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Trade practices legislation : the British Columbia experience Exner, Heidi Maria 1979

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TRADE PRACTICES LEGISLATION : THE BRITISH COLUMBIA  EXPERIENCE  by  HEIDI MARIA EXNER  LL.B., University o f Tasmania, 1977  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF LAWS in THE  FAGULT¥rtOgKS^DUATE;-;STUDIES (THE FACULTY OF LAW)  We accept t h i s thesis as conforming to the required, standard.  THE UNIVERSITY OF BRITISH COLUMBIA January, 1979  (c)  Heidi Maria Exner, 1979'  In presenting  t h i s thesis in p a r t i a l  fulfilment of the  requirements for  an advanced degree at the University of B r i t i s h Columbia, I agree that the  Library s h a l l make i t f r e e l y available  for reference  and  study. I  further agree that permission for extensive copying of t h i s thesis for scholarly purposes may representatives. thesis  for  be granted by the Head of my  It i s understood  f i n a n c i a l gain  shall  that copying not  be  or  allowed  Department or by h i s publication without  of  my  permission.  Heidi Maria Exner  Faculty of  Law  The University o f B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5  January,  1979  this  written  ii ABSTRACT  The  innovative features of the recently enacted  B r i t i s h Columbia Trade  Practices Act have been widely acclaimed, but have received l i t t l e appraisal  by  legal  consumers  from  w r i t e r s . The  undesirable  Act  business  provides acts  wide-ranging  and  critical  protection to  p r a c t i c e s , making  relief  r e a d i l y a v a i l a b l e through both new and t r a d i t i o n a l enforcement mechanisms. This  thesis examines  provisions,  and  the  considers  interpretation  what  the  Act  given  has  in  to  the  fact  Act's  major  accomplished  for  consumers i n t h i s province. The discussion i s placed i n the wider context of the  protection that consumers should  be given  practices, contrasting t h i s with the inadequate It liberally has  i s shown  the  Act  has  not  and  unfair  remedies at common law.  always  been  fully  accepted  or  interpreted by the courts. The d e f i n i t i o n of deceptive practices  been narrowly  provision  that  from deceptive  applied  overlooked. The  by  some judges,  and  the  need, for some procedural  wide  timing  defect to  of  the  invoke  the  unconscionability provision has been s t r i c t l y adhered to, despite the  fact  that the Act i n v i t e s judges to emphasize matters of substantive unfairness. These problems have been complicated  by the Act's poor d r a f t i n g , and  the  lack of strong test cases. These d i f f i c u l t i e s aside, the Trade Practices Act has accomplished  much  for consumers i n t h i s province. Active enforcement of the Act's administrat i v e remedy, the assurance  of voluntary compliance,  evidence of i t s successful implementation.  provides  the  visible  But i t i s shown that i t i s at the  informal l e v e l that the Act has been most u s e f u l . It had provided consumers with  considerable bargaining  Ministry  of  Consumer  and  leverage,  Corporate  and  the  Affairs  r e s u l t s . The Act's very existence has had  mediation  have  often  efforts alone  of  the  achieved  a strong deterrent e f f e c t on  the  entire marketplace.  I t i s argued  that these  informal aspects are  i n fact  more important than the formal resolution mechanisms i n the consumer f i e l d , but that the l a t t e r are required to give strength to them. In  attempting  to  provide  British  Columbia  consumers  with  maximum  protection, the Trade Practices Act i s too onerous on suppliers in respect of i t s adoption of a s t r i c t l i a b i l i t y t e s t civil  for deception according to the  standard. It i s argued that a limited defence  i n cases of  innocent  deception would be f a i r e r and would not compromise the needs of consumers. A model defence i s proposed. The Act i s not without i t s weaknesses too. There i s a strong need to provide better protection from substantive unfairness and  from consumer abuses not d i r e c t l y t i e d  to a consumer transaction. The  Act also needs to be enforced more e f f e c t i v e l y . The Ministry's p o l i c i e s and p r i o r i t i e s require reassessment, and from  the  selection  of  the  there have been d i f f i c u l t i e s  courts  as  the  enforcement  forum.  arising Further  administrative remedies are considered. Small claims courts have proved consumer  are  suitable  a l t e r n a t i v e s . Both t r a d i t i o n a l and non-traditional approaches are  reviewed.  It  disputes,  i s concluded  bring  and  the  unsatisfactory for the resolution of  that while  question  arises  restructuring  the  as  to  present  what  court system would  improvements, introducing an a r b i t r a t i o n model t a i l o r e d  needs would be better.  to consumer  iv TABLE OF CONTENTS  ABSTRACT  i i  TABLE OF CONTENTS  iv  ACKNOWLEDGEMENT  V  I.  INTRODUCTION  1  1. 2. 3.  3 5 6  II.  Trade practices l e g i s l a t i o n i n B r i t i s h Columbia Outline o f thesis Background and scope o f the Act  DECEPTIVE TRADE PRACTICES  11  1.  The position at common law  12  2.  The Trade Practices Act - l e g i s l a t i v e approach  15  I I I . UNCONSCIONABLE TRANSACTIONS  32  1. 2.  Problems faced by consumers Court intervention  33 35  3.  L e g i s l a t i v e intervention  42  IV.  REMEDIES AND ENFORCEMENT  54  V.  1. Remedies available under the Act 2. Operation o f the Act 3. Evaluation o f the Ministry's a c t i v i t i e s 4. Evaluation o f the role played by the courts ALTERNATIVE REDRESS MECHANISMS 1. Who should mediate 2. Adjudicative forums 3. A r b i t r a t i o n within the B.C. framework 4. A r a d i c a l a l t e r n a t i v e - "no f a u l t " compensation  55 59 68 75 78 78 80 90 92  VI.  CONCLUSIONS  93  BIBLIOGRAPHY  98  V  ACKNOWLEDGEMENT  I would l i k e  to thank my supervisor,  Professor  Peter  Gall,  for  the  considerable time and e f f o r t he has put into improving t h i s work. Thanks are also  due to the s t a f f  Affairs,  o f the B.C. Ministry o f Consumer  e s p e c i a l l y Mr M. Hanson, Mr D. Morris,  and Corporate  and i t s former  Deputy-  Minister, Professor W. Neilson, who spent many hours sharing their knowledge and  experiences  Foundation  with  me. Financial assistance  and through  research  and teaching  provided  by the B.C. Law  opportunities  within the  Faculty o f Law, i s g r a t e f u l l y acknowledged. F i n a l l y , I owe an enormous debt of  thanks to my husband  Rolf, f o r a l l h i s assistance  during the course of t h i s work.  and encouragement  1 CHAPTER I  INTRODUCTION  Although the term "consumer" and the concept of "consumer protection" have  only  become  fashionable  complaints have existed  in modern  since man  times,  marketplace  abuses  and  f i r s t began to barter. But  the law  was  slow to move away from the o l d unwritten rule of caveat emptor  1  - l e t the  buyer beware! The  first  substantial  change came with the enactment of the  English  Sale of Goods Act i n 1893,2 which provided statutory remedies to purchasers of defective and "unmerchantable"  goods. The Act was a c t u a l l y a c o d i f i c a t i o n  of case law developments up to i t s time, and i t reflected the growing trend away from caveat emptor. But in the intervening decades, p a r t i c u l a r l y i n the post-war years of furious consumer a c t i v i t y , there has been a  realization  that f a r stronger support for the consumer was necessary. In the face of the complexity o f modern business, i t was  no  longer r e a l i s t i c  to assume that  consumers could reasonably look a f t e r themselves. Not that t h i s r e a l i z a t i o n was universal. Even today, some legal writers and economists s t i l l  advocate  that the market be s e l f - r e g u l a t i n g , ignoring the imbalances and d e f i c i e n c i e s in  the market, and  the s o c i a l  costs involved i n allowing i t to  operate  freely.3  1  But Belobaba (infra note R, p.327) reminds us that concern for consumers was shown even i n 1481, when King Louis XI of France issued the following edict: "Anyone who s e l l s butter containing stones or other things [to add to the weight] w i l l be put into our p i l l o r y ; then the said butter w i l l be placed on h i s head and l e f t u n t i l e n t i r e l y melted by the sun. Dogs may come and l i c k him and people offend him with whatever defamatory epithets they please without offence to God or the King." ^ 56 & 57 V i c t o r i a , c.71. This statute was subsequently adopted by Commonwealth countries through the world. See Sale of Goods Act R.S.B.C. 1960, c.344, as amended by S.B.C. 1973, c.84. 3 See Richard A. Prosner, Economic Analysis of Law, 2nd ed., L i t t l e Brown  2 A major concern was the lack o f comprehensive l e g i s l a t i o n  protecting  consumers from deceptive and unfair business p r a c t i c e s . Consumers are as much wronged by f a l s e claims and improper s e l l i n g imposition  o f harsh  contractual  techniques, and by the  terms, as they are by the purchase of  defective goods. But u n t i l quite recently, l e g i s l a t i o n i n B r i t i s h Columbia was piecemeal - aimed at countering else directed  certain s p e c i f i c sales practices, or  towards isolated industries.^ The one exception to t h i s was  the 1967 Consumer Protection Act^ which regulates,  i n general terms, c r e d i t  transactions and executory contracts. All-embracing l e g i s l a t i o n tackling the problems o f deception and unfairness d i d not come to B r i t i s h Columbia u n t i l the Trade Practices Act o f 1974. Prior  to t h i s  Act there  was  some  protection  at common  law from  deceptive and unfair practices, but the rules applied were highly technical and  very r e s t r i c t i v e l y  subject  interpreted. And the protection  to those ogres o f the common law - the parol  admissibility  o f disclaimer  clauses,  offered  was always  evidence r u l e , the  and the concept o f p r i v i t y  - which  barred r e l i e f in many cases. In addition, even where a consumer had a strong case  he  was  often  daunted  by  the cost  l i t i g a t i o n . Reform of the law required  and  formalities  both substantial  involved  in  a l t e r a t i o n to the  old rules o f law, and the introduction of new procedural mechanisms better suited to meet consumer needs.  and Co., Boston, 1977; c f . Ross Cranson, Consumers and the Law, Weidenfeld and Nicolson, London, 1978. 4 E.g. F a i r Sales Practices Act S.B.C. 1973, c.32, renamed as the Pyramid D i s t r i b u t o r s Act S.B.C. .1973, c.19; Closing-Out Sales Act R.S.B.C. I960, c.53; Trading Stamp Act R.S.B.C. 1960, c.385. • S.B.C. 1967, c.14. This Act has recently been s u b s t a n t i a l l y amended to cover a far wider range o f matters, including contracts for future services, foodplan schemes, and negative option contracts: S.B.C. 1977, c.6. S.B.C. .1974, c.96, as amended by S.B.C. 1975, c.80. 5  6  3 1.  TRADE PRACTICES LEGISLATION IN BRITISH COLUMBIA  The  Trade Practices Act, which has been made the  t h e s i s , embodies some of the most progresive protection  legislation  prohibits deceptive  and  in  other  parts  focal point of t h i s  features  of  the  unfair business acts and  of modern consumer  world.  It  specifically  practices and  provides a  diverse range of remedies in cases of infringement. Its adoption had t h i s province  in the  measures.  is  It  forefront as  ironic  that  a strong  prior  to  leader  1974  on  consumer  British  placed  protection  Columbia  had  the  reputation of being backward in t h i s f i e l d - i t was one of the l a s t Canadian provinces  to  a f f a i r s , and  establish  a  government  department  to  deal  features of American, English and American  jurisdictions  consumer  few statutory measures were "on the books".^  The Act i t s e l f i s a combination of what were considered  the  with  influence have had  longest  consumer-oriented l e g i s l a t i o n , and  best  Australian models. As might be expected,  i s the most pronounced. But the  to be the  and  in fairness, American  most comprehensive  experience  t h i s shows i t s e l f i n the B.C.  detailed l i s t i n g s of prohibited practices, and  the adoption of  in  Act i n the administra-  t i v e remedies.^ Ontario^ their own  and  Alberta  1 0  have already  followed  B.C.'s lead  by  comprehensive trade practices l e g i s l a t i o n . Other provinces  enacting intend  7 For developments i n Canadian consumer law generally, see: Jacob S. Ziegel, "The Future of Canadian Consumerism" (1973), 51 Can. Bar Rev. .191; Harold Buchwald, "Consumer Protection in the Community: The Canadian Experience - an Overview" (1977), 2 Can. Bus. L.J. 182. 8 Excellent discussion of the American influence in Edward P. Belobaba, "Unfair Trade Practices L e g i s l a t i o n : Symbolism and Substance in Consumer Protection" (1977), 15 Osg. Hall L.J. 327. See also Donald P. Rothschild & David W. C a r r o l l , Consumer Protection: Reporting Service, W.H. Anderson Co., C i n c i n n a t i , 1975, 522-576. 9 Business Practices Act S.O. 1974, c.131 (hereafter referred to as the Ontario Act) . Unfair Trade Practices Act S.A. 1975, c.3.3, as amended by S.A. 1976, c.54 (hereafter referred to as the Alberta A c t ) . 1 0  4 to do the same i n the near f u t u r e ; H  Saskatchewan i n 1976  b i l l which i s s t i l l awaiting parliamentary  produced a d r a f t  approval. The p r o v i n c i a l statutes  are far from uniform, but each i s committed to the idea that major r e v i s i o n of the  law  1970's and  i s e s s e n t i a l for consumers to be  adequately protected  in  the  i n the future.  Aims and p o l i c i e s of the Act The redress  primary goals of the Trade Practices Act are to provide e f f e c t i v e to  aggrieved  questionable diverse  consumers, and  business acts and  to  promote  practices.12  the  cessation  of  i t seeks to draw together many  elements of consumer protection l e g i s l a t i o n  free consumers from reliance on antiquated  quick  rules of  and  case law,  and  to  law.  The Act s t r i k e s at deceptive practices i n very strong terms, regardless of whether a consumer has higher  and  a c t u a l l y been harmed. For  more e t h i c a l business standards, rather  i t attempts to  set  than merely regulating  p a r t i c u l a r p r a c t i c e s . On the question of unfairness, i t seeks to r e v i t a l i z e the old doctrine of unconscionability and develop i t as a general all  remedy i n  cases involving grossly inequitable terms, thereby making i t a useful  tool for modern consumers. The  Act  a c t i v e l y and  operates on  the  l i b e r a l l y enforced  assumption by  the  that courts,  radically  new  laws can  be  for i t e s s e n t i a l l y leaves  decision making to t h i s body. This enforcement choice was made p a r t l y out of necessity, for i t was  feared that otherwise the Act would be considered  too  11 The move towards such trade practices l e g i s l a t i o n i s also discernable i n Canada's c i v i l law j u r i s d i c a t i o n . The Quebec Consumer Protection Act, A.N.Q., 3rd session, 31st Legislature, 1972, B i l l 72, proscribes deceptive business practices i n very general terms. 12 See Tex C. Enemark, Deputy Minister of the B.C. M i n i s t r y of Consumer and Corporate A f f a i r s (hereafter c a l l e d the M i n i s t r y ) , "Remarks on Trade Practices Enforcement", Consumer Law Conference, University of Toronto, Ontario, Oct 21, 1977.  5 radical and be rejected out of hand. Comprehensive trade practices l e g i s l a t i o n such as the Trade  Practices  Act has the advantage of reducing the need for further statutes directed at p a r t i c u l a r industries or practices, and time-lag  between  recognition  of  an  therefore of eliminating  undesirable  practice  and  the  usual  legislative  prohibition - a feature of piecemeal reform.  2.  OUTLINE OF THESIS  In Chapters II and and  unconscionable acts  some depth. The cases w i l l  be  I I I , the s p e c i f i c prohibitions r e l a t i n g to deceptive and  practices, respectively, w i l l  framework of these provisions discussed  so  as  to ascertain  w i l l be  law remedies, and other l e g i s l a t i v e  examined  analyzed, and  the degree of  offered to consumers. This protection w i l l be contrasted  be  in  major  protection  now  to the old common  initiatives.  Chapter IV w i l l be concerned with the enforcement of the Act. The of private, public and quasi-criminal  range  remedies available w i l l be b r i e f l y set  out, with attention being focused on the aspects of public enforcement. The role of the courts i n the f i e l d of consumer remedies w i l l be examined. The  implementation of the Trade Practices Act highlights the need for  more suitable forums to handle individual consumer complaints, e s p e c i a l l y at the adjudicative  l e v e l . In Chapter V,  a l t e r n a t i v e approaches which may  more suited to handling consumer grievences w i l l be examined. The a r b i t r a t i o n model i s discussed In Chapter VI, conclusions  consumer  in depth. w i l l be drawn as to the effectiveness of the  present Act. In i t s present form i t has been a useful experiment, but by means i s i t the  be  no  f i n a l answer to a l l consumer problems. Further l e g i s l a t i v e  reform w i l l be recommended.  6 For the moment, we w i l l turn to a b r i e f discussion of the h i s t o r i c a l background  of  the  Trade  Practices  Act  and  outline  the  scope  of  its  application.  3.  BACKGROUND AND SCOPE OF THE  ACT  The Trade Practices Act was introduced on May 8, 1974, gaining the edge over the Ontario Act by just a day. It was passed, with very few amendments, and.  proclaimed  only  two  months  later.^  It  i s quite  l e g i s l a t i o n of such a controversial nature, and  affecting  astonishing that so many people,  should have had such a swift and trouble-free passage through parliament. Many d r a f t i n g  flaws and  inadequacies became apparent during the Act's  f i r s t year of operation and several amendments were made i n 1975.14 The Act made no pretensions to being perfect; nor was perfection to be expected, for the newly i n s t i t u t e d Department of Consumer S e r v i c e s ^ had had but a year to research  and  consider  the  various  legislative  precedents,  to  draft  l e g i s l a t i o n , and to develop the machinery necessary for administrating i t . l ^ In i t s formative years , the Department dealt exclusively with consumer matters. An extensive campaign was and businessmen a l i k e of t h e i r new front  offices  popped  into  i n i t i a l l y undertaken to educate consumers rights and  existence  r e s p o n s i b i l i t i e s , and  throughout  the  province  to  consumer complaints. Expertize and competence in consumer matters was  storehandle soon  acquired i n t h i s atmosphere.  1 3  J u l y 5, 1974 (with the exception of ss.2(3)(n) & 2(3)(p) which have s t i l l to be proclaimed) . However, note that proclamation of the Ontario Act was delayed u n t i l May 1, 1975. 14 Supra note 6. For discussion, see A l l e n A. Zysblat, Commentary (1976), 1 Can. Bus. L.J. 99. S.B.C. 1973, c.108. 16 For general discussion concerning t h i s period see, William A. Neilson, "Consumer Protection and Public Administration: Some B.C. Notes" (1977), 2 Can. Bus. L.J. 169. 1 5  7 Various administrative changes have taken place i n the past few the most noticeable being the move i n October 1976 of government to the Department, and o f Consumer and Corporate A f f a i r s . I  years,  of the corporate branches  i t s consequent renaming as the Ministry 7  Scope of the l e g i s l a t i o n The  Trade Practices Act applies as such to a l l consumer transactions.  E s s e n t i a l l y i t covers a l l transactions involving the d i s p o s i t i o n of goods or services for purposes that are p r i m a r i l y personal, family, or household.18 The Act uneqivocally extends protection to a l l services, i n contrast to the other  provinces  which expressly  there have been no  exclude  professional  services;19  a s  y t e  cases which take advantage of this.20 However, private  transactions between consumers, as for example i n the private sale of a car, are e f f e c t i v e l y (and unfortunately) The usage  excluded from the Act's  protection.21  d e f i n i t i o n of a consumer transaction extends beyond  in  one  respect.  "Business  opportunities"  just  (first-time  private business  ventures) which involve personal services as well as expenditure of money or property  are  specifically  indicates that  covered.22 The  the Act does not  personal  cover a l l new  meant, b a s i c a l l y , to protect consumers who  services  qualification  business ventures.  It  was  became involved in small business  1^ S.B.C. 1977, c.75, amending the Department of Consumer Services Act, supra note 15. 18 S . l ( l ) . For detailed discussion, see Peter A. Gall, "Recent Developments i n Trade Practices", Consumer Law Conference, University of B.C., B r i t i s h Columbia, June 15, 1978, 1-5 (prepublished copy). 19 Ontario Act, s . l ( l ) ; Alberta Act, s . l ( g ) . 20 However, the Act has been applied to banking services which can be classed as quasi-professional: Bank of British Columbia v. Ramsey, Unreported decision, May 10, 1978 (B.C. Small Claims Ct., Surrey Registry). The c o n s t i t u t i o n a l d i f f i c u l t i e s involved in the a p p l i c a t i o n of p r o v i n c i a l l e g i s l a t i o n to banks were not even mentioned. 21 The penalties and remedies stipulated in the Act apply only against suppliers: ss.15, 16, 20 and 25.  22  s.l(l).  8 operations.23  But i t i s d i f f i c u l t to v i s u a l i z e any s i t u a t i o n which involves  pure investment without any personal  services. The present  wording of the  Act leaves a great deal o f uncertainity as to the exact type and extent o f services required to invoke it.24 Several important types o f transactions are excluded from the scope of the Act. Credit transactions dealing s o l e l y with real property, as defined  under the S e c u r i t i e s Act,25 and insurance 2  Insurance Act *-  are expressly  securities  contracts under the  excluded. I t i s indeed  anomalous that the  purchase o f real estate and the raising of money to finance  i t , which are  undoubtedly two o f the most s i g n i f i c a n t consumer transactions ever into,  should  receive  l e s s protection  than  the most  trivial  entered  o f consumer  purchases. Unfair terms i n mortgages are regulated to some extent Protection  Act, but since  this  Act f a i l s  to provide  i n the Consumer  the comprehensive  remedies a v a i l a b l e under the Trade Practices Act - i n t h i s context the right 2  7  of the Director of Trade Practices to intervene on behalf o f a consumer " i t i s o f limited value. Real-estate transactions have no s p e c i f i c statutory protection  from such p r a c t i c e s . While the complexity  o f t h i s area  o f law  suggests that the d i r e c t a p p l i c a t i o n of the Trade Practices Act, with i t s very general provisions, would be quite unsuitable, there i s a pressing need for strong l e g i s l a t i v e action. It i s interesting to note that subject matter excluded from the scope of the Act can i n d i r e c t l y come within i t s provisions through the Act's broad  2 3  E.g. see Johal & Director of Trade Practices v. D.&V J a n i t o r i a l Enterprises (Vancouver) Ltd., Unreported decision, Oct 28, 1978 (B.C.S.C., Vancouver Registry). Consumer invested money on the promise o f future j a n i t o r i a l service contracts. * The case o f Tropeano v. B.&H. Industries Inc., [1978] 4 B.C.L.R. 317, highlights the problems encountered. Decision i s now on appeal. S.B.C. 1967, c.45. S.B.C. 1960, c.197. 7 S.24. 4  2 5  2 6 2  9 d e f i n i t i o n of services. For instance, i n the real-estate sphere, the agent who holds himself out to be an expert on houses could be held l i a b l e for any misrepresentations  he makes. Several cases have already been decided  along  these lines.28  To whom does the Act apply A feature of modern trade practices statutes i s the dismissal of the old rule that a person bringing an action to enforce a contract, or seeking to r e l y on i t s defences, must prove that he was a c t u a l l y a party to the contract - the old notion of p r i v i t y . The Trade Practices Act overcomes t h i s r u l e by defining  i n very  wide  terms who  is a  "consumer"  and  who  is a  "supplier". A consumer i s defined as any i n d i v i d u a l , other than a supplier, who  participates  in a  consumer  guarantors or donees of that  transaction,  and  specifically  includes  individual.29 Thus, even i n cases where the  product was a c t u a l l y purchased by another member of the family, or was a g i f t from a f r i e n d , the r e c i p i e n t w i l l now be able to i n i t i a t e proceedings if  the product was misrepresented or the terms o f the sale were unfair.  However, t h i s extended d e f i n i t i o n  i s u n l i k e l y to have any real  impact as  s.20 s t i p u l a t e s that a consumer may only recover damages for losses he has a c t u a l l y suffered. A supplier i s defined  to include any individual who  i n the course of  h i s work advertizes or promotes the d i s p o s i t i o n of goods or services.30 definition  i s wide  manufacturer representations  2 8  who  enough breaches  to  allow  his  consumers  express  or  to  directly  implied  reach  warranties  This any and  rather than having to struggle against the middle-man - the  E.g. Brabender v. The Royal Trust Co., Unreported decision, Dec. 16, 1976 (B.C. Small Claims Ct., Vancouver Registry). 29 S . l ( l ) . 30 i b i d .  