Difference between revisions of "Consumer Protection from Deceptive and Unconscionable Acts (11:IV)"

Revision as of 01:20, 15 December 2021

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on August 5, 2021.

A. Does the Act Govern the Contract?

For a contract to fall under the Business Practices and Consumer Protection Act [BPCPA], the contract must be:

A consumer transaction, between
A consumer and
A supplier, as defined by s 1.

Each of the three criteria must be fulfilled before relying on the BPCPA.

The only exceptions to the applicability of the BPCPA are those listed under s 2 of the BPCPA and include credit reporting and debt collections practices. These sections apply regardless of whether the transaction or matter involves a consumer or not. Additionally, s 2(2) outlines the limited application of the BPCPA to contracts involving the sale, lease, mortgage of, or charge (such as a lien or security interest) on land or a chattel real.

1. Consumer Transaction

A consumer transaction is a dealing that:

a) Involves a supply of goods, services, or real property by a supplier to a consumer for primarily personal, family or household purposes, or
b) Is a solicitation, offer, advertisement or promotion by a supplier with respect to the above-mentioned types of transactions.

Except in Parts 4 and 5 of the BPCPA, a consumer transaction includes a solicitation of a consumer by a supplier for a contribution of money or other property by the consumer.

The BPCPA does not apply to securities as defined by the Securities Act, RSBC 1996, c 418 or contracts of insurance under the Insurance Act, RSBC 1996, c 226.

2. Consumer

Generally, the consumer may reside inside or outside BC. In some circumstances, the BPCPA will only apply where the consumer resides in BC. A consumer is an individual, other than a supplier, who participates in a consumer transaction for primarily personal, family, or household purposes. The definition of consumer (s 1) does not include a guarantor of the consumer who actually participated in the transaction.

3. Supplier

A supplier means a person, whether in BC or not, who in the course of business participates in a consumer transaction by:

a) Supplying goods, services, or real property to a consumer; or
b) Soliciting, offering, advertising, or promoting with respect to a transaction referred to in paragraph (a) of the definition of “consumer transaction”.

A supplier also includes the successor to, or assignee of, any rights or obligations of the supplier and, except in Parts 3 to 5 of the BPCPA, includes a person who solicits a consumer for a contribution of money or other property.

The definition of supplier in s 1 requires that the transaction occur “in the course of business”. Thus, private sales and transactions made by people who are not in the business of dealing with such goods are generally exempt from the BPCPA. If a consumer buys a used car advertised in a newspaper ad placed by a private person, the consumer will likely be restricted to the remedies found in the SGA (but keep in mind certain limitations or lower standards for used goods) or at common law. Some remedies in the SGA are also available only when goods are sold in the ordinary course of business (e.g. s 18 SGA).

Several suppliers can be involved in one transaction. Therefore, in order for the consumer to sue, they need not have a contract with the supplier who made a deceptive representation or committed an unconscionable act. For example, a consumer buys a car from a dealer and the contract is assigned to a financial institution. The vendor would be a supplier, as would the finance company attempting to collect on the contract (s 15). Recall, as well, that the definition of a supplier under s 1 includes successors and assignees. Since privity of contract is not necessary, each of the suppliers would be liable under the BPCPA if they engaged in deceptive or unconscionable practices.

According to s 6(2), advertisers who, on behalf of another supplier, publish a deceptive or misleading advertisement are not liable for damages, court actions, or offences, if they did not know and had no reason to suspect that its publication would contravene s 5. If, however, they knew or ought to have known that the advertisement had the capability, tendency, or effect of deceiving or misleading, then they too may be liable as a supplier under the BPCPA.

B. Defining a “Deceptive or Unconscionable Act or Practice”

For the consumer to have a remedy, the supplier’s conduct must involve deceptive or unconscionable acts or practices.

Under s 4, the BPCPA describes “deceptive” acts or practices. Under s 8, the BPCPA describes “unconscionable” acts or practices.

1. Deceptive Acts

A deceptive act or practice is a representation (whether oral, written, visual, descriptive, or other) or any conduct by the supplier that has the capacity, tendency, or effect of deceiving or misleading a consumer or guarantor. An extensive but non-exhaustive list of deceptive practices is set out in s 4(3).

