Are mandatory arbitration agreements an effective bar to
consumer class proceedings in common law jurisdictions? In reasons
released in March 2011, a bare majority of the Supreme Court of
Canada expressed concerns about the access to justice offered by
private arbitrations, and held that, in a proposed class action, a
mandatory arbitration agreement in a consumer contract was
unenforceable regarding rights and benefits conferred by consumer
protection legislation, but enforceable regarding other claims. A
strong dissent held that the entire dispute was required to be
resolved by arbitration, in accordance with the parties'
mandatory arbitration agreement, and confirmed that access to
justice is fully preserved in private arbitration.
Ms. Seidel entered into a standard form consumer contract with
Telus for cellular telephone service that included terms requiring
all disputes between them be resolved by arbitration, and
confirming she waived her right to participate in class
Despite the mandatory arbitration clause, Ms. Seidel filed a
class action against Telus alleging that it had unlawfully charged
her for time when her telephone was not connected to a cellular
network. She alleged various causes of action including violation
of B.C.'s consumer protection legislation (now called the
Business Practices and Consumer Protection Act (Act).
Telus applied to stay the class proceeding based on the
Commercial Arbitration Act and the Supreme Court of
Canada's recent rulings in Dell Computer Corp. v. Union des
Consommateurs (Dell) and Rogers Wireless Inc. v.
Muroff (Rogers); both proposed class actions based on consumer
contracts. There, the Court stayed the class proceedings and
referred the parties back to arbitration on the basis that the
procedural rights, in class proceedings legislation, do not affect
parties' substantive rights in an arbitration agreement. Both
cases were out of Québec.
At the British Columbia Court of Appeal, on the basis of
Dell and Rogers, Ms. Seidel's proposed class
proceeding was stayed in favour of mandatory arbitration.
All judges at the Supreme Court of Canada agreed that the key
issue was access to justice and whether this end could be served
through private arbitration.
The tone of the majority's reasons was hostile toward
private arbitration. The majority confirmed that, in general,
parties' agreements to arbitrate are to be enforced in the
absence of express legislative language restricting arbitration
agreements. However, the Act conferred rights that could not be
protected within any private arbitration and that the parties could
not contract out of such rights. The majority distinguished
Dell and Rogers on the basis that there was no
legislation analogous to the Act in force in Quebec at the time of
The minority was critical of the majority's hostility toward
private arbitration and held that justice, including the remedies
sought by Ms. Seidel pursuant to the Act, could be obtained through
McCarthy Tétrault Notes
Seidel v. TELUS provides guidance on the
enforceability of mandatory arbitration provisions in consumer
contracts in the class proceeding context and shows a split in the
Court's view of private arbitration.
In provinces like Ontario, Québec and Alberta, there is
consumer protection legislation that expressly prohibits
arbitration agreements and waiver of class proceedings clauses in
consumer agreements. However, in provinces like B.C. that lack such
legislation, it remains that such arbitration provisions are likely
enforceable, even in the face of a proposed class proceeding,
except for with respect to a relatively narrow set of consumer
The majority's hostility toward private arbitration,
criticized in the minority's reasons, may be further explored
in future judgments from the Court. For the present, mandatory
arbitration provisions remain a useful and important tool for many
defendants, with some limited exceptions.
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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