The Return of Textualism to the Court

Canada has largely been a leader in the use of arbitration for the resolution of disputes. When UNCITRAL finalized and adopted in July 2014 the”United Nations Convention on Transparency in Treaty-based Investor-State Arbitration“, also known as the “Mauritius Convention on Transparency,” Canada became the second State to ratify it on December 12, 2016. To date, 22 states have signed the Convention, and only 5, including Canada, have ratified it.

Although the focus of this Convention was on arbitrations between an investor and a State and the implementation of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration, it signalled at the highest level our willingness to make concessions that would improve consistency between jurisdictions on key financial disputes. The collection of past decisions is also intended to create some level of predictability, despite creating trade-offs in privacy.

Arbitration clauses domestically continue to provide some controversy, especially where multiple jurisdictions are involved in a consumer protection context. Central to this is the Consumer Protection Act, which limits the applicability of the mandatory stay provisions under the Arbitration Act.

Subject to certain exceptions, the Consumer Protection Act applies to all individuals in Ontario acting in a personal capacity who engage in a transaction with a business. This can include transactions which result in agreement for goods, services, or rewards, but does not have to. Provisions under the Act also apply to certain illegal forms of advertising or false, misleading or deceptive representations that may never result in an actual agreement.

The extent to which the Consumer Protection Act applies to non-consumers in the context of class proceedings was recently examined by the Supreme Court of Canada in TELUS Communications Inc. v. Wellman, involving a class action of 2 million Ontarians with mobile phone service contracts. Although the individual consumers would be protected from the arbitration clause by consumer protection litigation, the business customers technically would not be.

The majority, led by Justice Moldaver, affirmed this coherent interpretation of the two competing statues, and relied on the deferential approach expressed in Inforica Inc. v. CGI Information Systems and Management Consultants Inc,

[14] It is clear from the structure and purpose of the [Arbitration] Act in general, and from the wording of s. 6 in particular, that judicial intervention in the arbitral process is to be strictly limited to those situations contemplated by the Act. This is in keeping with the modern approach that sees arbitration as an autonomous, self-contained, self-sufficient process pursuant to which the parties agree to have their disputes resolved by an arbitrator, not by the courts. As Inforica states in its factum, “arbitral proceedings are presumptively immune from judicial review and oversight”. The Act encourages parties to resort to arbitration, “require[s] them to hold to that course once they have agreed to do so” and “entrenches the primacy of arbitration over judicial proceedings . . . by directing the court, generally, not to intervene”: Ontario Hydro v. Denison Mines Ltd., [1992] O.J. No. 2948 (Gen. Div.), Blair J.
[emphasis added]

This is the same approach employed by Justice Sharpe in Griffin v. Dell Canada Inc., which was the first significant authority that the majority based its decision in. However, this decision dealt with unique facts that emerged prior to the enactment of the consumer protection legislation. The second significant authority was the Supreme Court’s decision in Seidel v. TELUS Communications Inc., which promoted a textually, contextually and purposive interpretation of consumer protection in a manner that would benefit consumers, but still promoted a case-by-base basis analysis of fairness or unconscionability of arbitration clauses in light of relevant facts.

The interplay between these two cases was the primary focus of both the motions judge and the Court of Appeal. The majority applied the modern approach to interpreting the Arbitration Act, Consumer Protection Act and Class Proceedings Act in their full context applied the policy choices clearly stated by the legislature to conclude that the business customers should not benefit from the consumer protection provisions.

Where the parties differed significantly was in the interpretation of the partial stay provisions of the Arbitration Act, which requires the preconditions of matters that are part of the agreement and part not of the agreement, and it is reasonable to separate these matters. If these preconditions are met, the court may allow for matters not dealt with by the agreement to proceed in court,

[73] Mr. Wellman resists this logic. In effect, he submits that s. 7(5) must be read as meaning “may stay, [or may refuse 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”, and s. 7(5)(b) must be understood as authorizing this refusal where “it is [not] reasonable to separate the matters dealt with in the agreement from the other matters”. Respectfully, I cannot accede to this submission. Mr. Wellman’s interpretation reads language into s. 7(5) that simply is not there. Not only that, it reads language into s. 7(5) that is contained elsewhere in the statute — namely, in s. 7(2), which provides that “the court may refuse to stay the proceeding in any of the following cases”. Section 7(2) thus demonstrates that where the legislature intended to authorize the court to refuse a stay, it did so through the words “may refuse to stay”.

