Canada: TELUS v Wellman: SCC Rules Business Customers Can No Longer Piggyback On Consumer Class Actions

Last Updated: April 23 2019
Article by Gillian B. Dingle, Stacey Reisman (Danis) and Melody Burke

In a 5-4 split in TELUS Communications Inc. v. Wellman, the Supreme Court of Canada (SCC) held that, in the context of consumer class actions, business customers remain bound by arbitration clauses in agreements.1 The April 4 decision clarifies the reach of the protections under the Ontario Consumer Protection Act (CPA), and the validity of standard form arbitration clauses in the context of class actions involving both consumers and non-consumers.

What you need to know

  • Business customers will not be included as class members in consumer class actions where the agreement at issue contains a valid arbitration clause. Although arbitration clauses are generally invalid in the context of consumer agreements, business customers do not qualify as consumers and cannot invoke the protections under the CPA by piggybacking onto consumer claims.
  • Courts do not have the discretion to ignore an otherwise valid arbitration clause, even where it might be reasonable to do so. While sorting between consumers and non-consumers may be cumbersome in certain cases, this inconvenience does not permit courts to disregard valid arbitration agreements in order to avoid such difficulties.
  • The decision to exempt certain parties from the enforcement of arbitration agreements lies with the legislature, not the courts. Here, the legislature made a careful policy choice to exempt consumers—and only consumers—from the ordinary enforcement of arbitration agreements. Without legislative language to the contrary, arbitration clauses will generally be enforced.
  • While not at issue in this case, the majority suggested that any arguments over the potential unfairness resulting from the enforcement of arbitration clauses contained in standard form contracts are better dealt with directly through the doctrine of unconscionability.

Background

The plaintiff filed a proposed class action in Ontario against TELUS, alleging TELUS was improperly overcharging customers by rounding up calls to the next minute without disclosing this practice to consumers. The proposed class included both consumers and business customers. The service contracts between TELUS and each of its customers contained a standard form arbitration clause requiring that all contractual disputes be resolved through binding arbitration.

TELUS conceded that the statutory prohibition in Ontario's CPA invalidated the arbitration clauses in the consumer contracts. However, TELUS sought a partial stay as against the business customers on the basis that those customers remain bound by the arbitration clause contained in their service agreements.

The motions judge refused TELUS's motion to stay the claims of the business customers. Relying on section 7(5) of the Arbitration Act, she held that courts have the discretion to allow non-consumer claims that are otherwise subject to mandatory arbitration to participate in a consumer class action where it would be reasonable to do so. The Court of Appeal dismissed TELUS's appeal.

The decision

Justice Moldaver, writing for the majority, concluded that business customers cannot invoke the protections afforded to consumers under the CPA. Business customers do not qualify as consumers and, as such, they remain bound by the arbitration agreements into which they entered. Allowing persons who are not consumers to do an end run around the Arbitration Act by simply joining their claims with those of consumers would erode the policy that parties to a valid arbitration agreement should abide by their agreement.

In reversing the motions judge and the Court of Appeal, the majority confirmed that section 7(5) of the Arbitration Act does not give courts the discretion to ignore a valid and binding arbitration agreement, even where it would be reasonable to do so. Section 7(5) provides an exception to the general rule that courts are required to stay proceedings that are subject to a mandatory arbitration clause. However, section 7(5) applies only if two preconditions are met: (i) the proceeding must involve at least one matter that is dealt with in the arbitration agreement and at least one matter that is not, and (ii) it would be reasonable to separate the matters. Because the sole matter in this proceeding—the alleged overbilling—was dealt with in the arbitration agreements, the majority held that the first precondition was not met.

The majority acknowledged the policy concerns raised by the dissenting justices, including the importance of promoting access to justice, the difficulty of distinguishing between consumers and non-consumers, and the potential unfairness caused by enforcing arbitration clauses contained in standard form contracts, but concluded that such concerns "cannot be permitted to distort the actual words of the statute...so as to make the provision say something that it does not."2 This is in keeping with the SCC's previous decisions involving arbitration agreements in the context of class actions, such as Dell and Seidel. The responsibility for setting policy rests with the legislature, not with the courts, and the legislature made a careful policy choice to exempt consumers—and only consumers—from the ordinary enforcement of arbitration agreements.

The majority allowed the appeal and stayed claims of approximately 600,000 TELUS business customers.

Justices Abella and Karakatsanis, writing for the dissent, would have dismissed the appeal. The disagreement with the majority's conclusion hinged on the application of section 7(5). In the dissent's view, this provision reflects an explicit legislative intention to override an otherwise applicable arbitration clause by affording courts the discretion to grant or refuse a partial stay.

Considerations

This decision provides necessary guidance in navigating the relationship between arbitration and civil litigation, particularly in the context of consumer class actions. The majority's narrow reading of section 7(5) reinforces the binding nature of arbitration agreements and confirms that Ontario courts do not have the discretion to decline to stay a proceeding where there is an otherwise valid arbitration clause, even in contracts of adhesion. Although not at issue in this case, the majority suggested that any arguments over the potential unfairness resulting from the enforcement of arbitration clauses contained in standard form contracts are better dealt with directly through the doctrine of unconscionability.

Footnotes

1. See 2019 SCC 19.

2. para. 79

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Osler, Hoskin & Harcourt LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Osler, Hoskin & Harcourt LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions