Supreme Court of Canada rules business customers are bound by arbitration clauses in consumer class actions

Date Closed

April 04, 2019

Lead Office

Toronto

On April 4, 2019, the Supreme Court of Canada ("SCC") ruled that business customers must abide by arbitration agreements and cannot join consumer class actions. By a 5-4 majority, the SCC held that courts do not have discretion to decline to enforce arbitration agreements between businesses and that limited court intervention in arbitration matters to be a fundamental principle of arbitration law.

The decision is in respect of TELUS Communications Inc. v. Wellman, in which the plaintiff alleged that Telus overcharged its wireless telephone customers by rounding up the durations of their calls to the next minute. The class action included both individual customers and business customers, all of whom had entered into a contract stating that claims must be settled through mediation or arbitration. The Court of Appeal for Ontario upheld a decision by the motion judge that under section 7(5) of the Arbitration Act, Ontario courts have discretion to not enforce arbitration agreements where the agreements are not enforceable against all class members.

On appeal, the SCC overturned the Court of Appeal's decision. The majority concluded that section 7(5) of the Arbitration Act could not be interpreted so as to undermine the legislature's decision to protect only consumers from the effects of arbitration clauses through the Consumer Protection Act. The SCC ruled that, while individual customers may pursue their claims through class actions, business customers must abide by their contracts and proceed to arbitration.

McCarthy Tétrault LLP represented the Canadian Chamber of Commerce, as intervenor, with a team led by Brandon Kain that included Adam Goldenberg and Ljiljana Stanic.

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