TELUS Communications Inc. v. Wellman

TELUS Communications Inc. v. Wellman
Collection
Supreme Court Judgments
Date
2019-04-04
Neutral citation
2019 SCC 19
Report
[2019] 2 SCR 144
Case number
37722
Judges
Wagner, Richard; Abella, Rosalie Silberman; Moldaver, Michael J.; Karakatsanis, Andromache; Gascon, Clément; Côté, Suzanne; Brown, Russell; Rowe, Malcolm; Martin, Sheilah
On appeal from
Ontario
Subjects
Civil procedure
Notes
Case in brief SCC Case Information
Decision Content
SUPREME COURT OF CANADA
Citation: TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144
Appeal Heard: November 6, 2018
Judgment Rendered: April 4, 2019
Docket: 37722
Between:
TELUS Communications Inc.
Appellant
and
Avraham Wellman
Respondent
- and -
Attorney General of British Columbia, ADR Chambers Inc., Canadian Chamber of Commerce, Public Interest Advocacy Centre, Consumers Council of Canada, Canadian Federation of Independent Business, Samuelson-Glushko Canadian Internet Policy and Public Interest Clinic and Consumers’ Association of Canada
Interveners
Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ.
Reasons for Judgment:
(paras. 1 to 105)
Moldaver J. (Gascon, Côté, Brown and Rowe JJ. concurring)
Dissenting Reasons:
(paras. 106 to 172)
Abella and Karakatsanis JJ. (Wagner C.J. and Martin J. concurring)
TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 S.C.R. 144
TELUS Communications Inc. Appellant
v.
Avraham Wellman Respondent
and
Attorney General of British Columbia,
ADR Chambers Inc., Canadian Chamber
of Commerce, Public Interest Advocacy Centre,
Consumers Council of Canada, Canadian
Federation of Independent Business, Samuelson‑Glushko
Canadian Internet Policy and Public Interest Clinic and
Consumers’ Association of Canada Interveners
Indexed as: TELUS Communications Inc. v. Wellman
2019 SCC 19
File No.: 37722.
2018: November 6; 2019: April 4.
Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ.
on appeal from the court of appeal for ontario
Civil procedure — Stay — Class actions — Consumer and non‑consumer claims — Arbitration clause — Customer filing class action for damages alleging cell phone service provider engaged in deceptive practices — Class consisting of both consumers and non‑consumers — Cell phone service provider’s standard terms and conditions containing mandatory arbitration clause — Arbitration clause invalidated by provincial consumer protection legislation with respect to claims by consumers — Cell phone service provider relying on arbitration clause to seek stay of proceedings with respect to non‑consumers’ claims — Whether provincial statute governing arbitration grants court discretion to refuse to stay non‑consumers’ claims — Arbitration Act, 1991, S.O. 1991, c. 17, s. 7 — Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A.
W filed a proposed class action for damages against TELUS on behalf of about two million Ontario residents who entered into mobile phone service contracts with TELUS during a specified timeframe. The class consists of both consumers and non‑consumers (business customers). W alleges that TELUS 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. The standard terms and conditions of the service contracts included an arbitration clause stipulating that all claims arising out of or in relation to the contract, apart from the collection of accounts, must be determined through mediation and, failing that, arbitration. This clause was invalidated by the Consumer Protection Act to the extent that it would otherwise prevent class members who qualify as consumers from pursuing their claims in court. However, since the business customers do not benefit from this protection, TELUS sought to have the proceeding stayed with respect to the business customer claims, relying on the arbitration clause. The motions judge dismissed TELUS’s motion for a stay and certified the action. She held that s. 7(5) of the Arbitration Act, 1991 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, thereby allowing all of the matters to proceed in court. She was of the view that this discretion may be exercised to allow non‑consumer claims that are otherwise subject to an arbitration clause to participate in a class action, where it is reasonable to do so. The Court of Appeal dismissed TELUS’s appeal.
Held (Wagner C.J. and Abella, Karakatsanis and Martin JJ. dissenting): The appeal should be allowed and the claims of the business customers stayed.
Per Moldaver, Gascon, Côté, Brown and Rowe JJ.: Section 7(5) of the Arbitration Act, 1991 does not grant the court discretion to refuse to stay claims that are dealt with in an arbitration agreement. The protections afforded by the Consumer Protection Act allow the consumers to pursue their claims in court, but the business customers remain bound by the arbitration agreements into which they entered. Accordingly, the latter are exposed to a stay under s. 7(1) of the Arbitration Act, 1991. Since the only potential exception to the general rule under s. 7(1) relied on by W does not apply, the business customer claims should be stayed.
In keeping with the modern approach that sees arbitration as an autonomous, self‑contained, self‑sufficient process pursuant to which the parties agree to have their disputes resolved by an arbitrator, not by the courts, s. 6 of the Arbitration Act, 1991 signals that courts are generally to take a hands off approach to matters governed by that statute. Section 7(1) of the Arbitration Act, 1991 establishes the general rule that where a party to an arbitration agreement commences a proceeding in respect of a matter dealt with in the agreement, the court shall, on the motion of another party to the agreement, stay the court proceeding in favour of arbitration. This general rule reaffirms the concept of party autonomy and upholds the policy underlying the Arbitration Act, 1991 that parties to a valid arbitration agreement should abide by their agreement. Section 7(2) lists five exceptions to the general rule under s. 7(1) where it would be either unfair or impractical to refer the matter to arbitration. Section 7(5) provides a further exception to the general rule under s. 7(1) and consists of two main components. First, s. 7(5)(a) and (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. That is, the proceeding must involve at least one matter that is dealt with in the arbitration agreement and at least one matter that is not dealt with in the arbitration agreement. The second precondition is met if it is reasonable to separate the matters dealt with in the agreement from the other matters. Second, if both preconditions are satisfied, then 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, though it must nonetheless stay the court proceeding in respect of the matters that are dealt with in the agreement. If the preconditions are not met, then the discretionary exception under s. 7(5) is not triggered as s. 7(5) can have effect only if the two preconditions are satisfied. At that point, unless one of the exceptions listed in s. 7(2) applies, the general rule under s. 7(1) would apply, meaning that the proceeding must be stayed.
Policy considerations cannot be permitted to distort the actual words of the statute, read harmoniously with the scheme of the statute, its object, and the intention of the legislature, so as to make s. 7(5) say something it does not. While policy analysis has a legitimate role in the interpretive process, the responsibility for setting policy in a parliamentary democracy rests with the legislature, not with the courts. This is particularly so given that the Ontario legislature has already spoken to some of these policy concerns by shielding consumers from the potentially harsh results of enforcing arbitration agreements contained in consumer agreements, which often take the form of standard form contracts, through the Consumer Protection Act. The legislature made a careful policy choice to exempt consumers — and only consumers — from the ordinary enforcement of arbitration agreements. That choice must be respected, not undermined by reading s. 7(5) in a way that permits courts to treat consumers and non‑consumers as one and the same.
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 Arbitration Act, 1991. To do so would undermine the legislature’s stated 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. It would expand the opportunities for parties to a valid arbitration agreement to avoid their agreement and seek relief in court. Furthermore, this case is not about debating the merits and demerits of enforcing arbitration clauses contained in standard from contracts. Rather, it is about the proper interpretation of s. 7(5) of the Arbitration Act, 1991. And, while distinguishing between consumers and non‑consumers may be a difficult exercise in certain cases, that difficulty does not bear on the proper interpretation of s. 7(5). Sorting between consumers and non‑consumers may be cumbersome in certain cases, but this inconvenience does not permit the court to recast the legislation as it sees fit in order to avoid such difficulties. Permitting non‑consumers to tag along with consumers on the basis that it would be cumbersome to sort between the two would also allow commercial entities to find the inside of a courtroom despite having agreed to arbitration, even where the arbitration agreement was fully negotiated. This would reduce the degree of certainty and predictability associated with arbitration agreements and permit parties to those agreements to piggyback onto the claims of others. Lastly, where the application of an Ontario statute, properly interpreted, leads to a multiplicity of proceedings, the court must give effect to the will of the legislature. Section 7(5) of the Arbitration Act, 1991 expressly contemplates bifurcation of proceedings, as it permits the court to order a partial stay, thereby potentially resulting in concurrent arbitration and court adjudication.
