Québec – ‘best to leave it to the Supreme Court to reverse or distinguish its own majority decisions’ – #431

In authorizing a class action, Mr. Justice Sylvain Lussier in Société AGIL OBNL v. Bell Canada, 2021 QCCS 365 excluded from the group’s definition those members bound by standard form contracts containing an agreement to arbitrate.  Representative plaintiff had not signed such a contract and evidence of the circumstances of signature would be speculative, adding that it ‘would be unfair to impose on [representative plaintiff] the burden of pleading a question which does not concern it’.  Lussier J. also declined to remit the issue of the agreement to arbitrate to a subsequent declinatory motion as ‘one cannot refer a hypothetical file to a non-existent arbitrator’.  Lussier J. gave the parties the opportunity to comment on Uber Technologies Inc. v. Heller, 2020 SCC 16 which issued after their hearing but distinguished it as having been decided on common law rather than civil law legislation and argued by a representative plaintiff bound by the actual disputed agreement to arbitrate. In comments preceding his consideration of Uber Technologies, Lussier J. declined to accept the invitation to adopt the dissent’s comments in TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 SCR 144 because ‘it is best to leave it to the Supreme Court to reverse or distinguish its own majority decisions’. 

Société AGIL, OBNL (“AGIL”) a not-for-profit organization, signed an August 30, 2017 contract with Bell Canada (“Bell”) for the supply of IP telephony services (“Contract”). The Contract stipulated a monthly service fee of $464.50 plus taxes for the thirty-six (36) month term plus fees for any pre-term resiliation (termination). 

Planning, development and design of the telecommunication system, equipment installation, connection and migration of the telecommunication system took place between August 15, 2017 and October 17, 2017.  The telecommunication system went live October 18, 2017.  On February 20, 2018, AGIL informed Bell it ceased its activities and sought disconnection of the services and resiliation of the Contract effective March 28, 2018. Bell complied, terminating the services and charged AGIL $7,347.47, or fifty (50) percent of the balance of the contract, which AGIL paid under protest.

AGIL applied for authorization to institute a class action (“Application”) under article 574 and following of the Code of Civil Procedure, CQLR c C-25.01  (“C.C.P.”).  In Société AGIL OBNL v. Bell Canada, 2019 QCCS 4432, Lussier J. granted Bell’s application for leave to file evidence on specific aspects relevant to authorization of the class action.  With leave, Bell filed evidence regarding the composition of its business clientele which Bell classified as either “Small Business” or “Business”.  

Bell submitted that the contractual terms of each category of clientele differed in fundamental ways.  Aside from restrictions on a Small Business client’s ability to negotiate or make changes to Bell’s standard form contracts, contractual terms for Small Business included an agreement to arbitrate, reproduced at para. 28.  AGIL’s Contract apparently did not include the same agreement to arbitrate

Bell’s Small Business contract’s agreement to arbitrate, reproduced at para. 10 in its French language version from the Contract, included a reference to the online source of Bell’s Arbitration Policy in French (“Arbitration Policy”).  (A version of the Arbitration Policy in English is accessible online as well.)  The agreement to arbitrate covers disputes involving contractual, extra-contractual (tort) and statutory claims and provides for final and binding arbitration, without appeal, before a sole arbitrator, to the exclusion of the courts, in the province/territory of the client’s billing address pursuant to (i) Bell’s Arbitration Policy and (ii) the arbitration legislation applicable in the province/territory of the client’s billing address.

Lussier J. recorded Bell’s further submissions that, unlike Small Business contracts, the contracts with Business clientele were “unique”, reflecting a more bespoke approach and the particular needs and arrangements discussed and negotiated, including resiliation rights and fees.

The term “resiliation” appears in different sections of the Civil Code of Québec, CQLR c CCQ-1991 (“C.C.Q.”), including for nominate contracts, such as contracts of service. 

Article 2098 C.C.Q. A contract of enterprise or for services is a contract by which a person, the contractor or the provider of services, as the case may be, undertakes to another person, the client, to carry out physical or intellectual work or to supply a service, for a price which the client binds himself to pay to him”.

Article 2125 C.C.Q. allows a client to unilaterally resiliate a contract for services even though the work or provision of services is already in progress.  Absent agreement, that right is not automatically available to the service provider who is subject to other default provisions in article 2126 C.C.Q.