10 retailer  -  distribution  who  often  plays  of goods and  only  a  services.31  minor The  role  Act  in  the  further  promotion  provides  and  that  any  assignee of the supplier i s f u l l y l i a b l e for any consumer losses suffered as a r e s u l t of a deceptive or unconscionable act or practice perpetrated original  supplier. This  writers on  the  feature  grounds that  full  has  been  liability  severely fails  to  criticized fairly  by  by the legal  balance  the  interest of the parties involved.32  31 For the anomalous p o s i t i o n under the old rule see the Ontario Law Reform Commission, Report on Consumer Warranties and Guarantees i n the Sale of Goods, Department of J u s t i c e , 1972, 65-76. 32 See Belobaba, supra note 8, pp.331-332; Michael J . Trebilcock et a l , A Study on Consumer Misleading and Unfair Trade Practices, Department o f Consumer and Corporate A f f a i r s , Ottawa, 1976, v o l . 1, 242.  11 CHAPTER II  DECEPTIVE TRADE PRACTICES  Deception  in market  transactions s t r i k e s  at  the  very heart of  doctrines of contract law, f o r that law assumes that both  parties  the  freely  enter a contract with the f u l l knowledge of what they are buying or s e l l i n g , and  upon which terms. Where a buyer  (or s e l l e r )  i s deceived by the other  party, f a i r bargaining becomes i l l u s i o n a r y . More than any other class of buyers, consumers are p a r t i c u l a r l y  easy  prey to deceptive practices. Consumers lack the information, the experience, and _the business sense required to d i s t i n g u i s h sound from f a u l t y products or to  recognize  experience  by  shady  selling  repeatedly  techniques.  buying  Whereas  similar  a  businessman  products,  most  can  major  gain  consumer  purchases are "one-off" a f f a i r s . In recognition of t h i s , the Trade Practices Act takes a very f o r c e f u l stand  i n protecting consumers  from  providing remedies for consumers who  deceptive  practices.  In  addition  to  have a c t u a l l y suffered l o s s , i t seeks  to eliminate deceptive practices before they can become entrenched. This chapter  begins with a short review of the  protection given at common law, and bring  the  law  into  tune  with  of how  market  scant and  the courts are  realities.  The  main  confusing  struggling part  of  to the  discussion examines the innovative provisions of the Trade Practices Act and the interpretation which i s being given to them i n the courts.  12 1.  THE POSITION AT COMMON LAW  The  common law  deception.  Relief  has  is  always provided  found  under  two  some r e l i e f distinct  i n cases  headings,  involving  although  the  d i s t i n c t i o n has become confused and of l i t t l e s i g n i f i c a n c e . These are breach of contractual terms, and misrepresentation.^ The the  two  categories  determining  have  become closer  in  remedies a v a i l a b l e under  recent  years,  which to apply have become more confused.  and  the  rules  This confusion  has  resulted in considerable uncertainty as to the correct category of r e l i e f i n any p a r t i c u l a r case. adopted  2  One  i s often tempted to think that the c l a s s i f i c a t i o n  i n p r a c t i c e depends only on the remedy which the court wishes to  g i v e . Lord Denning has even admitted  3  as much.  Breach of contractual terms R e l i e f i s always granted, when the deception forms a term of a contract, regardless of whether the deceptive statement was Until  recent times, the r e l i e f a v a i l a b l e was  fraudulent or  innocent.  t o t a l l y dependent on whether  the term was classified, as a condition or merely as a warranty. Breach of a condition leads to actions for both r e s c i s s i o n and damages, whereas breach of a warranty leaves open only r e s c i s s i o n . Thus, even where the breach of a warranty  resulted  in  serious  losses, no  damages could  be  awarded.  To  overcome t h i s , courts have, as one might expect, used their d i s c r e t i o n i n l a b e l l i n g terms as conditions or warranties, according to the nature of the  1  For detailed discussion of these areas of law see G.C. Cheshire & C.H. F i f o o t , The Law o f Contract, 9th ed., Butterworths, London, 1976, 135-144, 246-271; G.H. T r e i t e l , An Outline of the Law of Contract, Butterworths, London, 1975, 127-152, 294-295; G.H.L. Fridman, The Law of Contract i n Canada, The Carswell Co. Ltd., Toronto, 1976, 110-123, 239-2B9. 2 See Trebilcock, A Study of Consumer Misleading and Unfair Trade Practices, 1976, v o l . 1, 197-206. 3  Comment (1967), 41 Aust. L.J. 293.  13 r e l i e f they intended to g i v e . Recently, courts have introduced the device of an award damages for a breach of warranty.^ An  innominate  the  severe  effect  of  a  breach  of  which  i s so  innominate  term to  term i s a warranty,  that  i t i s considered  equivalent to a condition.  Misrepresentation It i s often d i f f i c u l t to prove that deception in the form of an statement  forms a  term  of  a  contract, and  in  such  cases  oral  actions for  misrepresentation are a more common route to r e l i e f . Again, there are t r a d i t i o n a l categories into which an action for r e l i e f may one  of  very  recent  misrepresentation  origin  that  is classified  bridges  as either  the  other  fraudulent  two  f a l l , and a t h i r d  two.  Traditionally,  (with the  remedy of  r e s c i s s i o n and damages) or innocent (rescission o n l y ) . R e l i e f has aways been available for fraudulent misrepresentation, which i s deemed to occur when a person makes a d e l i b e r a t e l y untrue statement or i s i s r e c k l e s s l y unconcerned as to i t s t r u t h . Damages can be sought under the t o r t of d e c e i t . R e l i e f i n cases of innocent misrepresentation has only been available since the  19th  century, when Equity intervened to allow f o r r e s c i s s i o n . It  was  involving  not  only  until  1963  innocent  misprepresentation was  that  damages  were  misrepresentation.  ushered  decision of Hedley Byrne & Co.  i n by the  The  ever  allowed  doctrine  House of Lords  in  of  case  negligent  i n i t s landmark  Ltd. v. Heller & Partners Ltd.^ The  held that i n c e r t a i n circumstances,  court  innocent misstatements would allow f o r  4 Hong Kong F i r Shipping Co. v. Kawasaki Risen Kaisha, [1962] 1 474 (C.A.). Whether t h i s p r i n c i p l e w i l l be accepted in Canada uncertain, see Fridman, supra note 1, pp.279-285. [1964] A.C. 465. Applied in Babcock v. Servacar, [1970] 1 (Ottawa Cty. C t . ) ; Dodds & Dodds v. Millman (1964), 45 D.L.R. (B.C.S.C.)• 5  a  A l l E.R. is s t i l l O.R. (2d)  125 472  14 damages under the t o r t o f negligence. This doctrine i s only i n i t s formative stages and the extent to which i t w i l l be used by consumers i s uncertain.  The  above discussion might give the impression  that the common law  protects consumers from most deceptive acts and practices. This i s c e r t a i n l y not  the case. Many acts o f deception  involve only exaggerated  "puffs" - which have never been considered  to have any legal  Some respected legal authors have even endorsed  claims -  consequence.  this situation:  ... i t would be an impracticable and mischievous rule which permitted the r e s c i s s i o n o f contracts merely because expressions of a laudatory and optimistic nature, couched i n the language o f exaggeration, chanced to transcend the truth.^ However, courts are beginning to recognize that exaggerated people to enter into contracts and they are l a b e l l i n g  such claims as terms  of the contract or as actionable misrepresentation. This n o t i c i b l e i n the advertizing f i e l d . The quite  marketplace.  from  those  i s particularly  7  common law p o s i t i o n c r y s t a l l i z e d  different  claims do induce  existing  at a time when conditions were  i n today's  complex  and  diverse  The a r t i f i c i a l d i s t i n c t i o n s drawn only serve to cloud the real  issue - has the consumer been deceived, and i f so, are the circumstances such as to warrant r e l i e f ?  6 Cheshire & F i f o o t , The Law o f Contract, 2nd A u s t r a l i a n ed. (by J.G. Starke & P.F.P. Higgins), Butterworths, Sydney, 1969, 365. See Trebilcock, supra note 2, pp.197-199.  15 2.  THE TRADE PRACTICES ACT - LEGISLATIVE APPROACH  As  a  response  to the poor  level  of protection  governments throughout the world have enacted  at common law,  statutory measures seeking to  give consumers more comprehensive r e l i e f . The B.C. Trade Practices Act i s no exception. conduct  These statutes set out i n more s p e c i f i c  are unacceptable,  thereby  providing  terms what  a minimum  types o f  standard  for  the  marketplace to operate by. They attempt to not only catch existing offenders but  to encourage  and educate  a l l businessmen  honestly. The following discussion w i l l  to act more  f a i r l y and  focus on the Trade Practices Act  which seeks to give consumers very wide protection indeed.  (1)  In  General comments  common  with  most  trade  practices  legislation,  the B.C. Act  completely does away with the common law c l a s s i f i c a t i o n system for deceptive practices.  8  Section  2  characterizes  deceptive,  misleading,  or  false  representations without any reference to conditions, warranties, or types o f misrepresentation. I t begins with a general clause defining a l l deceptive acts and p r a c t i c e s : 2. (1) For the purposes o f t h i s Act, a deceptive act or practice includes (a) any o r a l , written, v i s u a l , d e s c r i p t i v e , or other representation, including non-disclosure; or (b) any conduct having the capacity, tendency, or e f f e c t o f deceiving or misleading a person. The general d e f i n i t i o n acts  and  practices  i s supported  set out  in  by an e x p l i c i t  subsection  list  (3).9 The  o f deceptive list,  though  8  See Alberta Act, s.4; Ontario Act, s.2; Federal Combines Investigation Act R.S. 1976, c.314, s.36(l); and the Australian Trade Practices Act 1974, no. 51, as amended by no. 63, 1975. 9  Penalties for deceptive conduct are provided  in later  sections: ss.15,  16 non-exhaustive, covers a broad spectrum of marketplace abuses. I t covers, inter a l i a , claims as to the sponsorship o f goods or services, t h e i r q u a l i t y and a v a i l a b i l i t y , the past h i s t o r y o f a product, the need f o r repairs, and f a i l u r e to emphasize the t o t a l cost involved i n a consumer transaction. Very close r e p l i c a s o f the l i s t can be found i n the Alberta and Ontario A c t s .  1 0  The Trade Practices Act also contains, i n s.3, a general description and  illustrative  list  o f unconscionable acts  and practices.  In treating  deceptive and unconscionable practices separately, the Act retains the o l d distinction contrast,  between the  common  Federal  law remedies  Combines  and  equitable  Investigation  Act  1 2  remedies. makes  11  no  In such  d i s t i n c t i o n . I t makes i t an offence to conduct one's business a f f a i r s i n c e r t a i n proscribed  ways, without c l a s s i f y i n g  the conduct as deceptive or  unconscionable. This approach has been argued by some to be more l o g i c a l , for  the consumer i s a f t e r a l l only concerned with e f f e c t i v e r e d r e s s .  t h i s argument i s d i f f i c u l t and  unfairness  classification  13  But  to follow as the differences between deception  are apparent  even  i n no way a f f e c t s  to  the consumer,  h i s chances  and  o f obtaining  the separate satisfactory  redress. The most s t r i k i n g feature o f s.2 i s the v a r i e t y o f s i t u a t i o n s i n which i t can protect the consumer. Prior to the passing of the Act, there was only a small body o f protective l e g i s l a t i o n (both B r i t i s h Columbian and Federal) aimed  at  preventing  specific  forms  of  1  deception. ^  Moreover,  this  16, 20, & 25. Supra note 8. See also Belobaba, "Unfair Trade Practices Legislation" (1977) , 346-351. The other Canadian provinces have also taken t h i s approach, although there are s i g n i f i c a n t departures both i n form and i n substance. Supra note 8, Part V. See Belobaba, supra note 10, p.347; Trebilcock, supra note 2, v o l . 1, pp.265-266, & v o l . 2, pp.1-8. 14 E.g. At the p r o v i n c i a l l e v e l see: Pyramid D i s t r i b u t o r s Act S.B.C. 1973, c.32; Closing Out Sales Act R.S.B.C. 1960, c.59. At the federal l e v e l see the Combines Investigation Act, supra note 8, which today combats deception 1 0  1 1  1 2  1 3  17 l e g i s l a t i o n was usually passed only generally pyramid  a f t e r many people had suffered  selling  eliminating consumers  i n response to a strongly hardship and loss  (e.g.  scheme). The comprehensiveness o f s.2 should  this legislative should  come  from  time l a g . Additional valuable the section's  ability  felt  need, from a  succeed i n  protection f o r  to catch  and correct  deceptive practices before they have even caused any harm. However, to e s t a b l i s h t h i s , major  features  o f the section  i t i s necessary to examine c l o s e l y the  and the problems that  have arisen  i n the  courts.  (2)  Tendency to deceive  Section  2 o f f e r s protection against  acts or practices which have the  c a p a b i l i t y , tendency, or e f f e c t o f deceiving  consumers. The central concept  i s therefore the tendency to deceive and not whether actual deception has occurred. The words "to deceive",  though previously interpreted by  case law, were c l e a r l y defined  long-standing  f o r the purposes o f s.2 i n the f i r s t major  case under the Trade Practices Act, that o f the Director o f Trade Practices v. Household Finance Corporation  of Canada. I t was held  that to deceive a  person i s "to lead that person astray into making an error of judgement" ,15 regardless o f whether the error i s to the person's detriment or benefit.16 A l l subsequent cases under s.2 have referred back to t h i s d e f i n i t i o n . It i s the protection against acts or practices having even a tendency to deceive that gives brought  against  the section much o f i t s strength.  practices  which might deceive,  even  Actions  can be  i f no consumer has  in many areas. [1976] 3 W.W.R. 731, 736 (B.C.S.C., Hutcheon J . ) . 16 Court o f Appeal's interpretation o f Hutcheon J's t e s t : decision, March 13, 1972 (Vancouver Registry). 1 5  Unreported  18 a c t u a l l y been injured by the  p r a c t i c e . In  declaratory r e l i e f have been obtained, and undertaken, i n just such c a s e s . It Act,  1 8  the  trade practices, has deception.  19  or  successful prosecutions have been  17  should be noted that s.5 which gives  f a c t , orders for injunctive  of the  American Federal  Commission power to  also been interpreted  regulate to not  Trade Commission  unfair and  require  deceptive  proof of  actual  i n complete contrast, the Ontario Act does require such proof  (s.2(a)) . The The  B.C.  Section d e l i b e r a t e l y does not  test of deception in s.2  require  deceive.  supplier's conduct  has  the c a p a b i l i t y or tendency to lead to an error of judgment. The supplier  may  have been merely careless, or b e l i e f himself, and  yet s t i l l  i s simply whether the  intention to  even t o t a l l y v i o l a t e s.2.  innocent and  under a mistaken  What i s important i n such cases  i s the objective capacity of the act or practice to deceive consumers, not the frame of mind of the supplier. For the intention of the Act was wide protection  to consumers, as was  pointed  out  by  Mr  to give  J u s t i c e Ruttan in  Findlay v. Couldwell: ... A deceptive act does not necessarily involve deliberate intention to deceive. Deception need only have the c a p a b i l i t y of deceiving or misleading, and i t may be inadvertent yet s t i l l s u f f i c i e n t to void the transaction under the statute, which i s directed to the welfare of the consumer, not the punishment of the vendor. 20  Insistence  on  proof  of  intention  to  deceive,  or  knowledge of  the  f a l s i t y of a statement, would only hamper the effectiveness of unfair trade  1 7  William Stubbe & Director of Trade Practices v. P.F. C o l l i e r & Son Ltd., [1977] 3 W.W.R. 495, 52.1. (B.C.S.C., Aikens J . ) ; The Queen v. Belmont Motors Ltd. & Ritchie Motors Ltd., Unreported decision, June 7, 1978 (B.C. Cty. Ct., Vancouver Registry). 15 U.S.C. 1970, s.45(a). Bockenstette v. Federal Trade Commission (.1943), 134 F.2d 369; see generally E a r l W. Kintner, A Primer on the Law of Deceptive Practices: A Guide for the Businessman, The Macmillan Co., New York, 1971, 31-34. 2° Unreported decision, June 10, 1976, 7 (B.C.S.C., Vancouver Registry). 1 8  1 9  19  practices  legislation.  No doubt,  Federal Trade Commission A c t ,  21  i t i s f o r these  very  reasons  that the  and the Australian Trade Practices A c t  2 2  treat deception as a s t r i c t l i a b i l i t y offence. At common law, deceit has always been understood and  deliberate falsehood. The law reports abound  this.  2 3  accept  to involve conscious  with  cases  to support  So i t w i l l no doubt take some time f o r judges and lawyers to f u l l y the implications o f the new  remembered  legislation.  that the common law affords some r e l i e f  But i s needs  to be  i n cases o f innocent  deception. I f the deception forms a term of the contract, then innocence i s irrelevant;  i f i t constitutes innocent  misrepresentation, then  at l e a s t  r e s c i s s i o n o f the contract i s p o s s i b l e . The Trade Practices Act's use o f the term  "misleading"  giving  as well as the term  "deceiving" should  aid judges i n  s.2 i t s f u l l meaning, as the former word has not been coloured by  years o f j u d i c i a l  interpretation.  As non-disclosure can constitute deception  under the Trade Practices  Act (a point which w i l l be amplified i n the next section) and intention to deceive i s i r r e l e v a n t , i t i s possible to contravene making no statements  the Act by innocently  at a l l . This seems overly unjust to suppliers, and. one  must wonder whether the Act has overstepped  the bounds o f f a i r n e s s . I t i s  therefore not surprising that judges have d i f f i c u l t y i n accepting the notion 2  of innocent deception i n non-disclosure cases. ^ But on r e f l e c t i o n , the fact  2 1  E.g. D.D.D. Corporation v. Federal Trade Commission (1942), 125 F.2d 679; see Kintner, supra note 19, pp.34-35. See excellent discussion o f the Australian provisions i n G.Q. Taperell et a l , Trade Practices and Consumer Protection: A Guide to the Trade Practices Act 1974 f o r Businessmen and their Advisors, Butterworths, Sydney, 1974, 168-246 (esp. pp.183-184, & 230-231). Taperell argues that, i n general, proof o f intent i s not necessary but that proof o f absence of intent, i n r e l a t i o n to the criminal charges (e.g. the l i s t o f deceptive practices set out i n s.53), can provide a defence under s.85(l). See Buckley J . i n re London & Finance Corp. Ltd., [1903] 1 Ch. 728, 732 (cited i n T a p e r e l l , i b i d . , p.183). ^ Despite the Act's clear s t i p u l a t i o n s to the contrary, Mr J u s t i c e Ruttan remarked i n Finlay's case, supra note 20, p.8, that he thought i t would be 2 2  2 3  2  20 that there was no d i s c l o s u r e i s l a r g e l y i r r e l e v a n t . As long as the supplier acted t o t a l l y innocently and responsibly, there i s l i t t l e d i f f e r e n c e between deception  arising  something  he  did  from not  something say.  Yet  he  the  said,  and  deception  common law  has  had  a  arising  from  tradition  of  attaching much more importance to what i s a c t u a l l y d i s c l o s e d . The whole question of l i a b i l i t y i n cases of innocent deception needs to be re-examined. While s t r i c t l i a b i l i t y i s i n keeping with the aim of setting higher  standards  for suppliers -  i t is certainly  an  incentive for every  supplier to exercise more care - i t i s at the same time unjustly harsh, and commentators have repeatedly c a l l e d for some form of defence.25 There have already been moves in B.C. Section 25A,  introduced in 1975,  away from  strict  liability.  allows due d i l i g e n c e to be a t o t a l  defence  from prosecutions under s.25.26 This a l l e v i a t e s much of the harshness,  as  prosecutions are the Act's most severe  to  penalty. S t i l l ,  i t i s tempting  propose a limited c i v i l defence, for the central question i s who bear  can best  the loss in such cases? To answer i t requires an examination  of  the  type of product or service involved in the transaction, and the resources of the two  parties.  It i s therefore proposed to allow a limited defence deception, i n which proof of due d i l i g e n c e and honest the supplier can be involving  taken  into  account  innocent deception. The  by  the  error on the part o f  court  onus should be on  i n cases of c i v i l  i n deciding a  case  the supplier to show  that he acted innocently. It would be for the judge to weigh fairness to the supplier  against  the  seriousness  of  the  offence  and  the  loss  to  the  very d i f f i c u l t to prove deception in non-disclosure cases without showing intent to deceive. 25 For extensive study of s t r i c t l i a b i l i t y provisions i n regulatory statutes, see Law Reform Commission of Canada, Studies i n S t r i c t L i a b i l i t y , Information Canada, Ottawa, 1974. 26 Note that s.37.3 of the Combines Investigation Act, supra note R, provides a s i m i l a r defence i n r e l a t i o n to c e r t a i n offences under that Act.  21 consumer. Such a defence need not compromise the needs o f consumers, but would be much f a i r e r to s u p p l i e r s .  Non-disclosure What a person does not say, as well as that which he does, can have a tendency to mislead. covers  both  types  general concept  The Trade  Practices Act recognizes  o f deception.  Non-disclosure  this  i s included  o f deception, and i s s p e c i f i c a l l y included  fact,  and  within the  i n the l i s t o f  deceptive practices i n s.2(3). In cases o f non-disclosure, the Act gives much better protection to consumers than  does the common law, which equates  misrepresentation  i n only three s p e c i f i c  what has a c t u a l l y  been  matter o f the contract (uberrima  said  i t to an actionable  situations:  (1) when i t d i s t o r t s  ("active concealment");  i s such  that  "utmost good  (2) i f the subject  faith"  must be shown  f i d e s ) ; and (3) when a f i d u c i a r y r e l a t i o n s h i p e x i s t s between the  contracting parties.27 In  recent  times  remedies  i n tort  have  been  available  i n some  s i t u a t i o n s . The Hedley Byrne doctine has been used to give a remedy f o r negligent non-disclosure,28  and i n Rivtow Marine Ltd. v .  Works,29 the Supreme Court o f Canada founded d i r e c t l y on Donoghue v. Stevenson.  30  liability  Washington  Iron  f o r non-disclosure  The doctrines developed  i n these cases,  27 i n a recent B.C. Case, Ames v . Investo Plan Ltd., [1972] 3 W.W.R. 443(B.C.S.C), Mr J u s t i c e Anderson held that f a i l u r e to advise a purchaser o f shares that a prospectus has not received the approval of the Securities Commission, amounted to fraudulent misrepresentation. On appeal i t was held that fraud (active concealment) had not been c l e a r l y shown: [1973] 5 W.W.R. 451. See also Bank o f Novia Scotia v. Boehm, [1973] 3 W.W.R. 757 (B.C.S.C). Walter Cabott Construction Ltd. v. The Queen (1974), 44 D.L.R. (3d) 82 (Fed. C t . ) , reversed (.1977), 69 D.L.R. (3d) 542; (S.C.C.); Bango v. Holt (1972), 21 D.L.R. (3d) 66 (B.C.S.C). See generally, Trebilcock, supra note 2, v o l . 1, pp.204-206; Joost Blom, Note, (1975), 10 U.B.C. L. Rev. 145. 29 (1972), 40 D.L.R. (3d) 530. See S.M. Waddams, Comment (1974), 52 Can. Bar Rev. 96. 30 [1932] A . C 562. 2 8  1  22 however, require considerable  (3)  clarification.  The deception must be material  Given that deception deserving  of  deception  the  did occur, i t i s by no means c e r t a i n that  protection  concerns  a  given  trivial  to  or  consumers  irrelevant  under  the  matter,  why  Act.  i t is If  the  should  the  transaction be overturned? Courts have always been in agreement with t h i s most  reasonable  misrepresentation representation s.2  of the  sub—clauses  standard,  and  have  must be material.31  (s.2(3)(p)&(r)),  that  This has  s i g n i f i c a n t l y influenced  Trade Practices Act  held  involved  deception  showing  or  that  the  the decision to contract. Although  only mentions the  the  the  concept  word "material"  underlies  the  entire  in  two  list  of  deceptive acts and practices i n s.2(3).32 Problems do a r i s e i n determining whether or not a matter i s m a t e r i a l l y deceptive,  and  discretion  to  please. The cautious  the  far-reaching  interpret the  examples of  requirements  s.2(3) give  for material  Household Finance case augurs for the  approach.  This  case  was  concerned  with  the  courts  deception  as  wide they  adoption of a somewhat non-disclosure  assignment of conditional sales contracts. While the contracts  in  of  the  question  warned consumers of the p o s s i b i l i t y of assignment, they were only advised  of  the actual assignment i n cases of d e f a u l t . In f a c t , Household Finance took elaborate  steps  to  disguise  the  arrangement,  even  going  so  far  as  communicating with customers on the r e t a i l e r ' s letterhead. Although there was  no evidence of any consumer having been harmed, and  there were no consumer complaints,  the Director of Trade Practices sought a  31 T r a i l l v. Baring (1864), 4 D.J. & S. 318. 32 The Federal Trade Commission adheres to t h i s p r i n c i p l e : Federal Trade Commission v. Mary Carter Paint Co. (.1965), 382 U.S. 46; Kintner, supra note 19. See also Combines Investigation Act, supra note 8, s . 3 6 ( l ) .  