The sole matter at issue in the proceeding commenced by W is alleged overbilling. This matter is dealt with in the arbitration agreements into which the consumers and business customers entered. Therefore, because there is at least one matter in the proceeding that is dealt with in the arbitration agreements, the general rule under s. 7(1) of the Arbitration Act, 1991 would ordinarily require a stay of the proceeding as a whole, leaving both consumers and business customers locked out of court. But, s. 7(5) of the Consumer Protection Act renders the arbitration agreements entered into by the consumers invalid to the extent that they would otherwise prevent the consumers from commencing or joining a class action of the kind commenced by W. The business customers, however, do not qualify as consumers and as such they cannot invoke the protections that the consumers enjoy.
The only potential exception to s. 7(1) of the Arbitration Act, 1991 sought to be invoked on behalf of the business customers in this case, the partial stay provision under s. 7(5), offers no assistance. This is because the sole matter at issue in the proceeding is dealt with in the arbitration agreements into which the consumers and business customers entered, such that the first precondition set out in s. 7(5)(a) is not met. Consequently, the general rule under s. 7(1) is left intact insofar as the business customers are concerned and the proceeding must be stayed. However, this stay must be restricted to the parties who are legally bound by an arbitration agreement — namely, TELUS and the business customers. In sum, the motions judge and the Court of Appeal erred in law by interpreting s. 7(5) of the Arbitration Act, 1991 incorrectly and refusing to order a stay that, under s. 7(1), was mandatory. Section 7(5) of the Arbitration Act, 1991 does not permit the court to ignore a valid and binding arbitration agreement.
Per Wagner C.J. and Abella, Karakatsanis and Martin JJ. (dissenting): The appeal should be dismissed. Where a proceeding includes matters covered by an arbitration agreement and other matters that are not, s. 7(5) of the Arbitration Act, 1991 gives a judge discretion to allow the entire proceeding to continue in court, even if some parties would otherwise be subject to an arbitration clause.
Section 7(5) of the Arbitration Act, 1991 reflects an explicit legislative intention to override an otherwise applicable arbitration clause. The words of the provision state that “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”. This means that the court can either stay the arbitrable matters before it or allow them to proceed. Logically, a discretionary ability to grant a partial stay also includes the power to refuse a partial stay. The only interpretation that gives meaningful effect to the discretionary language of s. 7(5) is one that confers on judges the ability to allow both arbitrable and non‑arbitrable disputes to proceed in court. An assertion that a court can never stay arbitrable matters under s. 7(5) renders the opening phrase — “may stay the proceeding with respect to the matters dealt with in the arbitration agreement” — superfluous. By interpreting the provision to apply only to non‑arbitrable matters, s. 7(5) adds nothing to a judge’s existing discretion.
Ontario’s Arbitration Act, 1991 was enacted to allow parties to design their own settlement processes and resolve their disputes outside the courts. It anticipated two or more parties freely negotiating their arbitral process. To ensure expedient resolution and lower litigation costs, the Arbitration Act, 1991 limited court intervention in arbitrable disputes. But it also gave judges discretion to permit court proceedings in certain limited circumstances, such as where the arbitration agreement was manifestly unfair. Where a proceeding includes both matters covered by an arbitration agreement and other matters that are not, s. 7(5) gives a judge discretion to allow the entire proceeding to continue in court, even if some parties would otherwise be subject to an arbitration clause. Since 2002, the Ontario Court of Appeal has interpreted s. 7(5) as granting the discretion to stay matters that would otherwise be subject to arbitration. Similarly, for nearly a decade, the Ontario Court of Appeal has interpreted s. 7(5) as permitting otherwise arbitrable matters to be joined with class actions in the public interests of avoiding duplicative proceedings, increased costs, and the risk of inconsistent results. This interpretation aligns with the text and scheme of the provisions and is consistent not only with the purposes motivating the enactment of the Arbitration Act, 1991 but also with the purpose of s. 7(5) itself.
The overall purpose of the Arbitration Act, 1991 was to promote access to justice. Its chosen means of achieving that goal was to promote accessibility by giving parties the choice of resolving disputes outside the court system. The reason for creating this option was a recognition that the court system could be costly and slow. The courts’ discretion to intervene in arbitrable matters was therefore narrowed to further the goals of expedient dispute resolution.
