Supreme Court – cumbersome task of sorting of consumer/non-consumer claimants does not authorize courts to re-cast arbitral legislation – #185

Canada’s Supreme Court in TELUS Communications Inc. v. Wellman, 2019 SCC 19 held that section 7(5) of Ontario’s Arbitration Act, 1991, SO 1991, c 17 does not give courts discretion to refuse to stay claims dealt with by an otherwise valid arbitration agreement.  Though Ontario’s Consumer Protection Act, 2002, SO 2002, c 30, Sch A invalidates arbitration agreements to the extent they prevent consumers from pursuing claims in court, that policy choice does not extend to non-consumers who remain bound by their agreements to arbitrate.  Courts are to interpret legislation and not re-write it.

Mr. Avraham Wellman (“Mr. Wellman”) applied as class representative under Ontario’s Class Proceedings Act, 1992, SO 1992, c 6 for certification of a class action against TELUS Communications Inc. (“TELUS”).  The proposed class comprises Ontario residents with a written mobile phone service contract with TELUS between August 2006 and July 2010 containing billing plans by which TELUS billed on a per-minute basis (the “Contracts”).  Mr. Wellman alleged that TELUS did not disclose its practice of rounding up the length of each call to the next minute (“rounding up”).  A call of 61 seconds would be rounded up to two (2) minutes. 

The effect of rounding up would be to accelerate the “depletion of the fixed number of minutes” in a class member’s plan and trigger the obligation to pay “excess usage charges” (“overbilling”). 70 percent of the class members were consumers, having agreed to sign with TELUS for their personal use, and 30 percent had signed plans for business use.

The Contracts contained an arbitration clause which stipulated that all claims arising out of or in relation to the contract, apart from account collections, must be determined by private and confidential mediation and, failing that, private, confidential and binding arbitration.

TELUS responded with a motion to stay claims involving non-consumer class members, relying on the arbitration agreement.

Mr. Wellman argued that: (i) section 7(5) of the Arbitration Act granted courts discretion to allow consumer and non-consumers to litigate their disputes in court as class members provided that it would not be reasonable to separate the two (2) categories of claims; and, (ii) Griffin v. Dell Canada Inc., 2010 ONCA 29 served as a precedent for the exercise of such discretion.

TELUS argued that: (i) section 7(5) provides courts no authority to refuse a stay for claims that are otherwise subject to valid and enforceable arbitration agreements; (ii) the only exceptions to a stay under section 7(1) are those set out in section 7(2); and, (iii) unless one of the section 7(2) exceptions applies, the litigation covering those claims subject to arbitration must be stayed.

The Superior Court and the Court of Appeal agreed with Mr. Wellman but the SCC sided with TELUS and overturned the two (2) lower court decisions. At paras 17-20, the SCC summarizes Madam Justice Barbara A. Conway’s reasoning in first instance in Wellman and Corless v. TELUS and Bell, 2014 ONSC 3318.  At paras 21-28, the Court summarizes the Ontario Court of Appeal’s reasoning in Wellman v. TELUS Communications Company, 2017 ONCA 433.  The latter reasons include two (2) sets which concur in the result but provide broader or narrower grounds for upholding Conway J.’s result.

In his concurring reasons, Mr. Justice Robert A. Blair foreshadowed the analysis the SCC eventually took on appeal.  He raised two (2) questions which the SCC set out at paras 27-28 of its reasons.  First, he considered the meaning of “other matters” in section 7(5) and whether that phrase could be read in a manner which “cross-pollinates” the stay from a single arbitration agreement context to the other agreements involving other parties.  Second, he challenged the “simple expedient of adding consumer claims” and “wrapping all claims in the cloak of a class proceeding”, thereby allowing the Class Proceedings Act to “override” the Arbitration Act and “sidestep” impediments to proceeding in the court with a claim subject to arbitration.

On appeal, the SCC in a split 5:4 decision held that section 7(5) does not grant courts discretion to refuse a stay of arbitrable claims not subject to the Consumer Protection Act.  Borrowing a phrase from Seidel v. TELUS Communications Inc., [2011] 1 SCR 531, 2011 SCC 15, the SCC held that section 7(5) is not “a legislative override of the parties’ freedom to choose arbitration”.

Mr. Justice Michael Moldaver, writing for the majority, set out the majority’s reasoning at paras 29-105.  Madam Justice Rosalie Abella and Madam Justice Andromache Karakatsanis, writing for the dissent, set out their reasoning at paras 106-172.  References in this note to “the SCC” are to the majority.

To frame its analysis, the SCC provided brief overviews of Griffin v. Dell Canada Inc., 2010 ONCA 29 and Seidel v. TELUS Communications Inc., [2011] 1 SCR 531, 2011 SCC 15, at paras 32-36 and 37-46.  Both decisions played a pivotal role in the lower courts, with the Ontario Court concluding that Griffin v. Dell Canada remained good law and remained consistent with the later Seidel v. TELUS Communications Inc.

To determine how to interpret section 7 of the Arbitration Act, the SCC looked first to the purpose and scheme of the Arbitration Act and Section 7 in particular, examining its framework.  The SCC stated the general rule in section 7(1) and then looked to the five (5) exceptions in section 7(2).  It then focused in on section 7(5) and its provision for a partial stay.

Section 7(5) contained two (2) preconditions.  First, the court litigation or “proceeding” must involve both of the following: (i) a least one (1) matter that is dealt with in the arbitration agreement and (ii) at least one (1) matter that is not.  Second, it must be reasonable to separate the matters dealt with in the agreement from those that are not.  If the preconditions are not met, the discretion under section 7(5) “is not triggered”.  The SCC was blunt:“[t]his follows as a matter of logic”. 

