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YOUR LEGAL RIGHTS

For ordinary causes our contentious system has great merit as a means of getting at the truth. But it is a denial of justice in small causes to drive litigants to employ lawyers, and it is a shame to drive them to legal aid societies to get as a charity what the state should give as a right.

— Roscoe Pound, “The Administration of Justice in the Modern City,” Harvard Law Review, Vol. 26 (1913), pp. 302–08

A Consumer Bill of Rights

In his March 15, 1962, speech to the United States Congress, President John F. Kennedy listed four basic consumer rights — to safety, to be informed, to choose, and to be heard. By 1985, the United Nations had expanded those four into a Consumer Bill of Rights, which includes the right to:

 safety

 be informed

 choose

 be heard

 satisfaction of basic needs

 redress

 consumer education

 a healthy environment

Jim Guest, the President of Consumers Union and publisher of Consumer Reports magazine, believes there should be a ninth consumer right: the right to privacy. He had this to say at the fiftieth anniversary of the Consumer Federation of America Assembly on March 12, 2012:

Who could have predicted that we’d have a tool like the Internet that provides so much opportunity, but at the same time, exposes each and every one of us to having our most personal information put at risk? Fundamentally, when I talk about consumer privacy, I’m talking about trust. When you hand over your private information to an online company, you’re trusting that your information will be treated fairly and responsibly.

Guest’s warnings are particularly relevant to Canadians today. We have our own “Patriot Act,” called the Anti-Terrorism Act, which amended the CSIS Act and the National Defence Act (read Part V.1). We have also set up our own American Foreign Intelligence Surveillance Court under the CSIS Act. And Canada’s Communications listening is part of the “Five Eyes” international intelligence community, an alliance of five English-speaking countries that share signals intelligence.

I have my own version of a consolidated list. I believe that, basically, citizens should be:

 sold safe products,

 given the facts needed to make informed choices,

 given a reasonable number of choices at a fair price, and

 able to access an attentive government that listens and responds positively to consumer grievances and suggestions.

From Rights to Laws

Today these rights are recognized and regulated through the codification of civil and criminal statutes. We have thousands of laws and regulations relating to warranties, product liability, misrepresentation (false advertising, etc.), competition (price-fixing), and negligence and punitive damages.

Warranties

The manufacturer’s or dealer’s warranty is an expressed verbal or written undertaking that a product or service will be as represented, or the contract will be cancelled. This promise remains in force as long as the warranty hasn’t expired.

The main drawback of an expressed warranty is that it allows the seller and manufacturer to act as judge and jury when deciding whether a product is defective or a service is unsatisfactory. Rarely does it provide a money-back guarantee.

Some of the more familiar lame excuses used in denying expressed warranty claims are “You abused the car”; “You spilled water on the cell phone”; “The dryer was poorly maintained”; “Bird droppings ruined your paint”; or, best of all, “It’s rusting from the outside, not the inside.” Or even “It passed the safety inspection.” Ironically, the expressed warranty sometimes says that the goods or services are guaranteed to have no guarantee.

And, when the warranty’s clauses (or lack thereof) don’t deter claimants, some sellers simply say that a verbal warranty or representation as to performance or durability is unenforceable — not true. Fortunately, these attempts to weasel out of the warranty and limit the seller’s liability seldom make it through judicial review.

Justice Searle put it this way in the Chams small claims court decision:

Ford’s warranty attempts to limit its liability to what it grants in the warranty. It is ancient law that one who attempts to limit his liability by, for example, excluding common law remedies, must clearly bring that limitation to the attention of the person who might lose those remedies. The evidence in this case is clear: The buyer of even a new car does not get a warranty booklet until after purchasing the car although he “would be” told the highlights sooner (2013 Lemon-Aid New Cars and Trucks guide, pp.136–42).

Thankfully, car owners get another kick at the can with the implied warranty — this is the promise of “fitness.” In the unreported Saskatchewan decision Maureen Frank v. General Motors of Canada Limited (see chapter 6), the judge declared that paint discoloration and peeling shouldn’t occur within eleven years of the purchase of a vehicle. Both of the above-cited judgments leave no doubt that the implied warranty usually trumps an expressed restriction.

