Court File and Parties

COURT FILE NO.: CV-22-89165 DATE: September 12, 2023

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

KIM ELISABETH THOMPSON Plaintiff – and – CANADIAN HOME IMPROVEMENT CREDIT CORPORATION and 10392197 CANADA CORP. o/a Ontario Green Savings Defendants

COUNSEL: Ken Dunham for the Plaintiff No One for the Defendants

HEARD: August 24, 2023

JUDGMENT

Justice Sally Gomery

[1] Kim Thompson seeks default judgment against 10392197 Canada Corp. (operating as Ottawa Green Savings or OGS). She claims $988.65 in damages to reimburse her for money she paid to rent HVAC equipment promoted by OGS, $25,000 in punitive damages, and her costs on a full indemnity basis. She also seeks orders rescinding the contracts she entered with OGS, an order discharging the notices of security interest registered by OGS on her real property, and a declaration that this judgment survives any bankruptcy by OGS.

[2] For the reasons that follow, judgment is granted against OGS for $988.65 in compensatory damages, $10,000 in punitive damages, $7,636 in costs, and the non-monetary relief sought.

Background

[3] In June 2021, the plaintiff Kim Thompson signed long-term rental and financing agreements for a water heater and air conditioner with Canadian Home Improvement Credit Corporation (CHICC). Ms. Thompson had responded to an OGS ad on Facebook offering a free in-home energy assessment and related rebates. The OGS representative who called her to schedule an appointment said that OGS was associated with the Government of Ontario and that they helped homeowners apply for “Ontario Efficiency Rebates”.

[4] During her visit to Ms. Thompson’s home, an OGS representative said she would have to see her HVAC equipment to assess whether Ms. Thompson qualified for rebates. Following her inspection, the representative unexpectedly told her that she should replace her existing water heater, air conditioner, and furnace, because they were old and inefficient. The representative also told Ms. Thompson that she would qualify for $40 per month in energy rebates from the Ontario government if she obtained new HVAC equipment through OGS.

[5] Ms. Thompson accepted OGS’ advice about replacing her water heater and air conditioner. She declined to replace her furnace, which was relatively new.

[6] When OGS then presented Ms. Thompson with contracts for her signature, she did not tell Ms. Thompson that she would have to pay over $28,000 to cancel them, or advise her that the contracts allowed OGS or its delegate to place a lien or notice of security interest on her property for that amount. The representative gave Ms. Thompson only a portion of the rental contracts for her signature.

[7] After Ms. Thompson signed the rental and financing contracts, OGS scheduled the first of a series of follow up appointments to ensure the new equipment was working properly and had reduced Ms. Thompson’s utility bills. No one from OGS showed up for the appointment or got in touch with Ms. Thompson. She has in fact not heard from OGS since signing the contracts.

[8] The new HVAC equipment was installed in Ms. Thompson’s home on July 22, 2021. It did not reduce her utility bills, and the new water heater performed poorly in comparison to her old water heater. OGS failed to cancel Ms. Thompson’s previous rental contract with Reliance as they had promised. As a result, for three months, Ms. Thompson was paying rent under the CHICC contract and her Reliance contract.

[9] Ms. Thompson was unable to reach either OGS or CHICC to ask to cancel the contracts. She discovered that, on August 4, 2021, CHICC had registered two Notices of Security Interest against the title to Ms. Thompson’s residence totaling over $28,000. This far exceeded the value of the water heater and A/C unit.

[10] Ms. Thompson sued CHICC and OGS in May 2022. CHICC has filed a defence. OGS was served but did not file a defence and has been noted in default.

[11] CHICC discharged these Notices of Security Interest registered against Ms. Thompson’s property after it was sued. On the day of the trial, however, Ms. Thompson learned that the CHICC’s Notices had been replaced by Notices filed by OGS, again for about $28,000.

[12] CHICC was not put on notice of the motion for default. Ms. Thompson advised at the hearing that she was not pursuing any claim against CHICC and agreed that the action against it should be dismissed.

Compensatory damages and the voiding of contracts and security on title

[13] Based on Ms. Thompson’s evidence, OGS made false and misleading representations to her about its relationship with the Ontario government, her need for new HVAC equipment, the cost savings she would achieve by using the equipment it promoted, and her eligibility for energy rebates. It misled her about the terms of the rental and financing agreements it promoted and hid the real terms by giving Ms. Thompson only a partial copy of them.

[14] After the agreements were signed, OGS misled Ms. Thompson about the services it would provide. It did not attend for a scheduled follow-up visit or cancel her existing leases for equipment. After this action was started, it registered a security interest on her property based on contract terms that had never been disclosed to her, the amount of which grossly exceeded the reasonable cost of her cancellation of the agreements.

[15] I conclude that OGS made fraudulent misrepresentations to Ms. Thompson to induce her to sign agreements for the rental and financing of equipment that she did not actually need, and that Ms. Thompson relied on these misrepresentations. This entitles her to an order setting the contracts aside. I further find that OGS’ misrepresentations to Ms. Thompson constituted an unfair practice under s. 14 of the Consumer Protection Act, 2002, SO 2002, c 30 Sched A. This finding again entitles her to rescission of the agreements, as well as setting aside of related security interests and damages under s. 18 of the Act.

