Décision

[1]           On appeal from a judgment of the Quebec Superior Court, District of Montreal, rendered on November 3, 2010 (the Honourable Mark G. Peacock), which dismissed Telus’ application to modify the Group.

[2]           For the reasons of Dalphond, J.A., with which Kasirer and Gagnon, JJ.A. agree, THE COURT:

[3]           ALLOWS the appeal with costs, sets aside the judgment of the Superior Court and proceeding to render the judgment that should have been rendered, GRANTS Telus' motion with costs and modifies the group to remove legal persons.

[4]           In March 2010, this Court authorized a class action in connection with roaming charges billed by the appellant, Telus Mobility (Telus), to the users of its cellular phones in areas along the Canada-U.S. border. Telus contends that the judge of the Superior Court erred in November 2011 in dismissing its motion to exclude from the group corporate customers that it showed were bound by an arbitration clause. For the reasons that follow, I agree. 

BACKGROUND

[5]           On April 21, 2008, a judgment of the Superior Court denied the authorization to institute class action proceedings. On March 29, 2010, in Karine Comtois v. Telus Mobilité, 2010 QCCA 596 , this Court overturned the judgment and authorized a class action on behalf of Telus' customers, including legal persons with fifty employees or fewer,[1] that were billed for roaming charges on calls that were made or received in Québec after April 24, 2004.

[6]           In the course of the first appeal, Telus argued that corporate customers should be excluded, alleging that their service contracts contained an arbitration clause, the validity of which could not be affected by the new s. 11.1 of the Consumer Protection Act, R.S.Q., c. P-40.1, adopted further to the decision of the Supreme Court in Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801 . Considering that at the time the file included only the service contract of the class representative and that no one had yet asked that the matter be referred to arbitration, Rochon J.A., writing for an unanimous panel, dismissed the argument as follows:

[54] Cette disposition contractuelle qui n’est plus opposable au consommateur depuis le 1^er avril 2007 le serait toujours à l’égard des personnes morales. Je peux certes en convenir, mais l’état du dossier ne permet pas de trancher cette question. Il n’y a aucune preuve au dossier d’un avis qu’aurait donné l’intimée afin de référer à l’arbitrage un différend avec une personne morale. Ainsi, à ce stade, aucune partie n’a demandé de renvoyer le dossier à l’arbitrage. En l’absence de demande formelle, le tribunal ne peut y suppléer d’office. [Emphasis added]

[7]           As a result, corporate customers were included in the group on behalf of which the class action proceedings were authorized. In May, 2010, the class representative filed her motion to institute a class action on behalf of that group.

[8]           Later on, Telus submitted a motion to modify the group to exclude corporate customers. The motion, in its re-amended version of October 2010, refers to art.  1022 (3) C.C.P., a provision that allows for amendments to the group. It alleges a lack of jurisdiction on the part of the Quebec Superior Court as a result of the arbitration clause found in all the service contracts entered into with corporate customers.

[9]           By a judgment rendered on November 3, 2010, the motion was dismissed with costs ( 2010 QCCS 5222 ). In December 2010, leave to appeal was granted ( 2010 QCCA 2387 ).

JUDGMENT UNDER APPEAL

[10]        Peacock J. found on the evidence before him that all contracts entered into by legal or natural persons included a clause providing for mandatory arbitration in the case of a claim by either party, along with a waiver of any right to participate in class action proceedings against Telus. He wrote at para. 32:

The Court understands from Mr. Iturralde that in all contracts for the relevant period the compulsory arbitration clause was always present, as was a sentence in a paragraph headed "General" which said:"... If you are a business, corporation or other entity, then you and the individual user of the service shall be jointly responsible for all obligations in these terms and conditions, individually and together. ..."

[11]        Nevertheless, he concluded that the motion should be denied for two reasons. First, he held that since Telus had failed to serve a notice of arbitration on its corporate customers, it could not ask the court to refer the matter to arbitration. In light of this failure, and taking into account the proportionality principle found in art. 4.2 C.C.P., the judge found it preferable to have all of the claims decided in one proceeding before the Superior Court. Second, he relied on s. 16 of the service contract, which provides that businesses, corporations and other entities are to be held jointly responsible with the individual user of the service for all obligations. According to Peacock J., this meant that the rights and obligations of corporations under the service contract were “inextricably interwoven” with those of the individual users. Thus it would be contrary to the interests of justice for civil courts to deal with the claims of individuals while arbitrators dealt with the claims of legal persons that arose out of the same agreement and calls.

