MDG Newmarket Inc. c.o.b. Ontario Energy Group v. Director under the Consumer Protection Act, 2002, 2016 CanLII 50117

Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2016-07-05

10179/CPA

10179 v. Director under the Consumer Protection Act, 2002

Appeal from an Order for Immediate Compliance issued by the Director under the Consumer Protection Act, 2002

MDG Newmarket Inc. c.o.b. Ontario Energy Group and Evgueni Farber a.k.a. Eugene Farber

Appellants

-and-

Director under the Consumer Protection Act, 2002

Respondent

Laurie Sanford, Vice-Chair, presiding

Gary Yee, Associate Chair

For the Appellants:

Pradeep Chand, Counsel

For the Respondent:

Jeffrey P. Ludlow, Counsel

Graeme Adams, Counsel

Heard in Toronto:

June 13, 2016

Introduction

This is an appeal to the Tribunal by the Appellants, MDG Newmarket Inc. c.o.b. Ontario Energy Group (“Ontario Energy Group”) and Evgueni Farber a.k.a. Eugene Farber, from an order for immediate compliance issued on April 5, 2016 by the Director under the Consumer Protection Act, 2002 (the “Director”).

The Director brought a motion to extend her order for immediate compliance until the hearing of this matter. Ontario Energy Group has brought a counter-motion for a stay of the Director’s order.

The Consumer Protection Act, 2002, R.S.O. 2002 c. 30, Sch. A (the “Act”) regulates aspects of certain consumer transactions occurring in Ontario. People or companies in the business of providing specified goods or services to consumers are subject to the requirements of the Act. There is no dispute that the Act applies to Ontario Energy Group in their provision of heating, cooling and ventilation products to consumers.

The Director may impose sanctions if she believes that the Act is being violated. Three of these sanctions are of particular relevance to these motions. The first of these of these would be that the Director may enter into an “undertaking of voluntary compliance” with a company or person. The Director chose not to take this route in this case, and Ontario Energy Group submits that this was the most appropriate sanction. The Director may also propose an order for compliance with the Act under section 111 if she “believes on reasonable grounds” that a person or company is acting in contravention of the Act. Finally, as was done in this case, the Director may make an order for immediate compliance with specific provisions of the Act if it is her opinion that the order is in the public interest.

Under section 112 of the Act, the immediate compliance order by the Director expires 15 days after an appeal to the Tribunal unless the Tribunal extends it until the hearing is concluded. In the present case, the parties consented to an extension of the immediate compliance order until these motions could be heard and the decision issued.

The two motions in the case could be seen as related, but the legal test for each motion is different. The Director’s motion to extend the order for immediate compliance is governed mainly by the public interest, as set out in section 112 of the Act. The Appellants’ motion to stay the Director’s order for compliance is governed by the legal test set out by the courts for injunctions and stays, which focuses mainly on whether irreparable harm exists and the balance of inconvenience. The Tribunal’s consideration of the public interest involves a balancing between the enforcement interests and the Appellants’ business interests and their right to a meaningful appeal. This analysis of the Director’s motion to extend her order will overlap significantly with the analysis of the Appellants’ motion to stay the order. Both of these motions were argued as one joint motion, but the Tribunal will proceed with a consideration of the Director’s motion first.

Director’s Motion to Extend the Compliance Order – the Public Interest

The Director submits that it is in the public interest to extend the order for immediate compliance until the hearing is concluded, and her counsel offers several arguments in support of this position. Mr. Ludlow submitted that the immediate compliance order should be extended to the hearing because it was only after hearing the evidence that the Tribunal could decide the matter. This argument would appear to apply to any immediate compliance order and would suggest that an extension should be automatic on the same ground. The Tribunal does not accept this argument. The Act sets out a very specific discretion on the part of the Tribunal in considering whether or not to extend the immediate compliance order prior to conducting the hearing. The issues for this motion are: first, on what basis the Tribunal ought to exercise that discretion, and second, how ought the Tribunal to exercise that discretion in this case?