If a certain practice is not listed in s 4(3), it may still be considered deceptive. The term “deceptive act or practice” was also found in BC’s old Trade Practice Act, which was repealed by the BPCPA in 2004. Thus, looking back at the old Trade Practice Act jurisprudence can shed light on the meaning of “deceptive act or practice.”

The term “deceptive practice” was interpreted by the court in British Columbia (Director of Trade Practices) v Household Finance Corp, [1976] 3 WWR 731, [1976] BCJ No 1316 (SC) at paras 19-23 [Household Finance] and later affirmed by the BC Court of Appeal. Household Finance suggests that a practice is deceptive for purposes of the BPCPA if it causes the consumer to commit an error of judgment. However, a practice of non-disclosure is not necessarily “a deceptive practice”

A plaintiff consumer relying on the supplier’s deceptive practice for an action should show:

a) That they were actually deceived by the deceptive practice;

b) That they relied on the deception to the extent that an error of judgment resulted from the deception; and

c) That the error of judgment caused loss.

To enforce the BPCPA against a supplier, the Director need only show that a deceptive practice would tend to cause consumers to make an error in judgment but does not need to show that any consumer made an error in judgment.

The BPCPA, similarly to the Trade Practices Act, should be interpreted as imposing “a high standard of candour, especially on suppliers who choose to commend their wares” (Rushak v Henneken, [1991] 6 WWR 596, [1991] BCJ No 2692 (CA) at para 17 [Rushak]).

Where there is an embellishing endorsement of the goods, and the supplier knows the goods may be defective in an important respect, these facts must be disclosed (Rushak).

For the consumer to set aside the consumer transaction on the basis that the supplier engaged in a deceptive act or practice, the representation must be material – what is material depends on the individual circumstances of the transaction (Rushak).

The court may draw the conclusion that a practice is deceptive on the basis of vague contractual language in circumstances where that language allowed the supplier to claim that additional work was not part of the original contract: see British Columbia (Director of Trade Practices) v Van City Construction Ltd, [1999] BCJ No 2033 (SC) (QL).

2. Unconscionable Acts

Clear prohibitions are now set out under ss 7 – 9 of the BPCPA. Unconscionable acts involve high-pressure tactics or demanding consideration far in excess of the market value, and may occur before, during or after the consumer transaction. Under s 10(1), if an unconscionable act or practice occurred in respect of a consumer transaction, that consumer transaction is not binding on the consumer or guarantor. The court will look at the particular vulnerabilities of the consumer, such as mental infirmity, ignorance, illiteracy, age or inability to understand the character, nature or language of the consumer transaction, which will trigger the reviewability of that transaction in the consumer’s mind. Both the common law and statutes hold the supplier to a stringent standard, demanding that they not act unreasonably in order to protect their own interests.

Under s 9(2), if it is alleged that a supplier committed or engaged in an unconscionable act or practice, the burden of proof is on the supplier to show that the unconscionable act or practice was not committed.

NOTE: As above, s 8(3) sets out a list of circumstances that the court must consider when determining whether a practice is unconscionable. Again, this list is not comprehensive, as the court must consider all of the surrounding circumstances of which the supplier knew or ought to have known at the time of the contract.

C. Remedies and Sanctions

1. Damages Recoverable by Consumers

Under s 171 of the BPCPA, a consumer may commence a civil action seeking damages for loss due to a deceptive or unconscionable act or practice. As with other civil actions, punitive damages or restitution may also be available. Small Claims Court may be used if the claim does not exceed $35,000 (Small Claims Rules, BC Reg 261/93, Rule 1(4)).

2. Transaction Unenforceable by Supplier

Under s 10(1), where there is an unconscionable act or practice in a consumer transaction, that transaction is unenforceable by the supplier.

3. Injunction, Declaration and Class Action

Under s 172, any person, whether or not that person has a special interest in or is affected by a consumer transaction, may bring an action seeking declaratory or injunctive relief. This involves seeking to have the court declare an act to be deceptive or unconscionable and to have the court grant an injunction restraining the supplier from engaging further in such acts. Under s 172(2) the Director may bring an action on behalf of consumers generally or a designated class of consumers.

The BPCPA stipulates that while the Provincial Court has jurisdiction for civil actions under s 171, actions under s 172 must be brought in Supreme Court.