AGIL’s Application tasked Lussier J. with considering each of the component elements set out in article 575 C.C.P. relying on Infineon Technologies AG v. Option consommateurs, 2013 SCC 59 (CanLII), [2013] 3 SCR 600, Vivendi Canada Inc. v. Dell’Aniello, 2014 SCC 1 (CanLII), [2014] 1 SCR 3, L’Oratoire Saint‑Joseph du Mont‑Royal v. J.J., 2019 SCC 35 and Desjardins Financial Services Firm Inc. v. Asselin, 2020 SCC 30.

Article 575 C.C.P. The court authorizes the class action and appoints the class member it designates as representative plaintiff if it is of the opinion that

(1)   the claims of the members of the class raise identical, similar or related issues of law or fact;

(2)   the facts alleged appear to justify the conclusions sought;

(3)   the composition of the class makes it difficult or impracticable to apply the rules for mandates to take part in judicial proceedings on behalf of others or for consolidation of proceedings; and

(4)   the class member appointed as representative plaintiff is in a position to properly represent the class members”.

Among the issues Lussier J. identified at paras 34-39, Lussier J. noted that AGIL’s Application required him to consider whether the agreement to arbitrate in contracts for Small Business blocked authorization of the class action for those bound by those contracts.

At paras 80-109, Lussier J. evaluated the composition of the proposed class and the role the agreement to arbitrate played, if any.

Bell argued that the agreement to arbitrate for Small Business clients resulted in the Superior Court having no jurisdiction to determine the dispute between it and those clients bound the agreement to arbitrate.  Bell relied on article 622 C.C.P. and precedents which had denied authorization of class actions in similar cases.  See Bisaillon v. Concordia University, 2006 SCC 19, [2006] 1 SCR 666, Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 SCR 801, Telus Mobilité v. Comtois, 2012 QCCA 170 and 9238-0831 Québec inc. v. Télébec, 2018 QCCS 4954 (aff’d Télébec v. 9238-0831 Québec Inc. (Caféier-Boustifo), 2020 QCCA 1720).  With regard to the latter decision, Lussier J. noted that plaintiff’s counsel had consented to the dismissal.

Lussier J. next referred at paras 83-86 to9369-1426 Québec Inc. (Restaurant Bâton Rouge) v. Allianz Global Risks US Insurance Company, 2021 QCCS 47.  (See the additional comment below in urbitral notes).  That case involved a proposed class action involving claims under an insurance policy for indemnification for business interruption due to COVID-19 measures.  The only means to resist referral to arbitration was to declare the nullity of the agreement to arbitrate. 

In the case before him, Lussier J. recorded AGIL’s invitation to declare null the agreement to arbitrate which bound the Small Business clients by considering the parties’ consent to the agreement to arbitrate and it proportionality regarding the modest individual claims anticipated.  Referring to 9369-1426 Québec Inc. (Restaurant Bâton Rouge) v. Allianz Global Risks US Insurance Company, Lussier J. noted that the court dismissed similar arguments in the absence of further evidence to support them.

Despite AGIL’s further invitation to adopt the comments of the dissent at paras 157, 163 and 170 in TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 SCR 144, Lussier J. expressly declined to do so because ‘it is best to leave it to the Supreme Court to reverse or distinguish its own majority decisions’.  Lussier J. excerpted only phrasings from those three (3) paras but see below in the urbitral notes for their fuller text.

Lussier J. noted that AGIL and Bell had pleaded on the Application before Uber Technologies Inc. v. Heller, 2020 SCC 16 issued but that each party had the opportunity to and did comment on it.  AGIL issued a new invitation to Lussier J., submitting that he too declare the nullity of the agreement to arbitrate in contracts for Small Business clients and, having done so, thereby include in the class definition those Bell clients bound by Small Business contracts.

Lussier J. declined to do so, referring to the analytic framework set out in Dell Computer and Seidel v. TELUS Communications Inc., 2011 SCC 15, [2011] 1 SCR 531.  AGIL argued that the arbitration legislation in the cases referred to – involving Ontario, B.C. and Québec legislative provisions – shared sufficient similarities and applied to the approach urged by AGIL.

AGIL was not a party to a Small Business contract and any evidence regarding the circumstances of the signature of such contracts by potential class members was purely speculative.  Lussier J. added that AGIL ‘need not defend a position which does not apply to it’.

Observing that Uber Technologies Inc. v. Heller, 2020 SCC 16 rested on a common law analysis of the inequities in the contract, Lussier J. required that the analysis in the matter before him proceed in a manner consistent with the C.C.Q. provisions governing arbitration.