[16] The agreements that Ms. Thompson signed are therefore rescinded, and the notice of security registered by OGS on the title of Ms. Thompson’s property based on the agreements shall be discharged. Ms. Thompson is also entitled to damages from OGS equivalent to what she paid for the equipment and financing charges, which totaled $988.65.

[17] Finally, given the OGS’ fraudulent conduct, I order that Ms. Thompson’s rights to enforce this judgment shall survive OGS’ bankruptcy, pursuant to s. 178(1)(d) and (e) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3.

Punitive damages

[18] Under s. 18(11) of Act, a court may award exemplary or punitive damages to the victim of an unfair practice, in addition to any other remedy. In this case, Ms. Thompson seeks $25,000 in punitive damages. She contends that a more modest amount would not serve to deter OGS from continuing to engage in its deceptive practices.

[19] In Hoy v. Expedia Group Inc., 2022 ONSC 6650, Perell J. outlined the guiding principles for awarding punitive damages pursuant to section 18(11). Under common law, punitive damages can be awarded, exceptionally, where a defendant’s conduct is in bad faith, malicious, or high handed. Perell J. concluded that punitive damages are more widely available under the Act, due to the general objectives of punitive damages and the Act’s objectives. These objectives include (a) the restoration of the balance in the contractual relationship between merchants and consumers (because consumers have less bargaining power and are at risk of informational vulnerability in their relationship with merchants); and (b) the elimination of unfair and misleading practices that may distort the information available to consumers and prevent them from making informed choices: Hoy, at para. 173.

[20] Perell J. drew on the Supreme Court of Canada’s guidance in Richard v. Time Inc., 2012 SCC 8, [2012] 1 SCR 265. Although Richard addressed the criteria for punitive damages under Quebec’s Consumer Protection Act, the Ontario and Quebec statutes shared the same goals. In Richard, the Supreme Court directed that courts should consider evidence that the defendant’s conduct was intentional, malicious or vexatious, or that they displayed ignorance, carelessness or serious negligence with respect to their obligations and consumers' rights. The court must consider the whole of the defendant’s conduct at the time of and after the violation: Hoy, at para. 175, citing Richard at para. 180.

[21] In Hoy, Perell J. concluded that the plaintiffs’ claim for punitive damages was not legally tenable based on the allegations pleaded, or rather not pleaded. The plaintiffs alleged facts that could lead a court to conclude that the defendant, Expedia, had engaged in unfair practices. They had not, however, alleged malicious or reprehensible conduct, ignorance, carelessness or serious negligence regarding the defendant’s obligations and consumers’ rights under the Act. Justice Perell concluded that an award of punitive damages under the Act must be based on “something more” than a mere breach of the Act’s prohibition on unfair practices. As a result, the claim for punitive damages could not succeed and was struck: Hoy, at paras. 176 to 180.

[22] By contrast, in this case, I find that Ms. Thompson has proved “something more” than an unfair practice by OGS.

[23] First, I find that OGS used the pretext of providing Ms. Thompson with information about energy rebates to gain access to her home for the purpose of selling her HVAC equipment. Unsolicited door-to-door sales of HVAC equipment have been prohibited in Ontario since 2018, pursuant to s. 43.1(1) of the Act and s. 35.1 of general regulation 17/05. When Ms. Thompson responded to OGS’ Facebook advertisement, OGS’ representative misrepresented its link to the Ontario government and told Ms. Thompson that she would qualify for any energy rebates for which she was, in fact, ineligible. There is no evidence that Ms. Thompson requested OGS’ visit so that she could sign a contract for HVAC equipment or that she was even aware that OGS might recommend that her equipment be replaced. OGS’ conduct appears to have been an attempt to circumvent the ban on door-to-door sales.

[24] Second, OGS’ representative hid the terms of the contracts it had Ms. Thompson sign. It did not advise her of the grossly inflated amount she would have to pay to cancel the contracts, or that OGS and CHICC could register a lien or liens against her property to secure that amount. The representative actively hid these terms by giving Ms. Thompson only a short excerpt of the agreements, which did not contain any of the fine print about the financing terms.

[25] Third, when Ms. Thompson attempted to contact OGS and CHICC to cancel the contracts, no one returned her calls. She was ultimately forced to retain a lawyer and sue, even though OGS had clearly breached the Act. This forced her to spend money on legal fees, with no guarantee of compensation.

[26] As a whole, OGS’ conduct is reprehensible and shows contempt for the consumer protection provisions in the Act. I find that punitive damages are appropriate to discourage OGS, and other companies like it, from engaging in such predatory practices. The question is whether the amount sought by Ms. Thompson is appropriate.