The Director submits that the Tribunal should use the same criteria that the Director uses in section 112 of the Act to determine in the first instance to issue an order for immediate compliance: that is, that such an order is in the public interest. The Tribunal agrees that the principle of public interest is central to its decision. The public interest served by the Act is primarily an expanded form of consumer protection and this public interest must be considered in this decision. While the public interest in the Act is clear, the more nuanced issue in this motion is when the public interest is sufficiently engaged to support an order for immediate compliance prior to a hearing on the merits of the order. Violations of the Act which cause demonstrable harm to a class of consumers would be one obvious example of such a public interest engagement but it does not follow that consumer harm is a necessary component of the public interest test. What will meet the test will depend on the facts in each case.

The public has other interests in this matter as well. There is a valid public interest in ensuring that Ontario Energy Group has an opportunity to have a meaningful hearing in this matter. This includes not only the right to put the Director to the proof of her allegations that Ontario Energy Group has violated the Act but also a right to make a full answer to the allegations. In particular cases, other public interests may also exist. For example, in some cases, the public interest could include the consumers’ interest in the continued availability of the Appellant’s products or services.

The Director issued reasons for her order for immediate compliance, which are supported by affidavits by various investigators who considered the conduct of Ontario Energy Group. The Director references these affidavits in footnotes to her reasons. The Director alleges that Ontario Energy Group has violated the Act in a variety of ways. At the hearing, the Director will bear the onus of proving these allegations on the balance of probability. For the purposes of this motion, the Tribunal is of the view that the Director must establish at least a prima facie case that violations of the Act have occurred that trigger the public interest requirement for an order for immediate compliance.

The Tribunal ruled not to admit the supporting affidavits submitted by the Director. In part, this was done in the interest of adjudicative efficiency to avoid the possibility of lengthy cross-examinations on the affidavits, which would potentially turn the hearing of this motion into something similar to the eventual full hearing on the merits. These cross-examinations may be expected at the hearing. The Tribunal notes that these affidavits are not as necessary for the Director’s argument of this motion because the content in these affidavits is extensively covered in the Director’s reasons. For the limited purposes of the motions addressed in this Decision, the Tribunal accepts as true the allegations made in the Director’s reasons.

Likewise, the Tribunal accepts the affidavit submitted by Mr. Farber for the truth of its contents, and counsel for the Director indicated that he was content to proceed with the motion without asking to cross-examine Mr. Farber on his affidavit. Although Mr. Farber’s affidavit was specifically prepared in support of the Appellants’ motion to stay the Director’s order, the Tribunal will also consider it in addressing the issues in the Director’s motion for an extension.

The Director alleges that a “regular” part of Ontario Energy Group’s business involves violations of the Act which expose the consumer to higher costs or which attempt to restrict rights consumers have under the Act. According to the Director, Ontario Energy Group sales representatives regularly misrepresent the cost of the contract, whether a rebate will be available and on what conditions. The Director alleges that Ontario Energy Group contracts commence on the day they are signed, obliging consumers to pay rent for equipment not yet installed, and the contracts present rental escalation provisions in a misleading way and give Ontario Energy Group title to the consumer’s existing equipment without an express provision for compensation. These allegations are detailed and supported by references to affidavits of investigating officials. The Tribunal, for the purposes of this motion, accepts these allegations, and concludes that the Director has established prima facie evidence of consumer harm due to alleged business practices of Ontario Energy Group. This consumer harm is sufficient to engage the public interest referred to in the Act.

It is relevant to note that Ontario Energy Group and Mr. Farber, in their Notice of Appeal, assert that the Ontario Energy Group “has a history of compliance with the [Act]” but they do not dispute the specific allegations in the Director’s reasons for her order. Ontario Energy Group questions whether the Director has the authority to issue such an order and whether it is excessive or premature, and these issues will be addressed below.