23 declaration  against these practices. The action  B r i t i s h Columbia  failed  because  both the  Supreme Court and the Court o f Appeal viewed the deception  as immaterial. At f i r s t  instance, Mr J u s t i c e Hutcheon held that deception  a f t e r completion o f a consumer transaction would not lead a person to make an error o f judgement - he could not envisage any decision to be made which would even be affected  by disclosure o f the truth.33 The Court o f Appeal  affirmed t h i s view.34 The f i n a n c i a l and economic a f f a i r s o f small business men (such as the retailers  in this  case)  were considered  to be e s s e n t i a l l y  personal matters, which were o f no concern  private and  to consumers and would  have  l i t t l e or no e f f e c t on t h e i r buying decisions.35 The judge stressed that the Act  was designed to protect consumers, not to require f u l l disclosure o f a l l  business affairs.36 Merely being kept i n the dark as to an immaterial fact did  not f a l l within the protection o f s.2. While t h i s decision may on the facts be correct, i t was poorly reasoned  and narrow i n scope. Mr J u s t i c e Hutcheon seemed unaware o f the fact that s.2 expressly  applies  transaction.37  i n cases where the deception occurs a f t e r  it  is  difficult  to  imagine  any  case  a consumer involving  post-contractual deception succeeding under s.2, given h i s c r i t e r i o n as to materiality. intention collection  But the f a u l t may not l i e e n t i r e l y with the judge.  of this  timing  practices  -  provision  for they  consumers and the r e t a i l e r s  i s to expose  could 3  involved ^  affect  If  the  such post-contractual  future  - they should  dealings between perhaps  have been  expressly l i s t e d i n s.2(3).  33 34 35 36  Supra note 15, p.738. Supra note 16. Supra note 15, p.7.37. i b i d . , pp.735-736. S.2 (2). Note that i n the Household Finance case, supra note 16, p.2, the Court of Appeal dismissed t h i s argument. 3 7  3 8  24 Mr  J u s t i c e Hutcheon's reasoning would presumably have led to the same  decision had there been no warning of possible assignment. This i s in sharp contrast Carolina,  to  the  Inc.,39  1968  American  in which  decision,  the  Federal  All-State  Industries  Trade Commission  held  of  North  that  such  practices were deceptive on public p o l i c y grounds, given the increasing need to regulate c r e d i t transactions. The  Commission held that i t was  necessary  to warn of the p o s s i b i l i t y of assignment but not to a c t u a l l y d i s c l o s e i f i t took place. Mr  J u s t i c e Hutcheon could  have adopted  a s i m i l a r approach to  a r r i v e at h i s d e c i s i o n . The  Ministry  have  expressed  great  disappointment  in  the  Household  Finance case, fearing that i t severely l i m i t s t h e i r a b i l i t y to bring cases where no one that  has  i s dishonest  deceive";  rather,  a c t u a l l y been deceived.4° The does not  automatically  case shows that a practice  carry  with  it a  "tendency  i t i s necessary to present good arguments as  to  to  why  a  practice i t m a t e r i a l l y deceptive.41 But on r e f l e c t i o n , one would expect only practices with a tendency to m a t e r i a l l y deceive to warrant the penalties i n the Act. The  Ministry's disappointment i s understandable, as i t r e s u l t s in  more work for them!42 The  case  of  William  Stubbe &  Director  of  Trade  Practices  v.  P.F.  C o l l i e r s Ltd.43 shows that when the arguments are presented well, the  courts  are prepared to consider  person  having been harmed. Mr  a practice deceptive J u s t i c e Aikens applied  in the absence of any the  Household Finance case  39 (1969), 75 F.T.R. 4° Conversation with Michael Hanson, B.C. Director of Trade Practices, Dec 1. 1978. 41 Which was not done in the Household Finance case! The judgments reveal that with one exception (see supra note 38 and t e x t ) , the case was argued on the basis of abstract l e g a l p r i n c i p l e s . ^2 under the Act, the Cabinet i s empowered to make a regulation declaring any p a r t i c u l a r dishonest practice to be deceptive: ss.2(3)(s) & 32. However, t h i s power has not yet been used. 43 Supra note 17.  25 test for deception, but adopted a more l i b e r a l view of what was His  Honour  substantive  stated  that  qualities  a  of  material the  product  factor need  not  i n question,  practice which induces a customer to buy may  relate but  material.  only  that  any  to act  the or  be m a t e r i a l l y deceptive under  s.2; he cited with approval American authority to that effect.44  Salesmanship Salesmanship, a term which covers a whole gamut of s e l l i n g and practices, i s severely limited by the Trade Practices Act. innuendo, or ambiguity as to a material fact offend seller  i s forced  to confine  himself  to making  s.2.45 AS  little  more  techniques  Exaggeration, a result a than  purely  factual statements during a sales presentation, despite Mr J u s t i c e Aiken's unsuccessful attempts i n the C o l l i e r ' s decision to assure  otherwise:  There i s , as far as I can see, no sensible reason why the statement by the representative that he intends to s e l l an encyclopaedia cannot be imbedded in legitimate representations as to the q u a l i t y and usefulness of the encyclopaedia. For instance, if C o l l i e r wishes to describe the encyclodedia as having educational value, which I have no reason to suppose i t lacks, C o l l i e r may prepare a s c r i p t embodying the statement that i t s intention i s to s e l l but also embodying representations that the encyclopaedia has educational value for adults and. c h i l d r e n . This sort of thing, provided there i s no deceit, i s no more than legitimate salesmanship and i t i s not my view that the Act was intended to foreclose salesmen from the use of t h e i r s e l l i n g s k i l l s , provided they are exercised in a way which i s not deceptive.46 I t remains to be seen i f s.2, by severely s t i f l i n g  salesmanship, w i l l have  the e f f e c t of discouraging suppliers from playing an active and  informative  role i n the marketplace.47 The main part of the discussion in the C o l l i e r ' s case a c t u a l l y revolved  44 Federal Trade Commission v. Colgate Palmolive Co. 1035, 1043. 45 s.2(3)(r). 46 supra note 17, p.513. 47 See Kintner, supra note 19, pp.32-33 (cited by p.514).  (1965), 85  Aikens  J.,  S.  Ct.  ibid.,  26 around whether the company's "door-opener" - the words used by i t s salesmen to win entry into a home - were deceptive. Door-openers are an integral part of  the sales presentation, and  although they do not touch d i r e c t l y on a  consumer transaction, they are s p e c i f i c a l l y dealt with i n s . 2 ( 3 ) ( l ) : A representation that the purpose or intent o f any s o l i c i t a t i o n of, or communication with, a consumer by a supplier i s for a purpose or intent d i f f e r e n t from the fact [constitutes a deceptive act or p r a c t i c e ] . In  the early 1970's C o l l i e r ' s salesmen had  used a door-opener  which  suggested that they were conducting a survey as to the effectiveness o f a television  campaign.  Following  the commencement o f Stubbe's  action,  the  company adopted a more honest approach. The new door-opener s t i l l spoke of a survey  (an educational  survey) , but the salesmen were instructed  to also  show a card which indicated that the real purpose o f t h e i r v i s i t was to s e l l encyclopeadias.  Mr  Justice  Aikens held  that  both  the old  and  the  new  door-openers were contrary to s.2. His Honour went so far as to state that any representation which did not reveal the true purpose o f a v i s i t , must be 8  suggestive of some other purpose and thus be deceptive.4 Therefore, C o l l i e r was ordered to prepare a new  script  which stated  at the outset that i t s  purpose was to s e l l encyclopeadias. This s t r i c t disclosure requirement would of  salesmen  acknowledged  gaining that  entry  i t was  into  homes.  Mr  s e r i o u s l y impede the chances Justice  to a salesmen's advantage  Aikens,  to speak  himself,  i n terms of  surveys rather than sales.49 So i t came as no surprise that C o l l i e r should challange t h i s d e c i s i o n . As the o r i g i n a l orders (for permanent injuctions and declarations) had not  been entered, the case was reheard by Mr J u s t i c e A i k e n s .  4  Supra note .17, p.510. i b i d . , p.504. Expert evidence to t h i s e f f e c t was admitted. [1978] 3 W.W.R. 257 (B.C.S.C).  8  49 5 0  50  This time,  27 however, C o l l i e r original Claim  had  more success.  decision had  nor  Firstly,  been phrased  the evidence  raised the  too  widely.  judge accepted Neither  issue that i t was  state the true purpose of a v i s i t at the Moreover, Mr  the  J u s t i c e Aikens  the  deceptive  voiced  a  doubt  as  to f a i l  to  whether  of to  neutral  reasons for h i s v i s i t )  f a l l within s.2.52 while such statements are deceptive  could  i n a general  they have no d i r e c t bearing on a consumer transaction, and  to  Statement  outset.51  door-openers (where the salesman suggests no  scope of s.2(3)(l) which was  that h i s  sense,  are outside the  interpreted, but not conclusively determined,  require some actual representation as to purpose. Yet neutral door-openers are s t i l l objectionable. Allowing  gain entry by such means places weak-willed persons - who ones most  likely  to  be  fooled  by  the  initial  purchases.  Such cases  could,  perhaps, be  are a f t e r a l l the  deception  vulnerable p o s i t i o n where they could e a s i l y be trapped d e a l t with  salesmen to  -  in  a  very  into making unwanted on  the  grounds  of  unconscionablity. A l t e r n a t i v e l y , s.2(3)(l) could be more strongly worded so as to expressly cover t h i s form of deception.  (4)  Relevant time  Section during,  or  2  protects  after"  consumers  from  a consumer transaction  decetion  which  (s.2(2)). This  occurs  "before,  all-encompassing  timing provision i s i n d i c a t i v e of the wide protection that the Act hopes to give consumers. The formation occurs  common law categories of  relief,  by  focusing  on  the  stages of the agreement, only allow r e l i e f i f the representation  before  or  during  the  making  of  the  contract.53  if o n  51 Ibid., pp.19-20. 52 Ibid., p.10-11. Note the example given by counsel of a door-opener: "How are you today? I represent C o l l i e r and I would talk to you. Can I step in?"  contract  neutral l i k e to  28 r e s u l t s , then no  be given. Moreover, i t i s often d i f f i c u l t  to  prove that the deception a c t u a l l y induced the consumer to contract. With  s.2  there  are  no  r e l i e f can  such d i f f i c u l t i e s ,  as  deception  prior  to  a  transaction  is  actionable regardless of whether i t i s completed or not. As an example of the power of s.2,  a successful action was  brought against  advertized that he was giving away free g i f t s , but who  a supplier  who  required consumers to  submit to a home demonstration of a vacuum cleaner before they could receive them.  54  Post-contractual  deception  is  not  actionable  under  contract  law  doctrines, and since the decision i n Numes Diamond Ltd.. v. Dominion E l e c t r i c Protection  Co.,  55  in which  losses  were  incurred  due  to  reliance  on  a  warranty given some time a f t e r a contract, the p o s s i b i l i t y of succeeding in an action for negligent misrepresentation The wide timing provision of s.2 least  be  useful  in  i n t o r t has been very  5  doudtful. ^  i s therefore very welcome, as i t should  mitigating  losses  arising  from  a  post-contractual  warranty. However, the Household Finance case shows that judges are to have great d i f f i c u l t y i n dealing with deception  at  outside the  terms. Mr J u s t i c e Hutcheon simply could not accept that i t was  likely  traditional possible to  have deception a f t e r a contract. The  timing provision in the B r i t i s h Columbia Act i s considerably wider  than that i n other Combines  5 3  Canadian statutes. The  Investigation  Act  5 8  only  Ontario  provide  relief  Act, in  5 7  and cases  the  Federal  where  the  See supra note 1. Director of Trade Practices v. J o l i n Industries, Unreported decision, Dec 29, 1977 (B.C.S.C, Vancouver Registry). Mr J u s t i c e Legg ordered a permanent injunction against these practices. (1972), 26 D.L.R. (3d) 699, 727-728 (S.C.C.). ^ The Majority held that intra-contractual misrepresentation was not actionable i n t o r t unless the negligence r e l i e d on arose from an independent t o r t . See Jacob S. Z i e g e l , "Tortious L i a b i l i t y for Pre-Contractual and Intra-Contractual Misrepresentations" (1976), 1 Can. Bus. L.J. 259. S.2 (a). Supra note 8. 5 4  5 5  5  5 7  5 8  29 misrepresentation a c t u a l l y induced deceptive  the contract. The Alberta Act s t r i k e s at  practices regardless o f whether a contact was entered  into, but  only i f the abuse occurred " i n the course o f inducing a person to enter into a consumer transaction"; i t does not protect consumers from post-contractual deception.59  (5)  Who i s protected  In assessing whether a representation has the capacity to deceive, the test i s not what would the reasonable man believe, but rather what would the f o o l i s h man believe. For the Act i s aimed at protecting those who most need i t s protection - those who might believe anything. This has been accepted by the courts; i n the C o l l i e r ' s d e c i s i o n , Mr J u s t i c e Aikens stated: ... the provisions o f the Act must be construed so as to protect not only a l e r t potential customers, but also those who are not a l e r t , are unsuspicious and are credulous.^ n  Thus, he held deceptive indicating  even  that  though  that  they  the current the salesmen  were s e l l i n g  door-opener displayed  used  a  encyclopedias.  by C o l l i e r ' s  was  card  to householders  He f e l t  that while the  a l e r t person would r e a l i z e what was happening, the l e s s wary would not.^l i n h i s d e c i s i o n , the judge s p e c i f i c a l l y referred to the decision o f Mr J u s t i c e Black o f the United  States Supreme Court,  i n Federal Trade Commission v.  Standard Educational Society,^2 where i t was stressed that trade practices l e g i s l a t i o n was made to protect the trusting as well as the suspicious. The "credulous man" t e s t , i n f a c t , originated i n a much e a r l y decision of the United  States Supreme Court,  Charles  o f the R i t z D i s t r i b u t o r s v.  Federal Trade Commission.63 This test was f i r s t  5 9  6 0  6 1  6 2  introduced  S . 4 ( l ) ( d ) . See Belobaba, supra note 10, p.12. Supra note 17, p.510. Ibid. (1937), 302 U.S. 112, 116.  i n Canada in R.  30 v.  Imperial  Tobacco L t d . , ^  4  a case concerned  with misleading  charges. Since t h i s decision the test has been repeatedly  advertizing  used by Canadian  courts, e s p e c i a l l y i n r e l a t i o n to advertizing c l a i m s . ^ In  sharp  contrast  to the B r i t i s h  Columbia  Act, the Alberta Act  r e s t r i c t s r e l i e f to cases where the representation or conduct has the e f f e c t or  might  reasonably  have  the e f f e c t  o f deceiving  a  consumer.^  The  Legislature's adoption o f t h i s test works against  the general  aims o f the  Act  The unwary  consumer i s  to protect  those  who  c e r t a i n l y better protected  (6)  are most  vulnerable.  i n B r i t i s h Columbia than i n Alberta.  Parol evidence and exemption clauses  Consumers representations  seeking  relief  at common  have always faced  law from  false  or  misleading  two major problems: the parol  evidence  rule which excludes any evidence which adds t o , v a r i e s , or contradicts a written  agreement, and the widespread  use o f exemption clauses  to avoid  l i a b i l i t y for promises and warranties which prove to be f a l s e . The  Trade  evidence  rule,  Practices implicitly  Act overcomes negated  representation can be deceptive, provides  that  oral  both  these  i n s.2 which  problems. states  that  i s expressly abolished by s.27.  and e x t r i n s i c  evidence  i s always admissible  The parol an  oral  Section 27 i n cases  dealing with consumer transactions. Exemption clauses are made inoperative for the purposes o f the Act i n s.28. Thus, no longer must consumers suffer for placing their t r u s t i n o r a l statements, nor be prevented from obtaining r e l i e f by reason o f fine print that they probably did not even read. This i s  6 3  (1944), 143 F.2d 676. (1970), 16 D.L.R. (3d) 470 (Alta S.C.) , affirmed (1972) 22 D.L.R. (3d) 51 (S.C. App. Div.). E.g. see. R. v. Colgate-Palmolive Ltd. (1972), 9 C.P.R. (2d) 62 (Ont. Cty. Ct.); R. v. Kraft Foods Ltd. (1972), 36 D.L.R. (3d) 376. 66 S.4(d). 6 4  6 5  31 only f i t t i n g , f o r oral claims, promises, and warranties can be major factors in persuading a consumer to enter into a transaction. It recent  should be noted times.  Although  that the position at common law has the  parol  evidence  overruled, judges are now much more w i l l i n g rule which  they recognize to be  rule  has  not  improved  been  in  directly  to make exceptions to the old  inappropriate  in many s i t u a t i o n s . 6  courts have been even more active i n r e l a t i o n to exemption  7  The  clauses. Judges  have proven to be very h o s t i l e to such clauses, and through the  development  of the doctrine of "fundamental breach" they have managed to circumvent them in many - but by no means a l l - cases.68  b /  See Trebilcock, supra note 2, pp.225-229. 68 For detailed examination of developments i n t h i s area of law see Cheshire & F i f o o t , supra note 1, pp.144-169; S.M. Waddams, Comment (1971), 49 Can. Bar Rev. 579.  32 CHAPTER III  UNCONSCIONABLE TRANSACTIONS  A novel feature o f the Trade Practices Act i s the statutory recognition of  the doctrine  o f unconscionability.  The doctrine,  established  i n the  courts o f Equity hundreds o f years ago, allows courts to declare excessively unfair have  ('unconscionable') contracts always  applied  i t very  as unenforceable. However, the courts  restrictively.  The importance  o f the new  statutory provision therefore l i e s i n i t s making the doctrine an accessible weapon for the modern consumer. I t w i l l provide  r e l i e f i n s i t u a t i o n s where  unfairness i s not the r e s u l t o f any deceptive conduct. The  Legislature's adoption o f the doctrine i s a c t u a l l y a r e f l e c t i o n o f  the renewed force i t i s now being given at common law. have  been  reluctant  themselves trapped  to give  protection  In the past,  to the unfortunate  i n harsh contracts. Recently,  courts  who  find  however, courts have been  more w i l l i n g to give such protection. They are starting to r a t i o n a l i z e the position  that  they  take,  and  are honestly  examining  whether  or not  intervention i s necessary i n a p a r t i c u l a r case. The  imposition o f unfair terms and conditions i s a real threat to the  consumer, ever vulnerable. self-imposed,  Vigilance on the part o f the courts, whether  or the r e s u l t  of legislative  necessary. This chapter w i l l discuss  reform,  in detail  i s both  welcome and  the developments at common  law, and the recent l e g i s l a t i v e moves i n B r i t i s h Columbia. Attention w i l l be centred on the scope o f the protection that should be given to consumers. We  begin  consumer.  the discussion  by considering  the p l i g h t  o f the modern  33 1.  PROBLEMS FACED BY CONSUMERS  Contract  law i s founded on the notion of freedom to contract • - the  right o f an individual to enter into such agreements as he chooses. The law assumes that contracting parties have roughly equal knowledge and bargaining power. 1 In e f f e c t ,  the free market  should  be s e l f - r e g u l a t i n g .  For t h i s  reason contract law as a body l a r g e l y r e l a t e s only to matters o f formation, not to the substantive contents o f the agreements. However, i n today's complex and organized marketplace, i t i s not enough that the law leaves the consumer to h i s own cunning and good (?) market sense.  2  Consumers often have l i t t l e knowledge o f the worth o f products and  are unable to make meaningful evaluations. They are forced into a p o s i t i o n of t o t a l reliance on the s e l l e r to d i s c l o s e information about the subject matter o f a transaction. This i s p a r t i c u l a r l y true o f durable goods - for example, cars and household appliances. Further, consumers are normally and  i n no position to negotiate the terms  conditions o f a s a l e , or to gain assurances o f a product's  Standard  quality.  form contracts are the norm, and such contracts do not permit  individual bargaining. The unnoticed  problems  inherent  i n standard  form  contracts  have  not gone  by the courts. In Schroeder v. Macauly Music Publishing Co. Ltd.,  Lord Diplock s p e c i f i c a l l y drew attention to the consumers' p l i g h t : The terms o f t h i s kind o f standard form of contract have not been the subject o f negotiation between the p a r t i e s to i t , or approved by any organization representing the interests o f the weaker  1 See M.J. Horwitz, "The H i s t o r i c a l Foundations o f Modern Contract Law" (1974), 87 Harv. L. Rev. 917. Horwitz contends that the " w i l l " theory o f contract law d i d not appear u n t i l the l a t e eighteenth century or early nineteenth century. For a general discussion o f consumer problems, see C.C. Hurd & P.L. Bush, "Unconscionability: A Matter o f Conscience f o r C a l i f o r n i a Consumers" (1973), 25 Hastings L.J. 1, 7-15. 2  34 party. They have been dictated by that party whose bargaining power, either exercised alone or i n conjunction with others providing s i m i l a r goods or services, enables him to say: " I f you want these goods at a l l , these are the only terms on which they are obtainable. Take i t or leave i t . " 3  Some legal sinister  commentators, notably  view o f such  facilitating avoiding  Prosner  contracts.  the conduct o f trade  4  and T r e b i l c o c k ,  They see them and reducing  merely  5  take  a less  as a means o f  the transaction costs, by  the necessity o f negotiating and d r a f t i n g an individual agreement  with every purchaser. These arguments gloss over the fact  that consumers  have no choice but to accept such terms, as there are no a l t e r n a t i v e sources of supply  or at l e a s t no other  sources which o f f e r the desired goods or  services on s u b s t a n t i a l l y d i f f e r e n t terms. C l e a r l y t h i s  i s the s i t u a t i o n  when a s e l l e r has a monopoly i n a p a r t i c u l a r industry. But even i n cases where there  i s no monopoly, choice  i s often l i m i t e d . Conscious p a r a l l e l i s m  pervades the marketplace, and suppliers as a rule o f f e r roughly  the same  terms and conditions. The consumer marketplace i s characterized by inequality o f bargaining power between buyers and s e l l e r s . The consumer's weakness could e a s i l y lead to  the imposition  o f unfair  contractual  terms. T r a d i t i o n a l contract law  theories simply do not f i t modern-day market r e a l i t i e s .  3  [1974] 3 A l l E.R. 616, 624. Prosner, Economic Analysis o f Law, 2nd ed., 1977, 84-88. Michael J . Trebilcock, "The Doctrine o f Inequality o f Bargaining Power: Post-Benthamite Economics i n the House of Lords" (1976), 26 U. Tor. L.J. 359. 4  5  35 2.  COURT INTERVENTION  (1)  Historical  perspective  The courts have not t o t a l l y ignored the i n j u s t i c e s which a r i s e from the application of general contract p r i n c i p l e s . * There are cases dating back to the eighteenth  century which c l e a r l y i l l u s t r a t e that the courts did assume  an o b l i g a t i o n to police the marketplace and give r e l i e f from contracts which were g r o s s l y u n f a i r : There i s the v i g i l a n c e of the common law which, while allowing freedom of contract, watches to see that i t i s not abused. 7  Equity always went further than the common law courts which only gave relief  i n cases  of  duress,8  mistake  or  misrepresentation.  There  established l i n e of cases which i l l u s t r a t e that the courts can grant in cases of "undue influence" where, because of the personal  is  an  relief  relationship  between the p a r t i e s , i t would be unfair to enforce a harsh or unconscionable contract. The cases can be divided  into two  kinds. F i r s t l y , there are some  classes of r e l a t i o n s h i p where the law presumed that undue influence existed - for instance, parent and c h i l d , s o l i c i t o r and c l i e n t , doctor and  patient.  9  In these cases (where the r e l a t i o n s h i p i s sometimes referred to as " s p e c i a l " or "fiduciary") the person seeking  to enforce the contract had  to show that  6 This i s true of a l l c i v i l i z e d countries. See A.M. Squillante, "Uncons c i o n a b i l i t y : French, German, Anglo-American Application" (1970), 34 Albany L. Rev. 297. Denning J . (as he then was) in John Lee & Son (Grantham) Ltd. v. Railway Exective, [1949] 2 A l l E.R. 581, 584. This view was reiterated by h i s Honour in G i l l e s p i e Brothers & Co. Ltd. v. Roy Bowles Transport Ltd., [1973] 1 Q.B. 400, 415-416. H i s t o r i c a l l y , duress was limited to actual violence or threats of violence to the person. However, the doctrine i s gradually being expanded to cover what can be termed "economic duress". For general discussion see Trebilcock, A Study on Consumer Misleading and Unfair Trade Practices, Ottawa, 1976, v o l 1., 246-250. Cox v. Adams (1904), 35 S.C.R. 393; Brown v. Premier Trust Co., [1947] 1 D.L.R. 593 (Ont. H.C.); A l l c a r d v. Skinner (1887), 36 Ch. D., 145 (C.A.); Public Trustee v. Skoretz (1973), 32 D.L.R. (3d) 749 (B.C.S.C). 7  8  9  36 the  contract  was  fair.  Secondly,  there  are  cases  relationships existed. In these cases the person who  where wished  no  special  to avoid the  contract had to show that a r e l a t i o n s h i p of confidence and influence did in fact e x i s t .  1 0  On a wider front, Equity always claimed to have a general review power over a l l unfair judicial  and  unconscionable transactions. But despite magnanimous  formulations o f the d o c t r i n e ,  restrictively.  