ISSUES

[12]        The appeal raises the following issues:

1. Was Telus required to show new circumstances before a judge could consider amending the group as defined by the judgment of the Court of Appeal?

2. Did the judge err in holding that a notice of arbitration was required for a modification of the group?

3. Did the judge err in relying on art.  4.2 C.C.P. as a basis for denying Telus’ application?

4. Did the judge err in its application of s.16 of the service contract?

5. Is the arbitration clause manifestly abusive and thus not binding?

ANALYSIS

I.          There was no need for a demonstration of new circumstances

[13]        The class representative relies on Syndicat national des employés de l’Hôpital St-Ferdinand v. Québec (Curateur publique), [1994] R.J.Q. 2761 (C.A.), for the proposition that an application made under art.  1022 C.C.P. requires new facts or circumstances in order for it not to amount to a disguised appeal of the decision to authorize the class action. In her view, Telus did not show that such was the case and thus, its motion was rightly dismissed.

[14]         Art.  1022 C.C.P. reads as follows:

[15]        The St-Ferdinand case dealt with an application made under paragraph 1 of art.  1022 C.C.P., not under paragraph 3 as in this case. Since paragraph 1 refers to the conditions set forth in art. 1003 a) ("the recourses of members raise identical, similar or related questions") and 1003 b) ("the composition of the group makes the application of articles 59 or 67 difficult or impracticable") no longer being met, it follows that the petitioner must show that something has changed since the authorization. If such a demonstration is made, the court may either amend or annul the judgment authorizing the class action or allow the representative to amend the conclusions sought. Paragraph 3 is meant to be broader, as indicated by its introductory words "In addition", the sentence "if the circumstances so require" and the fact that the court may even act ex officio. As stated by Peacock J. at paragraph 21 of his judgment: “Hence, the "circumstances" could even be pre-existing but never brought to the attention of the Court by the parties and yet still be raised by the Court itself per art. 1022 paragraph 3 C.C.P.”. Paragraph 3 limits a court's options to two: change or divide the group. For example a division of the group into subgroups may be ordered if it becomes evident that the burden of proof will vary significantly amongst classes of members of the group. However a court cannot change the conclusions sought or annul the authorization. In conclusion, paragraph 1 and paragraph 3 pursue different objectives and are not subject to the same requirements.

[16]        In any case, Telus' motion, though it refers to art.  1022 (3) C.C.P., was in fact akin to an application under art.  940.1 C.C.P. asking the Superior Court to decline jurisdiction over corporate customers because they were bound by an arbitration clause. This provision reads as follows:

[17]        Such a motion challenges the jurisdiction rationae materiae of the Superior Court and can be made at any time before the case is inscribed on the roll for hearing on the the merits (art.  940.1 C.C.P.; Spring v. Em-Yo Properties Inc., B.E. 2006BE-654 (C.A.)).

II.         The Superior Court erred in finding that a notice of arbitration was required

[18]        Recent jurisprudence has established that, in the absence of a contrary provision of law, an arbitration clause should be deferred to by courts (Seidel v. TELUS Communications Inc., 2011 S.C.C. 15, [2011] 1 SCR 531, at para. 42). Further, where a class action is available as a procedural vehicle, it creates no new substantive rights and does not alter the jurisdiction of the courts. Courts may not hear cases under a class action that they would not have jurisdiction to hear if they were brought as individual cases (Bisaillon v. Concordia University, 2006 SCC 19, [2006] 1 S.C.R. 666 , at paras. 19 and 22; Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801 , at para. 150). The normal combined effect of these rules is that where a valid arbitration clause exists, courts will decline to authorize class action proceedings and instead refer the cases to arbitration.

[19]        This has occurred even where only some members of the group were covered by an arbitration agreement (Bisaillon, supra, at para. 5).

[20]        Legal persons have remained a part of the group up to the bringing of Telus' motion for an evidentiary reason and a procedural one. At the time the authorization to institute class proceedings was granted, this Court was unable to rule on the existence of an arbitration clause in all the service contracts with corporate customers. Moreover, there was no notice of arbitration served, no arbitration pending and it was premature to present a motion to refer the claims of corporate customers to arbitration.

