Canada: Blaney's Appeals: Ontario Court Of Appeal Summaries (January 1 – 4, 2019)

Blaney's Appeals
Last Updated: January 9 2019
Article by John Polyzogopoulos

Good evening and Happy New Year to all our readers!

There were only two substantive civil decisions of the Court of Appeal this week. Most notably, in Heller v Uber Technologies Inc., the Court revived a proposed class action by Uber drivers against Uber alleging that they are employees who have been denied rights under the Employment Standards Act, rather than independent contractors. Justice Perrell had stayed the class proceeding on jurisdictional grounds in favour of Uber's arbitration clause requiring all disputes to be arbitrated in the Netherlands under Dutch law, and only after payment of a large fee. The Court determined that the arbitration clause was invalid and unenforceable because it purported to contract out of the Employment Standards Act, even though it remains to be determined whether the Uber drivers actually are employees.

Have a nice weekend.

John Polyzogopoulos

Blaney McMurtry LLP

416.593.2953 Email

CIVIL DECISIONS

Heller v. Uber Technologies Inc., 2019 ONCA 1

[Feldman, Pardu and Nordheimer JJ.A.]

Counsel:

M. Wright, D. Stampley, L. Samfiru, S. Gillman and J. Omran, for the appellant

L. Talbot and S. Whitmore, for the respondents

Keywords: Contracts, Arbitration Clauses, Enforceability, Unconscionability, Employment Law, Employment Standards, Civil Procedure, Class Proceedings, Jurisdiction, Stay of Proceedings, Arbitration, Statutory Interpretation, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 SCR 27, Machtinger v HOJ Industries Ltd., [1992] 1 SCR 986, Titus v William F. Cooke Enterprises Inc, 2007 ONCA 573, Douez v Facebook, Inc., 2017 SCC 33, International Commercial Arbitration Act, 2017, SO 2017, c 2, Sched 5, Arbitration Act, 1991, SO 1991, c 17, s. 7, Employment Standards Act, 2000, SO 2000, c 41, ss. 1, 5 and 96

Facts:

The appellant was an Ontario resident licensed to use the respondents' driver app to provide food delivery services. In registering for the app, the appellant was required to agree to its terms and conditions, which stipulated that any dispute between a driver and the respondents be arbitrated in Amsterdam, and be governed by Dutch law ("the Arbitration Clause"). Additionally, the up-front administrative costs for a driver to participate in arbitration were a minimum of US$14,500. The appellant earned about C$20,800-$31,200/year, before taxes and expenses.

The appellant commenced a proposed class action against the respondents, seeking a declaration that the drivers in Ontario who use the driver app to provide transportation or food delivery services are in fact employees of the respondents and are governed by the provisions of the Employment Standards Act, 2000, SO 2000, c 41 (the "ESA"). The claim also sought a declaration that the respondents violated the provisions of the ESA, and that the arbitration provisions of the services agreements entered into between the parties were unenforceable.

The respondents moved for a stay of proceedings. The motion judge granted the stay, observing that courts must enforce arbitration agreements freely entered into, even in contracts of adhesion. Any restriction on the parties' freedom to arbitrate must be found in legislation. He additionally concluded that the plain language of the ESA did not restrict the parties from arbitrating, and that the arbitrability of employment agreements was not a question of pure statutory interpretation. Rather, it raised a "complex issue of mixed fact and law" for an arbitrator to decide at first instance under the competence-competence principle. Finally, he rejected the unconscionability exception that the appellant advanced under both the Arbitration Act, 1991 (the "Arbitration Act"), and the International Commercial Arbitration Act, 2017 (the "ICAA").

Issue:

(1) Did the motion judge err in granting the respondents' motion to stay proceedings?

Holding:

Appeal allowed.

Reasoning:

(1) Yes. As a preliminary matter, the Court addressed the appropriate standard of review. In finding that the correctness standard applied, the Court made two observations: first, the central questions (including the proper application of the Arbitration Act and the ICAA) were questions of law; and second, the interpretation of standard form contracts has ramifications beyond this case.

The Court declined to address whether the parties' relationship was a commercial one, observing that nothing material turned on which arbitration legislation applied. However, the Court did note that it would make reference in its reasons solely to the Arbitration Act, since that statute was the more commonly referred-to statute on these matters.