Ontario Energy Group submitted an affidavit by Mr. Farber, the owner of Ontario Energy Group. In it, Mr. Farber sets out the prejudice which Ontario Energy Group would suffer if the immediate compliance order is not stayed. These include:

costs of changing terms and conditions of rental contracts;
training of sales agents;
changes in business practices which will “threaten the Applicants (sic) commercial and economic viability”; and
implementation costs of the changes, which are not recoverable.

Mr. Farber notes that Ontario Energy Group has already been put to “substantial efforts and financial expenditures” to comply with the Act. Mr. Farber also asserts that the immediate compliance order will cause harm to the Appellants’ reputation due to the publicity this matter has already received.

Although Mr. Farber states that Ontario Energy Group’s commercial and economic viability would be threatened by extending the immediate compliance order, there is no evidence given to assist the Tribunal in measuring the extent or timing of this threat.

The issue for the Tribunal is how to balance the prejudice that Mr. Farber asserts his company will suffer against the consumer harm alleged by the Director as a result of the alleged business practices of Ontario Energy Group.

One way to balance these interests, a method set out in the Act, is to hold a hearing on an expedited basis. That way, any cost or other prejudice associated with immediate compliance would be mitigated. With input from the parties, the Tribunal originally set hearing dates in June. However, Mr. Farber subsequently advised that the first three days of the hearing would have to be adjourned due to a previously scheduled vacation he had planned. The remaining dates in June were used to deal with these motions and other procedural matters which emerged after the hearing days had been set. New hearing dates have been established for August and September, 2016. The Tribunal recognizes that these dates are not the expedited hearing called for in the Act, but also notes that it was Mr. Farber who asked for the adjournment of the first half of the hearing dates, in early June.

Mr. Ludlow submits that Ontario Energy Group can suffer no prejudice by bringing itself into compliance with the Act. It is required to be in compliance in any event, Mr. Ludlow submits. The Tribunal does not find this argument persuasive. It is open to Ontario Energy Group to contest the Director’s interpretation of what constitutes compliance. Any expense incurred in an unnecessary compliance would be prejudicial to Ontario Energy Group.

Mr. Chand, counsel for the Appellants, submits that the Director should have moved first to negotiate an undertaking for voluntary compliance with Ontario Energy Group. By not doing so and by moving directly to the more onerous immediate compliance order, the Director exceeded her jurisdiction and imposed a premature and unnecessarily onerous obligation on Ontario Energy Group, in Mr. Chand’s submission. This argument pre-supposes that the remedies open to the Director are progressive, and that there is some obligation to start with less onerous sanctions. There is nothing in the Act that supports such an interpretation. The Director is empowered to choose the most appropriate sanction. At the hearing of this matter, the Tribunal will not be bound by the decision the Director has made, but the Tribunal is not persuaded that the Director has either exceeded her jurisdiction or acted prematurely or in an unduly onerous fashion.

In weighing the competing interests in this case, the Tribunal is struck by the widespread nature of the alleged infractions. Some parts of the Director’s order would appear to not require much change to whatever the Appellants and their representatives may or may not be doing, but other parts may be more onerous to comply with.

Mr. Chand submits that section 1 of the Director’s order is a blanket direction to comply with the Act. The Tribunal agrees that this is too widely expressed to permit the Appellants to understand what is required of them. Mr. Ludlow has agreed that section 1 of the order may be excluded from any extension of the order that the Tribunal directs.

The Tribunal notes that section 2 of the Director’s order directs the Appellants to “cease” certain practices, particularly practices of sales representatives making certain representations to consumers. The order sets out very detailed points about what sales representatives should or should not say, in order to be in compliance with the legislation. The Tribunal is of the view that the Appellants could comply with this part of the order by communicating these specific requirements to their sales representatives and training them as needed. The Appellants’ general statements that this would be difficult and costly do not convince the Tribunal that immediate compliance with this section would be unduly harsh.

