Originally published in Blakes Bulletin on Class
Actions, November 2011
On November 23, 2011, the Federal Court of Canada confirmed that
it does not have jurisdiction to hear a Motion to Certify an Action
as a Class Action, in the presence of a binding arbitration
agreement and related class action waiver. The decision was issued
by the Honorable Justice Richard Boivin in Murphy v. Compagnie
On October 23, 2009, the plaintiff, an Independent Business
Owner (IBO) who distributed Amway's products, instituted a
proposed class action before the Federal Court, on behalf of all
Canadian residents who distributed Amway's products starting
October 23, 2007. He claimed that Amway had breached various
dispositions of the Competition Act of Canada (the Act),
and sought damages of C$15,000 under section 36 of the Act.
Amway, represented by Blakes, filed a Motion to Stay and to
Compel Arbitration on the basis that the contractual documents
agreed to by the parties contained an arbitration agreement and a
class action waiver, governed by the Ontario Arbitration
Act. The class action waiver provides, notably, that neither
party is to "assert any claim as a class, collective, or
representative action if [...] the amount of the party's
individual claim exceeds $1,000."
The Motion to Stay and to Compel Arbitration was heard in the
context of a three-day hearing which included the hearing of the
plaintiff's Motion to Certify an Action as a Class Action, as
well as other accessory motions. The Court found it unnecessary to
rule on these other motions, in light of its decision to grant
Amway's Motion to Stay and to Compel Arbitration, and to
permanently stay the plaintiff's action.
The Court found that the wording of the arbitration agreement
and class action waiver was clear, and thus prohibited the
plaintiff from bringing his C$15,000 claim both (a) before a
State-appointed Court and (b) as a class action.
The Court relied on a series of decisions from the Supreme Court
of Canada (the SCC) that confirm the validity and enforceability of
On the basis of these decisions, Mr. Justice Boivin concluded
that "arbitration agreements must be enforced by courts absent
specific legislative language to the contrary", that class
actions are "a procedural vehicle whose use neither modifies
nor creates substantive rights", and that "absent clear
legislative language prohibiting class action waivers, it must give
effect to the parties' agreement to arbitrate." The Court
went on to find that such legislative language was nowhere to be
found in the Act.
Moreover, the Court concluded that the presence of an
arbitration agreement creates a "private jurisdiction"
between the parties, thus ousting the jurisdiction of the Court
over the subject matter of the dispute.
In March 2011, the SCC, in Seidel, confirmed that its
earlier jurisprudence on this issue, arising out of Quebec, was
equally applicable in common law jurisdictions. The Amway
decision applies Seidel to confirm that arbitration
agreements and class action waivers are valid and enforceable in
Canada, in the absence of specific legislative language to the
contrary. The fact that the claim is brought under a public order
statute, or that the plaintiff seeks to have his action certified
as a class action, cannot affect the validity and enforceability of
an arbitration agreement and class action waiver. This represents a
clear and forceful endorsement by the Federal Court of consensual
arbitration as a fair, efficient, and cost-effective way to solve
disputes in Canada, even in the face of a proposed class
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guide to the subject matter. Specialist advice should be sought
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