Author: Sarah Levine
The recent Provincial Court of Alberta decision, R. v. 1587915 Alberta Inc. (“1587915”), is a stark reminder of the Alberta Fair Trading Act’s
(the “FTA”) application to construction contracts, particularly for
home renovations, and the potentially serious ramifications for
contractors who deviate from the technical requirements of fair practice
and compliance under the FTA. Not only can corporations be found guilty
of contraventions of the FTA, but their directors can also be found
guilty of the offence if they authorize the impugned conduct, whether or
not the corporation has been prosecuted for the offence.
The Facts
1587915 involves 31 charges under the FTA and its Regulations against 1587915 Alberta Inc. and its directors, Kieron and Greta Warren. Kieron Warren (“Warren”) was also charged with four counts under the Criminal Code- two counts of fraud (under section 380(1)(b)) and two counts of theft (section 334(b)).
1587915 involves 31 charges under the FTA and its Regulations against 1587915 Alberta Inc. and its directors, Kieron and Greta Warren. Kieron Warren (“Warren”) was also charged with four counts under the Criminal Code- two counts of fraud (under section 380(1)(b)) and two counts of theft (section 334(b)).
The
31 charges under the FTA and Regulations arose in respect of 6 families
that 1587915 contracted with to provide home renovations. The charges
against 1587915, Kieron and Greta Warren were as follows:
Six Counts Section
104(1) FTA: No person may engage in a designated business unless the
person holds a licence under this Act that authorizes the person to
engage in that business;
Six Counts Section 10(2)(a) of the Prepaid Contracting Business Licensing Regulation
AR 185/99. A person who is engaged in a prepaid contracting business
must ensure that every prepaid contract the person enters into complies
with the requirements of section 35 of the Act;
Six Counts Section
31(2) FTA: Within 15 days after a direct sales contract is cancelled,
the supplier must refund to the consumer all money paid by the consumer
and return to the consumer’s premises any trade-in or an amount equal to
the trade-in allowance;
Six Counts Section
6(4)(a) FTA: It is an unfair trade practice for a supplier to do or say
anything that might reasonably deceive or mislead a customer.
Six Counts Section
6(4)(n) FTA: It is an unfair trade practice for a supplier to represent
that goods or services will be supplied within a stated period if the
supplier knows or ought to know that they will not.
One Count Section 10(3) Prepaid Contracting Business Licensing Regulation
AR 185/99: A person who is engaged in the prepaid contracting business
and who enters into a prepaid contract with a buyer must provide a copy
of the signed contract to the buyer.
A prepaid contracting business is a business designated as such by the Designation of Trades and Businesses Regulation. These
businesses include contracts for construction, maintenance or
renovation where, critically, the prepaid contractor solicits,
negotiates or concludes construction or maintenance contracts in person
at any place other than their place of business and accepts money before
all the work is done and/or the services are provided. Such operations
require a license in order to engage in the prepaid contracting
business. A direct sales contract is a consumer transaction where the
consideration for the goods or services exceeds $25 and is negotiated or
concluded in person at a place other than the supplier’s place of
business or at a place other than a market place, auction, trade fair,
agricultural fair or exhibition.
Behaviour in Breach of the FTA and Regulations
The six contracts from which the charges arose are variations on the same theme. In each of the contracts, references were made to completion deadlines and payment due dates. In each case, the families expressed concern that insufficient progress had been made by the dates when the contractor demanded more money. When the issue arose, as it did in each case, Warren referred back to the contract showing that the due dates of payments were clearly stated and were not related to progress.
The six contracts from which the charges arose are variations on the same theme. In each of the contracts, references were made to completion deadlines and payment due dates. In each case, the families expressed concern that insufficient progress had been made by the dates when the contractor demanded more money. When the issue arose, as it did in each case, Warren referred back to the contract showing that the due dates of payments were clearly stated and were not related to progress.
In
each of the six project situations, much the same pattern of conduct
followed: after execution of the contract and the first payment,
demolition began and generally proceeded. After demolition, customer
complaints were made by all families regarding: lack of workers, lack of
workers with appropriate skills, periods of inactivity and difficulty
in reaching Warren. When meetings were held with Warren, he stated that
the customers were late in making progress payments and in breach of the
contract. Evidence was heard that additional contractors were called in
by customers, and their explanation for engaging additional contractors
was nonattendance by the contractor and lack of progress on their
project.
Following a consideration of the evidence given by the
parties, the Court found that 1587915, Kieron and Greta Warren were
guilty of engaging in a prepaid contract without a license for all six
contracts; 1587915 and Warren were guilty of failing to comply with the
prepaid contract requirements; and that 1587915 and Warren were guilty
of failing to refund money to their customers following the cancellation
of a prepaid contract.
The Court did not find 1587915, Kieron or
Greta Warren guilty of doing or saying anything to mislead a customer
with respect to one of the contracts, but did find either 1587915 or
Warren, or both, guilty of this charge with respect to the five other
contracts. Similarly, 1587915, Kieron and Greta Warren were not found
guilty of promising to supply goods with the knowledge that they would
not be able to with respect to the first contract. However, 1587915 or
Warren, or both, were found guilty of this charge with respect to the
other five contracts. Lastly, the Court did not find Warren guilty of
any of the four criminal charges of theft or fraud with respect to the
home renovation contracts he entered into.
Tips and Takeaways
While Warren’s behaviour was particularly egregious, the moral of the story is to bear in mind the swath of technical requirements for licensing, entering into contracts, and otherwise engaging in certain business practices in accordance with the FTA and its Regulations.
While Warren’s behaviour was particularly egregious, the moral of the story is to bear in mind the swath of technical requirements for licensing, entering into contracts, and otherwise engaging in certain business practices in accordance with the FTA and its Regulations.
The
technical requirements of the FTA and its Regulations are not to be
taken lightly when prepaid contractors and/or direct selling businesses
contract with customers for construction services. The purpose of this
legislation is ultimately to protect consumers from unfair business
practices, ranging from misrepresentation and misleading customers to
operating without proper licensing. As is evident from this case, the
Courts will vigorously uphold this mandate in the interests of
protecting the public, which can be to the detriment of contractors if
they do not take care to comply with the FTA and its requirements.
