2012 QCCA 170, 2012 QCCA 170

Telus Mobilité c. Comtois 2012 QCCA 170 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-021221-106 (500-06-000400-073) DATE: January 27, 2012 CORAM: THE HONOURABLE PIERRE J. DALPHOND, J.A. NICHOLAS KASIRER, J.A. GUY GAGNON, J.A. TELUS MOBILITÉ APPELLANT – Defendant v. « Toutes les personnes physiques et morales au Québec, comptant cinquante (50) employés et moins, qui se sont vues facturer par l’appelante depuis le 24 avril 2004 des frais d’itinérance pour des appels effectués et/ou reçus au Québec »

The Group and KARINE COMTOIS The Representative Collectively, RESPONDENTS – Plaintiffs JUDGMENT [ 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. PIERRE J. DALPHOND, J.A. NICHOLAS KASIRER, J.A. GUY GAGNON, J.A. Mtre Michel Jolin Mtre François LeBel Langlois Kronström Desjardins, s.e.n.c.r.l.

For the Appellant Mtre David Bourgoin Mtre Benoît Gamache BGA Avocats s.e.n.c.r.l. For the Respondents Date of hearing: November 9, 2011

REASONS OF DALPHOND, J.A. [ 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 theCourt 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), (QC CA), [1994] R.J.Q. 2761 (C.A.), for the proposition that an application made under art. 1022 C.C.P. requiresnew 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: 1022.

The court may, at any time, upon theapplication of a party, revise the judgmentauthorizing the bringing of the class action if itconsiders that the conditions set forth inparagraph a or c of

article 1003 are no longermet. The court may then amend the judgmentauthorizing the bringing of the class action orannul it, or allow the representative to amend theconclusions sought. In addition, if the circumstances so require, thecourt may, at any time, and even ex officio,change or divide the group. [emphasis added] 1022. Le tribunal peut, en tout temps, à lademande d'une partie, réviser le jugement quiautorise l'exercice du recours collectif s'ilconsidère que les conditions énumérées dans lesparagraphes a ou c de l'article 1003 ne sont plusremplies.

Le tribunal peut alors modifier le jugement quiautorise l'exercice du recours collectif oul'annuler ou permettre au représentant demodifier les conclusions recherchées. En outre, si les circonstances l'exigent, letribunal peut, en tout temps, et même d'office,modifier ou scinder le groupe. [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 thiscase.

Since paragraph 1 refers to the conditions set forth in art. 1003 a) ("the recourses of members raise identical, similar or relatedquestions") and 1003 b) ("the composition of the group makes the application of articles 59 or 67 difficult or impracticable") no longerbeing 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 conclusionssought.

Paragraph 3 is meant to be broader, as indicated by its introductory words "In addition", the sentence "if the circumstances sorequire" 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 theCourt 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 adivision of the group into subgroups may be ordered if it becomes evident that the burden of proof will vary significantly amongstclasses 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. Thisprovision reads as follows:

940.1. Where an action is brought regarding adispute in a matter on which the parties have anarbitration agreement, the court shall refer themto arbitration on the application of either of themunless the case has been inscribed on the roll orit finds the agreement null. The arbitration proceedings may nevertheless becommenced or pursued and an award made atany time while the case is pending before thecourt. 940.1.

Tant que la cause n'est pas inscrite, untribunal, saisi d'un litige sur une question au sujetde laquelle les parties ont conclu une conventiond'arbitrage, renvoie les parties à l'arbitrage, à lademande de l'une d'elles, à moins qu'il neconstate la nullité de la convention.

La procédure arbitrale peut néanmoins êtreengagée ou poursuivie et une sentence peut êtrerendue tant que le tribunal n'a pas statué. [17] Such a motion challenges the jurisdiction rationae materiae of the Superior Court and can be made at any time before the caseis 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 bedeferred to by courts (Seidel v. TELUS Communications Inc., 2011 SCC 15 , 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 ofthe courts.

Courts may not hear cases under a class action that they would not have jurisdiction to hear if they were brought as individualcases (Bisaillon v. Concordia University, 2006 SCC 19, [2006] 1 S.C.R. 666, at paras. 19 and 22; Dell Computer Corp. v. Union desconsommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, at para. 150).

The normal combined effect of these rules is that where a validarbitration 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, atpara. 5). [20] Legal persons have remained a part of the group up to the bringing of Telus' motion for an evidentiary reason and a proceduralone.

At the time the authorization to institute class proceedings was granted, this Court was unable to rule on the existence of anarbitration clause in all the service contracts with corporate customers. Moreover, there was no notice of arbitration served, no arbitrationpending 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 excludedfrom the group (Karine Comtois v. Telus Mobilité, at para. 54).

In other words, the issue was left for future consideration by the SuperiorCourt, 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 acorporate customer, the Superior Court has original jurisdiction to hear a claim on behalf of a person legally bound by an arbitrationclause.

