COURT FILE NO.: 613/04

DATE: 20051003

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Between: Michael Anderson (Plaintiff/Respondent) v. Excel Collection Services Ltd. (Defendant/Appellant) et al.

Before: Swinton J.

Counsel: Jane E. Martin for the Appellant Excel Collection Services Ltd.

Jeffrey Kaufman for the Respondent Michael Anderson

Heard at Toronto: September 16, 2005

ENDORSEMENT

[1] Excel Collection Services Ltd. (“Excel”) appeals from the decision of Deputy Judge Mungovan dated October 20, 2004, in which he awarded damages for mental distress and anguish to the Respondent Michael Anderson in the amount of $5,000.00, after he found the Appellant Excel liable for negligence.

[2] In this action, Mr. Anderson alleged that Excel, a collection agency, harassed him in an attempt to collect money from him, which was claimed to be owing by Excel’s client, Azuria. The dispute between Mr. Anderson and Azuria, his former landlord, arose with respect to the timeliness of Mr. Anderson’s notice that he was terminating his tenancy. Azuria claimed that Mr. Anderson owed a final month’s rent, as he had not given 60 days notice, and he denied this.

[3] The first issue on this appeal is whether the Deputy Judge erred in finding that Excel fell below the standard of care and was negligent, because it failed to comply with regulations under the Collection Agencies Act, R.S.O. 1990, c. C.14. The second issue is whether the Deputy Judge erred in awarding damages for mental distress in the absence of any medical evidence or evidence of any physical or psychiatric injury. During oral argument, no objection was raised to the jurisdiction of the Deputy Judge, nor was the issue of vicarious liability argued.

[4] Both parties are agreed that the standard of review on this appeal is set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. On questions of law, the standard is correctness, while on questions of fact, it is “palpable and overriding error”. Findings of mixed fact and law, such as a finding of negligence, are to be accorded deference, absent a legal error or a palpable and overriding factual error (at para. 31).

Liability for Negligence

[5] The Deputy Judge concluded that Excel had engaged in conduct prohibited by the regulations under the Collection Agencies Act. More particularly, he found that Excel had violated s. 20(d) of Regulation 74, R.R.O. 1990, which provides that no collection agency shall “make telephone calls or personal calls of such nature or with such frequency as to constitute harassment of the debtor…”. He also found that Excel violated s. 20(f) of the regulation by giving any person “any false or misleading information that may be detrimental to a debtor” and s. 21 of the regulation because of improper contacts with Mr. Anderson’s employer.

[6] With respect to s. 20(f), the Deputy Judge stated that in order for the calls to be harassment, the language used must be abusive or threatening. He found that an employee of Excel, Roger Lansing, called Mr. Anderson nine times in September 2002, using threatening and abusive language and thus committing harassment. There is evidence from Mr. Anderson, which the Deputy Judge accepted, to support this conclusion.

[7] The Deputy Judge also made findings of fact with respect to the information reported to Equifax, a credit reporting bureau. Having considered the evidence, he concluded that Mr. Anderson had given proper notice to terminate his tenancy, and therefore, he did not owe Azuria the amount claimed, which Excel had reported to Equifax. Again, there was evidence to support the conclusion that there was no debt to Azuria and, therefore, incorrect information was provided to Equifax. However, as set out below, that does not determine the issue of negligence.

[8] Finally, the Deputy Judge concluded that Mr. Lansing made contacts with Mr. Anderson’s employer and conveyed information beyond what he was entitled to discuss under s. 21 of the regulation. Again, there is evidence to support this finding.

[9] The issue, then, is whether the Deputy Judge erred in finding that Excel failed to meet the standard of care for a collection agency, given his findings of fact. The Deputy Judge correctly stated that proof of a statutory breach which causes damages may be evidence of negligence (Galaske v. O’Donnell, 1994 128 (SCC), [1994] 1 S.C.R. 670 at para. 30).

[10] In my view, the Deputy Judge did not err in concluding that the Collection Agencies Act and regulations, designed as they were to protect debtors from certain practices, are evidence of the standard of reasonable conduct to be expected of a collection agency.

[11] Given his findings about the nature of Mr. Lansing’s calls and their frequency, the Deputy Judge reasonably concluded that s. 20(d) of the regulation set a standard of reasonable behaviour and, given the violation, Excel’s conduct fell below the standard of care.

[12] However, the Deputy Judge also held that the number of calls from Excel was excessive and constituted harassment, since Mr. Bryant, the first caller, was told in February, 2000 that Mr. Anderson disputed the debt. The Deputy Judge stated in his reasons that once a debtor makes a statement that he does not owe any money, the collection agency must stop contacting him, and to continue to call is “generally speaking, harassing”. In my view, this definition of harassment is overbroad, given the evidence of Mr. Bryant that it is very common for debtors to deny the debt initially. Moreover, the regulation refers to the “frequency” of the calls, which suggests that the focus is on the number of calls, in addition to their nature.