[27] Ms. Thompson relies on Dornajafi v. Decauni, 2022 ONSC 6579. In Dornajafi, the plaintiffs were convinced by their long-term investment advisor to invest their retirement savings in a start-up company. The company did not in fact exist. The money advanced by the plaintiffs was misappropriated by the defendants for their own purposes. Akbarali J. concluded that the defendants were liable for civil fraud, fraudulent misrepresentation, and conversion. She also found that they had abused the trust that the plaintiffs had placed in them for their own benefit, and that their actions were high-handed, malicious and highly reprehensible. The defendants were ordered to repay the plaintiffs’ lost investment and general damages, as well as punitive damages of $75,000. Akbarali J. acknowledged that this was high but concluded that this was required as deterrence, because the defendants had also defrauded other investors: Dornajafi, at paras. 55 to 58.

[28] There are aggravating features in Dornajafi that are absent here. The fraud in Dornajafi involved an egregious breach of trust. The lead plaintiff was 71 years old and had relied on the defendant Decauni, a friend of their son, for investment advice for 15 years. The defendants’ misrepresentations continued over many months and left the plaintiffs in a perilous financial situation. In these circumstances, along with evidence of other victims of the defendants’ fraudulent practices, the court awarded punitive damages equivalent to half of the misappropriated funds.

[29] On the other hand, an objective of punitive damages under the Act is deterrence, and the damages assessed must be meaningful if they are to serve this purpose. I conclude that punitive damages of $10,000 are appropriate. Ms. Thompson’s claim for compensatory damages is modest, but what she stood to lose through OGS’ misconduct was greater, given the security registered against her property (more than $28,000). Although there is no direct evidence that OGS induced other individuals into signing agreements, it would be naïve to think that their Facebook advertisement elicited only one response. But even if I did not infer that OGS in all likelihood engaged in the same conduct with other consumers, I would conclude that significant punitive damages are required to deter OGS and others from these practices going forward.

Costs

[30] Ms. Thompson seeks full indemnity costs of $8,375.66, based on OGS’ reprehensible and fraudulent conduct.

[31] Enhanced costs should be awarded only on a clear finding of reprehensible conduct on the part of the party against whom the costs order is being made: Young v. Young, , [1993] 4 S.C.R. 3, at p. 17; Smith v. Inco Ltd., 2013 ONCA 724, [2013] O.J. No. 5449, at para. 61. However, an award of punitive of damages does not preclude an award of substantial or full indemnity costs, since the conceptual basis for each type of order is distinct: Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669, [2013] O.J. No. 5017, at paras. 160-164 and 217.

[32] I have not been provided with any cases in which full indemnity costs have been awarded in the context of an action for breach of the Act.

[33] In Dornajafi, the plaintiffs recovered full indemnity costs, based on the principles set out in NDrive, Navigation Systems v. Zhou, 2021 ONSC 7772. In NDrive, at para. 22 and 23, Healey J. noted that full indemnity costs are awarded rarely, in the face of grave misconduct including manoeuvres within the litigation to evade or delay judgment, exhausting the aggrieved party and wasting scarce judicial resources. In Dornajafi, this last element— the defendants’ misuse of court procedures — weighed heavily in the decision to grant the plaintiffs full indemnity costs.

[34] In Hampton Securities Limited v Dean, 2018 ONSC, 2018 CarswellOnt 4561, affirmed 2018 ONCA 901, the court also awarded both punitive damages and full indemnity costs, explaining, at para. 24, that “a legitimate public purpose of cost orders is to discourage inappropriate conduct. A cost award based on the principle of full indemnity does that.”

[35] While not within the context of the Act, Ottawa Community Housing Corporation v. Foustanellas (Argos Carpets), 2015 ONCA 276, addressed the issue of full indemnity costs where there is a finding of fraud. In Foustanellas, the defendant contracted with the plaintiff to supply and install carpets in residential housing units in Ottawa. Investigations later revealed that the defendant had been systematically overbilling the plaintiff and installing substandard carpets. The plaintiff sued successfully for compensatory damages for breach of contract and fraudulent and negligent misrepresentations. The Ontario Court of Appeal upheld the trial judge’s decision to award the plaintiff its full indemnity costs of $630,475.47. Although such costs should be awarded only in limited circumstances involving reprehensible conduct, the court held that the defendants had engaged in a course of fraudulent conduct involving “inordinate and blatant wrongdoing”, including the delivery of falsified invoices.

[36] I have found that OGS’ conduct was both fraudulent and in breach of the Act. Ms. Thompson is therefore entitled to a higher level of costs. I do not, however, find that this is such an exceptional case that full indemnity costs are merited. Had it defended to the lawsuit, I may have concluded otherwise.

[37] I accordingly award Ms. Thompson costs against OGS on a substantial indemnity basis. The bill of costs submitted is reasonable. She is accordingly entitled to $7,636, or 90% of her lawyer’s fees and 100% of her disbursements, from OGS, in addition to compensatory damages of $988.65, punitive damages of $10,000, and the other relief ordered.

[38] The action against CHICC is dismissed.

Justice Sally Gomery Released: September 12, 2023