Rogers Wireless Inc. v. Muroff, 2007 SCC 35, [2007] 2 SCR 921

                                                 SUPREME COURT OF CANADA

Between:

Rogers Wireless Inc.

Appellant

and

Frederick I. Muroff

Respondent

Official English Translation:  Reasons of LeBel J.

Coram: McLachlin C.J. and Binnie, LeBel, Fish, Abella, Charron and Rothstein JJ.

______________________________

Rogers Wireless Inc. v. Muroff, [2007] 2 S.C.R. 921, 2007 SCC 35

Rogers Wireless Inc.                                                                                                         Appellant

v.

Frederick I. Muroff                                                                                                         Respondent

Indexed as:  Rogers Wireless Inc. v. Muroff

Neutral citation:  2007 SCC 35.

File No.:  31383.

2006:  December 14; 2007:  July 13.

Present:  McLachlin C.J. and Binnie, LeBel, Fish, Abella, Charron and Rothstein JJ.

on appeal from the court of appeal for quebec

Civil procedure — Arbitration — Effect of arbitration clause on court’s jurisdiction — Whether court must dispose of any arguments on validity of arbitration clause before referral to arbitration — Code of Civil Procedure, R.S.Q., c. C‑25, s. 940.1.

Rogers is a mobile telephone service provider.  Its Canadian subscribers can use their phones in the United States, subject to “roaming” charges.  In most parts of the United States, these charges were 95¢ per minute; however, in certain “excluded areas”, they were $4 per minute.  The service agreement between Rogers and M, a Quebec resident, contained an arbitration clause.  This clause not only referred all disputes to arbitration, but also expressly prohibited a customer from commencing or participating in a class action.  M applied for authorization to institute a class action against Rogers on behalf of himself and all other subscribers who had been charged $4 per minute for roaming charge, challenging both the $4 per minute charge and the arbitration clause on the basis that they were abusive.  Without addressing the issue, the trial judge held that the clause deprived her of jurisdiction and referred the matter to an arbitrator.  The Court of Appeal set aside that decision and returned the matter to the Superior Court to decide the issue of the validity of the arbitration clause.

Held:  The appeal should be allowed.

Per McLachlin C.J. and Binnie, Fish, Abella, Charron and Rothstein JJ.:  Applying the principles set out by the majority in Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, 2007 SCC 34, the trial judge was correct to renounce jurisdiction in favour of arbitration.  To determine whether the arbitration clause was abusive would have required a detailed factual inquiry on a mixed question of law and fact.  An arbitrator has exclusive jurisdiction to undertake such an inquiry and for a court to do so would run counter to art. 940.1 of the Code of Civil Procedure and deprive the arbitrator of jurisdiction to rule on its own jurisdiction.  [13] [15‑16]

As was also held in Dell, s. 11.1 of the Consumer Protection Act, which prohibits any stipulation requiring a consumer to refer a dispute to arbitration, does not apply to legal situations that had fully occurred at the time it came into force, such as this one.  [18‑19]

Per LeBel J.:  A review of the trial proceedings confirms that M plans to adduce evidence, which could require a long and complex inquiry, to establish that the arbitration clause is abusive.  On either the test set out by the majority in Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, 2007 SCC 34, or the one proposed by the dissent in that same case, the Superior Court should decline to consider this issue.  M’s claim must be referred to arbitration.  [25]

Cases Cited

By McLachlin C.J.

Followed:  Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, 2007 SCC 34, rev’g [2005] Q.J. No. 7011 (QL), 2005 QCCA 570.

By LeBel J.

Referred to:  Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, 2007 SCC 34.

Statutes and Regulations Cited

Act to amend the Consumer Protection Act and the Act respecting the collection of certain debts, Bill 48, 2nd Sess., 37th Leg., Quebec (now S.Q. 2006, c. 56), s. 2.

Civil Code of Québec, S.Q. 1991, c. 64, arts. 1437, 3149.

Code of Civil Procedure, R.S.Q., c. C‑25, art. 940.1.

Consumer Protection Act, R.S.Q., c. P‑40.1, ss. 8, 11.1.

APPEAL from a judgment of the Quebec Court of Appeal (Morin, Rochon and Doyon JJ.A.), [2006] Q.J. No. 1000 (QL), 2006 QCCA 196, setting aside a decision of Borenstein J., [2005] Q.J. No. 17037 (QL).  Appeal allowed.

Pierre Y. Lefebvre, Éric Simard and Isabelle Deschamps, for the appellant.

Albert A. Greenspoon, Johanne Gagnon and Steve Whitter, for the respondent.

The judgment of McLachlin C.J. and Binnie, Fish, Abella, Charron and Rothstein JJ. was delivered by

The Chief Justice —

1.  Introduction

1                                   This case concerns the effect of an arbitration clause on a court’s jurisdiction under Quebec civil law — in particular, how a court should deal with an arbitration clause that is alleged to be null.  In this case, the arbitration clause was allegedly null because it appeared in a consumer contract and because it barred access to class action procedures. The appeal therefore deals with issues similar to those in Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, 2007 SCC 34. However, no issues of private international law are raised in this case.

2.  Facts

2                                   Rogers is a mobile telephone service provider. Its Canadian subscribers can use their telephones in the United States, subject to “roaming” charges. In most parts of the United States, these charges are 95¢ per minute; however, in certain “excluded areas”, they are $4 per minute. Dr. Muroff, a Quebec resident, used his Rogers mobile phone to make calls from Rhode Island and Maine; Rogers billed him $4 per minute for these calls.

3                                   The service agreement between Rogers and Dr. Muroff contained an arbitration clause. Not only did this clause refer all disputes to arbitration, it also expressly prohibited the customer from commencing or participating in a class action. The service agreement appeared on the bills that Rogers sent to Dr. Muroff, and on Rogers’ Web site.

3.  Legal History

4                                   Dr. Muroff applied for authorization to institute a class action against Rogers on behalf of himself and all other Rogers subscribers who had been charged $4 per minute for roaming service.  This contradicted the arbitration clause in the service agreement, so Dr. Muroff challenged both the $4 per minute charge and the arbitration clause, arguing that they were abusive, contrary to art. 1437 of the Civil Code of Québec, S.Q. 1991, c. 64 (“C.C.Q.”), and s. 8 of the Consumer Protection Act, R.S.Q., c. P-40.1.

5                                   Rogers argued that the court had no jurisdiction, due to the arbitration clause (art. 940.1 of the Code of Civil Procedure, R.S.Q., c. C-25 (“C.C.P.”)). Dr. Muroff brought a motion for permission to conduct an examination on discovery of Rogers’ representatives. Rogers asked the court to dismiss this application.

6                                   The Superior Court judge, Borenstein J., noted that Rogers’ bills and its Web site contained an arbitration clause. She held that Dr. Muroff had accepted the terms and conditions of the contract by paying these bills. Borenstein J. was satisfied that the arbitration clause was mandatory and exclusive (“parfaite”). She did not address the question of whether the clause was abusive; she simply held that the clause deprived her of jurisdiction to rule on either the examination on discovery or the institution of a class action ([2005] Q.J. No. 17037 (QL)).

7                                   The Court of Appeal overturned this decision, holding that Borenstein J. had erred by sending the dispute to arbitration without deciding whether or not the clause was abusive.  Citing its decision in Dell ([2005] R.J.Q. No. 1448, 2005 QCCA 570), the Court of Appeal declared that the Superior Court should first assess the validity of an arbitration clause before renouncing jurisdiction in favour of arbitration. The Court of Appeal therefore returned the matter to the Superior Court to decide this issue ([2006] Q.J. No. 1000 (QL), 2006 QCCA 196).

8                                   Rogers appeals to this Court.  It argues that the Court of Appeal erred in ordering the Superior Court to assess the validity of the arbitration clause.  In its view, Borenstein J. was correct to hold that an arbitrator had exclusive jurisdiction.

4.  Analysis

9                                   Two principal questions arise. The first is the degree of scrutiny a trial court should apply to an arbitration clause whose validity is contested under art. 940.1 C.C.P. The second is the allegedly abusive nature of the clause under art. 1437 C.C.Q., and whether the trial judge should have addressed this question, applying the correct level of scrutiny. 

10                               Irrespective of these questions, this Court must also ask whether the arbitration clause in this case was rendered null by the enactment of Bill 48, An Act to amend the Consumer Protection Act and the Act respecting the collection of certain debts,  2nd Sess.,  37th Leg., Québec, 2006 (now S.Q. 2006, c. 56).

4.1 The Effect of the Arbitration Clause on the Court’s Jurisdiction

11                               In Dell, the Court was unanimous in finding that under art. 940.1 C.C.P., arbitrators have jurisdiction to rule on their own jurisdiction (the “compétence-compétence principle”). The majority of the Court held that, when an arbitration clause exists, any challenges to the jurisdiction of the arbitrator must first be referred to the arbitrator. Courts should derogate from this general rule and decide the question first only where the challenge to the arbitrator’s jurisdiction concerns a question of law alone.  Where a question concerning jurisdiction of an arbitrator requires the admission and examination of factual proof, normally courts must refer such questions to arbitration.  For questions of mixed law and fact, courts must also favour referral to arbitration, and the only exception occurs where answering questions of fact entails a superficial examination of the documentary proof in the record and where the court is convinced that the challenge is not a delaying tactic or will not prejudice the recourse to arbitration.