Similarly, section 3 of the Director’s order addresses very specific revisions to the agreements used by Ontario Energy Group. The Tribunal is proceeding on the basis that the Appellants should not be required at this appeal stage to change any of its existing agreements already made with consumers. Re-writing existing agreements to comply with the Director’s order, even assuming the order requires that, would potentially be onerous for the Appellants. Changing the forms to be used for future agreements appears to be feasible, even if there may be some costs and training involved.

Section 4 of the Director’s order relates to the ability of consumers to cancel their agreements with Ontario Energy Group. This section may be interpreted as addressing future cancellations because the order uses the future tense in referring to the Appellants’ required actions. If this is the case, then any prejudice to the Appellants appears to be less significant.

Section 5 of the Director’s order addresses obligations of Ontario Energy Group’s officers and directors, and is similarly framed to relate to future activities. After considering the Director’s order for immediate compliance, the Tribunal is of the view that, for the purposes of this motion, the order may be read as addressing future activities and agreements and as excluding existing contracts.

Given these findings by the Tribunal that the Appellants’ immediate compliance with the Director’s order would not appear to be unduly onerous, the Tribunal finds that the public interest supports the extension of the Director’s order. This public interest involves a balancing between the interest of enforcing the Act to ensure consumer protection, and the Appellants’ business interests and their right to have meaningful access to an appeal. With the Director successfully showing that the immediate compliance order should be extended further, the Tribunal will next consider if the Appellants can show that there should still be a stay pending the Tribunal’s hearing of their appeal.

Appellants’ Motion to Stay the Director’s Order Pending Hearing of the Appeal

The Appellant’s motion to stay the Director’s order involves much of the same findings and analysis as the above discussion, but it is not based only on an assessment of the public interest. While there is a similar balancing of interests, there is a clear three-part test that includes a focus on the Appellant’s grounds for appeal and the harm caused to the Appellant. The parties agree that the principles of law applicable to such a stay motion are those set out in the Supreme Court of Canada decision in RJR MacDonald Inc. v Canada (Attorney General), [1994] 1 SCR 311, 1994 CanLII 117. The Court in RJR Macdonald set out a three-part test to guide the exercise of the court’s discretion when deciding whether to issue an injunction to stop the government from enacting regulations about cigarette packaging that the company would have to follow.

This test has been extended to the similar situation of the Tribunal exercising its discretion to either grant or deny a stay of an order. First, is there a serious issue to be tried? Second, will denial of the stay cause the Appellants’ irreparable harm? Thirdly, does the balance of inconvenience favour granting the stay? The Supreme Court held that no one element is determinative, and a strong case for a stay on one element of the test may overcome deficiencies in another element. The overarching consideration is that a just decision is reached, weighing the three factors.

The threshold for determining if there is a serious issue to be tried is a low one. The Court in RJR MacDonald held that the determination at the motion stage is a preliminary assessment of the merits of the case. The test is not whether in the opinion of the Tribunal, the Appellants are likely or unlikely to succeed on the appeal. Indeed, in this case, such a pre-determination would be inappropriate. Here, if the Tribunal is satisfied that the motion is neither vexatious nor frivolous, the Tribunal should move on to the remaining elements of the test.

The Director submits that the Appellants have not cleared even this low bar to establish that they have a serious issue to be tried. Counsel for the Director points to the Notice of Appeal filed by the Appellants and to the lack of disclosure by them. Counsel submits that the Appellants have established no grounds for the appeal other than a generalized denial of the allegations. However, the Appellants are entitled to put the Director to the proof of her allegations. The proceeding will be a fresh hearing, and the question of whether there have been violations of the Act that are sufficient to justify, in the public interest, an order to immediately comply with the Act is a serious issue to be tried. It is neither frivolous nor veracious. The first element of the test in RJR MacDonald is met.

The second component of the test is whether the Appellants would suffer irreparable harm if the stay is not granted. As the Court in the RJR MacDonald case held, “irreparable” refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured . . .”

