Canadian Class Action Defence Blog

Riding the wave: recent developments with class action waivers

Sep 7, 2021 4 MIN READ
Authors
Sonia Bjorkquist

Partner, Disputes, Toronto

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A class action waiver is a contractual term — usually found in a contract between an individual and a company — that stipulates that the individual will not participate in a class proceeding against the company and instead commits to resolving disputes on an individual basis. Such terms mitigate a company’s risk of exposure to class proceedings, which can be very costly to defend, even when a claim lacks merit.

As we have previously stated, the enforcement of a class action waiver is essentially a matter of contract. However, the enforcement of contracts may be affected by various statutes and common law doctrines. For disputes arising out of “consumer agreements,” the Ontario Consumer Protection Act, 2002, section 8(1), renders class action waivers unenforceable. Outside of the consumer context, however, the enforceability of class action waivers at common law is an unsettled matter of some controversy.

Recent court treatment of class action waivers

We previously observed that the Supreme Court of Canada sidestepped this issue in Seidel v. TELUS Communications Inc. The Court held that provincial consumer protection legislation rendered a pre-dispute arbitration clause void. The accompanying class action waiver was also invalidated because the contract was drafted so as to make the class action waiver dependent on the arbitration provision.[1]

Recently, the B.C. Court of Appeal revisited this issue in Pearce v. 4 Pillars Consulting Group Inc. The Court concluded that a class action waiver between debt advisors and their clients was unenforceable due to the unconscionability doctrine and the public policy doctrine.[2]

In its unconscionability analysis, the Court found an inequality of bargaining power on the basis that the clients of the debt advisors were financially distressed and the agreement containing the class action waiver was a standard form contract that offered no opportunity for negotiation.[3] The plain-language drafting of the waiver and a common practice of explaining the contract to clients before signing was not sufficient to overcome this imbalance.[4] Rounding out the inquiry, the Court found that the substance of the class action waiver was improvident because it denied the class members access to justice, as alternative procedures would be prohibitively costly.[5]

The Court continued, in obiter, to explain how, in its view, class action waivers are also contrary to the public policy doctrine. It has long been held that an agreement to oust the jurisdiction of the superior courts is contrary to public policy and is therefore void. In the Court’s view, class action waivers contravene this policy — despite the fact that they do not actually oust court jurisdiction —  because they have the practical effect of precluding access to justice.[6] The Court effectively recast the policy against ousters of court jurisdiction into a free-standing policy against agreements that inhibit access to justice.

Even more recently, in a decision certifying a class proceeding, the Ontario Superior Court of Justice observed that the class members “have reasonably strong arguments” that a class action waiver is unenforceable due to the unconscionability doctrine and the public policy doctrine.[7] The Court cited, neutrally, to the B.C. Court of Appeal’s decision in Pearce, discussed above. However, the Court declined to rule definitively on the issue at the certification stage, as it felt the issue had to be determined at trial. The decision was covered more fully in a previous blog post, "The ride isn’t over: Uber v. Heller certified as a class action."

Takeaway

Thus, despite these recent developments, there remains significant uncertainty concerning the enforceability of class action waivers at common law. The B.C. Court of Appeal relied on the unconscionability doctrine for its decision, which is a fact- and context-specific doctrine. Its comments about the public policy doctrine were non-binding obiter dicta. The ambiguous status of class action waivers is likely to persist until Canada’s highest court weighs in on the issue.


[1] Seidel v. TELUS Communications Inc., 2011 SCC 15, at paras 44–45.

[2] Pearce v. 4 Pillars Consulting Group Inc., 2021 BCCA 198, at paras 247, 279.

[3] Pearce v. 4 Pillars Consulting Group Inc., 2021 BCCA 198, at paras 225–226 and 236.

[4] Pearce v. 4 Pillars Consulting Group Inc., 2021 BCCA 198, at paras 227–235.

[5] Pearce v. 4 Pillars Consulting Group Inc., 2021 BCCA 198, at paras 244 and 246.

[6] Pearce v. 4 Pillars Consulting Group Inc., 2021 BCCA 198, at para 248.

[7] Heller v. Uber Technologies Inc., 2021 ONSC 5518, at para 128.