representative presented her with portions of equipment rental contracts to sign, rather than the whole contracts. The representative also did not tell her she would have to pay more than $28,000 to cancel the contracts, nor was she told that the contracts permitted OGS to put a lien or notice of security interest on her home for that amount.  

The following month, the new HVAC equipment was installed, but it did nothing to reduce her utility bills, and the new water heater did not work as well as the old one.  OGS also failed to cancel the plaintiff’s contract with the company that rented her old equipment, resulting in her paying rent under two contracts for several months. When she tried to reach OGS, they were unresponsive.  Further, she discovered two Notices of Security Interest had been registered by one of the defendants against the title to her home.

Unfair Consumer Practices and Punitive Damages

The Court concluded that the various misrepresentations made to the plaintiff to induce her to sign the equipment rental contracts were fraudulently made, which entitled her to have the contracts set aside.  Moreover, the Court noted that such misrepresentations constituted an “unfair practice” under section 14 of the Consumer Protection Act.  This finding triggered the potential application of section 18(11) of the Consumer Protection Act, which provides that a court may award exemplary or punitive damages to a consumer impacted by an unfair practice.

The plaintiff sought $25,000 in punitive damages, which far exceeded her claim for compensatory damages. In considering this request, the Court referenced prior case law and noted the objectives of the Consumer Protection Act as described by the Supreme Court of Canada in Richard v. Time Inc..  Those objectives included the need to restore the balance in the contractual relationship between sellers and consumers since consumers generally have less bargaining power, and the elimination of unfair practices that may hinder consumers from making informed choices by distorting the information available to them.  The Court went on to note prior comments of the Supreme Court of Canada to the effect that courts should consider “evidence that the defendant’s conduct was intentional, malicious or vexatious, or that they displayed ignorance, carelessness or serious negligence with respect to their obligations and consumers’ rights.”  The behaviour of the defendant, both at the time of the violation and thereafter, must be considered.

Court Awards Punitive Damages Due to Defendant’s “Reprehensible” Conduct

The Court concluded that, while a mere breach of the Consumer Protection Act’s prohibition on unfair practices was insufficient to ground an award of punitive damages, the case before it involved more than just an unfair practice. Specifically, the Court noted that, under the guise of providing information to Thompson about energy rebates, OGS had engaged in “unsolicited door-to-door sales” of HVAC equipment, which is unlawful in Ontario. Further, OGS’s representative had actively hid the terms of the contracts signed by the plaintiff, so she was unaware of the financing terms or that OGS could register a lien against her property for the excessive amount she would have to pay to cancel the contracts. Lastly, the defendants did not return the plaintiff’s calls, forcing her to commence legal action.  

Based on these facts, the Court concluded that OGS’s conduct was “reprehensible” and showed “contempt for the consumer protection provisions in the Act.”  It was therefore appropriate to award punitive damages to discourage OGS and companies like it from engaging in such practices.

The Risk of Class Proceedings

The Court ultimately awarded punitive damages of $10,000, noting that while there was no direct evidence that OGS induced others into signing agreements, “it would be naïve to think that their Facebook advertisement elicited only one response.”  If OGS had treated other consumers in the same manner, it is conceivable they could have faced a class action proceeding, which might have resulted in a significantly higher punitive damages award. 

Businesses would do well to remember that section 8 of the Consumer Protection Act expressly provides that a consumer may commence a class proceeding in respect of a dispute arising out of a consumer agreement. While the risk posed by having to pay compensatory damages for individual transactions may be relatively small, vexatious behaviour in a consumer context can be very costly, especially if it is routine or might affect multiple customers.

For Advice on Commercial Litigation Claims or Defending Class Action Proceedings, Contact the Lawyers at Milosevic & Associates in Toronto

The skilled commercial litigation lawyers at Milosevic & Associates in Toronto are highly experienced at representing clients in claims pertaining to a breach of contract and regularly advise clients on potential legal risks in a commercial or consumer protection context. Our trusted commercial law team is available to provide practical advice tailored to the unique needs of each client, and provide superior representation before all levels of court in Ontario in the event that a dispute requires litigation. To find out how we can assist you, contact our office by phone at 416-916-1387 or online.