[informal translation] ‘[98] Regarding the analysis undertaken by the Supreme Court in Uber, the state of the present file does not permit to rule on the question at the authorization stage.  That is not any reproach, AGIL not being a party to such contracts.  It would be unfair to impose on it the burden of pleading a question which does not concern it, be it at the authorization stage, for a declinatory application or on the merits.

[99] The court notes that to remit the analysis to a debate on the declinatory in the present file would have an artificial character given that one cannot refer a hypothetical file to a non-existent arbitrator’.

Lussier J. at para. 100 observed that ‘serious arguments’ could be made to Bell regarding the validity of the agreement to arbitrate and its Arbitration Policy and it would therefore be ‘inappropriate’ to dismiss the proposed class action involving Small Business clients.

[informal translation] ‘[101] In the absence of a representative having signed such a [Small Business] contract, it is more prudent to exclude from the group the Small Business signatories of such contracts.  It would always be possible to apply for permission to add such representative, if need be, and to modify the group as a result [referring to article 588(2) C.C.P.]’. 

Having addressed the other elements applicable to authorization of a class action, Lussier J. did authorize the class action on specific terms and, in doing so, expressly excluded ‘Small Business clients having signed a contract containing an arbitration clause’.

urbitral notes – First, Lussier J.’s comment that it is best to leave to the Supreme Court reversals and distinctions of its own majority case law, see the earlier Arbitration Matters note “Supreme Court – for those SCC justices willing to consider it, Vavilov applies to private commercial arbitration where legislation provides for appeal – #420”.

Canada’s Supreme Court in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 offered to clarify a contracting party’s duty to exercise in good faith a discretion granted to it by contract and recognized in Bhasin v. Hrynew, 2014 SCC 71.  In dismissing the appeal from Greater Vancouver Sewerage and Drainage District v. Wastech Services Ltd., 2019 BCCA 66, the Supreme Court upheld a decision in first instance to set aside a private, commercial arbitration award.  The appeal presented an opportunity for the Supreme Court to consider the effect, if any, of Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 on the standard of review principles applicable to appeals of commercial arbitration awards set out in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 and Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32.

Regarding that opportunity, six justices preferred to “leave [it] to another day” while the other three chose to embrace it, considering that to “leave this undecided is to invite conflict and confusion”.  The six reasoned that they did not have the benefit of submissions on that question or the assistance of reasons on point from the courts below and that, in any event, the appeal’s outcome did not depend on identifying whether the proper standard of review was correctness or reasonableness.

Second, regarding 9369-1426 Québec Inc. (Restaurant Bâton Rouge) v. Allianz Global Risks US Insurance Company, 2021 QCCS 47, see the earlier Arbitration Matters note “Québec – no legal principle to support applying competence-competence for mediation – #415”.  In a proposed class action involving claims under an insurance policy for indemnification for business interruption due to COVID-19 measures, Mr. Justice Gary D.D. Morrison in 9369-1426 Québec inc. (Restaurant Bâton Rouge) v. Allianz Global Risks US Insurance Company, 2021 QCCS 47 referred the parties to mediation and arbitration and dismissed the application for authorization. 

While Québec law did not state that parties to an insurance contract can submit their disputes to arbitration, it also does not stipulate that they cannot.  The C.C.P.’s class action provisions are procedural and do not modify substantive law or create jurisdiction for the courts over disputes which parties have lawfully excluded. Having relied in part on proportionality to refer the parties, Morrison J. declined to comment on whether his order would “require each individual insured to proceed by way of the lengthy and costly dispute resolution process, which may discourage many from exercising their rights”.  Morrison J. also held that competence-competence does not arise in referral to mediation “as there exists no legal principle in support of such an approach”.

Third, for ease of reference, below are the fuller passages of the three (3) noted by Lussier J. when outlining AGIL’s arguments drawn from the dissent in TELUS Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 SCR 144.

[157] Finally, 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”.

[163] The empirical reality is that the effect of mandatory arbitration clauses is to deny access to justice in the context of low-value claims. As Prof. Cynthia Estlund points out,

. . . the great bulk of disputes that are subject to mandatory arbitration agreements . . . simply evaporate before they are even filed. It is one thing to know that mandatory arbitration draws a thick veil of secrecy over cases that are subject to that process. It is quite another to find that almost nothing lies behind that veil. Mandatory arbitration is less of an “alternative dispute resolution” mechanism than it is a magician’s disappearing trick or a mirage. Metaphors beckon, but I have opted for that of the black hole into which matter collapses and no light escapes.

(Cynthia Estlund, “The Black Hole of Mandatory Arbitration” (2018), 96 N.C. L. Rev. 679, at p. 682)”.

[170] 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”.