Canada: Once More Unto The Breach: The Supreme Court Of Canada Weighs In Again On Arbitration Clauses And Class Actions

Last Updated: April 22 2019
Article by Paul-Erik Veel

The question of whether and when arbitration clauses will preclude a class proceeding is seemingly continually litigated. In some circumstances—such as in the consumer protection context—legislatures have clarified that certain claims cannot be subject to arbitration. In other cases, however, it is up to courts to craft the appropriate rules. The recent decision of TELUS Communications Inc v Wellman shows that the question of what rules are appropriate can attract significant disagreement. In a 5-4 split decision, the majority of the Supreme Court of Canada held that valid arbitration clauses in contracts should generally be given effect and that persons with such contracts should not be included in class proceedings.

By way of background, the plaintiff had brought a proposed class proceeding in Ontario against Telus, alleging that Telus was improperly overcharging customers by rounding up calls to the next minute without disclosing this practice to consumers. The effect of this was that consumers would more quickly use up their monthly allotment of minutes and incur additional charges.

The plaintiff's proposed class action included both consumers and business customers.  Telus' contracts with customers contained clauses requiring that their disputes be resolved in binding arbitration. Telus conceded that Ontario's Consumer Protection Act invalidated the arbitration clauses in the consumer contracts. However, Telus argued that the claims asserted on behalf of business customers in the class should be stayed, as those contracts were subject to arbitration clauses that remained valid.

The plaintiff argued that the claims on behalf of business customers should not be stayed.  While s 7(1) of Ontario's Arbitration Act provides that a court "shall" stay an action where a matter is subject to an agreement to arbitrate, the plaintiff relied on s 7(5) of the Act to argue that the claims of business customers should not be stayed. Section 7(5) provides as follows:

7(5) The court may stay the proceeding with respect to the matters dealt with in the arbitration agreement and allow it to continue with respect to other matters if it finds that,

  1. the agreement deals with only some of the matters in respect of which the proceeding was commenced; andli it is reasonable to separate the matters dealt with in the agreement from the other matters.

Numerous courts in Ontario had previously held that s 7(5) of the Arbitration Act permits courts to decline to grant a partial stay where some class members' claims were subject to a valid arbitration clause and others were not. The practical effect of this is that if some class members' contracts included valid arbitration clauses while others did not, but there were common issues across all class members, Ontario courts would often let all class members be included in a class action out of concerns for efficiency and access to justice.

The Ontario Superior Court of Justice accepted the plaintiff's position and rejected Telus' partial stay motion, as did the Ontario Court of Appeal. Telus sought and was granted leave to appeal to the Supreme Court of Canada. 

In its decision released on April 4, 2019, the Supreme Court of Canada allowed Telus' appeal in a 5-4 decision. The majority, authored by Justice Moldaver, noted that Ontario legislature had made a clear policy statement to emphasize party autonomy in allowing the parties to resolve their disputes by way of arbitration. The Court noted that courts were generally required to stay proceedings where they are subject to a non-arbitration clause and court intervention arbitrations are limited.

Turning to the interpretation of s 7(5) of the Arbitration Act, the majority of the Supreme Court interpreted that section different than how Ontario courts had previously interpreted it. The majority held that s 7(5) could only be employed where two pre-conditions were met: first, the agreement deals with only some of the matters in respect of which the proceeding was commenced; and second, it is reasonable to separate the matters dealt with in the agreement from the other matters. Where both of those conditions are met, s 7(5) provides the court the ability to stay the proceeding with respect to the matters dealt with in the arbitration agreement, and allow it to continue with respect to other matters.

The majority did not accede to the plaintiff's submission that s 7(5) provided a basis on which courts could refuse to stay the proceeding where it was not reasonable to separate the matters dealt with in the agreement from the other matters. The Court specifically held that s 7(5) could not be used to allow cases to proceed to litigation in courts where there was a valid arbitration clause. Put differently, in the majority's view, s 7(5) could be used to stay a proceeding, but not to refuse to stay a proceeding where there is an otherwise valid arbitration clause. Justice Moldaver also noted the policy reasons in support of his conclusion:

...Mr. Wellman's interpretation sits at odds with the policy underlying the Arbitration Act that parties to a valid arbitration agreement should abide by their agreement. If accepted, Mr. Wellman's interpretation would reduce the degree of certainty and predictability associated with arbitration agreements and permit persons who are party to an arbitration agreement to "piggyback" onto the claims of others. Ultimately, this would reduce confidence in the enforcement of arbitration agreements and potentially discourage parties from using arbitration as an efficient, cost-effective means of resolving disputes. Clearly, this was not what the legislature had in mind when it passed the Arbitration Act.

The plaintiff had advanced, and the dissent considered seriously, a number of other policy concerns that supported their position that the claims of such class members should not be stayed in favour of arbitration. These policy considerations included access to justice, the potential for abuse of arbitration clauses in contracts of adhesions, multiplicity of proceedings, and the difficulties distinguishing between consumers and non-consumers. The majority rejected all of these concerns, holding that they could not prevail in the face of clear legislative text to the contrary.

Interestingly, with respect to the point about contracts of adhesion, the Supreme Court of Canada noted that any concerns about unfairness resulting from standard form contracts would be better dealt with through the doctrine of unconscionability, as the Ontario Court of Appeal had done in its recent decision in Heller v Uber Technologies Inc, rather than through s 7(5) of the Arbitration Act. Because the plaintiff in Wellman had not raised the issue of unconscionability, that argument was not available.

In the result, Justice Moldaver, for the majority, held that s 7(5) provided Ontario courts no jurisdiction to decline to stay class members' claims where those class members had entered into a valid arbitration clause.

The Supreme Court of Canada's decision in Wellman confirms that the legislative policy of giving effect to arbitration agreements should not be easily set aside in class actions on policy grounds by courts alone. Certainly, the legislature can always choose to dissent certain types of claims from arbitration in favour of class proceedings, as most legislatures have for claims under provincial consumer protection statutes. However, in the absence of clear legislative guidance to the contrary, the majority of the Supreme Court refused to stretch the language of the Arbitration Act in order to allow claims subject to a valid arbitration clause to be included within a class action.

Ultimately, as I have pointed out in previous blog post here and here, identifying the appropriate boundary between the competing policy objectives of favouring party autonomy to agree to arbitrations and allowing plaintiffs to pursue effective redress in the form of a class action is difficult. Courts have generally approached this issue through careful interpretation of the applicable legislation. The majority's decision in Wellman employs a textual approach to interpreting the Arbitration Act and lands in favour of giving primacy to valid arbitration clauses.

To the extent that decisions like Wellman do not reflect the appropriate balance of these competing policy objections, it remains open to the legislature to either specifically permit or decline to permit the use of arbitration clauses in particular contexts. Indeed, legislatures are likely better placed to draw this line than are courts. However, for the time being, parties with valid arbitration clauses (at least outside the employment law context) can feel secure in the knowledge that courts will give serious effect to such 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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Osler, Hoskin & Harcourt LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Osler, Hoskin & Harcourt LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions