Motor Vehicle Dealing (Ontario)
Ch.6 - Motor Vehicle Dealers Compensation Fund
(20 June 2021)
- Claim Exceptions
- Procedure for Commencement of Claim
- Processing a Claim
- Eligibility Determination
- Interim Payments
- Decisions are Public Information
- Dealer Liability to Fund
The Motor Vehicle Dealers Compensation Fund (the 'Fund') is run by a Board of Trustees (and a separate Trustee: Reg 70) that customers can make compensation claims to through the OMVIC registrar. It is funded by "levies and payments imposed on registrants", and in some case registrants may be liable to the Fund for reimbursement of monies paid to customers [Act 42, Reg 61-88].
Customers may make claims for pecuniary (money) loss for claims arising from a trade in a motor vehicle between the customer and a dealer when the customer is acting as a 'consumer' [ie. an "individual acting for personal, family or household purposes and does not include a person who is acting for business purposes": CPA 1] [Act 79].
The administration of the Fund, particularly where the making of a customer claim is involved, involves an unusual collection of distinct entities: the OMVIC board's registrar (the 'registrar'), the Fund's Board of Trustees (the 'Board') [Reg 61], a trust corporation (the 'Trustee') [under Reg s.61,69-70] and the "director" of OMVIC [Act s.2(1)]. Be careful to keep these separate.
The Fund itself may be a pointless and expensive legislative venture. The OMVIC website announces that it has paid out $5 million since 1986, which amounts to $143k per year on average, which in today's market amounts to the value of a small handful of mid-priced sedans, or one and a half Cadillac SUVs, per year. When you take into account the overhead of running the 'Fund' system with it's relatively complex structure, the productivity of the Fund system in terms of actual consumer compensation is questionable, especially given the magnitude of the Ontario motor vehicle sector's 2019 (pre-COVID) sales at $85 billion (new only).
Fund-eligible claims (potentially) include those arising [Reg 79(3)]:
- While Dealer is under Notice of Proposal re Refusal or Suspension
The claim arose from an act or omission of the dealer that was the subject of a notice of proposal [under Act 9(1)(a-b)] to suspend, revoke or refuse to renew the registration of the dealer and,
i. the dealer did not request a hearing by the Tribunal, or
ii. the dealer requested a hearing by the Tribunal and the Tribunal ordered the registrar to suspend, revoke or refuse to renew the registration of the dealer.
- Where Dealer Convicted of Offence
The claim arose from a trade in connection with which the dealer has been convicted of an offence.
- Where Law Enforcement Seized Vehicle
The trade from which the claim arose was a purchase or lease of a motor vehicle from the dealer. A law enforcement authority has seized the vehicle and indicated that it will not be returned to the purchaser or the lessee.
- Where Creditor Seized Vehicle
The trade from which the claim arose was a purchase or lease of a motor vehicle from the dealer. A creditor, other than a creditor of the customer, has legally seized the vehicle and indicated that it will not be returned to the purchaser or the lessee.
- Where Claim is for Deficiency that Does Not Exceed Value of Motor Vehicle
The trade from which the claim arose was a purchase or lease of a motor vehicle from the dealer. The claim does not exceed the total sale price of the vehicle at the time of the purchase (if the claim arose from a purchase of the vehicle) or the lease value of the vehicle included in the lease disclosure [see the CPA Guide at Chattel Leases, s.3 "Disclosure Statements for Part VIII Chattel Leases"] [under s.89(2) CPA] at the time of the lease (if the claim arose from a lease of the vehicle). The claim is for a deficiency that the dealer has refused to remedy. The deficiency is something that,
i. the vehicle does not have and the customer had indicated was material to the trade for the vehicle to have, or
ii. the vehicle has and the customer had indicated was material to the trade for the vehicle not to have.
- For Deposit or Other Return
The claim is for the return of a deposit or other payment by the customer under a contract for the purchase or lease of a motor vehicle from the dealer. The dealer has not delivered to the customer, within the time period required by the contract, the vehicle or an alternative motor vehicle that is acceptable to the customer. The customer has made a demand for a refund of the deposit or payment. The dealer has refused without legal justification to make the refund or is unable to make the refund by reason of bankruptcy or insolvency.
- Under Extended Warranty
The claim relates to an extended warranty that was sold by the registered motor vehicle dealer or facilitated through the dealer. The claim is for:
i. the return of all payments made by the customer under the warranty that were unearned because the dealer has not complied with their duty under a facilitated (indirect) extended warranty sale to provide the seller of the warranty with sale documents, payments and statement of condition and distance driven [Reg 47(7)(c)];
ii. the cost of repairs or replacement that should have been, but were not, provided under the warranty, if the dealer was the seller of the warranty.
When compensation is payable under (ii), the Board may order return of the amount of the premiums that the customer is required to make under the extended warranty that is unearned at the time that the customer makes the claim [Reg 79(5)] - although if the Board directs the Trustee to return the amount of these premiums then the customer is not entitled to any further compensation for any further (ii) claims [Reg 79(6)] (ie. you get the unpaid extended warranty benefit, or a refund of the premiums - but not both).
iii. the amount for which the dealer is liable under a facilitated sale because it cannot be settled because the seller of the warranty is no longer in business and because the amount is above the $500,000 security provided [Reg 47(1)(b)(ii)].
- Facilitated or Direct Service Plan-Related Default by Dealer
The claim relates to a service plan that was sold or facilitated by the dealer. The claim is for:
i. the return of all payments made by the customer under the service plan that were unearned because the dealer has not complied with their duty under a facilitated (indirect) service plan sale to provide the seller of the warranty with sale documents and payments [Reg 48(6)(c)]; or
ii. the cost of goods or services that should have been, but were not, provided under the service plan, if the dealer was the seller of the plan.
- Refund Owing on Cancellation of Contract for Mis-Disclosure
The claim is for a refund owed to a customer after the customer has asserted contractual mis-disclosure, claimed cancellation of the contract and followed the requirements [see Ch.4: "Types of Contracts and Disclosure", s.11 "Statutory Cancellation Remedy for Mis-disclosure of History"] to arrange a meeting to return the motor vehicle and obtaining a refund. This applies whether the agreement to meet is reached or not [under Reg s.50(10)(b), 50(11)(b)].
- Existing Judgment or Order
The amount of the claim is the subject of a judgment or an order made by a court for the payment of compensation or the making of restitution by the dealer to the customer. The judgment or order has become final by reason of the expiration of the time for appeal or of having been confirmed by the highest court to which an appeal may be taken.
- Insolvent Dealer
The claim is for a liquidated amount that the dealer owes to the customer. The dealer has become a bankrupt or a winding-up order has been made or a receiver appointed in respect of the business of the dealer under the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or the Winding-up and Restructuring Act (Canada). [because the claim is against the Fund, it is unaffected by the insolvency filing stay]
3. Claim Exceptions
A customer is not entitled to compensation from the Fund if [Reg 79(4)]:
- the customer is related, by blood or adoption, to the dealer against whom a claim is made or to a director or officer of the dealer;
- the customer is a spouse of the dealer against whom a claim is made or a spouse of a director or officer of the dealer;
- the customer is 'associated' [see Ch.3, s.2(d) "Notice to Applicant of 'Associated' and 'Interested' Persons"; MVDA 1(2)"] with the dealer against whom a claim is made;
- the customer was complicit in illegal conduct relating to the trade;
- the customer misrepresents the nature of the claim or provides false or misleading evidence in support of the claim; or
- the customer made a previous claim for compensation from the Fund based on the same facts or substantially the same facts.
4. Procedure for Commencement of Claim
Claims against the Fund must be preceded by the customer giving the dealer "a written notice of demand for payment [served under Act s.37(1-2); see Ch.1, s.6(d) "Administrative Matters"], of the claim", and the dealer refusing or being unable to pay the claim [Reg 79(1)(e)].
Then, for the making of any actual Claim, the customer has two years "after the claim first meets the requirements set out" [in the relevant paragraph in "2. Claims" (above)] to file a written notice to OMVIC's registrar [Reg 80(1)]. This limitation may be extended by the Board of Trustees of the Fund, if they "considers it proper to do so" [Reg 80(2)].
"The notice of the claim shall contain full particulars of the claim and full particulars of any partial payment or recovery that the customer has received or is entitled to receive in respect of the claim, and shall be accompanied by all documents and other information that the Board requires to determine whether or not the customer is entitled to compensation from the Fund" [Reg 80(3)].
5. Processing a Claim
On receiving the customer's notice of a Claim, and the accompanying documents and information [as per s.4 "Procedure for Commencement of Claim", above], the registrar shall forward them to the Board" (of trustees) [Reg 80(4)].
"The Board may request that the customer making a claim for compensation from the Fund provide documents or other information in addition to those that accompany the claim and may require that the additional documents or information be in the form of an affidavit or be supported by an affidavit" [Reg 81(1)]. "The Board may request that a customer agree in writing to subrogate the Fund to any and all rights and remedies to which the customer is entitled in respect of payment of a claim for compensation from the Fund" [Reg 81(2)].
Failure of the customer to comply with either of these requests [additional documents and information, and subrogation] within one year after receiving the request, the claim shall be deemed to be abandoned - "unless the Board is satisfied that it would not be fair to do so" [Reg 81(3)]. "A customer whose claim is deemed to be abandoned shall not in any way revive the abandoned claim" [Reg 81(4)].
6. Eligibility Determination
The Board determines any compensation payable, and they then advise the Trustee [Reg 82(1)] - but that is by no means the end of the consumer's chores. This is truly a last resort system, and the Trustee shall only pay that amount after the following additional hurdles are met.