[13] Nevertheless, the evidence of the nature and frequency of Mr. Lansing’s calls in September, 2002 reasonably led to the conclusion that there was harassment within the meaning of s. 20(d) of the regulation and conduct that fell below the standard of care - especially given Mr. Anderson’s explanation of events throughout to Excel.

[14] With respect to s. 20(f) of the regulation, the Deputy Judge stated, “The statutory or regulatory duty to be honest in respect of the information given to a third party is a reasonable standard of behaviour at common law.” He expressed the opinion that a collection agency should not report a debt to a credit bureau without a judgment from the courts if the debtor disputes the debt. Therefore, Excel was negligent in reporting the debt because Mr. Anderson was found to owe no money to Azuria.

[15] The Collection Agencies Act, in s. 28(10)(c), makes it an offence for a person to “knowingly” contravene the Act and regulations. Moreover, the Consumer Reporting Act, R.S.O. 1990, c. C.33, s.22 prohibits a person from “knowingly” supplying false or misleading information to another who is engaged in making a consumer report. The Deputy Judge made no finding that Excel knowingly provided false information to Equifax. Mr. Bryant gave evidence that he relied on information provided by Azuria, and the fact that there was no debt was not determined until the trial in this proceeding.

[16] As Galaske, supra stated, breach of a statute may be evidence of negligence. In this case, there is no offence under the two Acts unless the person making the report knew that the information was false. It may also be reasonable to find a breach of the standard of care when a person reports a debt without taking reasonable care to determine the existence of the debt. In the absence of a finding that the report here was made with knowledge that the information about the debt was false or without due care in determining the debt existed, there was no breach of the standard of care in reporting the debt. The fact that the debt was subsequently found not to exist is not, on its own, sufficient to show dishonesty nor a breach of the standard of care.

[17] Finally, the Deputy Judge reasonably found that Excel fell below the standard of care in the contacts made with Mr. Anderson’s employer.

Damages

[18] In order to prove negligence, the plaintiff must prove not only that the defendant has fallen below the standard of care, but as well, that he has suffered compensable damage as a result. In this case, the Deputy Judge held that there was mental distress and anguish caused by Excel’s conduct, and he awarded $5,000.00 in general damages and dismissed the claims for aggravated and punitive damages. In doing so, he stated,

Mental anguish, stress, worry do constitute general damages in the law of negligence. It is doubtless true that Mr. Anderson did suffer “mental anguish”. Mr. Anderson did not introduce into evidence a medical report nor did he say that he had to visit a doctor for mental depression or insomnia. However, in this context, courts do not require such evidence of stress. It is a matter of common sense that any human being in Mr. Anderson’s situation would be upset by knowing that a debt has been filed with a credit agency for all the world to see, particularly if that world consisted of his employer and his clients, and particularly, if he or she believes on good grounds that the debt is false. (at p. 13)

[19] There was no medical evidence of depression or mental suffering, nor was there evidence of loss of income. All that was before the Deputy Judge was the evidence of Mr. Anderson and his wife about the emotional distress and anguish suffered. There was also evidence from Mr. Anderson that he was distracted from his work because of Mr. Lansing’s calls.

[20] It has traditionally been held that there can be no recovery for psychiatric damage unless the psychiatric damage results in a recognized psychiatric illness (Vanek v. Great Atlantic & Pacific Co. of Canada Ltd. (1999), 1999 2863 (ON CA), 180 D.L.R. (4th) 748 (Ont. C.A.) at paras. 25 and 62). The Court of Appeal in Vanek made reference to Mason v. Westside Cemeteries Ltd. (1996), 1996 8113 (ON SC), 135 D.L.R. (4th) 361 (Ont. Ct. (Gen. Div.), where damages for mental distress of $1,000.00 had been awarded to the plaintiff, despite the lack of evidence of psychiatric illness, after a cemetery lost the ashes of his deceased parents. However, the Court of Appeal declined to comment on the correctness of the decision or to reassess existing principles in that case, reiterating that the settled law prevented recovery in negligence without proof of a recognizable psychiatric illness (at paras. 62, 67). In a more recent decision, Hockin J. followed Vanek and refused to award damages for mental distress in negligence without proof of psychiatric illness (McLoughlin v. Arbor Memorial Services Inc., [2004] O.J. No. 5003 (S.C.J.) at paras. 18-19).

[21] In this case, while there was evidence of mental distress, there was no evidence of psychiatric or medical problems caused by Excel’s conduct. Therefore, the Deputy Judge erred in awarding general damages for mental distress, despite his finding of negligence. For this reason, the appeal is allowed, the decision of the Deputy Judge is set aside, and the claim is dismissed.

[22] The award of costs in a proceeding is discretionary. Despite the success of Excel on this appeal, it is clear that the conduct of its employee was odious and disruptive of Mr. Anderson’s life. Mr. Anderson has done a public service in bringing this case in an effort to help define the standard of reasonable care applying to collection agencies. In my view, this is a case where no costs of the appeal should be awarded, given the conduct of Excel.

Released: October , 2005

Swinton J.