SCC Rules on Arbitration Clauses and Class Actions

The Supreme Court of Canada released its decision in Seidel v. Telus Communications Inc., 2011 SCC 15. In a 5-4 ruling, the Court allowed the plaintiff to proceed with part of a class action against the defendant despite an arbitration clause in the parties' contract.

TELUS Communications Inc., the defendant, and Michelle Seidel, the plaintiff, had entered into a written cellular phone services contract. The standard form contract contained an arbitration clause. The plaintiff filed a statement of claim in the Supreme Court of British Columbia, setting out a variety of complaints including some that invoked rights, benefits or protections under the Business Practices and Consumer Protection Act (BPCPA), and then sought certification under the Class Proceedings Act.

TELUS unsuccessfully applied for stay relying on the arbitration clause pursuant to s. 15 of the Commercial Arbitration Act., which provides that “[i]f a party to an arbitration agreement commences legal proceedings in court against another party to the agreement in respect of a matter agreed to be submitted to arbitration . . . the court must make an order staying the legal proceeding unless it determines that the arbitration agreement is void, inoperative or incapable of being performed.” TELUS successfully appealed to the BC Court of Appeal, and the plaintiff's action was stayed in its entirety.

The plaintiff appealed to the Supreme Court of Canada. Her appeal was allowed in part.

Justice Ian Binnie, writing for the majority, held that arbitration clauses are to be enforced, and courts should give effect to terms of contract freely entered into, unless the legislature has expressly decided otherwise in a particular circumstance. Section 172 of BPCPA contains a remedy whereby a person other than supplier may bring an action in Supreme Court to enforce the statute's consumer protection standards, whether or not the person has special interest or any interest under BPCPA, or is affected by the consumer transaction that gives rise to action. Under s. 3 of BPCPA, any agreement between parties that would waive or release “rights, benefits or protections” conferred by BPCPA was “void.” To the extent that the plaintiff's claim invoked remedies under s. 172 of BPCPA in respect of “rights, benefits or protections” conferred by BPCPA, the Court held that her court action must be allowed to proceed notwithstanding the arbitration clause.

As to the plaintiff's other complaints, the Court found the arbitration clause was valid and enforceable, and the stay was upheld in relation to those claims.

Arthur Grant and Bruce Lemer of Grant Kovacs Norell acted for the plaintiff, Michelle Seidel.

Robert Anderson, QC, Sean Hern and Nicholas Hooge of Farris, Vaughan, Wills & Murphy LLP acted for the defendant, TELUS Communications Inc.

Babak Barin and Frédéric Côté of BCF LLP and Gaston Gauthier of Barreau du Québec acted for the intervenor Barreau du Québec.

Ivan Whitehall, QC, and Alejandro Manevich of Heenan Blaikie LLP acted for the intervenor Canadian Arbitration Congress.

Barry Leon, Andrew McDougall and Daniel Taylor of Perley-Robertson, Hill & McDougall LLP/s.r.l. acted for the intervenor ADR Chambers Inc.