The SCC took Mr. Wellman to task for resisting the interpretation given to the preconditions in section 7(5).  See specifically J. Brian Casey, Arbitration Law of Canada: Practice and Procedure, 3rd ed. Huntington, N.Y.: Juris, 2017. pp. 352-353. The SCC found that Mr. Wellman’s resistance went against the logic of the section itself, ran counter to the grammatical structure of the section and was at odds with the policy of the Arbitration Act requiring parties to valid arbitration agreements to abide by those agreements.

At para. 77, the SCC listed five (5) policy concerns Mr. Wellman raised which supported Mr. Wellman’s interpretation: access to justice and the courts; abuse of arbitration clauses in adhesion contracts; shrinking class sizes; multiplicity of proceedings; and, difficulty distinguishing between consumers and non-consumers.   In its reasons, the SCC addressed each of them in turn but, prior to doing so, commented on the interplay of policy set by legislatures and interpretation given by courts.

[79] While I appreciate these concerns, I am respectfully of the view that they 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 the provision say something it does not. While policy analysis has a legitimate role in the interpretative process (see [Ruth Sullivan, Sullivan on the Construction of Statutes, 6th ed. Markham, Ont.: LexisNexis, 2014], at pp. 223-50), the responsibility for setting policy in a parliamentary democracy rests with the legislature, not with the courts. The primary role of the courts, in my view, is to interpret and apply those laws according to their terms, provided they are lawfully enacted. It is not the role of this Court to re-write the legislation.

The SCC noted that the Ontario legislature had already chosen a policy to exempt consumers – and only consumers – from the enforcement of arbitration agreement. To respect that choice, the courts are not allowed to interpret section 7(5) in a way that “permits courts to treat consumers and non-consumers as one and the same.

Recognizing such policies does not allow courts to read the Arbitration Act in a way that allows the policies to “overwhelm” express objectives of legislation.  The SCC majority disagreed with the SCC dissent giving too much prominence to policy over express wording.

[83] …  Respectfully, my colleagues’ approach 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 — even a heavily negotiated one between sophisticated commercial entities — to avoid their agreement and seek relief in court.

The SCC also sought to reframe the issue.  “This case is not about debating the merits and demerits of enforcing arbitration clauses contained in standard form contracts. Rather, it is about the proper interpretation of s. 7(5) of the Arbitration Act.” 

The SCC resisted reading into the Arbitration Act the perception that it was designed for freely negotiated arbitration agreements.  It noted that nothing in the Arbitration Act suggested that standard form arbitration agreements “characterized by an absence of meaningful negotiation” were unenforceable per se.

With a nod to but no express support for Heller v. Uber Technologies Inc., 2019 ONCA 1, the SCC confirmed that Mr. Wellman had not argued that the standard form arbitration agreement was unconscionable.   In mentioning unconscionability, the SCC merely noted that “stretching the language” of section 7(5) was not the appropriate avenue to argue potential unfairness caused by enforcing such agreements.

The SCC readily acknowledged that it might be difficult to determine who was and was not a consumer but that difficulty did not justify re-orienting the interpretation of any express wording in the legislation. “While sorting between consumers and non-consumers may be “cumbersome” in certain cases, this inconvenience does not permit the court to re-cast the legislation as it sees fit in order to avoid such difficulties. Instead, the courts must work within the framework established by the legislature, including at the class certification stage.

Developing the second question raised by Blair J.A. in his concurring reasons, the SCC did not accept that non-consumers should be allowed to “piggyback” or “tag along” just because it might be “cumbersome” to separate the groups.  It objected to the result by which such non-consumers would be allowed “to find the inside of a courtroom despite having agreed to arbitration”.

In similar fashion, the SCC also objected to an interpretation of section 7(5) by which a class action would be certified in its entirety so long as a single consumer was part of the class of members.   Doing so would “open the courthouse doors to all”.  At para. 97, the SCC examined the wording of the Consumer Protection Act and noted how the definitions applied to a particular type of contract namely between a consumer and a supplier which, once met, triggered a “legislative override”. Extending the carefully worded, specific protection of the Consumer Protection Act to non-consumers otherwise subject to the Arbitration Act would be unacceptable:

[98] … If non-consumers bound by a valid arbitration agreement could do an end run around s. 7(1) of the Arbitration Act simply by joining their claim with that of a consumer and pointing to s. 7(5) of the Consumer Protection Act, then this provision could become a vehicle for “piggybacking” non-consumer claims onto consumer claims. Indeed, if such an interpretation were accepted, a class action proceeding brought on behalf of millions of non-consumers who are each bound by an arbitration agreement would, if certified, be permitted to proceed in court in its entirety so long as a single consumer joined the class. In this way, the inclusion of a single consumer would be enough to open the courthouse doors to all.

The non-consumers cannot avoid a stay under section 7(1) the Arbitration Act by invoking the Consumer Protection Act.  Only sections 7(2) and 7(5) provide potential solutions but neither of them applied to non-consumers in the case.  Mr. Wellman had not argued that any of the exceptions in section 7(2) applied and section 7(5) “stands as the business customers’ only possible pathway into court”.

The SCC the determined that section 7(5) did not apply to those non-consumers.  The first of the two (2) preconditions set out in sections 7(5)(a) and 7(5)(b) had not been met.  The class proceeding involved a single matter – overbilling – and not two.  That single matter was caught by the arbitration agreement.  “As such, the first precondition is not met, so s. 7(5) has nothing to say.” Since section 7(5) did not apply, the proceeding must be stayed under section 7(1).  The stay would be restricted to those non-consumers bound by arbitration agreement.