Court File and Parties

COURT FILE NO.: CV-16-2517-SR DATE: 2021 02 23

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

MDG Newmarket Inc. o/a Ontario Energy Group, Plaintiff Elliot Birnboim and Michael Crampton, for the Plaintiff

- and -

Pierre Pascal, Defendant Jyoti Chaudhry, for the Defendant

HEARD: February 22, 2021

REASONS FOR DECISION

LEMAY J

[1] This is a motion for summary judgment brought by the Plaintiff (“MDG”) to enforce minutes of settlement signed by the Defendant (“Mr. Pascal”) back in October of 2014. These minutes of settlement relate to an underlying rental contract entered into on February 14th, 2014 for a furnace and a boiler. The February 14th, 2014 agreement incorporated MDG’s “standard terms”.

[2] Mr. Pascal has brought a counterclaim alleging, inter alia, that the minutes of settlement (and any other alleged agreement between him and MDG) should be set aside as being void. Mr. Pascal also claims negligent and/or fraudulent misrepresentation, unjust enrichment and “statutory breaches”. The alleged statutory breaches include claims of breaches of the Consumer Protection Act 2002, S.O. 2002 C. 30, Sched. A.

[3] There is an underlying class action that has been brought against MDG and other parties. That underlying class action was certified by Raikes J. (see 2019 ONSC 6432), and the certification appears to cover a number of issues relating to the enforceability of other agreements that are just like the February 14th, 2014 contract that Mr. Pascal entered into.

[4] As a result of the underlying class action, I have determined that MDG’s action should be temporarily stayed. Further, this action should be referred to Thomas R.S.J., the Regional Senior Judge in the Southwest Region, for a determination as to whether MDG’s action against Mr. Pascal is more appropriately within the Southwest Region’s jurisdiction, given its ties to the class action currently before Raikes J. To assist in this determination, I will also provide Raikes J. with a copy of these reasons.

Background

a) The Parties

[5] The Plaintiff, MDG Newmarket Inc. o/a Ontario Energy Group is a company that was in the business of providing water heaters and other HVAC equipment to householders throughout Ontario. According to MDG’s factum “[s]ince 2016, [MDG] has not been installing new equipment and solely concentrated on managing its existing book of business.”

[6] The Defendant, Pierre Pascal, does not speak or write English very well, if at all. He is a relatively recent immigrant to Canada and his primary language is Haitian Creole. At the time the contract was entered into, Mr. Pascal and his wife were the owners of a property in Welland, Ontario.

[7] Mr. Pascal moved into the house in Welland with his wife and two teenaged children in January of 2014. They had recently immigrated from Haiti and the rest of the family also spoke Haitian Creole, which I understand is a language that has its roots in the French language.

b) The Contract and the Positions of the Parties

[8] The original contract in this matter was signed on February 14th, 2014. Shortly after, MDG representatives installed new equipment at the Pascal residence. It was not clear on the evidence before me who signed the original agreement. Mr. Pascal and his family have claimed that he did not sign it and that it was signed by either his wife or his nineteen year old son.

[9] The equipment was delivered to Mr. Pascal’s home and installed approximately a week later. Shortly thereafter, Mr. Pascal was contacted by someone who advised that there was an additional cost to the equipment. Mr. Pascal asked for his old equipment back but was told that it would cost $4,000.00 to remove the equipment that MDG had installed and that his old equipment would not be returned.

[10] Mr. Pascal then went to a legal aid clinic for assistance. Ultimately, a legal aid lawyer assisted Mr. Pascal in negotiating a reduction in his monthly payments to MDG. These terms were encapsulated in minutes of settlement that were signed in October of 2014 by the President of MDG and by Mr. Pascal.

[11] The minutes of settlement in this case include an acknowledgement that Mr. Pascal has received independent legal advice and a provision allowing them to be executed in counterpoints. The other provisions of the minutes of settlement are a reduction in the monthly cost payable by Mr. Pascal, the payment of an Enbridge account in the sum of $781.00 on Mr. Pascal’s behalf by MDG and a statement that “the remaining terms of the Contract are unchanged and remain in force.”

[12] Mr. Pascal paid the monies on the contract for approximately a year after the minutes of settlement were signed. These amounts were collected through Enbridge. In the fall of 2015, Mr. Pascal registered a complaint with Enbridge, which resulted in the refund of certain monies that had been paid on his Enbridge bill.

[13] Mr. Pascal has not made any payments on the agreement with MDG since the fall of 2016. MDG brought this action to enforce payments under the minutes of settlement. MDG originally noted Mr. Pascal in default. That noting in default was set aside and a defence and counterclaim were entered.

[14] On this motion, MDG seeks a declaration that the minutes of settlement are valid and binding. The Affidavits that MDG has filed outline how much money MDG is seeking, but do not set out the basis for the calculations that MDG has made and I have struggled to arrive at the same calculation that MDG made.

c) The Class Action

[15] As I noted at the beginning of these reasons, a class action has been certified relating to MDG’s contracts. There are in excess of 12,000 of these contracts province-wide, and the class action is designed to deal with a number of issues in common.