The Court then turned to the two issues to be determined: (a) whether the Arbitration Clause amounted to an illegal contracting out of the ESA and was thus invalid; and (b) whether the Arbitration Clause was unconscionable and thus invalid on that separate basis. As set out below, the Court found in the appellant's favour on both points.

Contracting out

Notably, the Court expressly declined to determine whether the appellant was an employee or an independent contractor, noting that this was to be decided in the main action. Nevertheless, given that this was a preliminary issue in the proceeding, the Court observed that it would presume the appellant could prove that he was an employee.

The Court observed that s. 7(1) of the Arbitration Act, which mandates a stay of proceedings where parties agree to arbitration, is subject to several exceptions under s. 7(2). One of those exceptions is where the arbitration agreement is invalid, which the appellant alleged here on the basis that it amounted to a contracting out of the ESA. Specifically, the Court considered s.5 of the ESA, which stipulates that parties may not contract out of an employment standard, which under s. 1 of that statute was defined as "a requirement or prohibition under this Act that applies to an employer for the benefit of an employee".

The Court concluded that the Arbitration Clause violated the appellant's right under s.96 of the ESA to make a complaint to the Ministry of Labour, subject to the exception that such a right would be foreclosed where an employee opts to commence a civil proceeding. The Court rejected the respondents' argument that s. 96 did not apply on the basis that the arbitration would count as a "civil proceeding", finding that this interpretation was inconsistent with the plain wording of the ESA, extracted s.96 from the relevant statutory context, invited an unduly narrow interpretation of s.96, and would run afoul of the Supreme Court directive in Machtinger v. HOJ Industries Ltd regarding the interpretative approach to be taken to the ESA.

The Court similarly rejected the respondents' argument that this issue was one for an arbitrator to decide under the competence-competence principle, finding that the issue here was not one of jurisdiction but of validity.

Returning to the appellant's s. 96 right to make a complaint, the Court dismissed the relevance of the appellant's decision to opt for a civil proceeding and thus foreclose the possibility of a complaint. On this point, the Court made five observations: first, since the Arbitration Clause was invalid, it was irrelevant what the appellant chose to do; second, the Arbitration Clause essentially transferred the appellant's s.96 rights to the respondents; third, the fact that this was a proposed class action made it obvious why the appellant opted for a civil proceeding; fourth, any findings would be public under either procedure; and fifth, there was no evidence as to what remedy the appellant could expect to obtain if he were successful in arbitration.

With respect to this fifth point, the Court rejected the respondents' argument that it was incumbent upon the appellant to provide expert evidence, finding that a) the respondents also failed to do so despite the fact it would have been much easier for them, and b) no expert evidence was required.

Unconscionability

The Court first rejected the motion judge's finding that the only substantial disputes would entail arbitration in the Netherlands, while most disputes could be resolved via mechanisms readily available in Ontario. To the contrary, there was no dispute resolution mechanism other than the Arbitration Clause. The reason that only substantial disputes would go to arbitration was a result of the financial barriers imposed upon drivers. The Court similarly rejected the motion judge's decision to look at the collective claim of the class action rather than the appellant's claim, noting that since the class action was merely proposed, the claim at issue remained in essence a single claim. On this basis, it was financially prohibitive for the appellant to begin an arbitration.

Turning specifically to the test for unconscionability, the Court declined to address the inconsistency between the four-part test accepted in Ontario and the two-part test accepted in British Columbia, since both tests could be met in this case. Accordingly, the Court opted to apply the more thorough four-part test, which required the following to be demonstrated: a grossly unfair and improvident transaction; a victim's lack of independent legal advice or other suitable advice; an overwhelming imbalance in bargaining power caused by the victim's ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and the other party knowingly taking advantage of this vulnerability.

Before turning to its analysis, the Court observed that the broader test from Douez v Facebook for forum selection clauses was applicable here, because the Arbitration Clause was also a forum selection and choice of law clause. Under the Douez test, the Arbitration Clause was subject to the two requirements: a) that it be valid, clear, enforceable, and applicable to the cause of action before the court; and b) that there were otherwise no strong reasons not to enforce the forum selection clause. In the context of the Arbitration Act, however, the Court observed that the Douez test would be modified in two respects: first, the burden of proof would fall upon the person seeking to set aside the clause (in this case, the appellant); and second, a finding of validity under the first part of the test would preclude the application of the second part because s.7(2) of the Arbitration Act would not apply and the stay would therefore become mandatory.

