In a 5 to 4 decision, the
Supreme Court of Canada held the concept of “party autonomy” and holding
parties to a valid arbitration agreement trumped access to justice and policy
concerns. The Court allowed an appeal from the Court of Appeal for
Ontario in which the majority ruled that part of a class action should be
stayed and should proceed by way of arbitration even where there was a
possibility of duplicating proceedings and inconsistent results.
In this case, the plaintiff
Avraham Wellman proposed a class action for damages against TELUS
Communications Inc. (“TELUS”) on behalf of about 2 million Ontario residents
who had entered into mobile phone service contracts with TELUS during a
specified time frame. The proposed class consisted of both consumer and
business customers. Wellman alleged that TELUS had engaged in an
undisclosed practice of rounding up calls to the next minute such that
customers were overcharged and were not provided the number of minutes to which
they were entitled. TELUS’s standard terms and conditions in its service
contracts included an arbitration clause stipulating that all claims arising
out of or in relation to the contract (apart from collection of accounts) must
be determined through mediation and then arbitration.
The arbitration clause was
invalidated by Ontario’s Consumer Protection Act to the extent that it would
otherwise prevent class members who were consumers from pursuing their claims
in court. However, it did not apply to business customers. TELUS
sought to have the class action stayed with respect to business customers,
relying on the arbitration clause. The motion judge dismissed TELUS’s
motion for a stay and certified the action. She held that Section 7(5) of
the Arbitration Act, 1991 (“Act”) grants the courts discretion to refuse a stay
where it would not be reasonable to separate the matters dealt with in the
arbitration agreement from the other matters. The motions judge held that
this discretion could be exercised to allow business customers’ claims that
were otherwise subject to the arbitration clause to participate in the class
action where it was reasonable to do so. The Ontario Court of Appeal
dismissed TELUS’s appeal.
Justice Moldaver wrote the
opinion for the majority of the SCC (Justices Gascon, Cote, Brown and Rowe
concurred). Justice Moldaver held that Section 7(5) of the Act does not
grant the court discretion to refuse to stay claims that are dealt with in an
arbitration agreement.
This finding is somewhat
perplexing because Section 7(5) of the Act reads as follows:
The court may stay the
proceeding with respect to the matters dealt with in the arbitration agreement
and allow it to continue with respect to other matters if it finds that,
(a) the agreement deals
with only some of the matters in respect of which the proceeding was commenced;
and
(b) it is reasonable to
separate the matters dealt with in the agreement from the other matters.
However, Justice Moldaver
held that in keeping with the modern approach that sees arbitration as an
autonomous, self-contained, self-sufficient process to which the parties agree
to have their disputes resolved by an arbitrator, courts should generally take
a hands off approach to matters governed by the Act. The general rule
reaffirms the concept of party autonomy and upholds the policy underlying the
Act that says that parties to a valid arbitration agreement should abide by
their agreement. Paragraph 7(5)(a) and 7(5)(b) set out two
preconditions. The first precondition is met if the agreement deals with
only some of the matters in respect of which the proceeding was
commenced. The second precondition is met if it is reasonable to separate
the matters dealt with in the agreement from the other matters. If both
preconditions are met, instead of ordering a full stay, the Court may allow the
matters that are not dealt with in the arbitration agreement to proceed in
Court and may stay the court proceeding in respect of the matters that are
dealt with in the agreement. Justice Moldaver held that policy
considerations cannot be permitted to distort the actual words of the statute,
read “harmoniously” with the scheme of the statute, its objects and the intention
of the legislature. In this case, the legislature had already spoken to
some of the concerns by shielding consumers from the potentially harsh results
of enforcing arbitration agreements through the Consumer Protection Act.
The legislature made a careful policy choice to exempt consumers and only
consumers. That choice must be respected and must not be undermined by
reading Section (7)(5) in a way that permitted courts to treat consumers and
business customers as one and the same.
Justice Moldaver held that
while there can be no doubt as to the importance of promoting access to
justice, this objective cannot, absent express direction from the legislature,
be permitted to overwhelm the other important objectives pursued by the
Act. To do so would undermine the legislature’s objective of ensuring
parties to a valid arbitration agreement abide by their agreement, reduce the
degree of certainty and predictability associated with arbitration agreements,
and weaken the concept of party autonomy in the commercial setting.
The dissenting opinion was
jointly written by Justices Abella and Karakatsanis (Chief Justice Wagner and
Justice Martin concurred).
The dissenting judges held
that Section 7(5) of the Act did give courts discretion to allow the entire
proceedings to continue in court even if some parties would be otherwise
subject to an arbitration clause. A discretionary ability to grant a partial
stay logically includes the power to refuse a partial stay. They held
that the only interpretation that gives meaningful effect to the discretionary
language of Section 7(5) is one that confers on judges the ability to allow
both arbitrable and non-arbitrable dispute to proceed in court. Otherwise
the words “may stay the proceedings with respect to the matters dealt with in
the arbitration agreement” are superfluous and add nothing.
The dissenters reasoned that
the Ontario Court of Appeal has since 2002 granted stays of proceedings that
would otherwise be subject to arbitration and for nearly a decade has permitted
otherwise arbitrable matters to be joined with class actions in the public
interest of avoiding duplicative proceedings, increasing costs and risking
inconsistent results. They held that the overall purpose of the Act was
promote access to justice because the court system can be costly and
slow. The court’s discretion to intervene was narrow to further the goals
of expedient dispute resolution. Arbitration was intended to be a means
by which parties on a relatively equally bargaining footing chose to design an
alternative dispute mechanism. However, all of TELUS’s clients, both
business and consumer, signed the same non-negotiable standard form
agreement. TELUS’s individualized arbitration clause effectively
precludes access to justice for business clients when a low-value claim does
not justify the expense. It’s mandatory nature illustrates that the
rationales of party autonomy and freedom of contract are not existent.
By inserting the reasonable
requirement in Section 7(5)(b) of the Act the legislature clearly contemplated
that in certain circumstances, it would be unreasonable to separate matters
dealt with in the arbitration agreement from other matters. In this case,
eliminating judicial discretion effectively eliminates access to justice.
TELUS’ interpretation would result in costly and time consuming factual
inquiries on how to divide the arbitrable and non-arbitrable claims even where
the substance of both claims is identical as in this case.
Here to impose arbitration on
willing parties violates the spirit of the Act and operates as an invisible
barrier to a remedy and presumptively immunizes wrongdoing from accountability
contrary to fundamental notions of civil justice.
TELUS Communications Inc. v. Wellman 2019 SCC 19
Regards,
Blair
