Supreme Court ruled that in Ontario, businesses cannot get out of arbitration agreements by joining class action lawsuits with consumers.
Mr. Wellman was a customer of TELUS, wherein he had a cellphone contract with them. He contended that TELUS rounded up the calls to the next minute, thereby overcharging its customers without informing them. It was stated that the customers were not given their full number of minutes. Mr. Wellman filed a class action suit against TELUS, where his suit was representing two million other customers of TELUS. Among those who joined the class action law suit, 1.4 million were consumers who bought cell phones for personal use, while the remaining were business consumers. Mr. Wellman sought for $500 million in damages on behalf of the group.
The contract entered into by the consumers and TELUS had standard terms and conditions which stated that in case of billing disagreements, the same would be decided in arbitration. All the consumers of TELUS had agreed to these terms and conditions. Arbitration is common in businesses as it reduces the expenditure and legal costs. Arbitration is when a neutral third party other than a judge decides a legal dispute between two parties. The Arbitration Act governs the rules of arbitration in Ontario. The Act lays down that people must live up to their agreement when they go for arbitration, unless the agreement is not valid.
The Arbitration Act encompasses for an exception for consumers too. It has been laid down in the Ontario Consumer Protection Act that consumers can file or join a class action law suit despite having agreed to arbitration clause in the agreement. Relying on this provision, the consumers believed they were entitled to compensation by way of class action law suit. The contention here is that business consumers were not covered in the Consumer Protection Act. On this basis, TELUS sought that the agreement condition of arbitration should thereby be held. This meant that business consumers should go to arbitration and pleaded that the court should stay the claims of business consumers or forbid them from going forward in class action law suit.
The key provision on which the case hinged was Section 7(5) of the Arbitration Act. Mr. Wellman stated that the section shed light on courts power to decide to let a claim go to court, despite prevalence of an arbitration clause in the agreement. He said that this would happen, if it would not be reasonable to separate both the consumers claims and business claims. He contended that both the groups were eligible to approach the court. On the other hand, TELUS put forth that the court had to stay claims covered by valid arbitration agreements. It stated that the claims for personal use could go to court but those of business consumers had to be stayed.
The motions judge as well as the Court of Appeal favored Mr. Wellman, which meant the business consumers could join the class action law suit. But, the majority of the Supreme Court disagreed. Under Section 7(5), the court was not empowered to refuse to stay claims dealt with a valid arbitration agreement. People will be able to escape their agreements easily by joining their cases to those who were not bound by the arbitration clause in the agreement. The majority made a notice that the class action was disputed on billing of calls which was agreed by all customers to be dealt through arbitration. This would indicate that everyone’s claim in the class action suit would be stayed. Due to the exception in the Consumer Protection Act, consumers were prevented from a stay but the business customers were not entitled to this exception, whereby they are required to respect their agreement (arbitration clause). The decision did not shed light on Mr. Wellman’s claim of TELUS overbilling its customers; it just passed a judgement that the business customers were not allowed to join the class action suit and go to court.