For an example of a class action suit dealing with the BPCPA, see Dahl v Royal Bank of Canada, 2006 BCCA 369. Credit card debtors brought a class action suit against the Royal Bank of Canada, the Canadian Imperial Bank of Commerce, and the Bank of Montreal. In the plaintiffs’ Statement of Claim, they asserted that the defendants failed to disclose the true cost of borrowing by providing the transaction dates for cash advances on their monthly statements rather than the posting dates (the dates the money was actually advanced), allowing more interest to be charged; the court, however, ultimately rejected this argument.

In any action for a permanent injunction under s 172(1)(b), the court may restore to any interested person any property or money acquired by deception or unconscionable acts or practices by the supplier (s 172(3)(a)) and may require the supplier to advertise to the public in a way that will assure prompt and reasonable communication to consumers (s 172(3)(c)).

4. Supplier Found Guilty of an Offence Under the BPCPA

Under s 189 is a list of offences punishable by both fines and imprisonment, which may be sought by the Crown against a party found in breach of the BPCPA. Under s 190, an individual who commits an offence under the BPCPA is liable to a fine of not more than $10,000, or to imprisonment for not more than 12 months, or to both.

D. Limitation Period

Under s 193, no prosecution under the BPCPA may be started more than two years after the date on which the subject matter of the proceeding arose.

Note that s 193 does not apply to civil proceedings. The limitations period in civil proceedings will depend on the nature of the claim and the time period allowed by the Limitation Act; see 11:IX E. Determine the Limitation Period for Making a Claim.

E. Powers of the Director

Consumer Protection BC [CPBC] is responsible for the administration and enforcement of the BPCPA and is also empowered by another piece of legislation: the Business Practices and Consumer Protection Authority Act, SBC 2004, c 3. Part 10 of the BPCPA contains all inspecting and enforcement powers of CPBC, its inspectors, and the Director. The Director has the power to:

a) Use the same powers that the Supreme Court has during trials of civil action for the purposes of an inspection, to summon and enforce the attendance of witnesses, compel witnesses to give evidence under oath or in any other manner, and to produce records;
b) Institute proceedings or assume the conduct of proceedings on behalf of a consumer;
c) Make an order (called a “freeze” order) against assets of a person who is being investigated (s 159). This order can also be attached to property being held in trust for a person under investigation. Thus, although CPBC is not empowered to actually seize money, it is able to freeze accounts, which can be a way to encourage supplies to transfer funds to consumers;
d) Refrain from bringing an action against a supplier and accept instead a written undertaking under s 154 of the BPCPA. This undertaking usually takes the form of a formal agreement between the Director and supplier and may involve consumer redress. It is probably one of the most effective remedies under the BPCPA because it avoids both the time and expense of court proceedings;
e) Issue a compliance order under s 155 of the BPCPA where compliance is mandatory. The Director can order restitution and compensation to the consumer with this function (s 155(4)) without having to go through court proceedings. If a person fails to comply with a compliance order, they are committing an offence under s 189(5) and could face a fine of not more than $10,000, imprisonment for not more than 12 months, or both;
f) File an undertaking, compliance order, or a direct sales prohibition order with the Supreme Court. Doing so would mean that the undertaking or order is deemed to be a court order, and thus it will be enforceable as such (s 157). This can be useful in encouraging resolution amongst parties.
g) Seek a declaration and/or injunctive relief on behalf of a consumer, or a class of consumers, and make their applications ex parte (s 172); and
h) Impose an administrative penalty under s 164.

While there are a number of actions that CPBC is empowered to take, including pursuing civil and quasi-criminal enforcement, it is much more likely that CPBC will be involved in handling complaints and in investigations. Complaints can be initiated on Consumer Protection BC’s website: https://www.consumerprotectionbc.ca/consumer-help/start-a-complaint/.

F. Deceptive Practices Under the Competition Act

In addition to the protections under the BPCPA, the Competition Act, RSC 1985, c C-34, proscribes various types of deceptive practices. Some common ones are discussed below:

1. More than One Price Tag (“Double Ticketing”)

Shopkeepers often mark goods for sale with more than one price tag. Under the Competition Act, RSC 1985, c C-34, it is an offence for the store to charge anything but the lowest price unless the lower price has been crossed out or the new tag covers the older tag (s 54). The older tag does not have to be unreadable; a line over it or a new tag slightly covering it is fine. However, a cashier may not cross out the older price at the cashier stand. Note that the consumer has no independent right of action. The Competition Bureau, on its website, indicates that “prosecutions under this section have rarely occurred”.