Arbitration was intended to be a means by which parties on a relatively equal bargaining footing chose to design an alternative dispute mechanism. One cannot talk about “equal bargaining power” and “party autonomy” if the very nature of the contract reveals that one party has exclusive contractual authority. Parties to mandatory individual arbitration clauses cannot reasonably be said to have “come to the table” and bargained, since there is no bargaining table. That individuals and companies sign these contracts is a function not of bargaining choices, but of an absence of choice. 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. And its mandatory nature illustrates that the animating rationales of party autonomy and freedom of contract are nowhere to be seen.
By inserting the reasonableness requirement in s. 7(5)(b) of the Arbitration Act, 1991, the provincial legislature clearly contemplated that in certain circumstances, it would be unreasonable to separate the matters dealt with in the arbitration agreement from the other matters. The availability of judicial discretion in s. 7(5) does not require judges to allow a class action including arbitrable claims to proceed: it simply lets them decide when it is reasonable to do so. Eliminating judicial discretion, on the other hand, effectively eliminates access to justice. In this light, s. 7(5) must be interpreted to give judges the discretion to refuse to stay arbitrable claims if it is unreasonable to separate them from non‑arbitrable claims. This interpretation applies with equal force whether the proceeding is between two or more named parties, or is a class action. An interpretation of s. 7(5) of the Arbitration Act, 1991 which permits otherwise arbitrable matters to be joined with class actions in the public interest of avoiding duplicative proceedings, increased costs, and the risk of inconsistent results aligns with the text and scheme of the provisions and is consistent not only with the purposes motivating the enactment of the Arbitration Act, 1991 but also with the purpose of s. 7(5) itself.
TELUS’s 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. Both parties acknowledged the potential difficulties associated with drawing the line between a “consumer” as defined by the Consumer Protection Act, who is exempt from arbitration, and a business customer, who is not. This distinction may be especially difficult to determine for those individuals who use their cell phone for both personal and business purposes. For these individuals, determining whether they fall within the scope of the exception in the Consumer Protection Act adds unnecessary complexity.
The purpose of the Arbitration Act, 1991, was to facilitate the ability of parties to negotiate their own process for resolving disputes outside of the courts, on the premise that access to justice had as much to do with access to a result as with access to a judge. To impose arbitration on unwilling parties violates the spirit of the Arbitration Act, 1991 and the arbitral process. This operates as an invisible but formidable barrier to a remedy and presumptively immunizes wrongdoing from accountability contrary to our most fundamental notions of civil justice. Section 7(5)(b) of the Arbitration Act, 1991 gave the motions judge discretion to consider whether it was reasonable to separate the matters dealt with in the agreement (claims of business customers) from the other matters (the consumer claims). The discretion was properly exercised in this case to allow the business claims to be joined with the consumer class action dealing with the same issues.
Cases Cited
By Moldaver J.
Considered: Griffin v. Dell Canada Inc., 2010 ONCA 29, 98 O.R. (3d) 481; Seidel v. TELUS Communications Inc., 2011 SCC 15, [2011] 1 S.C.R. 531; referred to: Corless v. Bell Mobility Inc., 2015 ONSC 7682; Bisaillon v. Concordia University, 2006 SCC 19, [2006] 1 S.C.R. 666; Canadian National Railway Co. v. Canada (Attorney General), 2014 SCC 40, [2014] 2 S.C.R. 135; Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235; Radewych v. Brookfield Homes (Ontario) Ltd., 2007 CanLII 23358, aff’d 2007 ONCA 721; Johnston v. Goudie (2006), 212 O.A.C. 79; Penn‑Co Construction Canada (2003) Ltd. v. Constance Lake First Nation (2007), 66 C.L.R. (3d) 78, aff’d 2008 ONCA 768, 76 C.L.R. (3d) 1; Frambordeaux Developments Inc. v. Romandale Farms Ltd., 2007 CanLII 55364; New Era Nutrition Inc. v. Balance Bar Co., 2004 ABCA 280, 357 A.R. 184; Griffin v. Dell Canada Inc. (2009), 72 C.P.C. (6th) 158; Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801; Rogers Wireless Inc. v. Muroff, 2007 SCC 35, [2007] 2 S.C.R. 921; GreCon Dimter inc. v. J.R. Normand inc., 2005 SCC 46, [2005] 2 S.C.R. 401; Desputeaux v. Éditions Chouette (1987) inc., 2003 SCC 17, [2003] 1 S.C.R. 178; Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559; Re Rootes Motors (Canada) Ltd. and Wm. Halliday Contracting Co., [1952] 4 D.L.R. 300; Ontario Hydro v. Denison Mines Ltd., 1992 CarswellOnt 3497; Astoria Medical Group v. Health Insurance Plan of Greater New York, 182 N.E.2d 85 (1962); Re Arbitration Act (1964), 47 W.W.R. 544; Haas v. Gunasekaram, 2016 ONCA 744, 62 B.L.R. (5th) 1; Inforica Inc. v. CGI Information Systems and Management Consultants Inc., 2009 ONCA 642, 97 O.R. (3d) 161; Alberici Western Constructors Ltd. v. Saskatchewan Power Corp., 2016 SKCA 46, 476 Sask. R. 255; Briones v. National Money Mart Co., 2013 MBQB 168, 295 Man. R. (2d) 101, aff’d 2014 MBCA 57, 306 Man. R. (2d) 129; MDG Kingston Inc. v. MDG Computers Canada Inc., 2008 ONCA 656, 92 O.R. (3d) 4; Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87; Heller v. Uber Technologies Inc., 2019 ONCA 1.