12                               In the same case, Bastarache and LeBel JJ. suggested an alternative, discretionary approach favouring resort to the arbitrator in most instances: “a court should rule on the validity of the arbitration only if it is possible to do it on the basis of documents and pleadings filed by the parties without having to hear evidence or make findings about its relevance and reliability” (para. 176).

13                               Applying the standard endorsed by the majority in Dell, the trial judge was therefore correct to refer the matter to arbitration, unless the nature of the challenge and its evidentiary implications justified a departure from the general rule of deference to arbitral jurisdiction.

4.2 The Allegedly Abusive Nature of the Arbitration Clause

14                               Dr. Muroff alleges that the arbitration clause is abusive under art. 1437 C.C.Q.  He claims the right to prove this in court using a variety of evidence, including transcripts of oral examinations of Rogers’ representatives.

15                               Whether the arbitration clause is abusive is a mixed question of law and fact. Answering this question would apparently require a probing factual inquiry, including cross-examination; it would go far beyond a superficial examination of the documentary evidence.  (As Bastarache and LeBel JJ. held in Dell at para. 229, an arbitration clause is not necessarily abusive simply because it appears in a consumer contract; see also the reasons of Deschamps J. at para. 104.)

16                               Under the approach to art. 940.1 C.C.P. adopted by the majority of this Court in Dell, an arbitrator has exclusive jurisdiction to undertake such an inquiry.  For a court to conduct such an inquiry would run counter to art. 940.1 and deprive the arbitrator of jurisdiction to rule on its own jurisdiction.

17                               Borenstein J. was therefore correct to hold that she had no jurisdiction and to refer the matter to an arbitrator. The Court of Appeal erred in returning the matter to the Superior Court for a determination on this issue.

4.3 Transitional Law

18                              Bill 48 was assented to on December 14, 2006, the day of the hearing of this case before our Court.  Section 2 of Bill 48, which added s. 11.1 to the Consumer Protection Act, came into force the same day. This provision prohibits any stipulation requiring a consumer to refer a dispute to arbitration, particularly if it deprives a consumer of access to class action procedures.

19                               As this Court held in Dell, s. 11.1 of the Consumer Protection Act represents a change of substantive law. It has no retroactive effect.  It only applies to legal situations that occurred after its coming into force or were ongoing at the time it came into force.  It does not apply to legal situations that had fully occurred at the time it came into force, such as this one.

5.  Conclusion

20                               Faced with a challenge to the validity of an arbitration clause that would have required a detailed factual inquiry on a mixed question of law and fact, Borenstein J. was correct to renounce jurisdiction in favour of the arbitrator, under art. 940.1 C.C.P. The Court of Appeal erred in returning the matter to the Superior Court.

21                               I would therefore allow the appeal, reverse the decision of the Court of Appeal and reinstate the decision of the Superior Court, with costs in this Court only.   

English version of the reasons delivered by

22                               LeBel J. —  I have read the Chief Justice’s reasons.  I agree with her that the appeal should be allowed and the respondent’s claim referred to arbitration.  However, I feel that certain aspects of this case require further comment.

23                               First of all, the interpretation of art. 3149 of the Civil Code of Québec, S.Q. 1991, c. 64, is not at issue in the case at bar, and it would not be at issue even if the respondent had clearly raised it.  This question has been resolved by the decision of the majority of this Court in Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, 2007 SCC 34, in which it is held that art. 3149 does not apply to an arbitration clause like the one in the parties’ contract.  I would nevertheless reaffirm the comments I wrote jointly with my colleague Bastarache J. in our dissenting reasons in Dell.

24                               Thus, the remaining issue in the instant case concerns the validity of the arbitration clause in the telephone service contract between Rogers and Dr. Muroff.  Dr. Muroff contests its validity, arguing that it is abusive.

25                               A review of the trial proceedings confirms that Dr. Muroff plans to adduce evidence, which could require a long and complex inquiry, to establish that the agreement is abusive.  In my opinion, on either the test for intervention by the Superior Court set out by Deschamps J. in her reasons in Dell or the one proposed by the dissent in that same case, the Superior Court should decline to consider this issue.  As the trial judge held, Dr. Muroff’s claim must be referred to arbitration.

26                               Therefore, as the Chief Justice proposes, I would allow the appeal, reverse the Court of Appeal’s decision and restore the Superior Court’s judgment, with costs in this Court.

Appeal allowed with costs.

Solicitors for the appellant:  Fasken Martineau DuMoulin, Montréal.

Solicitors for the respondent:  Kaufman Laramée, Montréal.