It benefitted,  1 1  i t was almost always applied very  f o r the most part, 12  s i l l i e s " as h e i r s , farmers, s a i l o r s and women. onus was on the stronger p a r t y . The  doctrine  decades.  of  only such  "presumptive  i n such cases, again, the  1 3  unconscionability  was  widely  ignored  for  several  Courts were content to b a t t l e against unfair contracts on other  fronts. As  an  example, exemption  clauses to contracts were  circumvented  through the doctrine of "fundamental  breach" - the nature o f the breach i s  so  the  severe, or  contemplated, clearly  the  that  the  inequality  facade). In the 1973  courts do  was  contract  so  different  from  take  into  consideration  questions o f  case of G i l l e s p i e Brothers and Co. Ltd. v. Roy Bowles  disallowing  admitted that what the courts were r e a l l y  "a party to exempt  himself from  his l i a b i l i t y  common law when i t would be quite unconscionable for him to do s o " .  1 0  that  (while hiding their reasoning behind a technical  Transport Ltd., Lord Denning M.R. doing  of  that the clause cannot be used as a defence. Yet the cases  reveal  unfairness and  performance  at  1 4  Williams v. Bayley (1866), L.R. 1 H.L. 200; Inche Moriah v. Shaik A l l i e bin Omar, [1929] A.C. 127. See Wood v. Abrey (1818), 3 Madd. 417, 423; 56 E.R. 533, per Leach V.C. Arthur A. Leff., "Unconscionability and the Code - the Emperor's New Clause" (1967), 115 U. Pa. L. Rev. 485, 533. See Earl of Chesterfield v. Janssen (1750), 2 Ves. Sr. 125; 28 E.R. 82; Evans v. L l e w e l l i n (1787), 1 Cox Eg. Cas. 333; Fry v. Lane (1888), 40 Ch. D. 312. Aylesford v. Morris (1873), L.R. 8 Ch. App. 484. Supra note 7. Reiterated in Levison v. Patent Steam Carpet, [1977] 3 W.L.R. 90. 1 1  1 2  1 3  1 4  37 Over the past decade courts have become much more w i l l i n g the  true  to express  rationale f o r t h e i r decisions. The o l d doctrine o f unconsciona-  b i l i t y has been increasingly r e l i e d upon and extended. The doctrine i s being reshaped into a major tool f o r the avoidance o f unfair contractual and  terms,  i t s a p p l i c a t i o n i s p o t e n t i a l l y a very far reaching one. However, caution  must be exercised  to ensure that the doctrine does not become a c a t c h - a l l  phrase applied even i n cases where i t i s quite  (2)  inappropriate.  Canadian developments  In the 1960's, Canadian courts began to reassert t h e i r power and set aside unconscionable agreements. Most o f the cases involved seller  of land  from  an  unfavourable  t r a d i t i o n a l categories o f r e l i e f .  bargain,  In the past  15  and  fell  r e l i e v i n g the within  the  few years the doctrine has  been applied i n a wider v a r i e t y o f circumstances. In Towers v. / A f f l e c k ,  16 a  1974 decision o f the B r i t i s h Columbia Supreme  Court, the Court held that a release form signed, by the p l a i n t i f f soon a f t e r a motor accident plaintiff  was  consideration  was not binding.  an had  o l d lady been  of  totally  Mr J u s t i c e /Anderson stressed "limited inadequate  i n t e l l i g e n c e " , and (she had  that the that  received  a  the mere  pittance). His Honour concluded: ... the p l a i n t i f f has proved by a preponderance o f evidence that the parties were on such an unequal footing that i t would be unfair and inequitable to hold her to the terms o f the agreement which she s i g n e d . 17  A  1 5  s i m i l a r s i t u a t i o n arose  i n Pridmore v. C a l v e r t ,  1 8  another  British  Knupp v. B e l l (.1966), 58 D.L.R. (2d) 466 (Sask. Q.B.) , affirmed C.A. 67 D.L.R. (2d) 256; Marshall v. Canada Permanent Trust Co. (1968), 69 D.L.R. (2d) 260 (Alta. S.C.); Mundinger v. .Mundinger (1968), 3 D.L.R. (3d) 338 (Ont. C.A.). (1974) , 1 W.W.R. 714. Ibid., p.719. (1975), 54 D.L.R. (3d) .133 (B.C.S.C). 1 6  1 7  1 8  38 Columbia case. The p l a i n t i f f had at an e a r l y stage accepted a mere S300 i n damages applied "unequal  her  actual  damages amounted  the Towers' decision footing"  ag reement.  that  i t was  and  held  to over that  S20 000.  Mr  Justice  the parties were on  inequitable to hold  the  such  plaintiff  Toy an  to  the  They compared  the  19  In both cases the judges adopted bargaining positions o f the parties and  a dual  test.  2 0  examined whether the terms of the  agreement as such were unfair. The Ontario Court o f Appeal adopted the same test i n Black v. W i l c o x ,  21  a case which involved the sale of property by an  alcoholic at a price s u b s t a n t i a l l y l e s s than i t s market value. The  Court  concluded: ... i n a s i t u a t i o n of t h i s nature, the Court w i l l invoke the equitable rule that a person who i s not equal to protecting himself w i l l be protected, not against h i s own f o l l y or carelessness, but against h i s being taken advantage of by those i n a position to do so by reason of t h e i r commanding and superior bargaining p o s i t i o n . The combination of inequality o f p o s i t i o n and improvidence i s the foundation upon which the doctrine i s b a s e d . 22  On the question of fairness, the judges i n the two  British  Columbia  cases stressed that the weaker party had not had the benefit o f independent advice. But the test o f fairness was  an unusually tough one: whether "a  practising lawyer would have approved of the s e t t l e m e n t " .  23  Aside from a l l  the objections that one may raise to t h i s i m p l i c i t declaration of lawyers as the sole purveyors of wisdom in t h i s world, i t also a r b i t r a r i l y rejects the "reasonable man"  test that s u f f i c e s i n other areas of the law. Is the man on  the Clapham Omnibus in fact a lawyer?  1 9  Ibid, p.144. Note also Gaertner v. Fiesta Dance Studios (1973), 32 D.L.R. (3d) 639 (B.C.S.C.). Although t h i s case dealt d i r e c t l y with the question of fraud i t i s apparent from the tenor of the decision that the Court was influenced by the o v e r a l l unfairness o f the terms and the overpowering sales t a c t i c s used to obtain the contracts. (1976), 12 O.R. (2d) 759. Ibid., p.764 Supra note 16, 719. 2 0  2 1  2 2  2 3  39 (3)  The doctrine o f inequality  The renewed reliance on the doctrine of unconscionability i s not merely a  Canadian  phenomenon. English  courts have also  become more w i l l i n g to  openly take into account questions o f unfairness and inequality. This i s evident i n the landmark decisions o f both the Court o f Appeals i n Lloyd's Bank Ltd. v. Bundy In his  24  and the House o f Lords i n Schroeder's case.  Bundy's case the defendant, a farmer, had banked for many years at  local  branch o f the Lloyd's Bank. In 196.1 a company operated by Mr  Bundy's son, and which banked at the same branch o f the bank, got into financial  difficulties.  To keep  the company a f l o a t ,  Mr Bundy on three  occasions guaranteed the company's overdraft, each time giving charges over his  farm  as s e c u r i t y .  In r e l a t i o n  to the f i r s t  two guarantees  Mr Bundy  received advice from h i s lawyer, but on the t h i r d occasion he r e l i e d  solely  on the bank manager's advice. The company continued to flounder and within a few months collapsed. The bank made arrangements to s e l l the farm to enforce i t s guarantees. Upon Mr Bundy's refusal  to leave the farm, the bank took  action to gain possession. The bank was successful at f i r s t McLellan, sympathized  instance. The t r i a l judge, Mr J u s t i c e  with Mr Bundy*s s i t u a t i o n but thought that no remedy  existed. The Court o f Appeal  reversed t h i s judgment, unanimously  deciding  that Mr Bundy should be given r e l i e f on the grounds o f undue influence. The Court  25  held that i n the special circumstances o f the case a f i d u c i a r y duty  existed between the bank and Mr Bundy, and that t h i s duty had been breached by the f a i l u r e to advise Mr Bundy to obtain  independent  advice. S i r E r i c  Sachs acknowledged that i t was rare to impose such a duty between a creditor and a guarantor, but held, on the f a c t s , that a r e l a t i o n s h i p o f confident-  24 2 5  [1974] 3 A l l E.R. 757. Lord Denning M.R., S i r E r i c Sachs, and Lord Cairns.  40 i a l i t y did e x i s t and warranted the imposition o f such a duty. Lord  Denning  M.R. went  further  than  undertaking a wide review o f the existing duress,  unconscionable  established  transactions,  categories - he concluded  h i s fellow  judges.  law, and referring  and that  undue such  influence  After  to cases on -  a l l well-  categories were  merely  instances o f a wider j u r i s d i c t i o n . His words have subsequently been quoted by almost every writer on the subject o f unconscionability: Gathering a l l together, I would suggest that through a l l these instances there runs a single thread. They rest on "inequality o f bargaining power". By v i r t u e of i t , the English law gives r e l i e f to one who, without independent advice, enters into a contract upon terms which are very unfair or transfers property f o r a consideration which i s grossly inadequate, when h i s bargaining power i s grievously impaired by reason o f h i s own needs or desires, or by h i s own ignorance or i n f i r m i t y , coupled with undue influences or pressures brought to bear on him f o r the benefit o f the other. When I use the word "undue" I do not mean to suggest that the p r i n c i p l e depends on proof o f any wrongdoing. The one who s t i p u l a t e s for an unfair advantage may be moved s o l e l y by h i s own s e l f - i n t e r s e t , unconscious o f the d i s t r e s s he i s bringing to the other. I have also avoided any reference to the w i l l of the one being "dominated" or "overcome" by the other. One who i s i n extreme need knowingly consents to a most improvident bargain, s o l e l y to r e l i e v e the s t r a i t s i n which he finds himself. Again, I do not mean to suggest that every transaction i s saved by independent advice. But the absence o f i t may be f a t a l . 2 6  His Lordship held that i n t h i s case there were three elements which combined to undermine the transaction. F i r s t l y , the bank's consideration was g r o s s l y inadequate. In exchange for the guarantee the bank had made no promises to continue or increase the company's overdraft  (in f a c t , the overdraft  limit  had been reduced). Secondly, Mr Bundy's strong a f f e c t i o n for h i s son had put him i n a very vulnerable p o s i t i o n . F i n a l l y , the bank had f a i l e d to recognize that a c o n f l i c t o f interest arose; Mr Bundy was a customer  o f the bank and  the bank knew that he r e l i e d on i t s advice. Therefore, since i t was i n the bank's interest  that the mortgage be signed, i t should have advised i t s  customer to obtain independent advice.  2 6  Supra note 24, p.765.  41 The majority of the Court i n Bundy expressed theory enunciated  no opinion on the general  by Lord Denning. Therefore, i t does not t e c h n i c a l l y form  part of the r a t i o decidendi of the case. But many learned w r i t e r s equated  his  Stevenson,  judgment  28  to  Lord  Atkins'  and predict that i t may  famous  speech  in  2 7  have  Donoghue  v.  have just as pronounced e f f e c t on the  law. - The House of Lords i n Schroeder' s case appears to have accepted Denning's theory. In t h i s case, an unknown songwriter had  entered  Lord  into  an  exclusive services agreement with a music publishing company f o r a period of f i v e or possibly ten years. He signed a standard  form agreement, the terms  of which were g r o s s l y one-sided: The songwriter assigned f u l l copyrights for all  h i s musical  publish  or  agreement songwriter.  works, but  promote but  them;  there  was  Four years  there the  no  later  was  Company  no  undertaking  had  the  corresponding (after  right  provision  becoming  by  the  to in  company to  terminate favour  successful!) the  of  the the  songwriter  sought a d e c l a r a t i o n that the agreement was v o i d . His action was successful. The judgement was  subsequently  affirmed by both the Court of A p p e a l  29  and  the House of Lords. The House of Lords unanimously held that the contract was of  trade and  exclusive  contrary to  service  public p o l i c y .  contracts  -  which  3 0  of  Lord  Reid  necessity  stated  in restraint that whilst  involve  extensive  r e s t r i c t i o n s - normally do not need to be j u s t i f i e d , i f i n the circumstances the r e s t r i c t i o n s appear to be  unnecessary  or reasonably capable  enforced i n an oppressive way,  then they must be j u s t i f i e d .  3 1  of being  His Lordship  2 7  See Cheshire & F i f o o t , Law of Contract, 9th ed., 1976, 2RR-290; C. Carr, Note (1975), 3R M.L. Rev. 463. [1932] A.C. 562. Instone v. Macaulay, [1974] 1 A l l E.R. 171. Lord Reid, Viscount Dilhorne, Lord Diplock, Lord Simon of Glaisdale and Lord Kilbrandon. Supra note 3, p.622. 2 8  2 9  3 0  3 1  I  42 went on to hold that on the facts i n t h i s case  the contract was far too  one-sided to be equitable. Lord Diplock was more bold and simply asked "was the bargain His Lordship thought that i t was the court's r o l e to assess  fair"?  3 2  the r e l a t i v e  bargaining power o f the p a r t i e s and to determine i f the stronger party had used i t s superior position to exact from the weaker onerous promises. Diplock  claimed  that  this  r a t i o n a l e explained  enforce r e s t r a i n t o f trade contracts which were Although  Schroeder's  the  Court's  unconscionable.  33  Lord  refusal to 34  case only d e a l t d i r e c t l y with r e s t r a i n t o f trade  p r i n c i p l e s , i t i s apparent from the decisions that the reasoning  i s not to  be so narrowly confined. The decisions were e x p l i c i t l y based on "inequality of bargaining power".  35  This p r i n c i p l e has also been recognised and approved  of i n one Canadian c a s e .  36  Further, the dual  test adopted  i n other  recent  Canadian cases does not appear to be very d i f f e r e n t i n substance.  3.  LEGISLATIVE INTERVENTION  (1)  As  Procedural and substantive unfairness  we have seen, a t common law the courts  determining  whether a contract i s unconscionable.  that  i s a procedural  there  apply  a dual  test  I t i s necessary  when  to show  defect - an unfair a c t or practice at  the  formation stage o f the contract, for example excessive sales pressure - and that the contract s u f f e r s from substantive unfairness - the actual terms o f the contract are harsh. In f a c t , the emphasis has always been on procedural  3 2  Ibid., p.623. Ibid. Ibid. In C l i f f o r d Davis Management v. W.E.A. Records Ltd. (1974), 1 W.L.R. 61, Lord Denning acknowledged that Schroeder supported h i s general theory. McKenzie v. Bank o f Montreal (1975), 7 O.R. (2d) 521 (Ont. H.C.). 3 3  3 4  3 5  3 6  43 defects;  the only substantive  issue considered  i s o v e r a l l imbalance. Bad  contracts, as such, are never r e l i e v e d . It has been strongly argued  that t h i s approach i s too r i g i d .  3 7  Some  contractual terms are so unfair that they warrant r e l i e f without evidence of any procedural  defect.  3 8  But to adopt such a p o s i t i o n forces us to address  the question o f how far should  the law s t r i v e to protect the f o o l i s h from  their own f o l l y . The common law has c e r t a i n l y not shown much keenness to protect the "blind and f o o l i s h " . If r e l i e f were given i n every case involving a bad contract, consumers would  lack  a l l incentive  to make  careful  and  responsible  marketplace  decisions. And the courts would be heavily burdened with cases brought by dissatisfied certain  purchasers  terms  seeking  relief  from  bad contracts!  are so g r o s s l y  unfair  that  they  should  be  Conversely, considered  unconscionable i n a l l cases. The courts have been unwilling to c l a s s i f y any such terms, and legal advocated  that  writers doubt that  legislators  should  they should.  act to provide  c e r t a i n terms which should be considered  I t has long  specific  been  regulation of  inherently unconscionable.  39  Legislatures i n many parts o f the world have enacted statutes providing greater protection to people caught i n unfair c o n t r a c t s .  40  But as yet there  has been no clear statement i n any a c t s t i p u l a t i n g that unfair terms alone can be s u f f i c i e n t to warrant r e l i e f . The dual test i s s t i l l  3 7  the basic r u l e .  The need for greater protection from unfair terms i s being increasingly recognized. But most commentators favour legislative regulation to c o u r t - i n i t i a t e d reforms. See Arthur A. L e f f , "Unconscionability and the Crowd - Consumers and the Common Law T r a d i t i o n " (1970), 31 U. P i t t . L. Rev. 349; Lewis A. Kornhauser, "Unconscionability i n Standard Forms" (1976), 64 C a l . L. Rev. 1151, 1160. Consider f o r example the case where a person buys a product from a door-to-door salesman at double the normal r e t a i l p r i c e . Supra note 37. For a review o f statutory expressions o f the doctrine o f unconscionab i l i t y i n A u s t r a l i a , England, Canada and America, see Trebilcock, supra note 8, v o l . 1, pp.260-265. 3 8  3 9  4 0  44 The American Uniform Commercial Code applied  on  41  t h i s basis. S i m i l a r l y , the  Consumer Protection  Act  of  1967  unconscionability provision has been provisions  have been very  in the  British  narrowly  Columbia  interpreted.  42  I m p l i c i t l y , the Trade Practices Act moves away from the s t r i c t  traditional  test;  in c e r t a i n  section  s i t u a t i o n s . The  3  suggests  that  unfairness  alone  can  suffice  approach taken by the l e g i s l a t u r e s w i l l be dealt with more  f u l l y i n the sections that follow.  (2)  The  Trade Practices Act  Trade  unconscionability  Practices and  Act  applies  codifies i t to  the  the  common  consumer  law  doctrine  marketplace.  s p e c i f i c a l l y focuses i t s attention on consumer transactions.  of  The  Section  Act 3  of  the Act contains a general description of unconscionable acts and practices, followed by a non-exhaustive l i s t of c e r t a i n classes of conduct that may relevant to a finding of unconscionability: 3. (1) An unconscionable act or practice by a supplier in r e l a t i o n to a consumer transaction may occur before, during, or a f t e r the comnsumer transaction. (2) In determining whether or not an act or practice i s unconscionable, a court of competent j u r i s d i c t i o n s h a l l consider a l l the surrounding circumstances which the supplier knew or ought to have known, including, without l i m i t i n g the g e n e r a l i t y of the foregoing, (a) that the consumer was subjected to undue pressure to enter into the consumer transaction; (b) that the consumer was taken advantage of by h i s i n a b i l i t y or incapacity to reasonably protect h i s own interest by reason of h i s physical of mental i n f i r m i t y , ignorance, i l l i t e r a c y , age, or his i n a b i l i t y to understand the character, nature, or language of the consumer transaction, or any other matter related thereto; (c) that, at the time the consumer transaction was entered into, the price g r o s s l y exceeded the price at which s i m i l a r subjects of s i m i l a r consumer transactions were r e a d i l y obtainable by l i k e consumers; (d) that, at the time the consumer transaction was entered into,  4 1  4 2  Section 2-302. S.B.C. 1967, c.14  as amended, ss. 17-20A.  be  45 there was no reasonable p r o b a b i l i t y of f u l l payment of the price by the consumer; (e) that the terms or conditions on, or subject to, which the consumer transaction was entered into by the consumer are so harsh or adverse to the consumer as to be inequitable; and (f) such other circumstances as may be prescribed by the regulations. (3) Where there i s an unconscionable act or practice i n respect of a consumer transaction, that consumer transaction is unenforceable by the supplier. (4) Nothing in t h i s section l i m i t s , r e s t r i c t s , or derogates from the power and j u r i s d i c t i o n of the court. 1  The Act r e f l e c t s Lord Denning s view that the law w i l l not allow gross inequality to be exploited. But common law  position.  Its  in some respects  wide  timing  s.3  provision  goes further than the  -  unfairness  can  arise  "before, during, or after a consumer transaction" - and the e x p l i c i t l i s t of relevant .factors suggest that the d r a f t e r s of  the  transcend t r a d i t i o n a l approaches to the question of The  Act c l a r i f i e s procedural  categories  abuses, and  of unconscionability.  specifically  draw attention  to  reasonableness of the p r i c e , and  Sub-sections substantive  Act  intended  unfairness.  i t sets out (c) , (d) , and matters  -  the p r o b a b i l i t y of f u l l  provinces have gone even further in t h i s regard. The  for  judges to  43  new (e)  substantive of s.3(2)  instance,  the  payment. But other  Ontario Act protects a  buyer in s i t u a t i o n s where the s e l l e r knew or ought to have known that  the  buyer would not receive a "substantial benefit" from the subject matter of the  transaction.  expensive vacuum  44  The  fashionable  cleaners  to  two  illustration families who  i s the he  salesman who  knows share  the  sells same  apartment. The object of s.3 i s to provide greater protection from unfairness than i s afforded at common law. However, t h i s noble intention i s thwarted by poor d r a f t i n g . The section does not a c t u a l l y define what i s an unconscionable act  4 3  That t h i s was the hope of the d r a f t e r s was confirmed in a conversion with William Neilson, Deputy Minister of the Department of Consumer and Corporate A f f a i r s 1973-1976, Aug 21, 1978. S . 2 ( b ) ( i i i ) ; see also Saskatchewan B i l l , s.4(2)(c). 4 4  46 or p r a c t i c e . And, unlike the l i s t o f prohibited deceptive  practices i n s.2,  the l i s t o f acts and practices i n s.3 need only be considered making  their  determination  and  does  not  declare  by judges i n  such  conduct  as  unconscionable per se. Judges are directed i n every case to consider " a l l the surrounding circumstances", including those matters s p e c i f i c a l l y l i s t e d . Enforcing contracts, and determining when they should has  traditionally  been  the domain  o f judges.  They  j e a l o u s l y . The Act attempts to i n t e r f e r e as l i t t l e courts'  traditional  jurisdiction.  This  sub-section(4), which states that s.3 should power  of  the courts  i n any way.  45  i s made  not be enforced,  guard  these  areas  as as possible with the patently  obvious  in  not be read as r e s t r i c t i n g the  Judges  are l e f t  with  unfettered  d i s c r e t i o n , and i n the absence o f c l e a r guidelines to do otherwise they are l e f t to resort to common law notions o f unconscionability. Admittedly, i t i s not as easy to define what conduct or terms should be classed as unconscionable as i t i s to define what practices are deceptive; any l i s t w i l l invariably r e s u l t i n g e n e r a l i t i e s , and necessarily so for t h i s i s one area of the law where f l e x i b i l i t y i s e s p e c i a l l y required. The types of cases which w i l l a r i s e i n the future cannot be predicted with any degree of c e r t a i n t y or c l a s s i f i e d  into s t r i c t categories. But some guidelines can  be set out. The  Trade Practices Act attempts to do just t h i s i n the l i s t  but the wording of the section only leads to confusion.  i n s.3,  I t i s not at a l l  clear i f a l l o f the l i s t e d categories o f unfairness need to be present, or if  4 5  i t w i l l s u f f i c e i f one or more are evident  in a particular case.  46  The  This section was a c t u a l l y included so as to allow the courts to grant r e s c i s s i o n i n cases where the transaction has already been completed and non-enforcement would be an i d l e remedy. Not s u r p r i s i n g l y , legal writers have been confused as to the meaning to be given to the l i s t i n g i n s.3. Professor Trebilcock thinks that i t i s a l i s t o f s p e c i f i c prohibitions! See Trebilcock, supra note 8, v o l . 1, pp.265-266. 4 6  47 drafters's intended  to leave the  p o s s i b i l i t y open to judges to declare  a  transaction unconscionable on the basis of only one of the l i s t e d grounds.  47  Adopting t h i s approach, the section would provide r e l i e f from c e r t a i n unfair terms without  the  need  to prove procedural  defects. However, courts  u n l i k e l y to take such a radical step on the basis of the present e x p l i c i t guidence i s necessary. For with  the  words  "one  or  more  of  instance, the  list  the  following  take  towards  could can  are  s.3. More  be  prefaced  constitute  an  unconscionable act or practice."  J u d i c i a l interpretation The  stand  that  the  courts  will  s.3  is s t i l l  largely  uncertain. Over the past four years there have been s u r p r i s i n g l y few cases argued on the basis of t h i s section. While the Department's f i l e s show that approximately one quarter of the complaints i t receives concern questions of unfairness, these cases are almost always resolved  by  informal means and  only r a r e l y do they come before the courts. There has  been only one  case of any  real  Trade Practices v. John's Tax  Service L t d . ,  well  by  for a  liberal  approach  the  4 8  courts.  