COURT OF APPEAL FOR ONTARIO

CITATION: Weller v. Reliance Home Comfort Limited Partnership, 2012

ONCA 360

DATE: 20120531

DOCKET: C53910

Rosenberg, Juriansz and Rouleau JJ.A.

BETWEEN

Scott Weller

Applicant (Appellant)

and

Reliance Home Comfort Limited Partnership

Respondent (Respondent)

Martin Teplitsky and Bradley Teplitsky, for the appellant

Barry Bresner and Brendan Wong, for the respondent

Heard: January 31, 2012

On appeal from the judgment of Justice George Strathy of the Superior Court of Justice dated May 24, 2011, with reasons reported at 2011 ONSC 3148, 335 D.L.R. (4th) 690.

Rosenberg J.A.:

[1]        This appeal from the judgment of Strathy J. requires an interpretation of the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A (“the Act”), and a regulation to that Act, General, O. Reg. 17/05 (“the Regulation”). The principal issue is the right to amend the terms and conditions of an existing consumer contract, in this case, a contract for rental of a water heater. Although presented as a consumer protection issue, this particular application is part of an ongoing dispute between two competitors, the respondent Reliance Home Comfort Limited Partnership and National Energy Corporation (“National”). The application judge found that the proposed amendments to the contract comply with the applicable regulation and he dismissed the application. In the alternative, the application judge would have dismissed the application on the basis of s. 93(2) of the Act, which allows a court to order that a consumer be bound by a defective consumer agreement if it would be inequitable for the consumer not to be bound.

[2]        For the following reasons, I would dismiss the appeal.

THE FACTS

[3]        The appellant rents a water heater from the respondent pursuant to what the Act refers to as a “remote agreement”, being a consumer agreement entered into when the consumer and supplier are not present together: see the Consumer Protection Act, 2002, s. 20. The respondent wants to amend its agreement with the appellant. As the application judge pointed out, to understand this litigation it is necessary to refer to the history of litigation between the respondent and National or its proxies. It appears that National mounted a campaign to take customers from the respondent. National would have the customer sign a document appointing it as the customer’s agent to carry out the termination of the customer’s contract with the respondent. In response, the respondent instituted a policy requiring customers wishing to terminate their rental agreements to first telephone the respondent to obtain a “Removal Reference Number”. In this way, the respondent would have the opportunity to speak directly to its customer before the customer terminated the contract. A customer of the respondent and now a vice-president of National, Douglas MacGregor brought an application, at the behest of National, challenging this new policy. In 2010, Echlin J. held that MacGregor was entitled to appoint an agent to fulfill the contractual obligation of contacting the respondent. His reasons are reported at MacGregor v. Reliance Home Comfort Ltd. Partnership, 2010 ONSC 6925. Echlin J. did, however, suggest that it would be open to the respondent to amend its contract.

[4]        The respondent attempted to do so and it is that attempt that led to this litigation. The appellant is married to a vice-president of National’s parent company. In 2007, he purchased a home which contained a water heater owned by the respondent. The previous owner had terminated the agreement. The appellant received a package from the respondent that set out the terms and conditions and rates and methods of payments. The appellant has been paying the rental fees since that time. In February 2011, obviously in response to the MacGregor decision, the respondent attached the following notice to the appellant’s account:

Important Information About Your Water Heater Rental Agreement

The Terms & Conditions under which you rent your water heater will be amended to include the following paragraph as the last paragraph under the heading "Termination of the Rental Agreement": "Any return of your water heater must occur in accordance with the return processes and procedures as set by Reliance Home Comfort from time to time. Reliance Home Comfort may in its sole discretion refuse to deal with any agent or delegate you appoint to comply with any such processes and procedures." All of your other Terms & Conditions will remain unchanged except as otherwise provided. If you do not agree to this amendment, please call us at 1-866-RELIANCE prior to this amendment taking effect in order to terminate your rental. If you do not respond to this notice, this amendment will take effect automatically on April 1, 2011.

[5]        The appellant then began the application at the behest of National. In his application he sought a declaration that the proposed amendment is invalid because it does not comply with the Regulation under the Consumer Protection Act.

THE ACT AND REGULATIONS

[6]        The Regulation governing amendments to rental agreements reads, in part, as follows:

42(2) A consumer agreement mentioned in subsection (1) that provides for amendment, renewal or extension may, in addition to being amendable, renewable or extendable under section 41, be amended, renewed or extended if the following conditions are satisfied:

1. The agreement indicates what elements of the agreement the supplier may propose to amend, renew or extend and at what intervals the supplier may propose an amendment, renewal or extension.

