Class Action – Consumer Contract –
In this case the Supreme Court of Canada permitted a proposed
representative plaintiff ("Seidel") to
proceed with a class action against TELUS Communications Inc.
("TELUS") despite an arbitration clause
in the parties' contract.
The cellphone contract between Seidel and TELUS purported to
require the parties to settle any dispute by arbitration and
purported to prevent Seidel from participating in a class action.
This did not stop Seidel from commencing an action alleging that
TELUS had misrepresented its formula for calculating air-time usage
and had thereby engaged in deceptive and unconscionable practices
contrary to the Business Practices and Consumer Protection
Act, SBC 2004, c 2 ("BPCPA") and
the Trade Practice Act, RSBC 1996, c 457
("TPA"). TELUS had charged consumers for
phone calls from when their phone began to ring rather than from
when they answered it.
The B.C. Court of Appeal had stayed the action, in reliance on
the Supreme Court decisions in Dell Computer Corp v
Union des Consommateurs, 2007 SCC 34
("Dell") and Rogers
Wireless Inc v. Muroff, 2007 SCC 35 ("Rogers
Wireless"). These decisions out of Québec
stayed class actions which had sought to proceed in the face of
By a majority of 5-4 the Supreme Court in Seidel
allowed the claim under section 172 of the BPCPA to proceed on the
basis that the BPCPA provided a cause of action to a person
regardless of whether that person had a contractual relationship
with the defendant. In contrast, the Court upheld the stay of the
common law and TPA claims. In effect, the Supreme Court extended
the Dell and Rogers Wireless decisions to common
law Canada, except insofar as legislation, such as the BPCPA,
prevents the enforcement of arbitration clauses.
Section 172 of the BPCPA allows consumer activists or others,
whether or not they are personally "affected" by a
"consumer transaction", to bring an action in the B.C.
Supreme Court. As Justice Binnie stated for the majority, the
"clear intention" of the BPCPA is to "supplement and
multiply" the government's ability in "an era of
tight government budgets" to implement fair consumer
practices. The BPCPA seeks to achieve that goal by "enlisting
the efforts of a whole host of self-appointed private
This means that Seidel is able to advance her claim by
"sheltering" under section 172. In effect, she brings the
claim under this section as a consumer advocate and not simply as a
wronged party to a contract. The majority further held that the
competence-competence principle (arbitrators have power to rule on
their own jurisdiction) did not apply because the issue of
jurisdiction was raised on undisputed facts and an authoritative
judicial interpretation was appropriate.
In dissent, Justices LeBel and Deschamps characterized the legal
issue as the determination of the proper role and status of
arbitration, and stated that the majority decision was
"hostile" to that role and status. They held that the
BPCPA does not foreclose, by means of sufficiently explicit
language, the use of arbitration as a means to resolve disputes. In
their view, because arbitrators can provide the same remedies as
the BPCPA contemplates and because arbitral awards would have an
impact beyond the immediate parties, arbitration would preserve
access to justice.
Ontario, Alberta and Québec already prohibit mandatory
arbitration clauses in consumer contracts. In those provinces the
impact of this decision will be felt where persons rely on other
remedial legislation, such as franchise protection legislation, to
circumvent arbitration clauses.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The recent decision of the Ontario Court of Appeal in BMW Financial Services Canada, a Division of BMW Canada Inc. v. McLean provides some useful insight into the relationship between automobile dealers and the financing arms of the manufacturers for whom those dealers are franchisees.
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