By Abella and Karakatsanis JJ. (dissenting)
Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27; Griffin v. Dell Canada Inc., 2010 ONCA 29, 98 O.R. (3d) 481; Griffin v. Dell Canada Inc. (2009), 72 C.P.C. (6th) 158; Radewych v. Brookfield Homes (Ontario) Ltd., 2007 CanLII 23358, aff’d 2007 ONCA 721; Johnston v. Goudie (2006), 212 O.A.C. 79; Penn‑Co Construction Canada (2003) Ltd. v. Constance Lake First Nation (2007), 66 C.L.R. (3d) 78, aff’d 2008 ONCA 768, 76 C.L.R. (3d) 1; Frambordeaux Developments Inc. v. Romandale Farms Ltd., 2007 CanLII 55364; New Era Nutrition Inc. v. Balance Bar Co., 2004 ABCA 280, 245 D.L.R. (4th) 107; R. v. Alex, 2017 SCC 37, [2017] 1 S.C.R. 967; Rosedale Motors Inc. v. Petro‑Canada Inc. (1998), 42 O.R. (3d) 776; Brown v. Murphy (2002), 59 O.R. (3d) 404; Seidel v. TELUS Communications Inc., 2011 SCC 15, [2011] 1 S.C.R. 531.
Statutes and Regulations Cited
Arbitration Act, 1991, S.O. 1991, c. 17, ss. 1 “arbitration agreement”, 6, 7.
Class Proceedings Act, 1992, S.O. 1992, c. 6.
Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A, ss.1 “consumer”, “consumer agreement”, “supplier”, 7, 8.
Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 106, 138.
Interpretation Act, R.S.O. 1990, c. I.11, s. 10.
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 1.03(1) “proceeding”.
Authors Cited
Alberta. Institute of Law Research and Reform. Report No. 51. Proposals for a New Alberta Arbitration Act. Edmonton: Institute of Law Research and Reform, 1988.
Alberta Law Reform Institute. Final Report No. 103. Arbitration Act: Stay and Appeal Issues. Edmonton: Alberta Law Reform Institute, 2013.
Casey, J. Brian. Arbitration Law of Canada: Practice and Procedure, 3rd ed. Huntington, N.Y.: Juris, 2017.
Driedger, Elmer A. Construction of Statutes, 2nd ed. Toronto: Butterworths, 1983.
Estlund, Cynthia. “The Black Hole of Mandatory Arbitration” (2018), 96 N.C. L. Rev. 679.
McEwan, J. Kenneth, and Ludmila B. Herbst. Commercial Arbitration in Canada: A Guide to Domestic and International Arbitrations. Aurora, Ont.: Canada Law Book, 2004 (loose‑leaf updated December 2018, release 16).
McGill, Shelley. “The Conflict Between Consumer Class Actions and Contractual Arbitration Clauses” (2006), 43 Can. Bus. L.J. 359.
Ontario. Legislative Assembly. Official Report of Debates (Hansard), 1st Sess., 35th Parl., March 27, 1991, pp. 245, 256.
