Canada: Arbitration In B.C., Even In The Face Of A Class Action

On March 23, 2009, the British Columbia Court of Appeal (B.C.C.A.) in MacKinnon v. National Money Mart Company, 2009 BCCA 103 (Money Mart) confirmed that arbitration clauses in consumer contracts, including consumer loan agreements and service contracts, are enforceable even in the face of a proposed class action. This means that, where the parties have entered into an agreement to arbitrate, even if a proposed class action has been filed, the action should be stayed and the dispute sent to arbitration. In reaching this conclusion, the B.C.C.A. applied two decisions of the Supreme Court of Canada that had arisen from disputes in Québec. This decision has particular implications for jurisdictions, like B.C., that lack legislation prohibiting arbitration agreements with consumers.

The Supreme Court of Canada addressed this question in two concurrent appeal cases from Québec: Union des consommateurs v. Dell Computer Corp, [2007] 2 S.C.R. 801, 2007 SCC 34 [Dell], and Muroff v. Rogers Wireless Inc., [2007] 2 S.C.R. 921, 2007 SCC 35 [Rogers]. In Dell, the majority of the court held that the substantive agreement to arbitrate was to be enforced despite the fact that the case had been certified as a class action. The majority set out a jurisdictional approach to arbitration clauses in the class actions environment: arbitration is based on a substantive agreement, whereas a class action (even once certified) is merely procedural. Where the parties have agreed to arbitrate and the requirements of the arbitration legislation are met, the court is without jurisdiction. Accordingly, in this case, Madam Justice Deschamps, speaking for the majority, set out a general rule of referral to arbitration for all but pure questions of law.

In Dell's companion case, Rogers, a mobile telephone service agreement contained an arbitration clause referring all disputes to arbitration. The plaintiff subscriber alleged overcharges on long-distance "roaming" calls and sought class action certification. Chief Justice McLachlin applied the principles in Dell and ruled that the matter should be sent to arbitration. The Québec courts had also determined this case was appropriate for certification.

The live question has been whether common law courts will interpret the principles from Dell and Rogers favouring arbitration broadly, or whether they will confine them to Québec.

On March 13, 2009, a panel of five justices of the Court of Appeal of British Columbia in Money Mart held that the principles from Dell and Rogers, including the general rule of referral, were the law in British Columbia. In so doing, British Columbia's pre-Dell approach was overruled. Newbury J.A. for the court reasoned that Dell and Rogers logically extend to the law of British Columbia. She held that the various features of class proceedings are essentially procedural and "cannot be used to overcome the exclusive jurisdiction of arbitral tribunals or to modify the substantive rights of parties to arbitration agreements. The lesson of the Supreme Court's decisions is that a valid agreement to arbitrate "removes the dispute from the court's purview provided one of the parties applies [for a stay of the court proceeding] within the applicable time limit."

McCarthy Tétrault Notes

In British Columbia, as in Québec, then, where parties enter into an agreement to arbitrate any dispute between them, including where the agreement to arbitrate is contained in an on-line purchase contract or a loan document, the courts cannot resolve the dispute by class action or individual action if one of the parties applies for a stay.

Some provinces, including Ontario and Québec, have already provided a legislative "fix" for this situation, forbidding arbitration agreements in certain types of consumer contracts. In other provinces, including British Columbia, no such legislation is in place, or has yet been proposed. The result is that in British Columbia, an arbitration clause in a contract — including a consumer contract — appears to be an enforceable way to require disputes with customers be resolved by arbitration rather than class action.

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