The implied warranty is solidly supported by a large body of federal and provincial laws, regulations, and jurisprudence, and it protects you primarily from hidden dealer- or factory-related defects. But the concept also includes misrepresentation and a host of other scams.

This is a powerful “super” warranty that sellers never tell you about. It also holds businesses to a higher standard of conduct than private sellers because, unlike private sellers, professionals are presumed to be aware of the defects present in the products they sell. That way, they can’t just pass the ball to the manufacturer and then walk away from the dispute.

The implied warranty is so effective with cars and other goods because it:

 is always in effect and cannot be abrogated by a bad faith clause in the contract like “sold, as is, without warranty”;

 is frequently used by small claims court judges to give refunds to plaintiffs “in equity” (out of fairness) rather than through a strict interpretation of contract law;

 establishes the concept of “reasonable durability,” meaning that parts are expected to last for a reasonable period of time as stated in jurisprudence, judged by independent experts, or expressed in extended warranties given by the manufacturer in the past through “goodwill” warranty extensions;

 covers the entire product and can be applied for whatever period of time the judge decides;

 can require that the product be taken back, or that a major repair cost be refunded;

 can help plaintiffs claim compensation for extra expenses incurred because of a product’s failure, including inconvenience, mental distress, missed work, lodging, and ruined vacations — as well as exemplary (or punitive) damages in cases where the seller behaved particularly badly;

 applies during and after the expiration of the manufacturer’s or dealer’s expressed or written warranty and requires that a part or repair will last a “reasonable” period of time.

Product Liability

Judges usually apply the implied or legal warranty when there’s no expressed warranty, or when the manufacturing defects remain uncorrected. Notably, two landmark judicial decisions uphold implied warranties in Canada, one relative to drinks served in a bar and the other concerning car quality. Additionally, our courts have been active in applying the implied warranty in everything from electronic goods to botched vacations, the habitability of rented apartments, home and condo purchases, the safety of blood transfusions, and whether a bar association can be held responsible for a careless act when no malice is intended. This last case shows that the concept of “product liability” applies not only within the realm of products but also when it comes to services.

Let’s first take a look at the Finney v. Barreau du Quebec decision rendered in 2004, in which the Supreme Court awarded an aggrieved client of a member of the Barreau (bar) $25,000, plus solicitor and client costs, for “moral damages” because her lawyer failed to prosecute diligently and had a history of serious professional misconduct. What makes this case unique is that it proves lawyers aren’t above the law when their work is sub-standard. This was the first time that a professional regulatory body was found liable for failing to protect the public. As the Court noted, “The delegation of [regulatory] powers by the State imposes obligations on the governing bodies of the profession, which are then responsible for ensuring the competence and honesty of their members in their dealings with the public.”

The Court ruled the Barreau could not escape liability by pleading good faith in the performance of its duties: “It would be contrary to the fundamental objective of protecting the public if this immunity were interpreted as requiring evidence of malice or intent to harm to rebut the presumption of good faith. Gross or serious carelessness is incompatible with good faith.”

This judgment was a shot across the bow of all self-regulated professions and should help ensure they act in a timely manner to discipline members who don’t provide what they promise, whether they are doctors, lawyers, or accountants.

In Donoghue v. Stevenson, [1932] A.C. 562 (H.L.), the court had to determine if the manufacturer of a bottle of ginger beer owed a duty to a consumer who suffered injury as a result of finding a decomposed snail in the bottle after consuming part of the bottle’s contents. Lord Atkin, in finding liability against the manufacturer, established the principle of negligence. His reasons have been followed and adopted in all the common-law countries:

The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer’s question, who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, is my neighbour?

The answer seems to be persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.

More than three decades ago, the Supreme Court of Canada clearly affirmed, in General Motors Products of Canada Ltd. v. Kravitz, [1979] 1 S.C.R. 790, that automakers and their dealers are jointly liable for the replacement or repair of a vehicle if independent testimony shows that it is afflicted with factory-related defects which compromise its safety or performance.