Ontario. Legislative Assembly. Official Report of Debates (Hansard), 1st Sess., 35th Parl., November 5, 1991, p. 3384.
Pavlović, Marina, and Anthony Daimsis. “Arbitration”, in John C. Kleefeld et al., eds., Dispute Resolution: Readings and Case Studies, 4th ed. Toronto: Emond Montgomery, 2016.
Sullivan, Ruth. Statutory Interpretation, 3rd ed. Toronto: Irwin Law, 2016.
Sullivan, Ruth. Sullivan on the Construction of Statutes, 6th ed. Markham, Ont.: LexisNexis, 2014.
Uniform Law Conference of Canada. Arbitration Amendment Act (2002) (online: https://www.ulcc.ca/en/uniform‑acts‑new‑order/drafting‑conventions/117‑josetta‑1‑en‑gb/uniform‑actsa/arbitration‑act/1108‑arbitration‑act‑amendment; archived version: https://www.scc-csc.ca/cso-dce/2019SCC-CSC19_2_eng.pdf).
Uniform Law Conference of Canada. Uniform Arbitration Act (1990) (online: https://www.ulcc.ca/images/stories/Uniform_Acts_EN/Arbitrat_En.pdf; archived version: https://www.scc-csc.ca/cso-dce/2019SCC-CSC19_1_eng.pdf).
APPEAL from a judgment of the Ontario Court of Appeal (Weiler, Blair and van Rensburg JJ.A.), 2017 ONCA 433, 138 O.R. (3d) 413, 413 D.L.R. (4th) 684, 100 C.P.C. (7th) 1, [2017] O.J. No. 2800 (QL), 2017 CarswellOnt 8100 (WL Can.), [2017] AZ‑51397363, affirming a decision of Conway J., 2014 ONSC 3318, 63 C.P.C. (7th) 50, [2014] O.J. No. 5613 (QL), 2014 CarswellOnt 16562 (WL Can.). Appeal allowed, Wagner C.J., Abella, Karakatsanis and Martin JJ. dissenting.
D. Geoffrey G. Cowper, Q.C., Andrew D. Borrell, Alexandra Mitretodis and Alan Dabb, for the appellant.
Joel P. Rochon, Peter R. Jervis, Golnaz Nayerahmadi and Eli Karp, for the respondent.
Jonathan Eades and James L. Maxwell, for the intervener the Attorney General of British Columbia.
Michael Eizenga, Andrew Little, Ranjan Agarwal and Charlotte Harman, for the intervener ADR Chambers Inc.
Brandon Kain, Adam Goldenberg and Ljiljana Stanić, for the intervener the Canadian Chamber of Commerce.
Mohsen Seddigh and Daniel Hamson, for the interveners the Public Interest Advocacy Centre and the Consumers Council of Canada.
Anthony Daimsis, for the intervener the Canadian Federation of Independent Business.
Marina Pavlović and Cynthia Khoo, for the intervener Samuelson‑Glushko Canadian Internet Policy and Public Interest Clinic.
Daniel E. H. Bach, Tyler J. Planeta and Michael Sobkin, for the intervener the Consumers’ Association of Canada.
The judgment of Moldaver, Gascon, Côté, Brown and Rowe JJ. was delivered by
Moldaver J. —
I. Overview
[1] This appeal requires the Court to decide what happens when a series of arbitration agreements, the Ontario Arbitration Act, 1991, S.O. 1991, c. 17 (“Arbitration Act”),[1] the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A (“Consumer Protection Act”), and a consumer/non-consumer class action collide.
[2] This collision occurred when the respondent, Avraham Wellman, filed a proposed class action in Ontario against the appellant, TELUS Communications Inc. (“TELUS”), on behalf of about two million Ontario residents who entered into mobile phone service contracts with the company during a specified timeframe. The class consists of both consumers and non-consumers, the latter being business customers. The action centres on the allegation that TELUS 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.
[3] The contracts in question, which were not negotiated, contain standard terms and conditions drafted by TELUS, including an arbitration clause which, broadly speaking, stipulates that all claims arising out of or in relation to the contract, apart from the collection of accounts by TELUS, shall be determined through mediation and, failing that, arbitration.