In his factum, Mr. Chand submits that without the stay, the order for immediate compliance “will put an end effectively to the business of [Ontario Energy Group] to the point that the hearing of this appeal will be rendered futile”. The affidavit refers to changes that the Appellants will need to make to their rental contracts, training of sales agents and business practices. It states that these changes are a threat to the company’s commercial and economic viability. The Tribunal finds that this offers very little evidence or details of the size, nature or timeframe of the threat. As noted in the discussion of the Director’s motion and the public interest, changes to a standard form contract would not appear to be overly onerous or impractical, at least for future contracts and not contracts that have already been signed. With such limited evidence about the size, immediacy or nature of this supposed threat to the viability of the company, it is difficult to see how the changes in contracts, training and business practices associated with compliance would amount to an irreparable harm to the Appellants, or would somehow undermine their right to a hearing if the Director’s order is not stayed.

The Tribunal gives little weight to the other factors set out in the affidavit – namely, the harm to the Appellants’ reputation, and the financial costs of continuing to appeal the Director’s order. The reputational harm that Mr. Farber alleges has been incurred by Ontario Energy Group due to the publicity of this matter has already occurred. There is no evidence that it will be made worse by an extension of the order for immediate compliance. Similarly, the costs of continuing to appeal the order are not affected by whether this stay is granted or not.

Financial costs generally are not the sort of damages to constitute irreparable harm. In this context, it is relevant to note again that the Tribunal is interpreting the Director’s order to refer to future actions and contracts, not existing ones. The Tribunal concludes that neither Mr. Farber nor Ontario Energy Group has demonstrated the irreparable harm called for in the RJR MacDonald decision.

The third component of the test is the balance of inconvenience. The Court in RJR MacDonald held that the factors to be considered in assessing the balance of inconvenience may be numerous and will be expected to vary in each case. While the Court held that public interest would be of particular importance in cases involving the Canadian Charter of Rights and Freedoms, it did not suggest that public interest should not be a consideration in other types of cases.

In assessing the balance of inconvenience in this case, the Tribunal needs to assess the public interest in immediate compliance with a consumer protection statute such as the Act, and to weigh that interest against the cost and prejudice to the Appellants of bringing themselves into compliance with the Director’s order before they have been given an opportunity to challenge that order in a hearing. The balance of inconvenience considerations are very similar to those the Tribunal considered in determining to extend the immediate compliance order, above, because the public interest is part of the test to extend the compliance order and is also a factor in assessing the balance of inconvenience in a stay motion. The Tribunal concludes, for the reasons discussed above, that the public interest and the balance of inconvenience favour extending the order for immediate compliance and do not favour staying that order pending the appeal.

Finally, the Tribunal must consider whether the result of the application of these three tests results overall in a just decision. For all the reasons noted above, the Tribunal is satisfied that denying the motion to stay the immediate compliance order is a just decision. There is no indication from the evidence or analysis that applying the three-part test in this case would somehow lead to an injustice against the Appellant.

The Appellants requested their costs on this motion. Rule 19.1 of the Tribunal’s Rules of Practice and Procedure, Version 1 (April 1, 2016) covers this request. Costs are not appropriate in this case. The issues are novel ones in the interpretation of the Act, and there is no evidence that the Director acted frivolously, vexatiously or in bad faith in pursuing the motion to extend her order.

ORDER

The Tribunal grants the Director’s motion to extend her order for immediate compliance until the Tribunal’s hearing of this appeal is concluded with its decision, or any further order otherwise. On consent of the Director, the Tribunal excludes numbered paragraph 1 of the Director’s order from this extension. For the purposes of this motion and decision, the Tribunal interprets the Director’s order for immediate compliance to relate to future actions, activities and agreements of the Appellants.
The Tribunal denies the Appellants’ motion for a stay of the order for immediate compliance.

LICENCE APPEAL TRIBUNAL

________________________

Laurie Sanford, Vice-Chair

________________________

Gary Yee, Associate Chair

Released: July 5, 2016