Background
Progressive Water Filters was a door-to-door company that was found to sell water filters for much more than they were sold for in stores. Who would buy such a product? Well, salesmen solicited the Toraman family – recent immigrants to Canada – at their home and eventually convinced them to lease a water filtration unit by telling them Toronto’s water might be unsafe for their baby.
On February 2, 2017, the Toramans signed a 10-year lease agreement with Progressive for $59.99/month, which was subsequently assigned to Skymark Finance Corp. (paras 5, 13). Both companies were owned by the same people. The reason the debt was assigned to Skymark was so that Skymark could try to take the Toramans to court, but avoid liability under the Consumer Protection Act, since they did not sell the water filter.
Essentially, it’s like getting ripped off, and the IOU to the person who ripped you off being given to a third party, who says “I don’t have anything to do with you being ripped off, I just want my money.” That was essentially Skymark’s attempted argument before the court.
The Toramans, a family with limited English proficiency and financial means, later expressed dissatisfaction with the filter and attempted to cancel the contract. Skymark denied cancellation, citing the expiration of the ten-day cooling-off period (paras 36, 45). Skymark later sued to enforce the lease and recover $8,648.48 (para 27), which was the balance owing under the contract.
The equipment was installed on February 6, 2017, and payments were made until October 2017 (paras 14, 20, 23). By the time the Toramans clued in to being ripped off and stopped paying, they had already given Skymark more money than the filter cost at a local retailer.
Outcome
Deputy Judge Gannage accepted our arguments and found that the Progressive sales representative engaged in unfair and unconscionable practices under the Consumer Protection Act (CPA), including misleading claims about water safety and purported City of Toronto endorsement (paras 53-55). The contract was found to be excessively one-sided, priced grossly above market value, and signed under undue pressure with deceptive assurances of easy cancellation (paras 59-64).
The court held that Skymark, as assignee, could not claim bona fide purchaser protection since it failed to perform sufficient due diligence and had knowledge or reason to suspect unfair practices (paras 66-73).
The Toramans were found to have effectively given notice of cancellation within the statutory one-year period, and in any event, the court exercised its discretion to waive strict compliance in the interests of justice(paras 75-82).
The court ordered rescission of the contract and reimbursement of $678.64 paid by the Toramans, in exchange for returning the water filter to Skymark (paras 90-92). Skymark’s claim was dismissed (para 93).
Key Takeaways
- Unfair and Unconscionable Practices:
The CPA prohibits false, misleading, or coercive sales tactics. Representations invoking authority or urgency, or exploiting consumer vulnerabilities, can void a contract (paras 50-65). - Assignee Liability:
A contract assignee inherits both rights and liabilities. Skymark could not enforce the lease because it failed to verify the fairness and legality of the underlying transaction (paras 68-73). Companies that buy debt should make sure that debt is legal. - Flexible Notice Requirements:
Consumers may cancel contracts under the CPA by any reasonable means. Courts can waive notice formalities if justice requires (paras 74-82) - Rescission and Restitution:
Where unfair practices are proven, courts can rescind contracts and require return of goods and payments (paras 85-91). - Costs Awarded toConsumers
The court awarded $1,300 in costs to the Toramans, reinforcing the CPA’s protective purpose (paras 96-99).
This decision underscores that consumer protection statutes will be robustly enforced, especially in cases of exploitative door-to-door sales targeting vulnerable households.