s i g n i f i c a n c e , Director  and  t h i s case does not augur  The  Director  failed  application for an interim injunction against an income tax refund which charged trial  judge  contract Cabinet  an  extortionate  refused  to  unconscionable. had  passed  a  fifty  accept He  did  that so  per  cent  unfair  discount terms  notwithstanding  regulation s p e c i f i c a l l y  of  aimed  that  could the  an  business,  rate, because  alone  at  in  render  the a  provincial  unfair tax  refund  discounting p r a c t i c e s :  4 7  Supra note 43. Unreported decision, March 10, 1975 (B.C.S.C, Vancouver Registry); c f . Director of Trade Practices v. Sponchia Unreported d e c i s i o n , Nov 71, 19"7 (B.C.S.C, Kamloops Registry). Held that practices engaged in by the defendant were unconscionable but the reasons were not elaborated upon. 4 8  7  48 ... a circumstance to be considered by the court ... [ i s whether the] d i s p o s i t i o n by a consumer to a supplier of the consumer's r i g h t or possible r i g h t to receive now or at any time i n the future, a payment, refund or other benefit, the amount received ... by the consumer from the supplier i s so small in r e l a t i o n to the t o t a l amount to which the consumer would have be e n t i t l e d i f the consumer transaction had not been entered into, the r e s u l t i s harsh or unconscionable. 49  Mr J u s t i c e McKay f e l t that he needed to know the circumstances of  the  affected consumers before giving r e l i e f : There i s no material before me to a s s i s t i n establishing the circumstances of the people who a v a i l themselves of t h i s "service" ... Were they taken advantage of? What was t h e i r capacity to reasonably protect their own interests? Were they l i t e r a t e ? Were they i g n o r a n t ? 50  His  Honour  held  that  understandably, did  a dual  not  test had  persuade him  to to  dramatic contrast stands the case of The Richie Motors L t d . ,  5 1  decided  be take  met. a  more  wording liberal  sympathies with the defendents -  s.3, In  Queen v. Belmont Motors Ltd.  and  i n which the defendents  practice by giving more prominence  to the monthly payment on cars than to the t o t a l p r i c e . Despite strong  of  stand.  on the basis of s.2,  were accused of engaging i n a deceptive  The  indeed, he  stressed  the Judge's that only  a  simple arithmetic c a l c u l a t i o n was  required to a r r i v e at the t o t a l cost - he  conceded  particular  reluctantly  that  the  practice  s.2(3)(q) and that the defendents were q u i l t y . These two  fell  clearly  under  5 2  cases i l l u s t r a t e well that j u d i c i a l conservatism can only be  overcome by c l e a r d r a f t i n g . Where great d i s c r e t i o n i s l e f t with the courts, one cannot count on radical r e v i s i o n to the l a w .  4 9  53  Regulation dated Feb 6, 1975. Made pursuant to powers set out i n s.32(o) of the Trade Practices Act. This has been the only ocassion when Cabinet has made any addition to the l i s t i n s.3 (see s . 3 ( 2 ) ( f ) ) . Supra note 48, pp.4-5. Unreported decision, June 7, 1978 (B.C. Cty. Ct., Vancouver Registry). Ibid., pp.6-7. Note that the Consumer Protection Act has recently been amended to include a provision which makes i t i l l e g a l to discount a refund by more than f i f t e e n per cent: S.B.C. 1977, c.6, s.37(3). See Director of Trade Practices v. Harbour Tax Services Ltd., Unreported d e c i s i o n , March 30, 1978 (B.C.S.C, 5 0  5 1  5 2  5 3  49 Relevant time Section 3 s p e c i f i c a l l y states that unconscionable acts and  practices  occurring before, during or a f t e r the transaction can be taken into account. This i s considerably wider than the p o s i t i o n taken at common law, where i t i s assumed that only the  time of contracting  is relevant.  54  since  i t is  often d i f f i c u l t to pinpoint when sales pressure or any other undue influence occurs i n a consumer transaction, extending coverage to unfairness occurring before  the  contract  i s completed  i s d e s i r a b l e . But  overriding  contracts  which are f a i r and reasonable at the time of contracting seems unfair to the supplier. Only i f the supplier knew, or ought to have known, at the time of contracting that the consumer would not be able to meet a l l payments under the agreement should  the transaction be regarded as unconscionable. As t h i s  s i t u a t i o n i s s p e c i f i c a l l y covered by s.3(2)(d) of the Act, the wide timing provision seems t o t a l l y unwarranted. In cases where changed circumstances such as  i l l n e s s of  unemployment  turn i n i t i a l l y f a i r terms into onerous ones, other forms of r e l i e f should  be  sought. Section 5 of the Debtor Assistance A c t  5 5  Department of Consumer A f f a i r s to  to help debtors i n obtaining  intervene  allows the B r i t i s h Columbia  postponements, adjustments or extensions of time on t h e i r debts.  (3)  The  Credit l e g i s l a t i o n  doctrine  Legislature.  of  It has  Canadian provinces  unconscionability  been  incorporated  is into  not  entirely  credit  since the 1960's. The present  new  legislation  to  the  i n most  law i n B r i t i s h Columbia i s  5  set out i n the Consumers Protection A c t . ^ However, t h i s l e g i s l a t i o n i s very  Vancouver Registry) . Supra note 3, per Lord Reid, p.618; per Lord Diplock, p.623. S.B.C. 1974, c. 25. Supra note 42. 5 4  5 5  5 6  50 limited i n scope; i t only covers the cost o f c r e d i t and not the other terms. Interestingly, l e g i s l a t i o n o f t h i s nature has existed i n Ontario 1912.  57  The other  provinces  Perhaps i t was t h e i r  were extremely slow  fear that such l e g i s l a t i o n  i n following  fell  since  the lead.  foul o f the Federal  Government's exclusive l e g i s l a t i v e power over " i n t e r e s t " matters.55 For i t was  not u n t i l  the Supreme Court approved  Attorney-General  f o r Ontario  of the Ontario  v. B a r f i e l d ' s Enterprises  legislation in  Ltd.59  that  they  enacted s i m i l a r l e g i s l a t i o n . In essence the l e g i s l a t i o n requires lenders and s e l l e r s to disclose the cost o f c r e d i t , and allows  the courts to open and rewrite  loan  contracts  "where the cost i s excessive and transaction i s harsh and unconscionable".6° Judges have as a rule interpreted t h i s as as a dual t e s t ; excessive cost o f c r e d i t i s merely seen as evidence that the contract may be harsh and uncon6  1  scionable. - -  Again the courts  have steered  well  clear of protecting the  foolish: The court e x i s t s for many purposes and one o f these purposes i s the protection of unsophisticated and defenceless persons against the exactions o f conscienceless persons who seek to take advantage of them. This l e g i s l a t i o n provides one method o f exercising that benevolent authority. But the courts are not empowered to r e l i e v e a man o f the burden o f a contract he has made under no pressure and with h i s eyes open, merely because h i s contract i s an act o f folly. 6 2  Moreover, the courts have not r e a d i l y accepted terms as being u n f a i r . A  5 7  Money-Lenders Act S.O. 1912, c. 30, ss.5-8. B r i t i s h North America Act 1867-1975, 30 & 31 V i c t . , c.3, s.91(19). 55 [1963] S.C.R. 560. Held l e g i s l a t i o n related to p r o v i n c i a l property and c i v i l r i g h t s : s.92(13) of the B.N.A. Act, i b i d . Supra note 42, s.17. Unrau v. Modern Finance L t d . (1970), 12 D.L.R. 366, 373 & 377 (B.C.C.A.), a f f . (1969), 70 W.W.R. 621; Household Finance Corporation L t d . v. McEllin (1970), 75 W.W.R. 187 (B.C. County C t . ) . But see strong dissent of Davey C.J. i n Unrau, i b i d , p.370. M i l l e r v. Lavoie (1968), 3 W.W.R. 359, 365, per Wilson C.J. (B.C.S.C). Note that t h i s case was a c t u a l l y concerned with s.3 of the Contracts R e l i e f Act S.B.C. 1964, c. 11, the predessor to s.17. o f the Consumer Protection Act. M i l l e r ' s case was c i t e d with approval i n Unrau's case, i b i d . 5 8  6 0  6 1  6 2  51 very high standard of unfairness i s demanded. The 1973 decision of the Court of Appeal in Wetter v. Nasqowitz^  3  i s a c l a s s i c example of the d i f f i c u l t y of  proving costs to be excessive. The  Court held that a mortgage yielding  annual return of t h i r t y f i v e per cent was were  no  extraordinary  mortgagee  had  risks  encountered  involved little  an  not excessive, even though there  to  warrant  difficulty  a  in  high  rate,  reselling  and  it  at  the a  considerably lower interest rate. The  Consumer Protection Act has  recently been r a d i c a l l y amended. The  unconscionability provisions have been brought into l i n e with the approach taken i n the Trade Practices A c t ; ^ of  s.3.  Unlike  4  the new s.43  However, i n some respects the  Trade Practices Act,  the  s.42  i s almost the exact r e p l i c a  1977  Act  gives  wider protection.  places  the  burden of proof  lender of c r e d i t to show that the mortgage transaction was able on the day i t was doctrine  to  real  entered  estate  not  on  the  unconscion-  into. Further the Act expressly applies the  mortgages  and  agreements  for  sale  involving  r e s i d e n t i a l property. Even before the recent amendments, the Act was held to apply i n such cases.^  5  The relevant sections of the 1977 Act are s t i l l awaiting proclaimation. The force that w i l l be given to them i s s t i l l uncertain, but i n l i g h t of the problems  encountered  with  s.3  they  are  unlikely  to  be  too  liberally  interpreted.  (4)  American a u t h o r i t i e s  Protecting consumers from substantively unfair terms has been a matter of great controversy i n the United States for many years. For over a quarter  6 3  Ltd. 6  5  (1973), 54 D.L.R. (3d) 489 (B.C.S.C). See also Brechlin v. Gary Holding (1975), 54 D.L.R. (3d) 361 (B.C.C.A.). Supra note 53. Note S.20A of the old Act which was added in 1969: S.B.C, c.5, s.7.  52 century the Uniform Commercial Code has given down unconscionable  the courts power to s t r i k e  contracts. Section 2-302 of the Code s t a t e s :  (1) I f the court as a matter of law f i n d s the contract or any clause of the contract to have been unconscionable at the time i t was made the court may refuse to enforce the remainder of the contract without the unconscionable clause, or i t may so l i m i t the a p p l i c a t i o n of any unconscionable clause as to avoid any unconscionable r e s u l t . (2) When i t i s claimed or appears to the court that the contract or any clause thereof may be unconscionable, the p a r t i e s s h a l l be afforded a reasonable opportunity to present evidence as to i t s commercial s e t t i n g , purpose and e f f e c t , to a i d the court in making the determination. This section, which i s now i n force i n a l l but two states, i s ambiguous as to whether i t covers substantive or merely procedural matters.  I t has been  widely c r i t i c i z e d for t h i s vagueness.^ An examination o f the cases reveals that the courts have taken a very narrow view o f the scope o f the section. The judges centre t h e i r attention on the bargaining behaviour o f the parties at the time o f contracting, and only  i f oppressive  terms are coupled  with  procedural  defects  is relief  given. Even i n cases involving gross unfairness, the t y p i c a l s i t u a t i o n being contracts f o r exorbitant p r i c e s , unfairness alone does not s u f f i c e ; the  courts  bargaining  consider stage.^  7  the harsh Admittably,  terms  as evidence  o f a defect  rather at the  there has been the rare decision based on  substantive grounds alone, but on closer inspection the facts i n v a r i a b l y reveal bargaining d e f e c t s . ^ The terms.  b  courts have made l i t t l e The most  comprehensive  effort American  to i d e n t i f y or categorize unfair judicial  attempt  to  identify  " L e f f , supra note 12; See also Symposium on Unconscionability (1970), 31 U. P i t t . L. Rev. Morris v. Capital Furniture and Appliance Co. (1971), 280 A.2d 775; Kugler v. Romain (1971), 279 A.2d 640. American Home Improvements, Inc. v. Maclver (1964), 201 A.2d 886. For commentary see John A. Spranogle, J r . , "Analyzing Unconscionability Problems" (1969), 31 U. Pa. L. Rev. 931, 965-967; Kornhauser, supra note 37. 6 7  h H  53 unacceptable Bloomfield  terms  occurred  Motors Inc. and  in  the  well 69  Chrysler.  i  n  known  case  of  t h i s case the New  Court thoroughly examined whether market concentration industry had  Henninqsen  Jersey Supreme  i n the  limited the choices available to the buyer. But  noted that t h i s case was  v.  automobile  i t should  be  not even d i r e c t l y concerned with s.2-302, for at  the time the Code was not i n force i n the State. American commentators, o v e r a l l , favour by the c o u r t s .  7 0  fear  r e s t r i c t i v e approach taken  They strongly advocate that, i n the  l e g i s l a t i v e guidelines, the Their  the  i s that  doctrine  otherwise  should  i t could  absence of  specific  merely cure procedural  enable  "courts  to  act  ills.  as  roving  commissions...[setting] aside those agreeements whose substantive terms they find o b j e c t i o n a b l e . " approval  71  I t i s therefore surprising that they have given t a c i t  to the Federal Trade Commission's increasing a c t i v i t y i n protecting  consumers from unfair trade Sperry & declare  Hutchinson unfair  determinations,  72  acts it  has  practices. This has  decision and  7 4  1972.  practices  great  guidelines have been s e t .  in  The  The as  discretion  been the  Commission unlawful;73  and  case since  the  i s empowered  to  j  n  flexibility,  breadth of t h i s power could  making  its  though  some  lead  to i t s  being used to further almost any regulatory p o l i c y , and s t r i c t e r l e g i s l a t i v e d i r e c t i v e s may  be needed to prevent abuse.  6 9  (1960), 32 N.J. 558. Richard E. Epstein, "Unconscionability: A C r i t i c a l Reappraisal (19 5), 18 J . Law & Econ. 293; Spranogle, i b i d ; L e f f , supra note 12. But see M.P. Ellinghaus, "In Defence of Unconscionability" (1969), 78 Yale L.J. 757, 773-775; W. David Slawson, "Standard Form Contracts and Democratic Control of Lawmaking Power" (1971), 84 Harv. L.J. 529, 565. Epstein, i b i d . , p.294. Federal Trade Commission v. Sperry & Hutchinson Co. (1972), 405 U.S. 233. See generally E a r l W. Kintner & Christopher Smith, "The Emergence of the Federal Trade Commission as a Formidable Consumer Protection Agency" 1975), 26 Mercer L. Rev. 65. 3 Federal Trade Commission Act (1970) 15 U.S.C. s.45(a), s . 5 ( l ) ( a ) . 29 Fed. Reg. 1964, 8324, 8355. The Commission examines (1) whether the practice offends public p o l i c y , (2) i s immoral or oppressive, and (3) whether i t causes substantial harm to consumers. 7 0  7  7 1  7 2  7 4  i  54 CHAPTER IV  REMEDIES AND ENFORCEMENT  L e g i s l a t i o n can be no stronger than the mechanisms i t provides for i t s enforcement  and the degree  to which  these are pursued. The B.C. Trade  Practices Act stands strong therefore with an impressive array o f remedies and an enviable record o f enforcement, especially, a t the Ministry l e v e l . I t provides  a diverse  range  of c i v i l ,  quasi-criminal,  and  administrative  remedies against deceptive and unconscionable acts and p r a c t i c e s .  1  A public  o f f i c i a l , the Director o f Trade Practices, i s p r i m a r i l y responsible for i t s enforcement,  but the Act also  consumers, or by interested  encourages  private  actions  by aggrieved  individuals or groups. Not only does the Act  give consumers considerably more protection than before, but i t abolishes the o l d common law rules which often  frustrated what otherwise might have  been successful actions. The Trade Practices Act has two d i s t i n c t  aims, and i t s remedies are  2  framed accordingly. These aims are: 1.  To provide wide redress to the individual consumers a c t u a l l y affected by deceptive or unconscionable acts or practices; and  2.  To protect the public at large by discouraging undesirable business practices, and thereby promoting a f a i r e r and more honest marketplace.  An evaluation of the Act's effectiveness must consider each o f these aims i n turn to discern the degree o f protection achieved. This chapter w i l l be concerned with a discussion o f the Act's range of enforcement  1  and  remedial  mechanisms,  assessing  their  effectiveness i n  For a further discussion o f the Act's remedial and enforcement provisions see, Belobaba, "Unfair Trade Practices Legislation" (1977), 357-375; G a l l , "Recent Developments i n Trade Practices", 1978, 31-41. See Enemark, "Remarks on Trade Practices Enforcement", 1977. 2  55 achieving  the twin goals,  and examining how the mechanisms have a c t u a l l y  been u t i l i z e d . As public enforcement a c t i v i t i e s rather than private actions have played priorities  the main role i n the Act's o f the Ministry w i l l  implementation, the p o l i c i e s and  be c l o s e l y examined. The Chapter  will  conclude with a review o f the role of the courts, the body with whom most o f the decision making has e f f e c t i v e l y been l e f t .  1.  REMEDIES AVAILABLE UNDER THE ACT  (1)  Redress  For  consumer  protection  legislation  to deserve  provide comprehensive redress for affected consumers. most important provision i n the B.C. Act i s s.20(l)  i t s name,  3  In t h i s respect the  which provides  consumer who has suffered l o s s , as a r e s u l t o f entering involving  deceptive  or unfair  business  practices,  i t must  that a  into a transaction  may  recover  damages  (including punitive or exemplary damages) and may obtain f u l l rescissionary r e l i e f . Moreover, wide d i s c r e t i o n i s l e f t other  terms which they consider  with  the courts  to impose any  j u s t . The l i k e l i h o o d o f individual actions  i s enhanced by the s t i p u l a t i o n that such actions may be brought before claims c o u r t s ,  4  small  where rules o f evidence and procedure are relaxed, and. the  cost and delay o f t r a d i t i o n a l court proceedings are minimized. The  inclusion of a substitute action provision, s.24,  Act's a b i l i t y to provide  redress. This novel  strengthens the  provision allows the Director  of Trade Practices to i n s t i t u t e or assume proceedings, or defend an action, on behalf o f a consumer or a group o f consumers.  3  5  Any damages recovered i n  See Belobaba, supra note 1, p.360. S.20(2). Adopted from l e g i s l a t i o n in V i c t o r i a , A u s t r a l i a : Consumer Protection Act 1972, no.8276, as amended by no.8382, 1973, ss.9A-C. 4  5  56 such actions are paid to the consumer involved.*^ Thus, i t i s possible to achieve redress even i n cases where the consumer himself i s not prepared, or i s unable, to bring h i s own  action.  Assurances of voluntary compliance promote  consumer  redress. In  supplier has engaged  cases  i n a prohibited  (AVCs), under s.15 of the Act, also  where  the  Director  believes that  business p r a c t i c e , he may  a  accept a  voluntary undertaking to comply with the Act as an a l t e r n a t i v e to formal court actions. Without  exception such assurances specify that the supplier  must take a l l steps necessary to reimburse consumers, to make r e s t i t u t i o n , or to reword unfavourable contracts, as the circumatances d i c t a t e . The Trade Practices Act allows for c l a s s actions to be i n i t i a t e d by the 7  Director or by consumers for the r e s t i t u t i o n of money or property." A c l a s s action i s a procedural device which brings together into a single action a number of claims by d i f f e r e n t  persons,  but  relating  to the same factual  s i t u a t i o n . It i s as such well suited to consumer complaints for i t promotes the e f f i c i e n t resolution of small claims which might otherwise not be worth taking  to court. Most  regrettably,  the  Act  fails  to  provide  for  class  actions f o r the recovery of damages, thereby removing much of the a t t r a c t i o n of the device; such actions must be brought under the archaic Supreme Court rules.  8  6  S.24(3)(c). S.16(2)&(3). B.C. Rules of Court, 0.16.R.l, M.R.123; 0.16.R.9., M.R.131. For a general discussion of c l a s s actions i n Canada see, B.C. Law Reform Commission, Working paper on Class Actions, Vancouver (prepublished copy); N e i l J . Williams, "Damages Class Action Under the Combines Investigation Act" i n A Proposal for Class Actions Under Competition P o l i c y L e g i s l a t i o n , Department of Consumer and Corporate A f f a i r s , Ottawa, 1976. 7  8  \  57 (2)  Prevention  Providing acts  or  redress to consumers d i r e c t l y affected by deceptive or unfair  practices  is  only  a  partial  answer  to  the  marketplace. It i s widely acknowledged that prevention most important goal of trade practices l e g i s l a t i o n , of detected  undesirable  practices  9  problems  of  the  and not remedy i s the for i f the r e p e t i t i o n  i s prohibited, and  similar a c t i v i t y  by  other businessmen i s discouraged, a large degree of protection i s achieved for the public at large. The Trade Practices Act seeks to curb offensive business practices i n a number  of  ways.  The  most  important  public  provision for injunctive r e l i e f set out  remedy  in s.16.  is  undoubtedly  This section states  the that  the Director or any other person, "whether or not that person has a s p e c i a l , or any,  interest under t h i s Act  consumer  transaction",  may  or  bring  the  an  injunction or for declaratory r e l i e f . fulfilled rather  the  critics'  action 1 0  for  an  or  i s affected by  interim  or  permanent  The wide-standing provision has  prophesies of a  flood of  a  frivolous a c t i o n s ,  not  1 1  but  i t provides for the legitimate interests of concerned consumers and  consumer groups designed  to  provides.  12  stipulating importance business,  to  be  ensure the  noteworthy that  9  Regulations,  B.C.  voiced.  The  provision  quick cessation  i s at  present  of  the  of  interim  questionable  only  injunctions  is  p r a c t i c e s . It i s  Canadian  province  which  so  Moreover, the Act f a c i l i t a t e s the a v a i l a b i l i t y of t h i s remedy by that to and  in such actions, courts  the that  protection the  party  of  should  consumers than  bringing  the  give to  action  greater  the need  weight  carrying not  out  prove  and of that  Enemark, supra note 2, p . l . Note the Ontario Act provides for no injunctive actions either private or public, see Belobaba, supra note 1, p. 359. C r i t i c i s m noted by Zysblat, Commentary (1976) , p.104. Ontario has instead adopted cease and d e s i s t orders, arguably an even more e f f i c i e n t and.speedy remedy; see discussion i n f r a pp.70-71. 1 0  1 1  1 2  58 irreparable harm would r e s u l t i f the remedy were d e n i e d . The  other  advertizing,  remedies available  14  also  play  a  preventative  would act as a greater deterrent spur to  in s.16,  class  actions  r o l e . Success  the  threat  itself.  in  adverse p u b l i c i t y of  educatonal  function  indicative  of  the  Corrective for wide  the  and  advertizing general  protection  that  a c l a s s action orders  public.  the  Act  1 5  corrective  in a c l a s s  than an individual action and  further l i t i g a t i o n e f f o r t s of t h i s kind. Not  important -  13  i t would be a  success i s a l l  poses a serve  These  intends  action  substantial  an  important  provisions  to  give  are  consumers  throughout the province. The  Act's remaining c i v i l  remedy, the  substitute action, plays  a  key  r o l e in i t s enforcement strategy. The Act expressly d i r e c t s that t h i s device should be only u t i l i z e d t h i s provision Minister action.^  as  i s not  well  as  when wider interests are abused, the  the  involved;  Director must gain  consumer before making  invariably, injunctive or declaratory  to ensure that  permission from  himself  a  r e f i e f as  w i l l be sought. For s i m i l a r reasons, AVCs always contain  party  well  to  the the  as damages  a clause  that  the  supplier w i l l r e f r a i n in future from engaging in the questioned practices. Section  25,  the  Act's  quasi-criminal  provision,  addition to or instead of a c i v i l remedy, charges may of the Act. Any contravention order or AVC, imprisonment  both.  Theoretically,  forceful deterrent weapon.  1 3  that  in  be l a i d for v i o l a t i o n s  of the Act, or f a i l u r e to comply with a court  i s a summary conviction offence or  provides  this  punishable by heavy fines or constitutes  the  Act's  most  17  S.17. S.16 ( l ) ( b ) . In William Stubbe & Director of Trade Practices v. P.F. C o l l i e r Ltd. (1977), 3 W.W.R. 495, 543 (B.C.S.C), Mr J u s t i c e Aikens held that the power was to be used to benefit the public by correcting lingering misimpressions, not to punish offenders. S.24(2). 1 4  1 5  1 6  59 2.  OPERATION OF THE  (1)  ACT  Redress for consumers  There  have  been  disappointingly  few  actions  initiated  by  private  individuals under the Trade Practices Act. This i s at f i r s t puzzling because the Act s p e c i f i c a l l y provides easy access to small claims courts for damages claims;  their  simplified  procedures  and  s u i t a b i l i t y for consumer actions. But on possible reasons why business man  informal  nature  suggests  their  r e f l e c t i o n there are a number of  t h i s might be. The average consumer - as opposed to the  - has a great reluctance to bring anything  before a court. To  him even the supposedly inexpensive and speedy small claims forum i s complex and  threatening; where the amounts involved are quite small, i t i s often  simply not worth pursuing h i s c l a i m .  1 8  of a l l actions brought before the B.C. complaints.  19  Studies show that only seven per cent Small Claims Courts involve consumer  Indeed, as has been the pattern throughout North America, the  courts have become the forum of the small businessman, t y p i c a l l y to enforce consumer d e b t s !  