[21]        However, in that judgment the Court acknowledged that the state of the law was such that legal persons could be excluded from the group (Karine Comtois v. Telus Mobilité, at para. 54). In other words, the issue was left for future consideration by the Superior Court, as Peacock J. rightly acknowledged.

[22]        Furthermore, this judgment cannot be understood as meaning that, failing a notice of arbitration given by either Telus or a corporate customer, the Superior Court has original jurisdiction to hear a claim on behalf of a person legally bound by an arbitration clause. On the contrary, it is important to remember that in Quebec, once an arbitration clause exists, the sole forum competent to hear a dispute covered by the said clause is the arbitrator, to the exclusion of the courts (art.  2638 C.C.Q.). Thus, until a case has been inscribed on the roll, a party may at any time ask that the matter be referred to arbitration (art.  940.1 C.C.P.). It is only when both parties agree to waive the arbitration forum, in other words to amend the arbitration agreement, that a court of law can assert jurisdiction. Such waiver may result from the failure to ask that a matter brought before a court be referred to arbitration before its inscription on the roll for hearing on the merits (Les Peintures Larvin inc. v. Mutuelle des fonctionnaires du Québec, [1987] R.D.J. 402 (C.A.); Lac d’amiante du Québec Ltée v. 2858 Québec inc., [1999] J.Q. n^o 5438 (C.A.), confirming J.E. 98-898 (S.C.)).

[23]        It is also well established that class action proceedings do not empower the Quebec Superior Court to exercise jurisdiction over a person as a member of the group where it could not do so if it dealt with an individual claim from the said person (Bisaillon, supra, at paras.19 and 22, reaffirmed in Dell, supra, at para. 150).

[24]        It follows that, in spite of the absence of a notice of arbitration being served by Telus on its corporate customers, once it has been established that the contracts with them contain an arbitration clause - a factual conclusion reached by the judge at paras 31-32 of his judgment - the Superior Court was obliged to decline jurisdiction over claims made behalf of corporate customers. Thus the judge should have modified the group to exclude them. This was the only way that he could have given effect to the substantive law governing arbitration agreements.

[25]        Furthermore, to hold that Telus was bound to serve a notice of arbitration to all its corporate customers despite the absence of claims brought against any of them would be contrary to the arbitration clause itself. That clause requires the party bringing the claim to serve a notice of arbitration, not the party defending the claim.

[26]        Finally, why should a party be bound to serve a notice of arbitration on those with whom it considers itself to have no dispute? A proper reading of the law cannot lead to such an absurd result (Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27 ).

[27]        For these reasons, I am of the view that the Superior Court judge erred in law in finding that serving a notice of arbitration on each corporate customer was required prior to a modification of the group to exclude them.

III.        The judge erred in relying on art. 4.2 C.C.P. for denying the  application

[28]        As pointed out by Justice LeBel in Marcotte v. Longueuil (City), 2009 SCC 43, [2009] 3 S.C.R. 65 , the rule of proportionality enunciated at art. 4.2 C.C.P. is not a substantive right but rather a guiding principle in the conduct of proceedings and in the case management by the court:

[43]      The principle of proportionality set out in art.  4.2 C.C.P. is not entirely new.  To be considered proper, a proceeding must be consistent with it (see Y.-M. Morissette, “Gestion d’instance, proportionnalité et preuve civile: état provisoire des questions” (2009), 50 C. de D. 381).  Moreover, the requirement of proportionality in the conduct of proceedings reflects the nature of the civil justice system, which, while frequently called on to settle private disputes, discharges state functions and constitutes a public service.  This principle means that litigation must be consistent with the principles of good faith and of balance between litigants and must not result in an abuse of the public service provided by the institutions of the civil justice system.  There are of course special rules for the most diverse aspects of civil procedure.  The application of these rules will often make it possible to avoid having recourse to the principle of proportionality.  However, care must be taken not to deny this principle, from the outset, any value as a source of the courts’ power to intervene in case management.  From this perspective, the effect of the principle of proportionality is to cast serious doubts on the appropriateness of bringing class actions to achieve the purposes being pursued in the appellants’ proceedings.  The class action has a significant social and legal role, as the courts have often confirmed.  Nevertheless, I consider the Quebec Court of Appeal’s consistent line of authority, according to which a request for a declaration that a municipal by-law is null cannot be made by means of a class action, to be sound in that it reminds us that the class action must be used properly, which does not seem to me to be the case in the two appeals before this Court.