2. The agreement gives the consumer at least one of the following alternatives to accepting the supplier's proposal to amend, renew or extend:

i. terminating the agreement, or

ii. retaining the existing agreement unchanged.

3. The agreement requires the supplier to give the consumer advance notice of a proposal to amend, renew or extend.

(3) The amendment, renewal or extension takes effect on the later of,

(a) the date specified in the notice; and

(b) the date that is 30 days after the day on which the consumer receives the notice.

(4) The amendment, renewal or extension does not retroactively affect rights and obligations acquired by the consumer before the effective date of the amendment, renewal or extension.

[7]          Section 93 of the Consumer Protection Act provides as follows:

(1) A consumer agreement is not binding on the consumer unless the agreement is made in accordance with this Act and the regulations.

(2) Despite subsection (1), a court may order that a consumer is bound by all or a portion or portions of a consumer agreement, even if the agreement has not been made in accordance with this Act or the regulations, if the court determines that it would be inequitable in the circumstances for the consumer not to be bound.

[8]        The original agreement between the appellant and respondent sets out the conditions under which the agreement may be terminated:

You may (so long as you are not in default under this agreement) terminate this agreement at any time. You agree to return the water heater to us in the same condition that it was delivered to you, normal wear and tear (reflecting its age, normal use and local water conditions and assuming that it has been maintained as required by this agreement) excepted. At your option, you may request us to remove the water heater or, at your own risk, have your own qualified contractor remove it ... If you choose to terminate this agreement or if we terminate this agreement because you have breached any term of this agreement, you will pay us our standard removal charges as follows: (i) our account closure charge (currently $200, if the water heater is one year old or less, or $40, if the water heater is over one year old, or $0 if the water heater is over 10 years old) plus (ii) if we remove the water heater, our drain and disconnect charge (currently $125) or, if the water heater is drained and disconnected by your own qualified contractor ... our water heater pick-up charge (currently $65 for a gas water heater or $125 for an electric water heater). You will pay such charges when billed by us.

REASONS OF THE APPLICATION JUDGE

[9]        The application judge dealt with a number of arguments that have not been raised on this appeal. I will summarize only those parts of the reasons that respond to the issues raised on the appeal. The application judge held that as remedial legislation, the Consumer Protection Act must be given a broad and liberal interpretation to ensure the attainment of its objects. He considered that s. 42 of the Regulation seeks to achieve a fair balance between the interests of the supplier and the consumer. It does this by preventing a supplier from forcing an amendment on an unwilling consumer. The consumer must be given the right to either terminate the agreement or retain the existing agreement, unamended. The agreement in this case complies with this requirement because the agreement imposes reasonable terms and conditions to terminate the agreement, namely that the consumer not be in default and pay the supplier’s standard removal charges. “Otherwise, consumers could seize upon an inconsequential amendment to avoid their contractual obligations” (at para. 41).

[10]     In any event, from the consumer’s point of view, the proposed amendment is innocuous. It imposes no additional burden on the consumer other than requiring the consumer to call the respondent to terminate the contract. In fact, the amendment may benefit consumers since it provides some counter-balance to the “entreaties of the ‘door-knockers’” (at para. 44). The protection of consumers is not advanced by the interpretation advanced by the appellant. The application judge also noted that this was really a dispute between two suppliers and not a real consumer protection dispute. For that reason, if he was wrong in holding that the proposed amendment and agreement complied with the Regulation, this was a case where s. 93(2) of the Act should be applied and the appellant bound by the proposed amendment. It would be inequitable in the circumstances for the appellant not to be bound by the amendment.

[11]     Given his findings, the application judge did not find it necessary to address the respondent’s argument that the application should be dismissed because it was launched for a collateral purpose.

THE POSITIONS OF THE PARTIES

[12]     The principal submission by the appellant is that the proposed amendment is invalid because it does not comply with s. 42(2)2 of the Regulation. That provision requires that an agreement cannot be amended unless the agreement gives the consumer the option to either terminate the agreement or retain the existing agreement unchanged. More specifically, since the agreement does not give the consumer the option to retain the existing agreement unchanged, the issue is whether it allows the consumer to “terminate the agreement”. The appellant submits that this must be an unconditional right to terminate; it is not open to the supplier to attach conditions or consequences, no matter how reasonable they might be.