On the contrary, it is important to remember that in Quebec, once an arbitration clause exists, the sole forum competent to hear adispute 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 inscribedon 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 towaive the arbitration forum, in other words to amend the arbitration agreement, that a court of law can assert jurisdiction.

Such waivermay result from the failure to ask that a matter brought before a court be referred to arbitration before its inscription on the roll forhearing on the merits (Les Peintures Larvin inc. v.

Mutuelle des fonctionnaires du Québec, (QC CA), [1987] R.D.J. 402 (C.A.); Lac d’amiante du Québec Ltée v. 2858 Québec inc., [1999] J.Q. no 5438 (C.A.), confirming (QC CS),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 jurisdictionover 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 hasbeen established that the contracts with them contain an arbitration clause - a factual conclusion reached by the judge at paras 31-32 ofhis judgment – the Superior Court was obliged to decline jurisdiction over claims made behalf of corporate customers.

Thus the judgeshould have modified the group to exclude them. This was the only way that he could have given effect to the substantive law governingarbitration agreements. [25] Furthermore, to hold that Telus was bound to serve a notice of arbitration to all its corporate customers despite the absence ofclaims brought against any of them would be contrary to the arbitration clause itself. That clause requires the party bringing the claim toserve 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), (SCC), [1998] 1S.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 oneach 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 proportionalityenunciated 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 casemanagement 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 beconsistent with it (see Y.-M. Morissette, “Gestion d’instance, proportionnalité et preuve civile: état provisoire des questions” (2009), 50C. 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 principlemeans that litigation must be consistent with the principles of good faith and of balance between litigants and must not result in an abuseof the public service provided by the institutions of the civil justice system. There are of course special rules for the most diverse aspectsof 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 casemanagement. From this perspective, the effect of the principle of proportionality is to cast serious doubts on the appropriateness ofbringing class actions to achieve the purposes being pursued in the appellants’ proceedings. The class action has a significant social andlegal 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 inthat 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 thisCourt. [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 allobligations 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 ofindividual users.

According to him, it would thus be contrary to the interests of justice to have the same agreement dealt with by civilcourts for the claims of individual users and by an arbitrator for the claims of the legal person, which would be the outcome if thearbitration 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 canjustify 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 mediationand 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:

15 ARBITRATION: Any claim, dispute or controversy (whether in contract or tort, pursuant to statute or regulation, or otherwise and whether pre-existing, present or future - except for the collection from you of any amount by TELUS Mobility) arising out of or relating to: (

a) this agreement; (

b) a phone or the service; (

c) oral or written statements, or advertisements or promotions relating to this agreement or to a product or service; or (

d) the relationships which result from this agreement (including relationships with third parties who are not parties to this agreement), (each, a "Claim") will be referred to and determined by private and confidential mediation before a single mediator chosen by the parties and at their joint cost. Should the parties after mediation in good faith fail to reach a settlement, the issue between them shall then be determined by private, confidential and binding arbitration by the same person originally chosen as mediator.

Either party may commence court proceedings to enforce the arbitration result when an arbitration decision shall have been rendered and thirty (30) days have passed from the date of such decision.

By so agreeing, you waive any right you may have to commence or participate in any class action against TELUS Mobility related to any Claim and, where applicable, you hereby agree to opt out of any class proceeding against TELUS Mobility otherwise commenced.(...) [Emphasis added] 15 ARBITRAGE Tout différend, controverse ou réclamation (de nature contractuelle ou délictuelle, en vertu de la loi ou d’un règlement, ou autrement, passé présent ou futur – sauf en ce qui concerne la perception par TELUS Mobilité de toute somme auprès de vous) qu’il découle des causes suivantes ou y soit lié :

a) la présente entente;

b) un téléphone ou le service;

c) des déclarations verbales ou écrites, ou des publicités ou promotions concernant la présente entente ou un produit ou un service; ou

d) les relations qui découlent de la présente entente (y compris les relations avec les tiers qui ne sont pas parties), chacune étant, individuellement, une « réclamation ») feront l’objet d’une médiation privée et confidentielle devant un seul médiateur choisi par les parties à leurs frais conjoints. Si les parties n’arrivent pas à un règlement après une médiation de bonne foi, le litige sera alors soumis à l’arbitrage privé, confidentiel et final de la même personne que celle qui a été choisie à l’origine comme médiateur.

L’une ou l’autre des parties peut intenter une action en justice aux fins de faire respecter et exécuter la sentence arbitrale rendue, à condition qu’une sentence arbitrale ait été rendue et seulement à ce moment-là, après un délai de trente (30) jours à compter de la date de cette sentence.

En acceptant ce qui précède, vous renoncez à tout droit que vous pouvez avoir d’intenter un recours collectif ou d’y participer, à l’encontre de TELUS Mobilité, en ce qui concerne toute réclamation, et le cas échéant, vous convenez, par les présentes, de vous retirer de tous recours collectif autrement intenté contre TELUS Mobilité (...) [ 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. PIERRE J. DALPHOND, J.A.