Law Times

Law TiMes • March 28, 2011 Legislatures can restrict scope of arbitration: SCC BY JULIUS MELNITZER For Law Times jurisdiction over consumer disputes, the Supreme Court of Canada has ruled. Th e ruling gives a huge boost to the P plaintiff s' bar and consumer advocates who have been battling companies' re- sort to mandatory arbitration clauses in consumer contracts as a means of cir- cumventing class actions. Ontario, Quebec, and Alberta all have consumer protection legislation that pro- hibits or limits waivers of class proceed- ings in favour of mandated arbitration. "Th e ruling makes sense because the source of arbitration jurisdiction tends to be consensual and nourished by leg- islation," says Ivan Whitehall of Heenan Blaikie LLP's Ottawa offi ce. He, along rovincial and federal legislatures have the power to narrow the scope of arbitrators' contractual tion of law or one of mixed law and fact that requires for its disposition "only su- perfi cial consideration of the documen- tary evidence in the record." But a 5-4 majority of the Supreme Court thought otherwise. Writing for the majority, Justice Ian Binnie ruled that whether or not s. 172 had the eff ect claimed was a question of law to be determined on undisput- ed facts. Th e competence-competence principle, therefore, didn't apply. As Binnie saw it, the question of re- stricting arbitration clauses was a legis- lative matter. Generally speaking, the courts would give eff ect to such clauses. Here, however, s. 172 aimed to en- courage private enforcement in the public interest following upon a legislative deter- mination that a well-publicized court ac- tion would do a better job of promoting adherence to consumer standards than private and confi dential arbitration. Furthermore, the class action waiver in the contract wasn't severable from the arbitration clause. Th e minority, however, held that the waiver clause applied absent explicit legis- lative intent to foreclose the use of arbitra- tion to resolve disputes under the B.C. act. In the view of the dissenting judges, the province had enacted no explicit legislation that removed consumer disputes from the ambit of arbitration laws and usurped the competence-competence principle. Indeed, the B.C. act provided only that people "may" pursue claims under its provisions at the Supreme Court. Be- cause B.C. legislation allowed arbitrators to impose the same remedies as the Su- preme Court, there would be no denial of rights if the court granted a stay. Th e argument that access to justice 'Binnie got it exactly right,' says Kirk Baert. with colleague Alejandro Manevich, represented the Canadian Arbitration Congress as an intervener in Seidel v. Telus Communications Inc. Th e dispute fi nds its origins in a writ- ten cellphone services contract between Michelle Seidel, a B.C. resident, and Te- lus, one of Canada's major telecommuni- cations companies. Telus' standard form contract referred disputes to mediation and arbitration and contained a waiver of any right to participate in a class action. When Seidel subsequently sued Telus in a proposed class action alleging mis- representation in the way it calculated airtime for billing purposes, the com- pany applied for a stay of proceedings on the basis of the arbitration clause. But Seidel based her claim on s. 172 of British Columbia's Business Practices and Consumer Protection Act. It allows a person other than a supplier to sue in the Supreme Court to enforce the statute's consumer protection standards whether or not the party bringing the action has a special interest or is aff ected by the transaction in question. Th e stat- ute voids any waiver of such rights. Th e British Columbia Court of Ap- peal held, however, that the arbitration clause bound Seidel on the basis of the "competence-competence" principle. It states that any challenge to an arbitrator's jurisdiction should fi rst be subject to the arbitration unless it involves a pure ques- required making s. 172 claims through a class proceeding was without merit, therefore, since the right would be avail- able through arbitration. Kirk Baert of Toronto's Koskie Min- sky LLP says the majority judgment is the more realistic one. "Th e minority judges seem to think that consumer arbitration agreements should be given the same weight as la- bour arbitration agreements or arbitra- tion agreements between sophisticated parties," he told Law Times by e-mail. "Th e reality of the situation is that the purpose of consumer arbitration agree- ments is to block litigation, especially class action litigation, from ever taking place. Binnie got it exactly right." However that may be, lawyers say Seidel doesn't undermine the recent line of cases in which the Supreme Court af- fi rmed its strong support for arbitration as a dispute resolution mechanism. "Both the majority and the minor- ity are very supportive of arbitration in general," says Andrew McDougall of Ottawa's Perley-Robertson Hill & McDougall LLP. Along with colleagues Barry Leon and Daniel Taylor, he repre- sented intervener ADR Chambers Inc. in the case. "Where they diverge is on the impact of s. 172, and whether con- sumer protection principles trump arbi- tration in this specifi c instance." Whitehall is of similar mind. "I don't believe the decision diminish- es arbitration," he says. "Th e judgment is entirely consistent with the existing arbitration regime, stating only that Par- liament is supreme and may choose to reduce the scope of arbitration for valid public-policy reasons." www.lawtimesnews.com Untitled-2 1 3/15/11 7:50:16 AM BURDEN FOR BENCHER » Bill Burden's background gives him the perspective to see the issues. » Bill Burden's experience gives him the judgment to see the solutions. » Bill Burden has practised both inside and outside of Toronto, in both small and large firms. Vote for Bill Burden. For more about Bill Burden please visit www.casselsbrock.com/People/Bill_Burden You can also find out more about Bill Burden by scanning the QR code on the right with your smart phone. NEWS PAGE 5

• Cover
• Evidence Tossed
• Duty To Consult
• Focus On Energy Law/Environmental Law