The Supreme Court of Canada's decision to exclude commercial claimants from a class action alleging overbilling by Telus demonstrates the tension between upholding arbitration clauses and facilitating access to justice, say lawyers who practise in alternative dispute resolution and class actions.
In a 5-4 decision, the court said only non-business customers could be included in a class action against the telecommunications company for alleged overbilling.
"[The decision] finally gives us clarity on the commercial side as to whether arbitration clauses would be upheld," says Craig Lockwood, a partner at Osler, Hoskin & Harcourt LLP in Toronto.
The case demonstrated the tension between two principles of the justice system: securing access to justice, and promoting party autonomy and the requirement to abide by contracts, says Lockwood.
"Class actions are the quintessential vehicle where consumers and commercial parties can perserve their rights to access to justice," he says. "On the other hand, you have a similar bedrock of our legal foundation which is: parties should be held to [their] obligations."
The Ontario Superior Court certified the class action in 2014 against Telus on behalf of two million Ontarians who had per-minute phone plans with Telus between August 2006 and July 2010. While 70 per cent of claimants purchased plans for personal use, the remaining 30 per cent purchased plans for business use, the Supreme Court's April decision says.
The contract with Telus includes a clause stipulating that all disputes, except those related to collection, must be resolved through private and confidential mediation, and if mediation fails, private and confidential arbitration. However, as the court's decison says, Ontario's Consumer Protection Act allows consumers to pursue class actions.
Telus had originally asked for business customers not be included in the class action. The Superior Court rejected that request. Telus appealed. In 2017, the Ontario Court of Appeal agreed that business users should also be included in the class action.
The federal court disagreed with the lower courts' decisions.
Writing for the majority, Justice Michael Moldaver said the court was to take a "hands off approach to matters governed by (the Arbitration Act)," saying that this response affirmed party autonomy.
Justices Clement Gascon, Suzanne Cote, Russell Brown and Malcolm Rowe agreed.
The majority concluded if business customers were meant to be included in the Consumer Protection Act, the law would have reflected that.
"The legislature made a careful policy choice to exempt consumers — and only consumers — from the ordinary enforcement of arbitration agreements," the decision says, noting the legislature's decision "must be respected."
Michael Schafler, a partner at Dentons LLP in Toronto who has extensive experience in litigation and dispute resolution, says this decision demonstrates how the supreme court is going to approach these cases.
"When these situations arise, the courts are going to take a very careful look at the overriding legislative context, and they are going to determine whether the particular case that's being asserted should effectively be referred to private arbitration because that's what the parties have agreed to do, or if there is an express legislative override to assure that access to justice," he says.
The minority opinion said banning business customers from the lawsuit restricted their ability to access justice.
"Arbitration was intended to be a means by which parties on a relatively equal bargaining footing chose to design an alternative dispute mechanism," Justices Rosalie Abella and Andromache Karakatsanis wrote for the dissent, which included Chief Justice Richard Wagner and Justice Sheilah Martin.
"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."
The majority view also recognized the importance of access to justice, but argued the decision in this case was about how to properly interpret Ontario's Arbitration Act.
"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," the decision says.
Businesses are excluded from the Consumer Protection Act because they are viewed as less vulnerable than consumers, says Lockwood.
"The going assumption is that (businesses) are sophisticated and should at least be aware of their legal rights and exercising those rights," says Lockwood. "When they enter into a commercial contract they should be bound by the terms of that contract."
This case could invite review, and possible change to Ontario's laws, Schafler says.
"It may be that this isn't the last chapter in this story. I think it's the last chapter in the courts for the time being. It could be that this matter continues to have a life in the legislative context."
Lockwood agrees. "As much as it's a helpful decision, it is firmly grounded in the Ontario statute, so the broader conceptual issue is still out there," he says.
William Horton, an independent arbitrator and lawyer with William G. Horton Corporation in Toronto, says the case shows weaknesses with Ontario's Class Proceedings Act. The court "didn't really have any good option," he says.
"I think if claims are certifiable as a class action, they should not be excluded on the basis of an arbitration agreement unless the arbitration agreement provides an effective alternative remedy," he says. "In most of these cases, the arbitration agreement is not really a legitimate form of dispute resolution. It's only purpose is to prevent class actions from being certified. Once the class action is certified, very few if any of those claims are going to go to arbitration."
Horton says this case demonstrates the problem with arbitration clauses, like the ones in the Telus agreement.
"These arbitration agreements are not real arbitration agreements. They're not intended to produce any arbitrations. They're intended to shut down any effective remedy that might be available," he says.