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Welcome to YouCounsel.

So far we have posted 2 lectures about arbitrations. The first lecture was about arbitrations in general, how arbitrations are scheduled and what is the framework of an arbitration. The second lecture was about arbitration clauses in consumer contracts.  In that lecture we explained that all of us, in some ways, are affected by arbitration clauses in so many contracts that we enter into and we don’t even know that arbitration clauses are applicable to our circumstances. We then argued that arbitration clauses in consumer contracts are unfair and problematic.  In today’s lecture we will discuss 3 cases—recent cases in Canada—that discuss the issue of arbitration clauses in contracts.  Then we will explain how Canadian courts have dealt with arbitration clauses in these decisions.

We begin our lecture with our usual disclaimer that this lecture is not legal advice. If you have any specific questions, regarding your issues you should contact a lawyer or a paralegal or the Law Society of Ontario for a referral.

The 1st case we will talk about is Telus v. Wellman.  The case was decided by the Supreme Court of Canada in 2019. The 2nd case will be Heller v. Uber.  This was decided by the Ontario Court of Appeal in 2019 and was appealed to the Supreme Court of Canada. We will discuss that as well.  Then finally there was also a case from Ontario Superior Court of Justice in 2019, Evans v. Mattamy Homes.

The story of Telus v. Wellman case is that this was a class action lawsuit that was brought against Telus by approximately 2,000,000 users.  Their essential allegation against Telus was that, Telus was overcharging them, overcharging all of these customers without disclosure.  How Telus was allegedly overcharging was that it was rounding up the calls to the next minute. For example, if you had a call which lasted 2 minutes and 45 seconds, Telus rounded it up to 3 minutes and charged you and other customers for that additional amount of time which was not part of your call. This was not disclosed to the customers and therefore this class action lawsuit was brought.

All of the Telus agreements with subscribers (with individual customers) had a mandatory arbitration agreement. Telus brought a motion before the court and argued that the courts do not have jurisdiction to deal with all of these complaints. They should not be part of a class action.  All of these individuals need to attend before an arbitrator separately. This was further complicated because Telus argued that there were 2 kinds of users out of these 2,000,000 users. Some of them were individual consumers and some of them were commercial consumers.  Why was the distinction made?  Because there is a legislation in Ontario called Consumer Protection Act.  That legislation basically provides that mandatory arbitration agreements in contracts, such as the one between Telus and its consumers, was unlawful.  Therefore, the mandatory arbitration agreement would not apply to ordinary consumers.

Telus brought this motion before the Superior Court of Justice in Ontario.  They lost that motion.  The judge reviewed the case on the basis of the Arbitration Act and basically decided that the 2 matters, i.e., the matters with respect to the consumers generally and with respect to the commercial or business consumers were related and they should be part of the same class action.  The judge made that decision by applying a specific provision of the Arbitration Act in interpreting that provision in a certain way.  It will be interesting for you to review the Superior Court judgement to understand how the judge made that decision. I will provide the link for the case below in the description of this video.

Now, Telus lost at the 1st instance at the motion.  Then they appealed at the Court of Appeal level. They lost at the Ontario Court of Appeal again.  Then they appealed to Supreme Court of Canada and interestingly they won at the Supreme Court of Canada. The decision at Supreme Court of Canada was quite divided.  There were 5 judges who ruled in favor of Telus and there were 4 judges who dissented.  It is an interesting discussion for you to read that case and understand how the Supreme Court of Canada was grappling with this issue. The majority (5) of the judges in Telus v. Wellman basically held that the Arbitration Act was enacted by the legislature and it dealt with the arbitration issues.  It allowed for the bifurcation of certain cases—where some part of the case could be argued before a court and some could be argued before an arbitrator.  If that can be done, then that should be done.  In this case, the consumers who were exempt from mandatory arbitration agreement because of the application of the Consumer Protection Act, should be able to proceed with a class action lawsuit before the courts.  But the other consumers who were not ordinary consumers should not be allowed and they should go to arbitration.

The fundamental reason why the majority judges came to that conclusion was that they believed that the language of the Arbitration Act was quite clear.  The discretion that was awarded to the courts was quite limited.  The discretion could not be exercised in the way the lower courts had decided on this case. The dissenting judges, had a different view.  Obviously, they disagreed with the 5 judges. The dissenting judges basically stated that the Arbitration Act allowed that level of discretion for the court.  And for the interest of justice and for public policy reasons, the court should use that discretion and then allow the class action to proceed for all of the subscribers. But I would suggest that you read this case and see the discussions between the justices of Supreme Court of Canada on this topic.

Let’s talk about Heller v. Uber. This was also a class action lawsuit.  It was brought against Uber by Uber drivers, who basically argued that they were employees and not independent contractors of Uber.  If that was correct, then Uber had violated the Employment Standards Act, in so many ways. All of these contracts that Uber drivers had with Uber had mandatory arbitration agreement.  It stated that you will have to bring an arbitration in Netherlands and the laws of the Netherlands would apply. Again, the issue was whether the courts have jurisdiction on this matter or not. When Uber brought its motion before the Superior Court of Justice, they were successful at that motion and the judge ruled in their favor—that yes, based on the application of the Arbitration Act and by reviewing the individual contracts the judge agreed with Uber that the court had no jurisdiction.

Then the matter was appealed to Ontario Court of Appeal which overturned the motion judge’s decision and basically ruled that Uber had violated the Employment Standards Act because the arbitration agreement, the mandatory arbitration agreement in the contract was in itself a violation of the Employment Standards Act.  That was one reason why the arbitration agreement would not be of help.  Secondly, the judges stated that the arbitration agreement was unconscionable because it required the individuals to spend money for the arbitration.  The cost was much higher for them and for that reason the agreement was unconscionable. When Uber was unsuccessful at Court of Appeal in Ontario, they then appealed to the Supreme Court of Canada.  That appeal was heard back in November of last year.  We are expecting the decision from the Supreme Court of Canada any time now.  It will be interesting to see how the Supreme Court of Canada rules on this issue.

The final case we’ll talk about today is Evans v. Mattamy Homes. This was also a class action lawsuit.  It was brought by various purchasers of Mattamy Homes.  All of their Agreements of Purchase and Sale had mandatory arbitration agreement. The case was also argued in 2019.  Mattamy Homes then brought this motion to argue that these consumers, these purchasers of homes did not have a right to go to court and bring a class action lawsuit.  The only option they have was to go to arbitration.  In this case the court held that the agreement was not unconscionable and the mandatory arbitration agreement was upheld and those individuals’ cases were thrown out of court.

As I said in the end of my last lecture, that the way the 1st world, the Western world has treated mandatory arbitration agreement, is quite different. In most of Europe, in Australia and in New Zealand, also I believe the mandatory arbitration agreements in consumer contracts are unlawful. In the United States they are prevalent and they are enforced.  Canada is now grappling with this issue.  Increasingly consumer contracts have this arbitration, mandatory arbitration agreement, which a lot of us are not even aware of.  The courts are now grappling with the issue whether those arbitration agreement should be enforced or not.  So far the courts have ruled in the favor of the mandatory arbitration agreements but we will see because the law will continue to develop on this matter.

Thank you for watching.