[16] I do not have the Certification Order in the materials before me. In addition, although the Defendant was seeking a stay of the Plaintiff’s claim and his counter-claim pending the outcome of the class action, neither party provided me with the certification decision of Raikes J. I was left to find that decision on my own, but was able to find it prior to the hearing of this motion so that both counsel were advised that I was aware of its contents and would take them into account in making my decision.

[17] For the purposes of my determination on this motion, the following issues from the class action appear to be relevant:

a) Potential non-compliance of MDG’s agreements with the Consumer Protection Act, 2002. b) Potential non-compliance of MDG’s sales and marketing materials with the Consumer Protection Act, 2002. c) Potential violations of the Competition Act R.S.C. 1985 c. C. 34. d) Questions relating to whether MDG has been unjustly enriched and/or whether the contract is unconscionable. e) Questions relating to what remedies should be available to the class members if breaches are found.

[18] These are all questions that I might have to grapple with if I interpreted the minutes of settlement. It is possible that there are other issues in the Certification Order that may also be relevant to the issues to be resolved in this action. Given my disposition of the matter, it is not necessary for me to review the Certification Order at this stage.

Should This Action be Stayed?

[19] Yes, at least on a temporary basis.

[20] I reach that conclusion for four reasons as follows:

a) Misrepresentations in the February 14th, 2014 contract could be grounds to set aside the parties’ subsequent settlement. b) Mr. Pascal appears to clearly fit within the definition of the class in this case. c) Raikes J. has already stayed a number of small claims court matters in this case. d) There is a live concern that a determination by me of issues in this case could produce a decision that is inconsistent with the decisions being made in the class action.

[21] I will deal with each issue in turn.

a) Misrepresentations in the February 14th, 2014 Contract

[22] As I have noted at paragraph 17, there are a number of issues in the class action relating to MDG’s contracts that could be relevant to the issues before me. These issues include some of the same issues that are raised in Mr. Pascal’s counterclaim.

[23] I start with the claims of misrepresentation and their potential effect on the minutes of settlement. In a recent Court of Appeal decision that was referenced by the parties, Deschenes v. Lalonde 2020 ONCA 304, the Court of Appeal was prepared to set aside a settlement agreement between the parties on the basis of innocent misrepresentation. It is generally easier to set aside a settlement agreement on the basis of negligent or fraudulent misrepresentation.

[24] In this case, depending on the outcome of the issues in the class action, it is quite possible that a Court could apply one of the branches of misrepresentation to the terms of the Minutes of Settlement and find that the minutes were unenforceable because of the unenforceability of the underlying contract. It is also possible that the provisions of the Consumer Protection Act referenced in the decision of Raikes J. may apply to the minutes of settlement in this case or that the underlying contract could be found to be unconscionable.

[25] I hasten to add that I am not concluding that a Court will reach either of these conclusions. I am just observing that these are possible outcomes that could be reached.

[26] I am fortified in my conclusion that these potential outcomes are available by the fact that the minutes of settlement that MDG is seeking to enforce state that “the remaining terms of the Contract are unchanged and remain in force.” If, on the class action, the Court finds that various provisions of the original contract are unenforceable, then it would seem to me that the minutes of settlement could very well also be unenforceable for the same reasons.

[27] This question of enforceability of the original agreement is a key issue in the class action proceeding. The agreement is incorporated by reference into the minutes of settlement. Therefore, it would seem to me that the enforceability of the agreement would be a necessary first question for me to answer on this motion. Further, if the agreement is found to be unenforceable, then the reasons why it is unenforceable will inform the interpretation of the minutes of settlement.

[28] This observation also addresses the argument that Mr. Birnboim advanced about independent legal advice. Mr. Birnboim argued, in essence, that the fact that Mr. Pascal obtained independent legal advice cured any problems with the original contract. I am not sure that this argument is correct. However, this argument can be better considered with the reasons (if any) as to why MDG’s contracts were unenforceable, if they are found to be unenforceable. Of course, if the original contracts were enforceable, then the issue does not arise.

[29] Either way, however, the resolution of this dispute could very well benefit from the resolution of the issues in the class action.

b) The Definition of the Class

[30] As I have noted above, neither side has provided me with the Certification Order in this case. However, by reviewing the decision of Raikes J., and particularly paragraphs 23 and 62 therein, I believe that the class is defined as follows:

“All persons in Ontario who are or were at any time party to a lease agreement of equipment with MDG Newmarket Inc. O/A Ontario Energy Group entered into between May 1, 2012 and the date of certification.

“Equipment” means furnaces, air conditioners, water heaters, water softeners, water purification systems, boilers, air cleaners, humidifiers, chimney liners, filters, and other equipment or services offered under the standard-form lease agreements.”

[31] It is clear that Mr. Pascal, as a purchaser of services from the Plaintiff, falls within the class definition.

[32] As a result, the issues relating to Mr. Pascal’s February 14th, 2014 contract are going to be adjudicated as part of the class action. As I have noted above, misrepresentations in the negotiation of that contract or other problems with that contract could be grounds to set aside both the contract and the subsequent minutes of settlement.