Adopting the plaintiff’s interpretation would run contrary to the policy rationale of the Arbitration Act of giving effect to valid agreements, which was affirmed by the Court in Seidel. This interpretation would reduce certainty and predictability in arbitration agreements, and reduce confidence in their enforcement.

Although the plaintiff relied on public policy considerations such as access to justice by removing barriers for relief in court, abuse of arbitration clauses by large companies with significant bargaining power, the reduction of class sizes that would make them less viable, and the concern of multiplicity of proceedings, the majority held the opposite conclusion. By allowing others to piggyback on the claims of others, it would discourage parties from using arbitration as an efficient and cost-effective tool for resolving disputes. This would also hamper access to justice.

The policy considerations here were relied on heavily by the dissent, written by Justices Abella and Karakatsanis. Not only did they dispute with the majority’s weighing of these concerns, they referred to their approach as a “return to textualism,”

[109] …The words have been permitted to dominate and extinguish the contextual policy objectives of both the Arbitration Act, 1991, S.O. 1991, c. 17 and the Class Proceedings Act, 1992, S.O. 1992, c. 6, creating a dispute-resolution universe that has the effect of forcing litigants to spend thousands of dollars to resolve a dispute worth a fraction of that cost; denies others meaningful access to a remedy if they are not prepared, or cannot afford to, engage in a cost-benefit losing proposition; and invites the very proliferation of proceedings a class action was invented to avoid. The result of these disincentives is that business consumers will simply not enforce their rights.

Although words matter, the dissent emphasized that policy objectives and consequences also matter. In their approach to contextualism, they intended to look towards utilitarian goals and objectives of the relevant legislation, to”prevent the suffocation of its meaning” by too literal and technical approach of examining the words alone.

Separating out what would appear to be different classes in class proceedings makes sense, if it is framed when looking at the similarities of the underlying claims. However, the dissent highlighted other possible outcomes,

[158] For class actions, the real-world effect of separating out everything subject to an arbitration clause could well turn the certification stage into a search by the defendant of the precise status of each member of the class to determine whether they are in fact business or consumer clients. As the interveners Public Interest Advocacy Centre and Consumers Council of Canada pointed out in their factum, this determination could well result in “an individual fact-finding process”, leading to “confusion [that] would further undermine Ontario’s class actions regime as a viable, procedural access to justice mechanism for consumers” (p. 25). TELUS’s interpretation, in short, not only renders s. 7(5) meaningless, but also undermines the Class Proceedings Act, 1992, by making class certification overly cumbersome.

The majority’s approach unreasonably hampered the judicial discretion which was always built into the text and scheme of the Arbitration Act. It would depart from the consistent interpretation by Ontario courts of the Act, which allow judicial discretion to determine whether the arbitrable and non-arbitrable claims can be reasonably separated where there are multiple parties or multiple agreements.

The dissent also distinguished its holding by emphasizing that it was dealing with an entirely different legislative scheme than in Seidel, where there was no analogous provision under the Arbitration Act. They relied heavily on the origins of the Arbitration Acts origins with the Uniform Arbitration Act (1990), adopted by the Uniform Law Conference of Canada to harmonize the law of different provinces, which itself emerged from a 1988 Alberta Law Commission Report. They even referred to the Hansard of the Attorney General, Howard Hampton, when introducing the Act to the legislature.

Resulting from this case are two equally compelling interpretations of the same statutory provisions, using different techniques of statutory interpretation. Is the text best understood by looking at the words in a provision, in context of the statute, and in light of other statutes (alone)? Or is the text better understood by attempting to understand what the legislature actually meant by the terms? Can this meaning ever really be gleaned, and which one is actually more deferential?

Those who believed that the correct or modern approach to statutory interpretation had been resolved will find plenty to comment on in the approach of either decision. It may not be a great surprise that the modern approach may yet encounter some updating.

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