2. Advertising a Sale Price

If a business advertises a sale price, it must charge that price throughout the sale period (Competition Act s 74.05). However, the advertiser may be relieved of this obligation if (1) the price was advertised in error and if the advertisement indicated prices were subject to error, or (2) the advertisement is immediately followed by a correction. Advertisers who violate this section may be subject to an administrative penalty (s 74.1).

3. Bait and Switch

If a business advertises a sale, it must stock a reasonable quantity of the item (Competition Act s 74.04(2)). The bait and switch tactic occurs when a business advertises an item at a bargain price to attract customers but, having no intention of selling the item, does not adequately stock it. Rather, the business intends to use sale pressure to get customers to buy other, higher-priced items.

If the business does not have adequate stock of a sale item, it must issue rain cheques. Rain cheques are not required, however, if the advertisement states “while quantities last”.

Advertisers who violate this section may be subject to an administrative penalty (s 74.1). A business may avoid penalties stemming from bait and switch tactics if it attempted to supply more of an item than it was able to, if demand for the item was greater than expected, or if the advertisement stated that the sale price was good “while supplies last”.

G. False or Misleading Advertising

All advertising, whether on radio or television, in a newspaper or flyer or posted in a store, is subject to federal and provincial laws that prevent businesses from making false claims that may mislead consumers. The BPCPA’s prohibition against deceptive acts and practices extends to advertising, as a representation made before a sale (s 4(2)).

Purchasers have a right to know what they are buying. If a person asks for information and the sales agent volunteers it, the information must be correct and not deceptive. However, not everything a salesperson says is a term of the contract; some comments are mere puffery. Puffery is the sort of comment that is made to promote a product. Such comments are statements of opinion rather than misrepresentations of fact and are not treated as part of the contract (see 11:III A. Identifying and Classifying the Terms of a Contract).

An example of puffery is “It’s a great little car.”

An example of a statement of fact is “It's a 1994 Dodge.”

What would otherwise be puffery may constitute a deceptive act or practice under the BPCPA. In circumstances where a supplier provides a laudatory description of a defective item of which they have specific factual knowledge and of which the potential buyer is wholly unaware, the description is not mere puffery, but rather a deceptive act. See Rushak, above.

For credit advertising, pay particular attention to ss 59 - 64 of the BPCPA. When there is misrepresentation, a consumer may also have a cause of action at common law.

1. The Common Law

Despite the breadth of the BPCPA, it does not provide remedies for all contractual situations. Before commercial legislation (SGA) or consumer protection acts (BPCPA), the common law provided remedies for misrepresentation.

a) Fraudulent Misrepresentation

Fraudulent misrepresentation occurs when the vendor knowingly makes a false statement of fact that is material to the contract and the statement serves as an inducement to enter the contract. The buyer may be awarded the common law remedy of rescission and can also sue for damages in the tort of deceit. Breaches of contract damages, such as the expectation of profit, are not available, because a party cannot claim for the contract to be rescinded and, at the same time claim that the contract exists for the purposes of claiming damages.

b) Innocent Misrepresentation

An innocent misrepresentation arises when a representation of fact is false, material to the contract, and the buyer is induced to enter the contract by the representation. Unlike fraudulent misrepresentation, though the representation is not known to be false. The remedy, which is an equitable remedy, is rescission, which attempts to put the parties back in the position they were in before the contract.

A misrepresentation might also be considered to be a term of the contract or as a term in a collateral contract. In this situation, the client can sue for damages if the misrepresentation ends up being untrue.

For the remedy of rescission, there could be several possible bars:

Third party rights have arisen;
An undue delay occurred since the misrepresentation;
The contract has been executed (not an absolute bar);
The contract has been affirmed by the aggrieved party; or
It is impossible for the courts to undo the contract.

c) Negligent Misrepresentation

Negligent misrepresentation operates in the same way as innocent misrepresentation, but it arises when the representation is made negligently as opposed to in a completely innocent manner. As with innocent misrepresentation, the remedy is rescission. Hedley Byrne & Co Ltd v Heller and Partners Ltd, [1961] 3 All ER 891 (HL) is an example of a case involving negligent misrepresentation.