[33] The problem is that, at this point, I do not know the extent (if any) of the misrepresentations or other issues that exist with MDG’s contracts. These are live issues that remain to be resolved in the class action.

c) Other Small Claims Court Actions Have Been Stayed

[34] In his reasons on the certification motion, Raikes J. stated (at paras 155-157):

[155] No one has suggested that there is an alternate vehicle for resolution of the claims apart from litigation. There is not, for example, an arbitration process under the agreements.

[156] I have earlier stayed a number of Small Claims Court actions pending the outcome of the certification motion at the request of the defendants. Those individuals may elect to opt out of the class and pursue those claims. By the same token, they may choose to await the outcome of the class proceeding where they would have no exposure to adverse costs or to the cost of their own legal representation.

[157] I do not see hundreds if not thousands of individual Small Claims Court actions as a preferable procedure. Further, there is no suggestion by the defendants that a test case would be agreeable, nor that joinder would be a viable and preferable procedure.

[35] I was also advised by Mr. Pascal’s counsel that she thought that at least the counterclaim had been stayed. The only evidence I have to support counsel’s assertion is a letter that appears to have been written by Mr. Birnboim on July 12th, 2019 proposing that Raikes J. hear a motion to stay this matter and other ones, consistent with his previous decisions. Although this letter was not part of an Affidavit, Mr. Birnboim did not seem to challenge its authenticity.

[36] I do not know what the result of that correspondence was. However, the correspondence does raise the question of whether this action should be stayed. Counsel for Mr. Pascal advised me that she thought that the action had been stayed until she received notice of this motion.

[37] I cannot be sure precisely what is happening in terms of the relationship between this case and the larger underlying issues in the class action. This lack of clear information is a strong reason to grant at least an interim stay until the issues are clarified.

d) Inconsistent Reasons

[38] I also have concerns that a decision by me on the issues in this case could result in a decision that is inconsistent with the class action. This concern is of particular significance since deciding this motion may require consideration of the February 14th, 2014 agreement. That agreement is clearly covered by the scope of the issues in the class action.

[39] This concern could arise in at least three ways that I can see:

a) I could make inconsistent findings on unconscionability; b) I could make inconsistent findings on the applicability of the Consumer Protection Act 2002 or other statutes to this contract; c) I could make inconsistent findings about the relevant remedies that might be available.

[40] As a result, the risk of inconsistent reasons is also a reason for granting at least a temporary stay to determine the status of the class action and whether this matter more properly belongs within the ambit of the class action.

e) Conclusion

[41] Given the lengthy time that this dispute has been before the Courts, and the relatively modest amounts in dispute, it is difficult to see how granting a temporary stay would be prejudicial to the Plaintiff.

[42] Certainly, any prejudicial effect that accrued as a result of a temporary stay is outweighed by the possibility that proceeding to adjudicate this motion could result in inconsistent findings. Further, the administration of justice is not served by having two judges considering the same set of issues arising from the same factual framework.

[43] As a result, I am ordering a stay of proceedings on terms in this matter. I now turn to those terms.

The Terms of the Stay- Process and Substance

[44] This action was commenced in the Central West Region. I have no authority to transfer it to the Southwest Region. Transfer requests are either granted (or denied) by the Regional Senior Judge (or designate) in the receiving Region. In this case, that would be Thomas R.S.J.

[45] I do, however, have the jurisdiction to initiate a motion for a transfer by advising Thomas R.S.J. of the facts as set out above, and of my view that it is possible that the issues in this case may be issues in common with the class proceeding that is currently before Raikes J. I am therefore providing a copy of this decision to both Thomas R.S.J. and Raikes J. for their information.

[46] However, at this stage, I should not permanently stay the Plaintiff’s action. Instead, a temporary stay should be issued on the following terms:

a) If Thomas R.S.J. and/or Raikes J. determine that this matter should be considered in the Southwest Region, then the stay will be the subject of further discussion before a designated judge in that Region. b) If Thomas R.S.J. and/or Raikes J. determine that this matter does not need to be considered in the Southwest Region and/or as part of the class action, then the matter is to be returned to me. I will then lift the stay and consider the merits of the motion.

[47] This approach has the advantage of ensuring that inconsistent decisions are not made by the Court on common issues while ensuring that this matter is dealt with as efficiently as possible.

Conclusion, Costs and Order

[48] For the foregoing reasons, I am ordering as follows:

a) The action in Court File No. CV-16-2517-SR is temporarily stayed, pending the completion of the other steps set out below. b) The matter is to be referred to Thomas R.S.J. in the Southwest Region for a determination as to whether it more appropriately belongs in that region and/or as part of the class action proceedings before Raikes J. c) If the matter is not transferred to the Southwest Region and/or stayed by Thomas R.S.J. and/or Raikes J., then it is to return to me for adjudication on the merits.

[49] This brings me to the subject of costs. As this is an interim step in this proceeding and I cannot yet make a determination as to the reasonableness of either party’s conduct, it is not yet appropriate to consider costs. As a result, costs of this matter are reserved to the judge who addresses the merits or as otherwise ordered by the next Judge considering the matter.

LEMAY J

Released: February 23, 2021