Turning finally to the clause at hand, the Court concluded that the Arbitration Clause failed both under the Douez forum-selection clause test, and under the general test for unconscionability. First, the transaction was self-evidently improvident, since the fees were out of all proportion to the amounts in dispute and a driver would be given no information on Dutch law. Second, there was no evidence that the appellant had any legal or other advice prior to entering into the agreement, nor was it realistic to expect that he would. Third, there was a significant inequality of bargaining power. Fourth and finally, given the analysis of the first three elements, the Court found it to be a reasonable inference that the respondents knowingly and intentionally took advantage of their drivers.

Appleyard v. Zealand, 2019 ONCA 4

[Strathy C.J.O, Roberts and Zarnett JJ.A.]

Counsel:

J.A. Appleyard, acting in person

M.J. Sweatman, for the respondent

Keywords: Civil Procedure, Orders, Setting Aside or Varying, Vexatious Litigants, Bankruptcy and Insolvency, Wills and Estates, Family Law, Spousal Support, Rules of Civil Procedure, Rules 37.14(1)(b) and 59.06(2)(a), Courts of Justice Act, RSO 1990, c C.43, s 134(1) and s 140

Facts:

The appellant filed two objections against the appointment of the respondent as trustee of the estate of the appellant's former spouse, among other claims against the estate. The appellant and her former spouse were divorced in 1996. When her former spouse died in 2013, he left a will which did not name the appellant as a beneficiary.

The respondent obtained an order on March 15, 2017, requiring the appellant to seek leave before bringing a claim or motion against the estate on the basis of the appellant's own ongoing bankruptcy proceeding. The order made in her bankruptcy proceeding precluded the appellant "from bringing any further or other proceedings or seeking any other relief without leave of this Court" until she complied with a costs order.

The appellant brought a motion to set aside or vary the March 15, 2017 order, which was dismissed on August 1, 2017, on the basis that she did not meet the criteria she relied on under Rules 37.14(1)(b) and 59.06(2)(a) of the Rules of Civil Procedure. The appellant appealed both the March 15, 2017, and August 1, 2017 orders.

Issues:

(1) Did the motion judge err in finding that the appellant required leave to bring claims against her former spouse's estate in the March 15, 2017 order?

(2) Did the motion judge err in dismissing the appellant's motion to set aside or vary the March 15, 2017 order?

Holding:

Appeal allowed in part.

Reasoning:

(1) Yes. The motion judge erred in finding that the appellant's bankruptcy proceeding was an obstacle to advancing a claim against her former spouse's estate, a claim unrelated to her bankruptcy. The scope of the bankruptcy order should not have been extended beyond the bankruptcy proceeding. In addition, the appellant had not been declared a vexatious litigant under section 140 of the Courts of Justice Act. Accordingly, the appellant should not have been required to obtain leave under this section. Therefore, the appeal to set aside the March 15, 2017 order was allowed.

(2) No. The motion judge did not err in finding that the appellant's failure to appear on a motion was due to "accident, mistake or insufficient notice" as required under rule 37.14(1)(b), because the appellant took a calculated risk in failing to appear. Further, the motion judge did not err in holding that there was no fraud as required under rule 59.06(2)(1). Therefore, the appeal from the August 1, 2017 dismissal order was dismissed.

CRIMINAL DECISIONS

R. v. Hafizi, 2019 ONCA 2

[Hoy A.C.J.O., Feldman and Benotto JJ.A]

Counsel:

P. Campbell and C. Verner, for the appellant

S. Reid, for the respondent

Keywords: Criminal Law, First Degree Murder, Second Degree Murder, Jury Charge, Mens Rea, R v Vectrovec, [1982] 1 SCR 811, R v Baltovich (2004), 73 OR (3d) 481 (CA), R v Yebes, [1987] 2 SCR 168, R v Biniaris, [2000] 1 SCR 381, R v W.H, 2013 SCC 22, R v Robinson, 2017 ONCA 645, R v Villaroman, 2016 SCC 33, Criminal Code, RSC 1985, c C-46, s 686(1)(a)(i)

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Authors
John Polyzogopoulos
Events from this Firm
6 Feb 2019, Other, Toronto, Canada

When it comes to class actions, costs regimes vary across Canada. Ontario follows the traditional two-way costs regime while other jurisdictions like British Columbia have adopted a no cost regime.

 
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