20  Moreover, consumers are by and  large unaware of the existence of small  claims courts and of their legal r i g h t s . When they do come into contact with the court, the forms and  1  procedures involved are b a f f l i n g  to the layman. A  ' However, the harshness of t h i s section i s mitigated by the provision of a due d i l i g e n c e defence i n S.25A. The dimensions of the problem are well outlined i n Mary Gardiner Jones & Barry B. Boyer, "Improving the Quality of J u s t i c e i n the Marketplace: The Need for Better Consumer Remedies" (1972), 40 Geo. Wash. L. Rev. 357, 359-364. See Pamela Sigurdson, "Small Claims Courts and Consumer Assess to J u s t i c e " in Consumer Redress Mechanisms, Consumer Research Council Canada, Ottawa, 1977, 27 & 105. I b i d . Study revealed that 60 per cent of a l l claims involved debt actions. Not s u r p r i s i n g l y , most were i n i t i a t e d by corporate plaintiffs (normally small l o c a l businessmen); see p.106. Note s i m i l i a r findings i n the B.C. J u s t i c e Development Commission Small Claims Project, Final & Interim Reports, 1976. 1 8  1 9  2 0  60 frequently voiced complaint  i s that the i l l - t r a i n e d court s t a f f are unable  to provide much assistance either on procedural  or legal q u u s t i o n s .  21  Yet  individuals are encouraged to represent themselves; few cases involve large enough sums to warrant lawyers*  fees, and  i n any event legal fees cannot be  recovered.22 Even when consumer complaints  are  brought  to a  small  claims  court,  redress i s normally sought under the older and more complex common law forms of r e l i e f - misrepresentation, fraud, fundamental breach - and not under the new provisions of the Trade Practices Act. This i s , no doubt, due mainly to a lack of f a m i l i a r i t y with the new and  l e g i s l a t i o n on the part of both lawyers  the public generally. Fortunately, the Act provides  even i f i t i s not s p e c i f i c a l l y pleaded,23 and due  that i t may  apply  to the e f f o r t s of small  claims court judges, the Act i s being applied whereever possible.24 Where a consumer claim exceeds $1000, the action must be brought before the  B.C.  Supreme Court.25 The  action would  act as  a  strong  cost  and  deterrent.  f o r m a l i t i e s involved High  legal  fees  i n such  an  are invariably  incurred and the case could be drawn out considerably, e s p e c i a l l y i f there are appeals. before  the  Practices protection  Indeed, the writer i s only aware of one Supreme Court  Act,  and  through  that the  by  an  case  individual  involved  Act's  a  on  the  small  coverage  of  case to date brought basis  of  businessman first-time  the who  Trade sought  business  opportunities.26  21 I b i d . , pp.21-22. 22 Small Claims Act R.S.B.C. 1960, c.359, s.80. This section expressly s t i p u l a t e s that no counsel fee of any kind whatsoever s h a l l be charged against either party. 23 s.35. 24 Conversation with Judge O'Donnel of the B.C. Small Claims Court, Nov 27, 1978. Note, i n some cases r e l i e f i s given under both the old rules and the new statutory provisions: Findlay v. Couldwell, Unreported d e c i s i o n , June 10, 1976 (B.C.S.C, Vancouver Registry). s.4 of the Smal1 Claims Act, supra note 22, l i m i t s the court's f i s c a l j u r i s d i c t i o n to a $1,000 maximum (prior to 1973 the maximum was only $500). 2 5  61 Most actions for individual redress under the Trade Practices Act have, in f a c t , been taken by the Director of Trade Practices. This may  well have  been  their  a  response  to  the  reluctance  of  consumers  to  initiate  own  actions, although i t must be remembered that the Director w i l l only act for a consumer when i t serves a greater public good. Since the introduction of the Act, the Director has become involved over t h i r t y substitute a c t i o n s . defending cases on  behalf  2 7  in  A number of these have a c t u a l l y involved  of consumers. These actions have almost always  been successful in winning s a t i s f a c t o r y redress for the consumer i n v o l v e d . Noteably, i n two  28  c l a s s actions brought upon t h i s basis, r e s t i t u t i o n orders  to s p e c i f i c groups of consumers were awarded.  29  But  not  every substitute  action or defence reaches the courts. In almost h a l f of the cases to date, the  Director  has  accepted  an  out  of  court  suspect that the terms were more favourable  settlement,  though one  would  than the consumer alone might  have achieved. The Ministry's impressive record with regard  to substitute actions  has  been s u l l i e d in the past year by a sharp p o l i c y r e v e r s a l . Rather than being readily used  in a l l cases, the device  with very strong  2 6  precedent v a l u e .  30  The  i s now  strictly  reserved  Director only intervenes  for cases or  brings  Tropeano v. B.&H. Industries Inc., [1978] 4 B.C.L.R. 317. Decision i s on appeal. Ministry's public f i l e s and Enforcement Reports show 34 substitute actions and defences between J u l y 1974 and Nov 1978. E.g. Johal & . Director of Trade Practices v. D.&V. Janitorial Enterprises, Unreported decision, Oct 28, 1978 (B.C.S.C, Vancouver Registry); Labine & Director of Trade Practices v. Active B a i l i f f Service Ltd., Unreported decision, A p r i l 14, .1976 (B.C. Small Claims Ct., Vancouver Registry) . Director of Trade Practices v. Budget Food Processors Ltd., Unreported decision, Dec 29, 1975 (B.C.S.C, Vancouver Registry); Director of Trade Practices v. Sponchia, Unreported decision, Nov 21, 1977 (B.C.S.C, Kamloops Registry). Decision i s now on appeal. Conversations with David Morris, Legal Services Branch, Ministry, Nov 21, 1978, and with Michael Hanson, B.C. Director of Trade Practices, Dec .1, 1978. now 2 7  2 8  2 9  3 0  62  proceedings i n cases which involve a point o f law not previously upon by the courts.  As a consequence,  i t i s to be expected  decided  that  many  legitimate claims w i l l now go unredressed. However, most o f the Ministry's assistance to consumers has not been through formal This  aspect  results  court actions, but through i t s informal mediation services.  o f the Ministry's work has always been  have been very  rebates was obtained section 4(b) shall  receive  gratifying.  Last  year  alone  emphasized, over  and the  $1 m i l l i o n i n  for consumers.bi-  of the Trade Practices Act s t i p u l a t e s that the Director  complaints  and attempt  to mediate on behalf  o f consumers.  Storefront o f f i c e s have been set up for t h i s purpose. The s t a f f o f consumer aids has remained r e l a t i v e l y s t a b l e , but the volume of complaints handled has  increased over the years from only 4000 i n 1974 to 7 0 0 0 i n 1 9 7 8 .  number of enquiries received  i s , i n f a c t , even greater,  3 2  The  f o r the M i n i s t r y  only proceeds to open a f i l e and attempt to mediate once i t has established the  likely  questionable  legitimacy o f the consumer's claim  and that  i t r e l a t e s to a  p r a c t i c e . The Ministry's small s t a f f have coped well with the  growing number o f complaints,  and have a s u r p r i s i n g l y high success rate with  mediation. Over 90 per cent o f a l l cases are resolved  i n t h i s manner.33 A  phone c a l l or a l e t t e r w i l l often s u f f i c e . The basic problem appears to be that the majority o f suppliers are unaware of, or choose to turn a blind eye to, a consumer's complaint, and are more than w i l l i n g to resolve the matter once the consumer's case - and that he has the backing of the M i n i s t r y - i s  3 1  M i n i s t r y Note, "Consumer and. Corporate Highlights Show Healthy Marketplace", Aug 23, 1978. Department o f Consumer Services Annual Report 1 9 7 5 , B.C., 3 9 - 4 3 , includes figures f o r 1970-1975. Current estimates obtained through conversation with Oskana Galichenko, Special Projects O f f i c e r , Ministry, Nov 3 2  16, 1 9 7 8 .  33 Conversation with Galichenko, i b i d . See also Enforcement Report, Aug 24, 1976 (Noted that mediation was the most widely used f a c i l i t y ) .  ,  63  brought to their attention. I n i t i a l l y , consumer aids were under the control of the Director, but they have recently been moved to an administrative section of the Ministry the Operations branch  of  Branch.  government,  s t i l l , they are c l o s e l y t i e d to the enforcement  34  and  do  refer  cases  for  formal  resolution  where  mediation does not succeed or the case involves a "flagrant v i o l a t i o n " - a deliberate contravention of the A c t . The  Act also encourages consumer store-level  with people who existence before.  3 5  36  bargaining. Discussions  have worked with the l e g i s l a t i o n have revealed that i t s very  gives  consumers  considerably  more  bargaining  leverage  than  i f an aggrieved consumer has received some l e g a l advice, from a  lawyer or through the Ministry - or he knows h i s r i g h t s already - he soon r e a l i z e s that he i s i n a very strong position, and  i s often able to resolve  h i s claim s a t i s f a c t o r i l y through private e f f o r t s . While to the l e g a l l y trained mediation and consumer s e l f - h e l p lack the glamour of court l i t i g a t i o n , they play an extremely  important  r o l e i n the  area of consumer redress, and  their value must not be underestimated. They  offer  e f f i c i e n t means of resolving  the most expedient  and  routine, minor  consumer complaints, which form the bulk of a l l complaints. However, there will  always be  some which cannot  discussion, persuasion, and  be  satisfactorily  compromise, and  in such  have ready access to a convenient decision-making  3 4  resolved through mere cases consumers must  forum. Moreover, redress  The s t a f f of the Trade Practices Branch of the old Department of Consumer Services have been s p l i t between the Operations Branch which concerns i t s e l f with complaints and administrative matters, and the Enforcement Branch which deals with investigations and formal enforcement of the Trade Practices Act. The Director of Trade Practices i s now more c o r r e c t l y c a l l e d the Director of Enforcement. See Enemark, supra note 2, p.6, f o r exact d e f i n i t i o n . Conversation with Morris, supra note 30, concerning p o l i c y of d i r e c t r e f e r r a l of flagrant cases. Conversation with William Neilson, Aug 21, 1978. 3 5  3 6  64 alone  i s never  sufficient  to  counter  serious on-going  practices.  Such  practices must be d e a l t with more strongly.  (2)  Protecting the public at large  The Act allows consumers and consumer groups to p r i v a t e l y bring actions for  injunctions, but  few have availed  themselves of t h i s opportunity. An  interesting exception i s the case of Walter against  P.F.  Collier.  3 7  But  Stubbe's  exceptional, as seen by h i s being  Stubbe, who  motivation  brought an action  and  interest  the president of a l o c a l branch  were of  the  Canadian Consumers Association. The f a i l u r e of consumer groups i n general to a c t i v e l y p a r t i c i p a t e i n the enforcement of the Act i s s u r p r i s i n g , but may  this  be because of the active r o l e played by the government watchdog, the  Ministry of Consumer and Corporate A f f a i r s . The Director of Trade Practices has c e r t a i n l y played the major r o l e . It i s simply impossible to police a l l marketplace offence; rather, the aim selected  a c t i v i t i e s and detect every  should be to strongly enforce the l e g i s l a t i o n i n  cases, thereby discouraging undesirable practices generally. The  Director i s best suited to t h i s task as h i s p o s i t i o n allows him to act i n a coordinated and centralized manner. Legal commentators are i n agreement that private actions alone produce at best random and fragmentary The  Trade  enforcement. The  Practices  Act  itself  but  a  preference  38  for  government  Director i s given very wide powers, placing him  forefront of the Act's implementation. Act,  has  law.  ancillary  to  this  he  has  in the  His primary r o l e i s to enforce the wide  investigatory powers,  and  the  r e s p o n s i b i l i t y to educate both consumers and businessmen as to their rights and duties under the A c t .  3 7  3 8  3 9  Supra note 15. See Belobaba, supra note 1, pp.366-367.  65 A c t i v i t i e s and  policies  The B.C. Act was the f i r s t of i t s kind to be introduced in Canada, and the response Services  was  demonstrating  i t would receive was uncertain. The then Department of Consumer faced  with  a  difficult  balancing  act  -  that i t s provisions would be a c t i v e l y and  on  the  one  hand  strongly enforced,  and on the other giving suppliers an opportunity to f a m i l i a r i z e themselves with the new  r u l e s . In the l i g h t of these  factors, the milder enforcement  options - AVCs and c i v i l (as opposed to criminal) actions - were o r i g i n a l l y stressed. Moreover, the framework of the Act suggests a preference for these methods. Voluntary assurances, the Act's major administrative remedy, have the advantage  that while  they  provide much f l e x i b i l i t y  are  a  formal  40  Other  of  enforcement,  i n form. They have a deterrent value  p u b l i c i t y , which has always been regarded agreement.  method  terms vary  according  as a non-negotiable to  the  specific  they in  their  term of the  circumstances,  though s.15 does set some general guidelines. Compliance i s assured by which makes i t s breach  a prosecutable offence. Theoretically,  could incur a double penalty - f i r s t for having breached  do  s.25  a supplier  the assurance,  and  secondly f o r having engaged i n the prohibited practice which constituted the breach. But how s e r i o u s l y the courts w i l l view a breach of an AVC remains to be seen. Over  f o r t y AVCs have been signed  incorporating  novel  terms.  41  The  1976  major Canadian magazine company agreed  by  suppliers since mid-1974, many  MacLean Hunter  assurance,  where a  to extablish a $10 000 t r u s t fund as  s.A. For general discussion of the Director's administrative duties and powers, see G a l l , supra note 1, pp.37-41. Conversation with Hanson, supra note 30. See Neilson, "Consumer Protection and Public Administration" (1977), 178-179. M i n i s t r y public f i l e s and Enforcement Reports show 45 AVCs between J u l y 1974 and Nov .1978. 3 9  4 0  4 1  66 s e c u r i t y for compliance with the Act, i l l u s t r a t e s the p o s s i b i l i t i e s . 4 2 AVCs are not suitable i n a l l cases though; the supplier may r e s i s t offered  i n an AVC, and the Director  may consider  the "terms"  the offence  to be  s u f f i c i e n t l y serious to warrant a c i v i l action or prosecution. The  Director  (s.16).  In those  relunctant contrast  has r a r e l y brought actions that  he d i d bring,  f o r injunctive r e l i e f  the courts  were  alone  generally  most  to grant an interim - l e t alone a permanent - injunction,43 i  to their  responsiveness to substitute  n  actions.  Only 4 permanent  recently  also  injunctions have been granted since 1974.44 Prosecutions  under  s.25 were  until  most  rare,  with  charges being l a i d i n only the most flagrant o f cases. But under a reversal of p o l i c y , made public i n October 1977, the Ministry i s now taking tougher line;45 prosecutions their  number has risen  signed  i n that  contravention Any of  are now preferred  tenfold  i n the l a s t  time, and to obtain  a much  to a l l other remedies, and  year. Only a s i n g l e AVC was  i t the supplier  had to admit  actual  o f the Act.46  discussion o f the Ministry's enforcement record must make mention  i t s investigatory a c t i v i t i e s . The team of investigators, who form the  backbone  o f the Director's  Enforcement  active;47  in addition to researching  Branch,  have  always  been  very  complaints referred to them, they carry  out independent investigations i n selected areas o f business.  Over the l a s t  42 Feb 27, 1976 (not reported i n the Enforcement Reports). 43 interim injunctions were granted i n the C o l l i e r case, supra note 15; Director o f Trade Practices, v. Apollo Manufacturing Co., reported i n the Enforcement Report, May, 1976; but see Director o f Trade Practices v. John's Tax Service Ltd., Unreported decision, March 10, 1975 (B.C.S.C, Vancouver Registry). 44 E.g. C o l l i e r ' s , i b i d ; c f . Director o f Trade Practices v. Household Finance Corporation o f Canada. [1976] 3 W.W.R. 731 (B.C.S.C.). 4^ Enemark, supra note 2. North Shore Capilano Recreational Society AVC, A p r i l 28, 1978, reported in the Enforcement Report, Aug, 1978. 47 see supra note 34. 4,5  67 summer, they undertook a "test shopping" programme i n the f i e l d of car and appliance repairs; firms were selected at random to repair items with known defects so as to assess i f unnecesasary  or f a u l t y repairs were made.  view of the high standard of proof which must be met convictions would be impossible without  48  In  in prosecution cases,  the use of such t a c t i c s - though  their morality may be questioned. P u b l i c i t y and  consumer education form an important r o l e i n the Act's  preventative scheme. Enforcement Enforcement  a c t i v i t i e s are outlined  in the Ministry's  Reports which are published on a regular basis and  are widely  d i s t r i b u t e d . It i s i n these reports and not the law reports where consumer law i n t h i s province i s to be found. When the Trade Practices Act was was  sent out to every household  public as to their new  f i r s t introduced, a 20-page brochure  i n the province. E f f o r t s at educating the  rights were intense, and  information campaign was set i n motion.  49  a major mass-media public  Today the main thrust of a c t i v i t y  i s at the school l e v e l , although occasional use i s made of the mass media to warn of p a r t i c u l a r abuses and promote increased, general awareness. speaking  engagements by  the Ministry's  staff,  at conferences  50  and  Public public  meetings, continue to play an important educative r o l e . A special d i v i s i o n within the Ministry concerns i t s e l f s o l e l y with the education of businessmen. The Trade Liaison Group, which was set up a f t e r a survey revealed that the i n i t i a l advertizing campaign had  failed  to reach  the business community, provides businessmen with advice and information, and sets out broad guidelines for s p e c i f i c industries to f o l l o w . The Ministry's achievements  5 1  i n the f i e l d of public protection cannot be  4 8  M i n i s t r y News Release, March 15, 1978. See Zysblat, supra note 11, p.100. Conversations with Morris, supra note Information O f f i c e r , Minstry, Nov 27, 1978. 1 See Neilson, supra note 40.  4 9  5 0  5  30,  and  with  Rick  Stevens,  68 measured  purely  on  the  investigatory a c t i v i t y . an  5 2  basis  of  successful  cases  or  the  degree  of  An a c t i v e l y enforced consumer protection Act  has  immeasureable general deterrent e f f e c t . Shady dealers are  unlikely  to  move to t h i s province i f t h e i r present abode treats them more kindly. And businessmen legislation  already  within  the  province,  once  i s being policed, w i l l be motivated  they  realize  that  to comply. Although  the these  factors cannot be quantified, i t i s strongly f e l t within the M i n i s t r y that the Trade Practices Act has had t h i s e f f e c t .  3.  EVALUATION OF THE MINISTRY'S ACTIVITIES  The  B.C.  M i n i s t r y has  had  prima  facie  a very  impressive  record  of  enforcement a c t i v i t y , quite in contrast to Alberta and Ontario which r e f l e c t the  normal  poor  level  of  government  a c t i v i t y has been r e s t r i c t e d only marginally b e t t e r .  activism  in this  to the occasional AVC,  and  field.  Alberta's  Ontario has been  5 3  But a high l e v e l of enforcement a c t i v i t y does not n e c e s s a r i l y mean that the B.C. Act i s being e f f e c t i v e l y enforced. The the  M i n i s t r y must be  compatible  more c l o s e l y  examined  to  p o l i c i e s and p r i o r i t i e s of assess  whether  with the Act's dual goals. A c o r o l l a r y question  they  i s what  are role  should the M i n i s t r y play i n consumer protection.  5 2  See Enemark, supra note 2. The sum t o t a l of Alberta's formal enforcement a c t i v i t y to date i s 19 AVCs: Alberta public Records (up to Oct 13, 1978). U n t i l March, 1977 Ontario's record was 10 cease and d e s i s t orders, 3 AVCs and 2 prosecutions,, but enforcement e f f o r t s have intensifed over the past year and there are now over 100 charges outstanding: Ontario News Releases and the Annual Report, March 1978. Generally, see: Belobaba, supra note 1, pp.380-382; E l l e n Roseman, "The Consumer Game", The Globe and M a i l , Nov 27, 1978 (Ont.). 5 3  69 (1)  Enforcement tools and  While the wide use  policies  made i n i t i a l l y  of AVCs was  factor i n the Act's smooth implementation,  undoubtedly a major  t h e i r importance has often been  overrated. In essence they provide a compromise between no action at a l l and formal court action, forming a suitable tool of  a r e l a t i v e l y minor nature  remedy i n a l l cases,  and  i t could  can be easily  in cases where the offence i s  quickly r e c t i f i e d . As  lead  to  the  adoption  a  of  primary a  "soft  approach" favouring settlement to court action even i n the worst cases, for the adverse p u b l i c i t y value of a court action far exceeds that of an Now AVCs and  that the Act i s well known to businessmen, s t r i c t e r  AVC.  terms i n the  the more frequent use of other tools are warranted. However, the  Ministry has completely overreacted; AVCs are no longer a c t i v e l y s o l i c i t e d , but are only considered where the supplier makes a written request for such an  agreement, and  will  not  be  considered  at  a l l i n cases  of  flagrant  violation.54 Leaving i t to the supplier to make the necessary moves neglects the fact that the s t a f f within the Ministry are  in the best position  to  discern when AVCs are s u i t a b l e . The  substitute action provision has been acclaimed  significant provision  feature of the Trade Practices Act.55 The  i s sadly f e l t  as the single most lack of a  similar  i n other Canadian provinces. It provides a great  " l e v e l l i n g " device, for i t p i t s the Ministry rather than the small consumer against the offending supplier. Moreover, i t allows the Director to shape the  jurisdiction  of the Act  through  the  careful  selection  of good  test  cases, rather than having to r e l y on consumers being s u f f i c i e n t l y motivated to seek redress. Restricting the use of such a strong and successful device to cases of  54 55  See Enemark, supra note 2, p.7. Belobaba, supra note 1, p.372.  70 precedent value considerably weakens the enforcement  c a p a b i l i t i e s o f the  Act. But i t i s reasoned that i f the Director brings actions merely because the  consumer  tantamount One  i s financially  to replacing  suitable test  unable 5?  Legal Aid. >  f o r the Director  to assert  h i s own  rights,  i t is  A compromise position must be found. to adopt would be to ask whether the  public as a whole would be l e s s protected  i f the case were not brought or  the case were l o s t due to the consumer's i n a b i l i t y to argue i t w e l l . I f t h i s criterion  i s met no qualms need  be f e l t  i n bringing  the action.  Such a  system would allow the experience and expertize o f the Ministry to be more f u l l y u t i l i z e d f o r the general benefit i n considerably more cases than the present p o l i c y . The  importance  difficulty  of using  o f otherwise  substitute  obtaining  r h e t o r i c , judges are d i s i n c l i n e d actual  (or very  likely)  actions  injunction  i s highlighted  orders. Despite  by the  the Act's  to make such awards without some proof o f  harm. This  decisions i n the Household F i n a n c e  57  point  i s well  exemplified  case and the John's T a x  58  i n the  case.  A f a u l t common i n a l l injunction actions has been long time delays. Cases have generally been drawn out over many months - i f not years. The Collier  5 9  case took over two years before a f i n a l  Section 16 has c l e a r l y f a i l e d curbing  undesirable practices.  decision was reached.  i n i t s design to provide a quick method o f The question a r i s e s  whether  a  Director-  i n i t i a t e d p r o h i b i t i o n order (cease and d e s i s t order) needs to be introduced into  the B.C. Act. Such a provision  already e x i s t s  i n Ontario^  0  and i s  proposed i n the Saskatchewan B i l l . 6 1 While there has been long been talk o f  b b  5 7  5 8  5 9  6 0  61  Conversations with Morris and Hanson, supra note 30. Supra note 44. Supra note 43. Supra note 15; Rehearing, ["19781 , 3 W.W.R. 257 (B.C.S.C). S.6(l). S.14(l).  71 such a remedy i n t h i s province, to date no  firm commitment has  Undoubtedly, such a remedy would strengthen  the preventative aspects of the  Act  for not  even ex  parte  convenient as such o r d e r s . of the bureaucracy and suppliers. Appeal  interim injunctions are 62  But  immediate as or  as  i t would also g r e a t l y increase the powers  care would need to be  r i g h t s , and  as  been made.  perhaps the  taken to ensure fairness to  right  to p r i o r hearings,  would  need to be s t i p u l a t e d . A  further  serious  administrative  consideration.  Such  American j u r i s d i c t i o n s and means of c l a r i f y i n g  remedy, powers,  rule-making  which  have  powers, also  been  widely  adopted  i n B r i t a i n , would provide an easy and  the  scope of  the  Act's  protection.  63  deserves in  convenient  B a s i c a l l y , the  Minister or some other o f f i c i a l would be given power to issue binding  trade  rules d e t a i l i n g what conduct f a l l s within the e x i s t i n g l i s t s of prohibited practices. This would work towards removing imprecision and  uncertainty i n  the Act. The  Ministry's new  p o l i c y of  stressing  prosecution  actions  to  the  neglect of a l l other options not only f a i l s to solve old problems, but also introduces new criminal  ones. The  high  evidentiary standards which must be met  cases make i t very d i f f i c u l t  to secure  convictions. Even laying  charges i s a d i f f i c u l t matter, as Crown prosecutors cases  for  offences;  what  they  consider  i f charges are  suffers long time d e l a y s .  