The existence of secret warranty extensions or technical service bulletins also help prove that a product’s deficiencies are the manufacturer’s responsibility. For example, in Lowe v. Fairview Chrysler in 1989, technical service bulletins were instrumental in showing that Chrysler had a history of automatic transmission failures similar to what we see in Ford and GM vehicles today. In addition to replacing or repairing the product, the seller and manufacturer can also be held responsible for any damages arising from the defect (see the CASE SUMMARY referring to Wharton, Chapter 5). This means that loss of wages, supplementary transportation costs, and damages for personal inconvenience can be awarded.

When a warranty claim is rejected on the pretext that the customer “altered”, failed to carry out preventive maintenance on, or damaged the product, manufacturers must prove to the court that there’s a link between their allegation and the failure (see Julien v. General Motors of Canada Ltd. [1991], 116 N.B.R. [2d] 80).

Misrepresentation

Misrepresentation or false advertising is illegal under federal and provincial laws and carries both civil and criminal penalties. Under the Competition Act, federal authorities regularly get multi-million dollar settlements from businesses that stretch the truth — or simply lie — to their customers. And, it doesn’t take much to start the ball rolling: a simple on-line denunciation (at www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/frm-eng/GH%C3%89T-7TDNA5) will suffice to start an investigation that could cost a company millions.

As can be seen in the federal court ruling against Bell Canada, Ottawa’s position is similar to Quebec’s: if qualifying information is necessary to prevent a representation from being false or misleading when read on its own, then that information should be presented clearly and conspicuously. “Fine print” won’t do.

CASE SUMMARY

Bell Canada found this out the hard way on June 28, 2011, when it consented to pay a $10 million settlement (the first time that the maximum penalty for misleading advertising has ever been imposed) and change its advertising after the Canadian Competition Bureau said the ads were contrary to the Competition Act’s civil prohibition against making representations that are false or misleading.

Bell made false, misleading representations for over five years about the prices at which certain of its services were available (including home phones, Internet, satellite television, and wireless services). Bell’s representations gave the “general impression” that the advertised monthly price for the services was sufficient, when in fact Bell used a variety of “fine-print disclaimers” to “hide” additional mandatory fees which made the actual price paid by consumers higher than the advertised price (in one instance 15 percent higher than advertised). According to the Competition Act’s misleading advertising provisions, the “general impression” conveyed by the advertisement to the average consumer, as well as its literal meaning, were considered in determining that the representations made were false or misleading. The settlement between Bell and the Bureau is set out in a “consent agreement” found at www.ct-tc.gc.ca.

As with most businesses caught scamming the public, Bell maintained it did no wrong. Nevertheless, the company paid the $10 million fine and agreed to drop all non-compliant advertising within sixty days. In particular, Bell agreed not to use small print or other ancillary disclosures that contradict the general impression of its price representations. Bell also agreed to pay the Competition Bureau $100,000 to cover the costs of [the Bureau’s] investigation.

Abuse of Trust

Abuse of trust is a polite way of saying to someone in authority “you lied.” Such a breach need not be intentional or malicious, but can be due to negligence, as was likely the case with Texaco and the Alberta Motor Association, below.

CASE SUMMARY

We are the Men from Texaco

We wear the Texaco Star

We like to think at Texaco

We’ve got everything for your car

We’ve got wipers for your windshield

Plugs ’n’ belts ’n’ tires, too

Lubricants and batteries and polishes for you

All the things to keep your engine up to par

We’ve got everything for your car

That’s why you can trust you car to the man who wears the Star

for the finest products that can take care of you car

At every Texaco station, clean across the nation

You can trust your car to the man who wears the Star

The big, bright Texaco Star!

In 1961, Texaco came up with the above jingle, which not only was hugely successful in promoting the company’s products but also won lawsuits for motorists who say they were ripped off by Texaco gas station repairs. Apparently, Texaco’s ad created a higher expectation of trust and that trust was abused by its franchisees. The jingle also figured in a $170 million racial discrimination lawsuit filed by black employees and settled by the company. It was the largest racial discrimination lawsuit settlement in the United States at the time, and was particularly damaging to Texaco’s public relations when tapes were released containing alleged ethnic slurs used repeatedly by company officers at high-level corporate meetings. The officers insisted they did not use the N-word, but were only referring to one of the black employees, “Nicholas.”

Over the years the company had also been accused of damaging the environment, cheating its franchisees, and overpricing its products. In 1987 Texaco filed for bankruptcy.

CASE SUMMARY