[4] By virtue of the Consumer Protection Act, however, this arbitration clause is invalid to the extent that it would otherwise prevent class members who qualify as “consumers” from commencing or joining a class action of the kind commenced by Mr. Wellman. Indeed, as we shall see, the Consumer Protection Act expressly shields consumers from a stay of proceedings under the Arbitration Act. Consequently, they are free to pursue their claims in court. The business customers, however, do not benefit from these protections. So where does this leave them?
[5] The answer, Mr. Wellman says, lies in s. 7(5) of the Arbitration Act which, read alongside s. 7(1), provides as follows:
Stay
7 (1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.
. . .
Agreement covering part of dispute
(5) 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.
[6] In Mr. Wellman’s submission, s. 7(5) grants the court discretion to allow all of the class members, consumers and business customers alike, to pursue their claims together in court, provided it would not be reasonable to separate their claims. This is so, Mr. Wellman maintains, despite the fact that the business customers contracted to resolve their claims through arbitration and would otherwise be bound by that agreement. The courts below, following Griffin v. Dell Canada Inc., 2010 ONCA 29, 98 O.R. (3d) 481, leave to appeal refused, [2010] 1 S.C.R. viii, agreed with Mr. Wellman.
[7] TELUS sees things differently. It contends that under s. 7(5), a court has no authority to refuse to stay claims that are subject to an otherwise valid and enforceable arbitration agreement. Rather, it says that the only exceptions to the general stay provision under s. 7(1) are found in s. 7(2), and unless one of those exceptions applies, claims that are subject to arbitration must be stayed — full stop. It submits that since none of these exceptions applies, the business customer claims must be stayed.
[8] For reasons that follow, I am of the view that s. 7(5) of the Arbitration Act does not grant the court discretion to refuse to stay claims that are dealt with in an arbitration agreement. To borrow the language from this Court’s decision in Seidel v. TELUS Communications Inc., 2011 SCC 15, [2011] 1 S.C.R. 531, it is not “a legislative override of the parties’ freedom to choose arbitration” (para. 40). Instead, as I will develop, when the s. 7 framework is considered along with the protections afforded by the Consumer Protection Act, it becomes clear that while the consumers remain free to pursue their claims in court, the business customers do not. Rather, they remain bound by the arbitration agreements into which they entered, thereby leaving them exposed to a stay under s. 7(1) of the Arbitration Act. The only potential exception to s. 7(1) sought to be invoked on behalf of the business customers in this case, the partial stay provision under s. 7(5), offers no assistance. This is because the sole “matter” at issue in the proceeding — alleged overbilling — is dealt with in the arbitration agreements into which the consumers and business customers entered, such that the first precondition set out in s. 7(5)(a) is not met. Consequently, the general rule under s. 7(1) is left intact insofar as the business customers are concerned.
[9] I would therefore allow the appeal and stay the business customer claims accordingly.
II. Background
A. TELUS Mobile Phone Service Contracts
[10] Mobile phone services arrived in Canada in the mid-1980s. For about a decade, the main service providers, including TELUS, billed customers on a per-minute basis. TELUS then started offering per-second billing but returned to per-minute billing in 2002.
[11] Throughout the relevant period, TELUS’s monthly plans included a fixed number of minutes for a set fee, with additional charges for excess usage. For example, TELUS offered a plan giving customers 50 minutes of service plus 50 local minutes for $30, with a charge of 30 cents for each additional local minute. Usage was calculated by rounding up call length to the next minute. So, for example, a call lasting one minute and one second was rounded up to two minutes.
[12] Each customer who signed up for a per-minute plan entered into a written contract incorporating TELUS’s standard terms and conditions, including an arbitration clause which, broadly speaking, stipulates that all claims arising out of or in relation to the contract, apart from the collection of accounts by TELUS, must be determined by private and confidential mediation and, failing that, private, confidential, and binding arbitration.
B. Mr. Wellman’s Class Action
[13] In 2006, Mr. Wellman entered into a per-minute plan with TELUS. Years later, he filed a proposed class action in Ontario against TELUS[2] alleging that between 2002 and 2010, TELUS’s standard terms and conditions made no mention of the practice of rounding up. The action consists of some two million Ontario residents who entered into per-minute plans with TELUS between August 2006 and July 2010. Seventy percent of the class members (about 1,400,000) are consumers who purchased plans for personal use, while 30 percent (about 600,000) are non-consumers who purchased plans for business use.