[29]        To use it to trump a general principle of law such as the one expressed at art.  2638 C.C.Q. on jurisdiction is an error of law. Art.  4.2 C.C.P. cannot justify the conclusion reached by the Superior Court judge.

IV.       An improper application of s. 16 of the service contracts

[30]         Section 16 of the service contract reads in part:

If you are a business, corporation, or other entity, then you and the individual user of the server shall be jointly responsible for all obligations in these terms and conditions, individually and together.

[31]        The Superior Court judge concluded that the obligations of legal persons were “inextricably interwoven” with those of individual users. According to him, it would thus be contrary to the interests of justice to have the same agreement dealt with by civil courts for the claims of individual users and by an arbitrator for the claims of the legal person, which would be the outcome if the arbitration clause were found to oust the jurisdiction of the courts over legal persons only.

[32]        With great respect, it is a further error of law to hold that the potential efficiencies to be derived from a unified proceeding can justify setting aside an arbitration agreement, as pointed out by the Supreme Court in Bisaillon, supra, and in GreCon Dimter inc. v. J.R. Normand Inc., 2005 SCC 46, [2005] 2 S.C.R. 401 .

V.        The arbitration clause is not patently illegal

[33]        The service agreements with corporate customers contain a clause that provides that any claim (except for a collection matter) is to be first mediated by a sole-mediator and thereafter arbitrated by the same person who becomes an arbitrator. Costs for the mediation and the arbitration are to be divided equally between the parties. In addition, the standard service terms, which are non-negotiable, provide for an exclusion of any class action:

[34]        The nullity of arbitration clauses in consumer contracts as set out in the recent amendment to the Consumer Protection Act does not apply here since the contracts with legal persons are not consumer contracts. Accordingly, the arbitration clause in the service contracts with corporate customers is legally valid.

[35]        The class representative submits, as an alternative argument for denying Telus' application, that the arbitration clause is abusive and should be declared null under art.  1437 C.C.Q. and arts 4.1 and 4.2 C.C.P. In her view, such an arbitration clause, by denying the possibility of participation in a class action and by exposing the losing party to the costs of arbitration, deters claims against Telus when the amount at stake is small.

[36]        Absent legislated exception, any challenge to an arbitrator's jurisdiction over a claim against Telus should first be determined by the arbitrator, unless the challenge involves a pure question of law or one of mixed fact and law that requires for its determination "only superficial consideration of the documentary evidence in the record" (Dell, supra, at para. 85; Siedel, supra, at para. 29; Unifund Assurance Co. v. Insurance Corp. of British Columbia, 2003 SCC 40, [2003] 2 S.C.R. 63 , at paras. 37-38).

[37]        Unfortunately for the class representative, this argument was rejected by the Supreme Court of Canada in Seidel, supra, a case involving Telus and the very same arbitration clause. This conclusion is in keeping with other decisions of the Supreme Court upholding arbitration agreements in contracts of adhesion absent legislative language to the contrary overriding the parties' freedom to choose arbitration (see: Dell, supra; Rogers Wireless Inc. v. Muroff, 2007 SCC 35, [2007] 2 S.C.R. 921 ; Desputeaux v. Éditions Chouette (1987) inc., 2003 SCC 17, [2003] 1 S.C.R. 178 ).

[38]        It follows that Telus has a contractual right to have the claims of its corporate customers determined by an arbitrator. As for the possibility that the said clause is abusive for certain corporate customers, such a finding will depend on the particular facts of the case, including testimonial evidence. As such, it should first be determined by the arbitrator under art.  943 C.C.P., subject to an application for revision under art.  943.1 C.C.P., considering the competence-competence principle (see Dell, supra, at paras. 84-86 and para. 229; Siedel, supra, at para. 4; Rogers Wireless, supra, at paras. 15-16).

CONCLUSION

[39]        For these reasons, I propose to allow the appeal with costs, to set aside the judgment of the Quebec Superior Court and proceeding to render the judgment that should have been rendered, to grant Telus' motion with costs and to modify the group to remove the reference to legal persons.