laid,  (often the  quite  case  in  are reluctant to bring  rightly)  i s given  very  to  be  low  very  minor  priority  and  6 4  The major d e f i c i e n c y of prosecution cases i s that they f a i l to provide any  6 2  redress  to affected consumers. While  i t i s possible to  proceed  both  See discussion i n Belobaba, supra note 1, pp.368-371. Ibid., supra note 1, pp.378-380; Trebilcock, A Study of Consumer Misleading and Unfair Trade Practices, vol.1, 148-164. ^ Conversations with Morris, Nov 15, 1978, and with Neilson, Nov .16, 1978. 6 3  72 c i v i l l y and c r i m i n a l l y under the Act,65 stressing an enforcement tool which completely  neglects one  of the dual  goals  i s unsatisfactory. Unless  and  u n t i l the criminal sanction i s amended to provide for some degree of redress similar  to  a  particularly  civil abusive  order,  i t should  practices where  be  resorted  punishment  to  of  highest priority.66 i n other cases, the very c i v i l  only  the  i n cases  offender  of  i s the  nature of the offence  should be respected. The cases to date indicate that prosecutions are u n l i k e l y to meet even the aim of deterrence. Only h a l f of the cases heard in  convictions, and  the  fines  i n court have resulted  imposed have been generally t r i v i a l . 6  7  The  a l e r t businessman w i l l soon r e a l i z e that deception can s t i l l be a l u c r a t i v e business!  More  unworkable  importantly,  policies  could  the  lead  strict to  the  implementation demise  of  the  of  such  entire  almost  Act.  Its  provisions in general could lose c r e d i b i l i t y and hence effectiveness. Making the  Ministry's enforcement  policies  publicly  known  only  increases  the  chances of unfavourable repercussions. Despite a l l the d i f f i c u l t i e s encountered policy,  and  the  widely  held  view outside  with the present enforcement the  Ministry68  that  criminal  sanctions are inappropriate in the enforcement of consumer l e g i s l a t i o n , the Ministry have evinced a desire to continue the present p o l i c y and  to apply  it  advocates  even more s t r i c t l y . A more recent  internal  p o l i c y statement  that not only should prosecutions be the main weapon, but that i f any other  65 E.g. See the Personal Motors Ltd. case, reported in the Enforcement Report, Nov, 1978 (both prosecution and substitute action pending). 66 see Zysblat, supra note 11, pp.107-108. Conceivably, s.25 could provide for c i v i l redress. The Canada Criminal Code, R.S.C. 1970, c. C-34, allows for c i v i l remedies upon sentencing: ss.653 & 663. 67 E.g. The Queen v. Traders Home Furnishing and Appliance Ltd., reported in Enforcement Report, May, 1977. Defendant fined a mere $200 for f a i l i n g to give equal prominence to the t o t a l p r i c e , as against the monthly p r i c e , i n advertizing h i s appliance. 68 Legal writers generally favour prosecutions only as a l a s t resort measure, see Belobaba, supra note 1, pp.373-375. !  73 action i s preferred, a prosecution action must accompany i t .  6 9  The most p o l i t i c a l l y expedient way of weakening any popular programme is  by an ostensible show of strength. In view of the current enforcement  policy  of  the  Ministry,  one  cannot  resist  wondering  whether  the  Trade  Practices Act i s being d e l i b e r a t e l y undermined. The criminal sanction may  be  the toughtest section i n the Act, but i t i s also the most d i f f i c u l t to use effectively.  (2)  P r i o r i t i e s within the Ministry  While  the Director himself i s nowadays only d i r e c t l y concerned  enforcement, the  Ministry as  such  is still  very  involved with  with  complaint  handling. Mediation i s stressed as the f i r s t step i n almost a l l c a s e s . while  mediation  offers  an  attractive,  simple  and  expedient  70  Yet  resolution  mechanism, care must be exercised in i t s use. For instance, simple r e s c i s i o n of  a  contract for the  previous accidental  purchase  of  damage cannot  a  car  guarantee  because that  of the  non-disclosure supplier  will  of not  commit the same offence with the next buyer. In such a case the deterrent remedies provided  in the Act need  to be  utilized  -  for example, an  AVC  s t i p u l a t i n g disclosure of the car's previous h i s t o r y . There  i s always a danger  that a mediation-orientated approach  s t i f l e enforcement a c t i v i t i e s . For i t i s often the worst offender who most  willing  to  settle  at  the  mediation  stage  i f the  will  i s the  opportunity  is  afforded. As a r e s u l t the enforcement body i s l e f t with marginal rather than strong cases. Fortunately, i n B.C. all  6 9  7 0  71  consumer aids have been asked  to refer  "flagrant v i o l a t i o n s " d i r e c t l y to the Director for enforcement.  Conversations with s t a f f within the Ministry, Dec Supra note 35 and text. ibid.  1978.  71  Only  74 in cases where the practice i s not a breach of the Trade Practices Act, or there i s only a "probable offence" (where the supplier's act was an isolated and  inadvertant incident) i s mediation  pursued.  72  I t i s interesting to note  that while the substantive provisions i n the Act i t s e l f d e l i b e r a t e l y do  not  require proof of intention, the s t a f f do take questions of good f a i t h into account  i n enforcing  the Act -  not  that  administrators of regulatory s t a t u t e s .  this  i s at a l l unusual  amongst  7 3  At the enforcement l e v e l the Ministry's p r i o r i t i e s often seem confused. Rather  than  substantial  focusing  on  serious  number of people,  on-going  time and  practices  limited  resources  wasted on minor v i o l a t i o n s of the Act. This problem present  strict  which  even  i f only  t e c h n i c a l , must be  the  a  frequently  i s exaggerated by  enforcement p o l i c y which d i c t a t e s that any  Trade Practices Act,  are  affect  breach of  the the  subject  of  a  p o t e n t i a l of consumer education  as  a  prosecution. Finally,  i n view of the great  preventative device, the Ministry needs to reassert t h i s aspect of i t s work. Educating  our youth w i l l pay long term dividends, but  i t i s the adults of  today who  need to become more aware of t h e i r r i g h t s , and  of the methods of  redress which are a v a i l a b l e .  (3)  The  S t a f f and  funding  high l e v e l of enforcement a c t i v i t y of the B.C.  that i t i s both well funded and  M i n i s t r y suggests  well s t a f f e d . While i t s current operating  budget of only $2 m i l l i o n i s very generous i n comparison to other consumer  7 2  D e f i n i t i o n found i n Enemark, supra note 2, p.6. Studies both i n Canada and England, show that moral f a u l t i s a very important consideration i n the enforcement decisions of regulatory bodies. See Law Reform Commission of Canada, Studies i n S t r i c t L i a b i l i t y , 1974, 70-137. 7 3  75 agencies, i t has forced i t to operate on a small and r e l a t i v e l y stable body of s t a f f .  7 4  executive  The s t a f f increases that have taken place have a l l been at the level  (to  manage  Ministry).75 i t i s suggested  the  separate  branches  the  expanded  that the money that t h i s bureacratic expansion  has required could have been more productively spent consumer aids and  of  investigators,  or  which provide advice and mediation  supporting  recruiting  community  additional  service groups  services to consumers outside the major  centres serviced by storefront offices.76  4.  EVALUATION OF THE ROLE PLAYED BY THE COURTS  The  Trade Practices Act  deceptive or unconscionable  essentially  leaves the  question of what i s  to court determination. With the exception of  AVCs, a l l of the formal remedies must be enforced through t h i s body. This i s in  contrast  to  the  American  tradition  of  establishing  administrative  agencies to d i r e c t l y enforce trade practices l e g i s t l a t i o n . The  courts,  implementation especially  long  renowned  for  their  conservatism,  have  of the Act's innovative provisions more d i f f i c u l t .  noticeable i n the  area  of c i v i l  made  the  This i s  enforcement. Judges have i n  several cases adopted a r e s t r i c t i v e rather than a policy-oriented approach to the Act's provisions. But i t i s f a i r to say that, for the most part, the courts  have  adopted  a  liberal  approach  sections.77 A more pronounced problem has  towards  the  Act's  been the general  substantive  reluctance to  74 Conversations with Galichenko, supra note 32; and with Hanson, supra note 30. i n t e r a l i a , the newly created positions of the Director of Information, the Director of Operations, the Director of Consumer Credit and Debtor Assistance, and the Director of P o l i c y and Planning. 76 see Ministry News Release, Sept 11, 1978 (grants to eleven groups t o t a l l i n g $140 000). Plans to promote such services i n more remote northern regions of the province are contingent on additional funding: conversation with Galichenko, supra note 32. 7 5  76 grant  injunctive  designed  to  encountered  relief,  provide  a  thereby quick  defeating  method  of  have been a l l the more acute  the  aim  curbing  of  s.16  abuses.  in cases  not  which  The  was  problems  involving  actual  complainants. The " j u d i c i a l unresponsiveness" displayed in some of the e a r l i e r cases cannot  be viewed  as  entirely  the  fault  c e r t a i n provisions creates ambiguity, and  of  the  judges.  The  drafting  of  there has been a lack of strong  test cases to i n v i t e j u d i c i a l sympathy. .As these problems are r e c t i f i e d  and  the judges become more familiar with the l e g i s l a t i o n , one can expect a more liberal  response.  The courts have always been regarded as strong upholders of j u s t i c e and individual vigorous  r i g h t s . Administrative agencies may  i n enforcing new  be more f l e x i b l e  far-ranging provisions, but  there  and  more  i s a marked  tendency f o r them to mellow with age, and thereafter to serve the interests of b u s i n e s s .  78  This observation doubtless influenced the enforcement  choice  in B.C. But more immediate and p r a c t i c a l reasons also played a part; i t was feared that such a radical Act would be rejected which represented a s t a b i l i z i n g mechanisms.  outright  force, were replaced by other  of the Trade Practices Act i s most  e f f e c t i v e l y pursued by a blend of both court enforcement a  resolution  79  It i s f e l t that public enforcement  powers,  i f the courts,  view  shared  by  Professor  Belobaba.  80  The  and administrative present  system  is  workable, but the introduction of further administrative weapons such as the cease  and  desist  power,  if  well  circumscribed,  could  add  to  the  77 E s p e c i a l l y i n r e l a t i o n to the deceptive practices provision, see generally discussion i n Chapter 2. For a dis Lscussion of t h i s problem from a Canadian perspective, see Michael J . Trebilcock, "Winners and Losers i n the Modern Regulatory System: Must the Consumer Always Lose" (1975), 13 Osg. H a l l . L.J. 619. 79 Conversation with Neilson, supra note 36. Supra note 1, 382-387. 7 8  8 0  77 effectiveness of the Act's preventative aspects. However, real  problems s t i l l  arise  in the  area  of private actions.  Despite the Act's provision for easy access to small claims courts and willingness of judges consumers  have  sought  at t h i s redress  level in  to strongly enforce the the  court  only  rarely.  the  legislation, There  is  a  compelling need to remedy t h i s . Either the present court system must be made much more accessible and a t t r a c t i v e to consumers generally, or  alternative  dispute resolution mechanisms must be introduced. The question of a suitable forum for individual redress w i l l be examined in the next chapter.  78 CHAPTER V  ALTERNATIVE REDRESS MECHANISMS  As has been seen, mediation i s a very e f f e c t i v e and e f f i c i e n t means of resolving the vast majority of consumer complaints. Although there i s l i t t l e interest here i n B.C.  i n replacing mediation with some other i n i t i a l redress  mechanism, the questions of whether the government should be acting as the mediator,  and more generally of "who  should mediate", a r e ^ a t t r a c t i n g much  debate. This chapter begins with an examination of these questions, but then moves to review popularly advanced formal mechanisms for private consumer actions. When mediation  fails,  the  only  resort  for  the  consumer  formally bring h i s complaint before an adjudicative forum, i n B.C.  i s to  typically  a small claims court. But the neglect that small claims courts have received from consumers i n t h i s province suggests favoured  changes are restructuring  arbitration  system  for  evaluated.  Finally,  a  the present  consumers. radically  that reform  The  system, and  merits  different  i s needed. The most  of  both  setting  up  proposals  non-adjudicative  an are  scheme  of  merit  of  "no-fault compensation i s examined.  1.  WHO  SHOULD MEDIATE  Legal  writers  are  beginning  being  closely  to  government  bodies  advocating  instead that t h e i r time and  e f f e c t i v e l y spent on all.  1  1  As  a  corollary  tied  critically to  question  individual  the  complaint  handling,  resources would be better and more  enforcing l e g i s l a t i o n vigorously for the benefit of to  this  i t i s suggested  that  business  or  trade  See John A. Serbert, "Enforcement of State Deceptive Trade Practices Statutes" (1975), 42 Tenn. L. Rev. 689; and "Consumer Protection i n the  79 associations,  or  consumer  groups,  could  successfully  mediate  complaints. That t h i s discussion i s more than theoretical recent  policy  developments  i n B.C.,  both  at  the  l e v e l s of government, which indicate a growing complaint  resolution.  Funding  cutbacks  i s reflected i n  federal  desire  within the  consumer  and  provincial  to move away from  Federal  Department  of  Consumer and Corporate A f f a i r s has resulted i n a reduction i n i t s complaint handling  staff,  and  accordingly  deemphasized.2 At the p r o v i n c i a l  3  scheme  Essentially, in certain  this  would  industries,  aspect  of  i t s work  l e v e l , while mediation  pursued, the idea of a "marketplace voiced.  this  is  is s t i l l  being  actively  i n s t i t u t e " i s presently being s e r i o u s l y involve  instead  of  a or  business to  operated  supplement  mediation  the  present  government scheme. The  sheer  volume  of  consumer  complaints  handled  departments suggests the need for d i v e r s i f i c a t i o n , and limiting  staff  by  budget  government restrictions  size can hamper the effectiveness of government  activity.  S t i l l , moves away from government supervision are regrettable as there are many strong  reasons  for  i t s continued  government clearing-house provides a essential  i n the formulation of new  participation.  valuable source  For of  one  thing,  data, which  a is  l e g i s l a t i o n or amendments to the o l d .  For another, i t acts as a f i l t e r i n g device, i s o l a t i n g out cases which are worthy  of  activity.  at  least  Outside  further  bodies  are  investigation, most  unlikely  i f not to  refer  actual bad  enforcement  cases  i f the  supplier i s w i l l i n g to mediate and compensate the individual involved in an existing dispute. More importantly, studies of existing mediation panels (and a r b i t r a t i o n  States and Local Communities", i n Staff Studies Prepared for the National Institute for Consumer J u s t i c e , U.S.A., 1972. This i s reflected i n the recent neglect of Box 99 (the Government's general complaint handling scheme). 3 Conversation with Michael Hanson, Dec 1, 1978. 2  80 panels)  established  shown that  by business, consumer, or public  they have had only very limited  success.  organizations have 4  which are funded by businessmen can hardly be expected  Trade  associations  to vigorously and  d i s i n t e r e s t e d l y solve consumer problems. Nor do consumers believe that they will  act i m p a r t i a l l y . In a s i m i l a r vein, consumer groups and panels have  been severely c r i t i c i z e d  for their pro-consumer b i a s . Government bodies at  least have an aura of independence and i m p a r t i a l i t y . Outside groups do not overcome the problem of limited resouces and s t a f f e i t h e r . In f a c t , they are often more poorly o f f than government departments.  I t would be f a r more  sensible to increase available government funds through business licencing fees, or making the disputing parties pay a small amount for the mediation service, than to remove government control on purely economic grounds.  2.  ADJUDICATIVE FORUMS  (1)  Small claims courts  When small claims courts were  first  century, t h e i r goal was to allow judges  conceived  at the turn o f the  to reach decisions by means o f  r e l a t i v e l y informal rules and procedures, and to provide the public with a speedy, inexpensive, and convenient venue for t h e i r complaints. every potential  f o r being a very useful mechanism  5  They have  for the resolution o f  consumer complaints. But they are not. Fortunately, most problems can be  A  The l i t e r a t u r e on t h i s point i s extensive, see e s p e c i a l l y Thomas L. Eovaldi & Joan E. Gestrin, "Justice for Consumers: The Mechanisms f o r Redress" (1971), 66 N.W.U. L. Rev. 281, 303-306; Jones & Boyer, "Improving the Quality o f J u s t i c e i n the Marketplace" (1972), 371-380; Note (1976), 49 Temple L. Rev. 385, 395-400; Larry A. Roine, "The Value o f Mediation and A r b i t r a t i o n for the Resolution o f Consumer Grievances", i n Consumer Redress Mechanisms. Consumer Research Council Canada, Ottawa, 1977, 157-164. ^ SeeRoscoe Pound, "The Administration o f J u s t i c e i n the Modern City" (1913), 26 Harv. L. Rev. 302.  81 overcome by r e l a t i v e l y minor changes. to  fi  The courts need to be more accessible  consumers. If courts were operated  on more f l e x i b l e  timetables, with  evening and weekend s i t t i n g s , the frequent complaint of the day's wages l o s t in pursuing a claim being more than the claim i t s e l f , would be a l l e v i a t e d . Equally as important, the courts need to be conveniently located to promote their use. Unfortunately, B.C.  i s at present moving  further away and  not  closer to t h i s i d e a l , by becoming even more centralized; the high volume of cases and  shortage of judges working  hearings are not p o s s i b l e .  i n t h i s area d i c t a t e s that l o c a l i z e d  7  Pre-screening devices, an example of which i s mediation, should be used to  ensure that court time  settled B.C.  i s not  wasted on  cases  which could  be  by informal means. There has already been some experimentation  Within the courts themselves.  mediation programme was  pre-court  hearings  In the summer of 1975,  a p i l o t court-  have  i s c u r r e n t l y being  collected  8  stopped within a short period. A new project of introduced. While  the  scheme  ostensibly aimed at helping the parties present t h e i r cases, and they  in  implemented by the J u s t i c e Development Commission.  Despite i t s success, i t was  that  easily  together  the  necessary  is  ensuring  documentation,  i t is  envisaged that many disputes w i l l , i n f a c t , be successfully mediated at t h i s stage.  9  In the absence of a pre-screening .device, a judge would, i n addition to acting as adjudicator, have to adopt the role of an active investigator questions both parties extensively, as envisaged of  roles could lead to a lack of confidence  1  0  by Ison.- -  i n the  who  This confusion  impartiality  of  the  " For extensive survey o f the problems of small claims courts i n Canada see Sigurdson, Consumer Redress Mechanisms, 1977. Conversation with Judge O'Donnel, Nov 27, 1978. See Sigurdson, supra note 6, pp. 72-86. Judge O'Donnel, supra note 7 Terence G. Ison, "Small Claims", (1972) 35 M.L. Rev. 18. 7  8  9  1 0  82 court.  1 1  The is  now  notion of minimum recovery provisions to encourage private actions in  recoveries advocated  vogue. ranging  their  Several from $25  American to  introduction  jurisdictions  $200, and  i n Canada.  at  12  While such provisions undoubtedly provide  very  u n f a i r l y against  suppliers. Such a  l e a s t one  This  be  for  minimum  commmentator  writer disagrees  a strong  consumers to press claims which might simply  provide  financial  has  sharply.  incentive to  impractical, they operate  provision e f f e c t i v e l y  forces  the  supplier to give i n to every claim, regardless of legitimacy, whenever h i s chance of losing exceeds the r a t i o of the claim to the minimum recovery the cost of l o s t time i n court. Thus, i f the minimum recovery cost to the supplier of l o s t time i s $50,  and  the  claim  plus  i s $200, the  i s $50,  then i t  would be i n the supplier's i n t e r e s t to s e t t l e out. of court even when he i s 80 per cent i n the right!  (2)  Arbitration  A r b i t r a t i o n i n i t s most general in dispute to the decision of an  sense i s the submission of the parties  independent a r b i t r a t o r . To  formally  apply  a r b i t r a t i o n to a p a r t i c u l a r f i e l d of law requires the development of a model that s p e c i f i e s the method of submission, the s e l e c t i o n of a r b i t r a t o r s , the degree of compliance with the  relevant body of law,  the  requirements for  appeal, and so f o r t h . D i s t i n c t i v e models can be found in the commercial and  labour law f i e l d s , r e f l e c t i n g the extensive  use made of a r b i t r a t i o n in  these areas. Commercial a r b i t r a t i o n , as t r a d i t i o n a l l y used and involves voluntary  1 1  submission to an  law  a r b i t r a t o r selected  by  understood,  both p a r t i e s ,  See George W. Adams, "Towards a Mobilization of the Adversary Process" (1974), 12 Osg. H a l l L.J. 569. Belobaba, "Unfair Trade Practices" (1977), 364.  1 2  83 who,  on the basis of the personal equities in the p a r t i c u l a r case, reaches a  binding  and  founded on  conclusive d e c i s i o n . the  notion of  1 3  North  American  self-government by  the  parties,  continuing nature of the labour relationship. The terms and a  arbitrator a  binding  attempts decision.  to 1 4  is the  parties specify t h e i r  own  realistically Arbitration  arbitration recognizing  conditions in t h e i r c o l l e c t i v e agreement, and  selected  inmposing  labour  in cases of dispute,  interpret  statutes  these  govern  terms,  voluntary  a r b i t r a t i o n s in a more general sense, but do l i t t l e more than r e f l e c t these well established  models.  15  Because of the success which a r b i t r a t i o n has enjoyed in these contexts, e f f o r t s are now disputes.  The  being made to promote i t as a suitable flexibility,  informality,  and  the  forum for consumer  private  mechanism make i t a very a t t r a c t i v e alternative  to  model. Implementing  far bolder  an  than merely streamlining  arbitaration  scheme i s a  the  nature present  of  this  litigious  step, though,  the present small claims courts. Care must be taken  to ensure that the model which i s introduced i s suited to the special needs of consumer law. There i s no guarantee that any existing model would f i t the requirements.  The  very  opposite  commentators have severely principles  i n the  would  criticized  consumer area;  seem the  to  use  be of  they acknowledge  true.  American  commercial that  legal  arbitration  disputes between  merchants are the closest analogue to the consumer complaint s i t u a t i o n , but stress that the differences are greater than the  1  similarities. *^  A possible consumer a r b i t r a t i o n model i s proposed below.  1 3  Commerial a r b i t r a t i o n is'widely used in the U.S.A. For discussion see Jones & Boyer, supra note 4; Aryeh Friedman, "The Effectiveness of A r b i t r a tion for the Resolution of Consumer Disputes" (1977), 6 N.Y.U. Rev. of Law & Social Change 175. In Canada i t s use has been more l i m i t e d , see Roine, supra note 4, p.169. The Labour Code of B r i t i s h Columbia Act S.B.C. 1973, c.122 as amended, sets out basic guidelines for a r b i t r a t i o n s within t h i s province. For instance, see the B.C. A r b i t r a t i o n Act R.S.B.C. 1960, c , 1 3 ( l ) . See Friedman, supra note 13, pp.196-199. 1 4  1 5  1 6  84 A model for consumer a r b i t r a t i o n Arbitration  should  be  offered  on  a comprehensive  covering a l l consumer complaints r e l a t i n g to goods and i t should apply to disputes involving  basis, preferably services. C e r t a i n l y  unlawful as well as lawful conduct,  for otherwise the process would not be a private a l t e r n a t i v e to the o f f i c i a l government mechanisms.  17  However, i t would again be wise to make the forum  available only a f t e r some e f f o r t has been made to mediate the dispute. Voluntary  submission  has  been  almost  universally  regarded  essential feature of a r b i t r a t i o n . But in the consumer f i e l d  i t may  as  an  be more  suitable to leave the decision at the d i s c r e t i o n of consumers alone, or to make i t compulsory f o r both p a r t i e s to submit,  for otherwise  the supplier  might never concede to a r b i t r a t i o n , preferring to go to court in a l l cases. If t h i s scheme were adopted,  i t would be best implemented through statutory  d i r e c t i v e s . A rather weaker alternative would be to encourage standard  form  contracts that guarantee a r b i t r a t i o n as the dispute resolution mechanism. On r e f l e c t i o n , there seems to be no reason why  a r b i t r a t i o n should not  be made compulsory for consumers as well as suppliers i n r e l a t i o n to minor claims readily  (e.g. under $200). Claims accepted  conjecture; into  18  by  that the a r b i t r a t i o n  consumers  under  such  forum would not  circumstances  i t s a c c e p t a b i l i t y could only be determined  practice.  