[14] Mr. Wellman, who pleads that he qualifies as a consumer, alleges that TELUS’s undisclosed practice of rounding up accelerated the depletion of the fixed number of minutes class members purchased and prematurely subjected them to excess usage charges. Consequently, he says, class members were overcharged and were not provided the number of minutes to which they were entitled. On this basis, he asserts three causes of action: breach of contract, breach of the Consumer Protection Act, and unjust enrichment. He claims $500 million in damages and $20 million in punitive damages on behalf of the class.
[15] Mr. Wellman brought a motion to have the action certified as a class action under the Class Proceedings Act, 1992, S.O. 1992, c. 6 (“Class Proceedings Act”).[3] In response, TELUS brought a motion to have the proceeding stayed with respect to the non-consumer claims, relying on the arbitration clause contained in its standard terms and conditions.
III. Statutory Provisions
[16] Two statutes lie at the heart of this appeal: the Arbitration Act and the Consumer Protection Act. The key sections of these two pieces of legislation are set out below. As it happens, there is some overlap in terms of section numbers, so care must be taken to keep in mind which statute is being discussed when a section number is referred to in these reasons.
Arbitration Act, 1991, S.O. 1991, c. 17
Definitions
1 In this Act,
“arbitration agreement” means an agreement by which two or more persons agree to submit to arbitration a dispute that has arisen or may arise between them;
. . .
Court Intervention
Court intervention limited
6 No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act:
1. To assist the conducting of arbitrations.
2. To ensure that arbitrations are conducted in accordance with arbitration agreements.
3. To prevent unequal or unfair treatment of parties to arbitration agreements.
4. To enforce awards.
Stay
7 (1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.
Exceptions
(2) However, the court may refuse to stay the proceeding in any of the following cases:
1. A party entered into the arbitration agreement while under a legal incapacity.
2. The arbitration agreement is invalid.
3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.
4. The motion was brought with undue delay.
5. The matter is a proper one for default or summary judgment.
Arbitration may continue
(3) An arbitration of the dispute may be commenced and continued while the motion is before the court.
Effect of refusal to stay
(4) If the court refuses to stay the proceeding,
(a) no arbitration of the dispute shall be commenced; and
(b) an arbitration that has been commenced shall not be continued, and anything done in connection with the arbitration before the court made its decision is without effect.
Agreement covering part of dispute
(5) 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.
No appeal
(6) There is no appeal from the court’s decision.
Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A
No waiver of substantive and procedural rights
7 (1) The substantive and procedural rights given under this Act apply despite any agreement or waiver to the contrary.
Limitation on effect of term requiring arbitration
(2) Without limiting the generality of subsection (1), any term or acknowledgment in a consumer agreement or a related agreement that requires or has the effect of requiring that disputes arising out of the consumer agreement be submitted to arbitration is invalid insofar as it prevents a consumer from exercising a right to commence an action in the Superior Court of Justice given under this Act.
. . .
Non-application of Arbitration Act, 1991
(5) Subsection 7 (1) of the Arbitration Act, 1991 does not apply in respect of any proceeding to which subsection (2) applies unless, after the dispute arises, the consumer agrees to submit the dispute to arbitration.
Class proceedings
8 (1) A consumer may commence a proceeding on behalf of members of a class under the Class Proceedings Act, 1992 or may become a member of a class in such a proceeding in respect of a dispute arising out of a consumer agreement despite any term or acknowledgment in the consumer agreement or a related agreement that purports to prevent or has the effect of preventing the consumer from commencing or becoming a member of a class proceeding.
IV. Decisions Below
A. Ontario Superior Court (Conway J.), 2014 ONSC 3318, 63 C.P.C. (7th) 50
[17] Before the motions judge, Conway J., TELUS conceded that s. 7(2) of the Consumer Protection Act shielded the consumers from the effect of the arbitration clause. It maintained, however, that the claims of the business customers, who enjoy no protection under the Consumer Protection Act, had to be stayed because they were subject to a valid and binding arbitration agreement.
[18] The motions judge disagreed. Relying on the Ontario Court of Appeal’s decision in Griffin, she held that s. 7(5) of the Arbitration Act grants the courts discretion to refuse a stay where it would not be reasonable to separate the matte