Firstly, the Board may require the customer to [Reg 82(2,3)]:
Secondly, the following limitations are imposed on any compensation finding that makes it this far [Reg 83]:
- Court Judgment and Collection Efforts
"(O)btain a judgment in respect of the claim, cause an execution to be issued under it, cause levies to be made under it and examine the judgment debtors";
- Exhaust Other Legal Remedies
"(E)xhaust any other legal remedies, in addition to those described" immediately above;
- Suing Any Defendents
"(B)ring an action against any person against whom the customer might reasonably be considered as having a cause of action in respect of the claim".
- Compensation Limited to What Dealer Owes
(C)ustomer compensation from the Fund shall not exceed "the amount that the customer would be entitled to from the dealer against whom the claim is made" [Reg 83(1)];
- No Interest Unless Court-Ordered
(N)o interest shall be paid unless a court has ordered it [Reg 83(2)];
- No Punitive Damage or Related Interest
(N)o punitive damages (or related interest) shall be awarded [Reg 83(3)];
- No Costs Unless Court-Ordered and Incurred
(N)o costs shall be paid unless a court has ordered it "and the amount of the awarded costs relates to a disbursement or fee actually paid by the customer" [Reg 83(4)];
- Maximium $45,000
(T)here is a maximum compensation payment of $45,000 [interim payments (see below) are counted towards this maximum, but court-ordered costs and interest are not] [Reg 83(5-6)].
7. Interim Payments
If "a customer is entitled to compensation from the Fund" and an interim payment "is necessary to alleviate undue inconvenience to the customer", then the Fund's Board of Trustees together with the OMVIC 'director' [MVDA 2(1)] may jointly determine that the customer is eligible "to receive an amount from the Fund immediately to alleviate the inconvenience" [Reg 84(1)]. Any interim compensation paid is an advance on any 'regular' compensation paid and is thus deductible from it [Reg 84(4)].
More officiousness here (this for a fund that only pays out $143k on average per year for 'regular' compensation):
- if a quorum of the Board is not available, any two members of the Board may exercise this power with the concurrence of the director [Reg 84(2)];
- if the Board makes this determination, it shall advise the Trustee of its determination and the Trustee shall pay the compensation determined by the Board [Reg 84(3)].
Note: Again, be careful to watch the different entities here.
If the Fund's Board of Trustees determines that a customer is not entitled to compensation, then "the Board shall serve notice of its decision, together with written reasons, on the customer" [Reg 85(1)]. Such notice of decision "shall inform the customer of the right to a hearing by the Tribunal and the manner and time within which to request the hearing" [Reg 85(3)].
The customer may appeal by "serv(ing) a written notice requesting a hearing on the registrar and the Tribunal" [the License Appeal Tribunal (LAT): MVDA 1(1)] within 15 days after being served with the notice of decision [Reg 85(2)], failing which the decision is final [Reg 85(4)]. There is no appeal from a determination not to pay interim compensation [Reg 85(8)].
If an appeal is filed, "the Tribunal shall appoint a time for and hold the hearing" [Reg 85(5)]. "The customer, the Board and the other persons, if any, that the Tribunal specifies are parties to the hearing" [Reg 85(6)]. The LAT may "allow the claim, in whole or in part, and direct the Trustee to pay the amount allowed from the Fund" or dismiss the appeal [Reg 85(7)].
9. Decisions are Public Information
Decisions with respect to claims on the Fund may be made available to the public, but they shall not "disclose the identity [or any personal information: Reg 86(3)] of an individual making a claim without the individual’s prior approval" [MVDA 42(7)]. The General Regulation hardens this discretion (ie. 'may') by making it a Board of Trustees duty ('shall'), requiring that they "make the following information available to the public with respect to the claims for payment of compensation from the Fund that were received in each year, based on the year that the Board determines", with the following details [Reg 86(1)]:
Such information shall be published electronically, and updated at least quarterly [Reg 86(2)].
- the total number of claims that were allowed in whole or in part and the total number that were denied.
- the total number of claims that were received but on which the Board has not made a determination.
- a summary of each claim described in paragraph 1 that includes:
i. the registered name of the dealer, if the claim has been allowed,
ii. the amount claimed, and
iii. the amount of any claim allowed, by claim ground [as per "s.2 Claims", above].
10. Dealer Liability to Fund
A dealer is liable to the Fund if [Reg 87]:
- the claim arose from a trade in connection with which a court convicted the dealer of an offence and ordered the dealer to pay compensation or make restitution to the customer;
- the claim arose from a court order [Reg 79(3)10];
- the dealer is insolvent; or
- "the dealer has become a bankrupt or a winding-up order has been made or a receiver appointed in respect of the business of the dealer under the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or the Winding-up and Restructuring Act (Canada)".