[13]     As to s. 93(2) of the Act, the appellant submits that s. 93(2) does not apply in this case because the appellant never said that he was not bound by the agreement, only the amended agreement. Alternatively, s. 93(2) should only apply to technical oversights, not a complete failure to comply with the Regulation.

[14]     The respondent supports the application judge’s reasons.  It submits that there is nothing in the Regulation requiring that the right to terminate be without any consequences. As to the application of s. 93(2), this is a discretionary decision and is entitled to substantial deference. In any event, it would plainly be inequitable to not require that the appellant be bound by the agreement and the proposed amendment.

ANALYSIS

Interpretation of the Regulation

[15]     The main objective of consumer protection legislation such as the Consumer Protection Act is to protect consumers: see Richard v. Time Inc., 2012 SCC 8, at para. 50. Thus, while this particular litigation in reality pits two suppliers against each other, the Act and Regulation must be interpreted in a manner that furthers the consumer protection objective. The Act and Regulation contain special protections for consumers who are bound by remote agreements. Among those protections is the protection against unfair unilateral amendments of the agreement set out in s. 42 of the Regulation. Central to this protection is s. 42(2)2, which requires the supplier to give the consumer the option to either terminate the agreement or retain the existing agreement unchanged as alternatives to accepting the proposed amendment. As indicated, this agreement does not give the consumer the right to retain the existing agreement unchanged. The issue is therefore whether the agreement allows the consumer to terminate the agreement.

[16]     I agree with the appellant that the right to terminate must be unconditional. An agreement that attaches conditions to the right to terminate does not provide the consumer with a true alternative to accepting the amendment. Depending upon the conditions for termination, the consumer could effectively be coerced into accepting the proposed amendment. Such an interpretation would be inconsistent with the consumer protection objective of the legislation. It follows that I agree with the appellant that the application judge erred in holding that the agreement complied with s. 42(2)2 because the conditions for termination were reasonable. Allowing the supplier to attach reasonable conditions would add a level of uncertainty. The consumer would often not know for sure whether or not he or she was required to comply with the conditions imposed by the agreement as the cost of opting out of the proposed amendment. Such an interpretation would encourage litigation and undermine the consumer protection objectives of the provisions.

[17]     The agreement in this case attaches at least two conditions to the consumer’s ability to terminate the contract: (1) the consumer must not be in default under the agreement; and (2) the consumer must pay the standard removal charges. These conditions may well be reasonable but in the result the right to terminate is not unconditional. The agreement therefore does not comply with s. 42 of the Regulation and was not binding on the consumer.

[18]     This holding, however, does not leave the supplier without remedies. Section 42(4) of the Regulation provides that any amendment does not retroactively affect “rights and obligations” acquired by the consumer before the effective date of the amendment. The supplier can still pursue the consumer in court for obligations previously incurred such as unpaid rental fees.

Application of s. 93(2) of the Act

[19]     However, I would not interfere with the application judge’s holding that this is a proper case to invoke the proviso in s. 93(2) of the Act. I agree with the application judge that s. 93(2) applies even though the appellant was not attempting to resile from the entire agreement, only the proposed amendment. There is nothing in s. 93 to so limit the reach of the provision. To the contrary, s. 93(2) refers to a court ordering that the consumer be bound by “all or a portion or portions of a consumer agreement”. This wording is broad enough to include a proposed amendment to the agreement. Similarly, there is nothing in s. 93(2) that limits its reach to technical oversights. The test for application of the proviso is not the nature of the defective compliance but whether it would be inequitable for the consumer not to be bound. Obviously, in deciding whether it would be inequitable, the court will take into account the nature of the non-compliance, and the more substantial the deviation from the legislative scheme the more likely it will be that the court will find it would not be inequitable for the consumer not to be bound to the agreement. I therefore turn to whether the application judge erred in finding that it would be inequitable for the appellant not to be bound to his agreement with the respondent.

[20]     Section 93(2) involves the exercise of discretion and is entitled to deference on review by this court. The application judge held that it would be inequitable in the circumstances for the consumer not to be bound by the defective agreement. In reaching that conclusion, he took into account that no consumer, including the appellant, would be prejudiced by the proposed amendment and that the application had been brought for a collateral purpose. These were proper considerations and I can see no basis for interfering with the application judge’s disposition.

DISPOSITION

[21]     Accordingly, I would dismiss the appeal with costs fixed at $7,500 inclusive of disbursements and H.S.T.

          Signed:        “M. Rosenberg J.A.”

                             “I agree R. G. Juriansz J.A.”

                             “I agree Paul Rouleau J.A.”

Released: “MR” May 31, 2012