It should  be  noted  that compulsory  are  once i t was  consumer  be  mere put  arbitration  schemes have already been i n operation i n other j u r i s d i c t i o n s for some time, and  have worked  advantages.  reasonably w e l l .  A compulsory scheme would o f f e r many  Most' importantly, i t would simplify the whole process for the  consumer; provision  1 7  1 9  of  alternative  routes  to  achieve  redress  i s often  See Eovaldi & Gestrin, supra note 4, p..312. Cf. Sigurdson, supra note 6, p.89. The. most comprehensive scheme i s i n Pennsylvania: Pa. Stat. Ann. t i t . 5, s.30 (Purdon Supp. 1976-1977). For comment see Sigurdson, i b i d . , p.88; Friedman, supra note 13, pp.185-187. 1 8  1 9  85 treated as a desirable goal i n i t s e l f , but f o r the average consumer who i s unable to comprehend or evaluate the merits o f d i f f e r e n t forums, i t i s only l i k e l y to cause confusion. And provision f o r court review o f such decisions should a l l e v i a t e fears o f i n j u s t i c e . A d i f f e r e n t approach could well be j u s t i f i e d sums. Because  o f the importance  i n cases involving larger  o f the transaction or the amounts i n  question, the procedural safeguards and evidentiary standards prevailing i n courts, either at small claims or at higher l e v e l s , may be warranted.  20  In  such cases, a r b i t r a t i o n should be used as a matter of choice, preferably a t the request o f both p a r t i e s . Further moves away from the notion o f a r b i t r a t i o n as a purely private system may be necessary, e s p e c i a l l y with regard to s e l e c t i o n o f a r b i t r a t o r s . As consumers w i l l generally not be i n a position to choose wisely, nor would they.want to be bothered with finding a suitable candidate, the d e c i s i o n may need to be made by other persons. The best solution would be to establish a tripartite  board,  consisting  of  business,  consumer  and  community  representatives (including government staff) to screen and assign a r b i t r a t o r s . 21  i f the d e c i s i o n were made s o l e l y  consumer groups, the s e l e c t i o n  would  by trade  associations or by  lack c r e d i b i l i t y ;  i f i t were made  e n t i r e l y by the Ministry, to ensure i m p a r t i a l i t y , the system might not be as r e a d i l y accepted by either businessmen or the public generally. The a r b i t r a t o r need not be an expert i n a p a r t i c u l a r trade, nor need he necessarily be a lawyer!  A better system would be to select mature and  i n t e l l i g e n t people from various f i e l d s , provided that they possess a broad background  and wide-ranging  i n t e r e s t s . With  a minimum  of t r a i n i n g ,  such  2° The need for f i s c a l d i s t i n c t i o n s was emphasized by the Consumers Association o f Canada i n i t s b r i e f on redress mechanisms, Nov 1973 (cited in Roine, supra note 4, pp.195-197). 21 See Friedman, supra note 13, p.213.  86 people  should  principles, involved  become  and  in  proficient  i t would  arbitration  no  in  doubt  basic  arbitration  streamline the  proceedings.  To  techniques  costs and  compensate  for  and  formalities  their  lack  of  expertise i n the technical aspects of various trades and the f i n e r points of law, t h e i r terms of reference should allow for wide access to the services of p r o f e s s i o n a l l y q u a l i f i e d people. A major concern with the introduction of a consumer a r b i t r a t i o n scheme i s that because of i t s very f l e x i b i l i t y , i t could well work to a consumer's disadvantage.  22  Unlike  a  p r i n c i p l e s of law, and legal  principles  of  judge  take  who  i s bound  into account  certainty,  an  such  arbitrator  to  apply  the  substantive  factors as consistency and i s generally not  bound  to  s t r i c t l y apply rules of law, but rather considers the personal equities of the parties before h i m .  23  In the consumer f i e l d  the enactment of statutes  such as the Trade Practices Act treats consumers very favourably, and noncompliance  with  legal  borderline cases. The  principles  could  lead  to  problem would be more acute  more  harsh  results  i f arbitrators  in  without  legal training were selected. Of course, i n areas not yet covered by statute law or seriously dealt with at common law, the a r b i t r a t o r ' s decision must be based on the equities of the case, and t h i s could well be to the consumer's advantage. To ensure that consumers are afforded the protections offered recent statutes, wide scope for j u d i c i a l  i n more  review must be permitted. Courts  should be e n t i t l e d to overturn decisions on the basis of an error of law or f a c t , or a breach of natural j u s t i c e . But no  2 2  award should  be  overturned  Jones & Boyer, supra note 4, pp.388-391; Friedman, i b i d . , p.212. 3 Though i n the Labour f i e l d , the a r b i t r a t o r ' s r o l e i s c l o s e l y akin to that of a judge. For the position i n B.C., see Paul W. Weiler, "The Code, the C o l l e c t i v e Agreement, and the A r b i t r a t i o n Process: As seen from the Labour Board" in M.A. Hickling (ed.), Grievance A r b i t r a t i o n : A Review of Current Problems. Institute of Industrial Relations, University of B.C., Vancouver, 1977. 2  87 without strong persuasive reasons being presented. Moreover, appeals should be  limited  to one  hearing  before  a small claims court or  county  court,  depending on the amounts involved. Small claims courts' appeals operate on a similar  basis, and  alternative  they  have been  approach would  be  to  far  from  stipulate  excessive that  i n number.  arbitration  merely advisory. For instance, the Swedish Public Complaints  24  awards  2 5  are  Board i s only  empowered to make recommendations, not binding decisions, i n r e l a t i o n consumer complaints brought before i t .  An  to  However, the former approach i s to  be preferred; i t does not compromise a consumer's legal r i g h t s , but i t does give greater weight and authority to a r b i t r a t i o n d e c i s i o n s . A r b i t r a t i o n hearings should remain private, but to promote consistency and  fairness, written awards and  a form  of  reporting comparable  records kept by small claims courts should, be important  function of  reporting, the  required. Although  to  the  the most  p r i n c i p l e of stare d e c i s i s ,  i s not  applicable, the opinions would be persuasive in guiding l a t e r a r b i t r a t o r s . ^ This  has  arbitral  been  the  case  i n the  labour  jurisprudence has developed.  sphere  The  where a d i s t i n c t  benefits of a  body  of  reporting system  would appear to j u s t i f y the additional cost. Before leaving the question of hearings, i t should be mentioned that the  notion  advocated. offered  27  of In  low-cost  "documents England,  the  arbitration  only  arbitration"  Institute along  is  being  of A r b i t r a t o r s has  these  lines.  2 8  The  increasingly for some time  idea  o f f e r s many  a t t r a c t i o n s , e s p e c i a l l y i n r e l a t i o n to very small claims where more formal  2 4  In B.C. during 1975 less than one per cent of a l l judgments were appealed: Sigurdson, supra note 6, p..108. For reviews see Donald B. King, Consumer Protection Experiments in Sweden, Fred B. Rothman & Co., South Hackansack, New Jersey, 1974;* Roine, supra note 4, pp. 151-153. See Friedman, supra note 13, p.199. See Roine, supra note 4, p.182. Ibid., pp.165-168. 2 5  2fi  2 7  2 8  88 actions seem unnecessary. But for the scheme to work, provision must be made for the parties to be assisted their documentation. Otherwise,  i n drafting their submissions the more experienced  and compiling  party or the one who  could afford to hire a lawyer would have a considerable advantage over the other. An even cheaper and perhaps better scheme along these l i n e s might be for the a r b i t r a t o r to communicate simultaneously with the parties by means of a three-way telephone connection. An objection to a l l such schemes, however, i s that unless the parties are a c t u a l l y p h y s i c a l l y present during a more formal hearing, they may well lack confidence i n the process. The old saying that j u s t i c e must be seen as well  as done must not be ignored. But t h i s  should  not deter  reasonable  experimentation. If relaxed  formal  proceedings  are adopted, they  as p o s s i b l e . The procedures  parties can be represented  and rules  by themselves,  should  be as f l e x i b l e and  should  be simple,  or by l a y advocates.  so that  They also  need to be held at convenient times and places. As has already been noted in relation  to small  claims courts,  i t i s a prerequisite to any consumer  grievance forum that i t must be p h y s i c a l l y close to consumers and reasonably accessible to suppliers. An a r b i t r a t o r or a r b i t r a t i o n panel could well be more mobile and f l e x i b l e than judges i n t h i s r e g a r d .  29  Time l i m i t s would also need to be well circumscribed. Long delays i n i n i t i a t i n g the action, i n the length of the hearing, or i n the time i t takes for an award to be issued - a real problem i n commercial and labour  spheres  - would reduce the effectiveness and a c c e p t a b i l i t y o f the consumer a r b i t r a tion forum. To make a r b i t r a t i o n t r u l y accessible to consumers, i t should involve no cost, or only a small nominal  2 9  fee, f o r the individual  complainant.  Jones & Boyer, supra note 4, p.396-398, stress t h i s factor.  The  89 economic  burden, as such, should  be borne by consumers  as a c l a s s .  The  question i s how to best achieve t h i s . An idea now gaining currency i s that the cost should always be paid by suppliers, who  are i n a good position to  spread them out by including such expenses i n the price of t h e i r goods and services.  3 0  But the fairness and workability o f such a scheme are suspect.  No doubt they should pay costs in cases where they lose, but i f suppliers are  always  altogether.  liable, 31  i t would  discourage  from  using  arbitration  A better approach i s for the government to pay the costs where  the consumer loses. But safeguards need consumers  them  do not waste  public  to be  introduced  funds by i n i t i a t i n g  to ensure that  frivolous actions.  One  such safeguard might be to always make mediation a prerequisite for "free" a r b i t r a t i o n , f o r i t can be s a f e l y assumed that cases i n which the government i s prepared to mediate have substance to them. The a r b i t r a t i o n forum must have at i t s disposal some means o f ensuring that the successful  consumer i s a c t u a l l y paid  judgments has always posed a major  problem  h i s damages. C o l l e c t i o n of  in small claims c o u r t s ,  3 2  and  there i s no reason to expect that a r b i t r a t i o n would be any better. Several means o f  overcoming  this  problem  suggest  themselves. One  would  be  to  encourage trade associations to demonstrate t h e i r good f a i t h i n the forum by guaranteeing consumers leaving  payment o f their  out o f a central the  fund  to  members. Another would  fund established  pursue  collection.  be  to d i r e c t l y  pay  e s p e c i a l l y for t h i s purpose,  Finally,  d i r e c t l y supervise the c o l l e c t i o n process, i n i t i a t i n g  the  government  could  court proceedings i n  cases of d e f a u l t .  3 0  See Friedman, supra note 13, p.212; Eovaldi & Gestrin, supra note 4, p.308. Note (1976), 49 Temple L. Rev. 459. But see Friedman, i b i d . He argues that making a r b i t r a t i o n expenses tax deductible would entice suppliers to participate. See Sigurdson, supra note 6, pp.20-21 & 57-59. 3 1  3 2  90 3.  ARBITRATION WITHIN THE B.C. FRAMEWORK  Arbitration  offers  complaints, but i t need  an  attractive  means  of  dealing  with  not e n t i r e l y replace the courts. The  consumer  ideal scheme  would allow f o r binding a r b i t r a t i o n as an a l t e r n a t i v e to court action, with provision for some degree of j u d i c i a l review. Schemes along these l i n e s have already been introduced i n New York C i t y community i n San J o s e .  3 4  during  and amongst the Spanish-speaking  However, f o r small claims (under $200), compulsory  a r b i t r a t i o n seems the most r e a l i s t i c offered  3 3  a transition  solution, perhaps with a choice being  period.  In  relation  to  the dual  system,  decision would have to be made as to whether to make the a r b i t r a t i o n  a  forum  completely d i s t i n c t from the courts, or to merely make i t an adjunct to the court system, possibly even within the same b u i l d i n g . The presence of judges nearby may give the proceedings a stamp of legitimacy which they might not otherwise h a v e ,  35  but i t would detract from the purported private nature of  a r b i t r a t i o n s , and necessitate that the forum be as centralized as the courts and generally less f l e x i b l e . If  consumer a r b i t r a t i o n  were  introduced  and  i t s use  were  actively  encouraged, the courts would undoubtedly play only a secondary r o l e , serving for the most part as a l a s t  resort mechanism. Consequently the urgency o f  reform at t h i s l e v e l would be reduced.  Role of the Government The introduction of consumer a r b i t r a t i o n would not erode the importance of the Ministry o f Consumer and Corporate A f f a i r s . Rather, the need  3 3  for a  For discussion see D.W. Determan, "The A r b i t r a t i o n of Small Claims" (1975), 10 Forum 831; Roine, supra note 4, p.164. Judge Beresford, "Perspectives from Other J u r i s d i c t i o n s " , Consumer Law Conference, University o f B.C., B r i t i s h Columbia, 1978 (prepublished copy). Sigurdson, supra note 6, pp.88-89. 3 4  3 5  91 central administrative body would be even more pronounced; i t could perform many functions which would be d i f f i c u l t Ministry should  be given the primary  scheme, overseeing  i t s operation, and  to achieve by other means.36  responsibility  f o r implementing  The the  suggesting changes and modifications  as t h e i r need becomes apparent. At  the  individual  level,  the  Ministry's s t a f f  should  assist  the  disputing parties i n presenting their cases for a r b i t r a t i o n , thus ensuring that the proceedings go as s w i f t l y as possible, and more importantly, that the a r b i t r a t o r w i l l be put in a position to f a i r l y judge the merits of the case. Further, i t should play some role i n the selection of a r b i t r a t o r s , i n channelling the most suitable people to p a r t i c u l a r cases, and. in helping the a r b i t r a t o r to organize the time and venue of the hearing. The M i n i s t r y also should take the prominent role in educating consumers as to their new and  duties under whatever scheme i s adopted. Without wide-scale  and  education  programmes, a r b i t r a t i o n  could be  just  rights  publicity  as neglected  as  the  present small claims system. The other aspects of the Ministry's work, providing mediation services and strongly enforcing consumer protection l e g i s l a t i o n , would continue to be very important. On the enforcement front, the Director of Trade Practices would be aspects  i n a position to concentrate of  the  Trade  Practices  almost  Act,  seeking  prosecutions i n serious cases of marketplace contrast, would be accessible  considerably less  s o l e l y on  the  injunctive  preventative relief  abuse. Substitute actions, i n  important  i f effective  to consumers for private actions, e s p e c i a l l y  forums were  i f the Ministry  played an active role i n preparing consumers for taking such actions.  3  fi  or  See Jones & Boyer, supra note 4, pp.402-405; Roine, pp.180-183.  92 4.  A RADICAL ALTERNATIVE - "NO  FAULT" COMPENSATION  Perhaps only to provoke debate, Professor Rosenberg has alternative  to  the  usual  consumer complaints. similar  to the  37  He  kind now  adjudicative has  proposed  prevalent  framework  for  the  suggested  resolution of  a "no-fault" compensation  in the  field  an  of automobile  scheme,  accidents,  which would automatically reimburse every small claim (say up to $200) that i s applied f o r . While  the  scheme  consumers, coupled  offers  the  attraction  with bureaucratic  of  simplicity,  an  instant  remedy  for  i t encourages widespread  consumer abuse. Rosenberg refutes such claims: Some w i l l say the plan i s naive and that consumers w i l l cheat on a massive scale by presenting dishonest claims. An antidote might be to use the type of spot checks that income tax c o l l e c t i o n services use - apparently with good r e s u l t s . 3 8  Heavy f i n e s and  spot checks might discourage  deliberate cheating, but i t  would not prevent consumers from seeking f u l l redress for every complaint partial validity.  Indeed, almost a l l consumer complaints  of  have some merit.  The scheme would remove a l l incentive for consumers to take care in making their  purchases,  initiating funding, integrity,  and  since  and maintaining i t would and  favours  distributing  the  cost  of  the scheme evenly, through some means of public  eliminate  thereby  Rosenberg  all  i t would  incentive  penalize  the  for  suppliers  to  act  honest ones. These  with  reasons  alone are s u f f i c i e n t to dismiss the scheme from serious consideration.  J /  Maurice Rosenberg, "Devising Procedures that are J u s t i c e that i s C i v i l i z e d " (1971), 69 Mich. L. Rev. 797. Ibid., p.815. 3 8  Civil  to  Promote  93 CHAPTER VI  CONCLUSIONS  British  Columbia  i s widely acclaimed  to have some o f the best and  strongest consumer protection l e g i s l a t i o n i n Canada. On a comparative basis t h i s may well be c o r r e c t , but i n many respects  i tstill  protection  by  ultimately  desired,  and  needed,  protection f o r consumers i n t h i s province  f a l l s short o f the  consumers  today.  Most  stems from the recently enacted  Trade Practices Act which seeks to give comprehensive and timely r e l i e f from undesirable business practices generally, both to individual consumers and to consumers as a c l a s s . Like other l e g i s l a t i o n o f i t s kind, i t attempts to rectify  the great  imbalance  presently  existing  between  consumers and  suppliers, and i n so doing i t must balance the needs o f consumers against fairness to businessmen and o v e r a l l e f f i c i e n c y o f the market. This thesis has been concerned with investigating the nature o f the r e l i e f offered i n the Trade Practices Act, and how i t has been interpreted and implemented, highlighting the shortcomings and problems which have become apparent. The Act has accomplished much f o r consumers, but i t does not s a t i s f y a l l their needs, nor does i t always keep within the bounds o f f a i r n e s s . Changes are needed, both minor ones that are e a s i l y implemented, and some major reforms.  The  Act's  achievements are manifold.  unacceptable, and i t allows p r o h i b i t i o n s , rather  relief  I t has c o d i f i e d conduct that i s  on the basis  than on antiquated  and often  o f expansive restrictive  r u l e s . Very wide protection i s given against deceptive in statutory form the l e v e l  statutory common law  p r a c t i c e s , providing  o f protection which has developed  i n America  only slowly through administrative decisions and court proceedings. The o l d  94 doctrine of unconscionability, as adopted by the Act, should  prove to be a  useful tool for consumers. The Act has s p e c i f i c a l l y applied the doctrine to consumer transactions, and has expressed i t i n wider terms than has been the case  at  success  common law, i n court  despite  actions  recent  has  been  developments enhancecd  by  there. the  The  chances  removal  of  the  of old  b a r r i e r s to r e l i e f such as the rules r e l a t i n g to p r i v i t y and parol evidence. The  introduction  of  wide  necessitated the establishment oversee  its  implementation  ranging  consumer  protection  measures  has  and l a t e r expansion of a government agency to and  enforce  i t s provisions.  B.C.  has  been  fortunate to acquire a Ministry which i s a c t i v e l y committed to pursuing  the  interests  the  of  consumers.  From  l e g i s l a t i o n meaningful, and  the  outset,  i t has  i t s enforcement record  sought  to  make  i s impressive,  despite  d i f f i c u l t i e s encountered i n the courts. The mediation scheme operated by the government  has  satisfactory  been  especially  resolution  of  the  successful great  and  majority  has of  resulted legitimate  in  the  consumer  complaints. The Act also recognizes  the need for private actions, and  consumers with a wide range of remedies, noteably provision which can be  has  provided  a comprehensive damages  r e a d i l y applied through as simple and  inexpensive  a  forum as a small claims court. But apart from formal a c t i v i t y , the Act forms an  important  weapon for consumer s t o r e - l e v e l bargaining  and  negotiation.  Moreover, the Act's mere existence has had a strong deterrent e f f e c t , and i s f e l t to have resulted i n higher business standards generally.  Despite  t h i s impressive  l i s t of achievements, the Trade Practices Act  has many weaknesses, both i n form and  in implementation. Its provisions go  too far i n some respects, not far enough i n others, and enforcement p o l i c i e s have not always served well the interests of consumers.  95 Courts have accepted  the extensive nature  of the  protection offered  against deceptive practices i n most respects, but the question of what i s m a t e r i a l l y deceptive, and the related question of the time period covered the Act, need  further c l a r i f i c a t i o n . The  difficulty  lies  not  by  so much i n  j u d i c i a l reluctance to accept new and innovative l e g i s l a t i o n , as i n the lack of  strong  and  well  argued  test  cases  brought  before  them.  It may  be  necessary f o r the Legislature to provide more s p e c i f i c guidelines as to what conduct  i s unacceptable,  though  there  i s always  the  danger  that  such  s p e c i f i c a t i o n w i l l work against the residual g e n e r a l i t y of s.2. The unconscionability provision suffers from timid d r a f t i n g , f a i l i n g to even define what  i s unconscionable  courts have always had  i n accepting  conduct. and  Given  the  difficulty  which  defining substantive unfairness,  more s p e c i f i c l e g i s l a t i v e d i r e c t i v e s as to what terms or circumstances to be  considered  expressed harshness,  in new then  unconscionable  are  essential.  language, f o r example, only i t would help free  judges  If these  i n terms of  from  the  directives  are were  unfairness and  l i m i t a t i o n s of  their  previous decisions. The adoption of a s t r i c t - l i a b i l i t y test for deception i s an instance of the Act's being overly protective. It should be possible to allow suppliers at l e a s t a limited defence  i n a l l cases of innocent deception, as i s  now  done with regard to prosecutions only, without overly depriving consumers of needed protection. Moral  f a u l t has i n practice always been a consideration  in determining whether to resolve a case through  informal of through  formal  means, and i t i s only f i t t i n g that the courts be given similar d i s c r e t i o n . Though the Act's dual goals of redress to consumers and elimination of undesirable practices have been s u b s t a n t i a l l y met, most success has been at the informal l e v e l ; the formal enforcement a c t i v i t i e s of the M i n i s t r y have produced  only mixed  results.  The  present  p o l i c y of prosecutions only i s  96 quite misdirected, and effectiveness. The  i s l i k e l y to lead to the rapid decline to the  enforcement tool in any  with f l e x i b i l i t y and  d i s c r e t i o n , and  range of options provided The further claims.  Provision  i s needed  of  use  should  be made of the broad  a  brought to  under the  motivate  suitable  forum  Act  illustrates  consumers is  a  to  pursue  major  to ascertain what methods of redress are  appropriate.  the  analysis,  mediation-adjudication  answer  framework, but  still  appears  with court  to  actions  that their  concern,  experimentation i s required On  chosen  for i n the Act.  lack o f private actions encouragement  full  p a r t i c u l a r case must be  Act's  and truly  l i e within preferably  the being  replaced or supplemented by a r b i t r a t i o n proceedings.  It  i s concluded therefore that further l e g i s l a t i v e reform i s needed to  ensure that the Trade Practices Act provides to give. The  modifications c a l l e d  true sense, but c l a r i f i c a t i o n and  the  f u l l coverage i t intended  for to ss.2 and  3 are not  radical  minor amendments could v a s t l y a l t e r  in a the  impact and scope of the Act. Further administrative remedies, noteably cease and  desist  orders  Ministry's a b i l i t y  and to  rule-making respond  powers,  quickly and  would  further  effectively  to  enhance  the  problems which  a r i s e i n the market. In the medium term, more substantial reform in the consumer protection f i e l d must be considered.  A p i l o t a r b i t r a t i o n scheme should  to test i t s attractiveness to consumers and  be  implemented  the extent to which i t might be  used. L e g i s l a t i o n , of comparable forcefulness to the Trade Practices Act, i s s t i l l needed i n the areas of land dealings and mortgage transactions -  two  of the most important of a l l consumer transactions. 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