Docket: A-357-13
Citation:
2014 FCA 136
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CORAM:
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BLAIS C.J.
NOËL J.A.
SCOTT J.A.
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BETWEEN:
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COMPAGNIE AMWAY CANADA and AMWAY GLOBAL
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Appellants
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and
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KERRY MURPHY
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Respondent
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REASONS
FOR JUDGMENT
NOËL J.A.
[1]
This is an appeal from an interlocutory decision
of the Federal Court, wherein Boivin J. (as he then was) (the Federal Court
judge) granted the motion brought by Mr. Kerry Murphy (the respondent) to lift
the stay of proceedings in his proposed class action (the class action or the
action) against Compagnie Amway Canada and Amway Global (the appellants)
pursuant to subsection 50(3) of the Federal Courts Act, R.S.C., 1985, c.
F-7.
[2]
Section 50 of the Federal Courts Act
insofar as it is relevant to the appeal provides:
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50. (1)
The Federal Court of Appeal or the Federal Court may, in its discretion, stay
proceedings in any cause or matter
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50. (1) La
Cour d’appel fédérale et la Cour fédérale ont le pouvoir discrétionnaire de
suspendre les procédures dans toute affaire :
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(a) on
the ground that the claim is being proceeded with in another court or
jurisdiction; or
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a) au motif que la demande est en instance devant un autre
tribunal;
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(b)
where for any other reason it is in the interest of justice that the
proceedings be stayed.
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b) lorsque, pour quelque autre raison, l’intérêt de la justice
l’exige
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…
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[…]
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(3) A court
that orders a stay under this section may subsequently, in its discretion,
lift the stay.
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(3) Le
tribunal qui a ordonné la suspension peut, à son appréciation, ultérieurement
la lever.
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[3]
In lifting the stay, the Federal Court judge
gave effect to a reduction in the amount claimed by the respondent in the
action which had the effect of bringing the matter outside the scope of a
compulsory arbitration clause and class action waiver which prohibited the
respondent from bringing any class action for individual claims exceeding
$1,000 (the arbitration clause). The appellants maintain that the Federal Court
judge erred in lifting the stay on this basis essentially because, in their
view, the action had been permanently stayed or finally dismissed and therefore
could not be revived.
[4]
For the reasons which follow, I am of the view
that the appeal cannot succeed.
FACTUAL
BACKGROUND
[5]
On October 23, 2009, the respondent, a
distributor operating under contract with Amway Corporation Canada, instituted an action against the appellants pursuant to section 36 of the Competition
Act, R.S.C., 1985, c. C-34 alleging that their business practices violated
its sections 52, 55 and 55.1. In his statement of claim, the respondent sought
damages from the appellants in the amount of $15,000 (Appeal Book, Vol. I at p.
18). He later filed a motion for certification (Appeal Book, Vol. II at p. 349).
[6]
On March 31, 2010, the appellants filed a motion
to stay and to compel arbitration on the basis that the Federal Court lacked
jurisdiction with respect to the respondent’s action, as it was subject to the arbitration
clause (Appeal Book, Vol. I at p. 61 as amended June 1, 2011).
[7]
On May 5, 2010, Mainville J. (as he then was),
acting in a case management capacity, directed that the appellants’ motion be
heard in limine litis as a response to a motion filed by the respondent alleging that the
appellants’ motion to stay and compel arbitration was premature (Rhodes v.
Compagnie Amway Canada, 2010 FC 498).
[8]
The ensuing decision issued on July 2, 2010
deals exclusively with the question whether the Federal Court or the
arbitration tribunal had the authority to pronounce on the enforceability of
the arbitration clause. Mainville J. confirmed the Federal Court’s jurisdiction
in this regard, leaving the substance of the motion to stay and compel
arbitration to be decided later, at the same time as the motion for
certification (Rhodes v. Compagnie Amway Canada, 2010 FC 724).
[9]
These motions were heard on October 3, 4 and 5, 2011
before the Federal Court judge. By reasons issued on November 23, 2011, he gave
effect to the arbitration clause, declared that the Federal Court had no
jurisdiction over the respondent’s claim for $15,000 and stayed the proceedings
pursuant to subsection 50(1) of the Federal Courts Act. The reasons also
affirm that the Federal Court has jurisdiction on claims not exceeding $1,000 (Murphy
v. Compagnie Amway Canada, 2011 FC 1341 at paras. 28, 31 and 75).
[10]
The respondent’s appeal from the aforesaid decision
was dismissed (Murphy v. Amway Canada Corporation, 2013 FCA 38, per
Nadon J.A. concurred in by Gauthier and Trudel JJ.A.). As had been held by the
Federal Court judge, this Court found that the arbitration clause effectively
barred the respondent from bringing a motion for certification of a class
proceeding for individual claims of $15,000.
[11]
On February 28, 2013, the respondent brought a
motion to lift the stay pursuant to subsection 50(3) of the Federal Courts
Act, based on his stated intent to reduce the amount sought in his
statement of claim from $15,000 to $1,000 (Appeal Book, Vol. II at p. 223). The
Federal Court judge granted the respondent’s motion and lifted the stay subject
to the announced amendment being made. The amendment in question has since been
brought (Appeal Book, Vol. II at p. 360).
[12]
This is the decision now under appeal.
THE REASONS FOR
LIFTING THE STAY
[13]
The Federal Court judge lifted the stay pursuant
to subsection 50(3) of the Federal Courts Act, subject to the condition
precedent that the respondent’s claim be reduced to $1,000 and that the
remaining $14,000 be waived.
[14]
In reaching this conclusion, the Federal Court
judge took into consideration the fact that subsection 50(3) specifically
empowered him to lift the stay which he had granted earlier and his own
decision confirming the Federal Court’s jurisdiction over class actions for an
amount not exceeding $1,000, as later upheld by this Court. He also noted the
appellants’ concession that the Federal Court had jurisdiction over actions
seeking $1,000 or less.
ALLEGED ERRORS
[15]
The appellants challenge both the Federal
Court’s jurisdiction to hear the respondent’s motion and the Federal Court
judge’s exercise of discretion in granting it.
[16]
First, they argue that the Federal Court judge could
not entertain the respondent’s motion to lift the stay under subsection 50(3)
of the Federal Courts Act, as he was functus
officio following his decision granting the stay, as
confirmed by this Court.
[17]
In the appellants’ view, the Federal Court judge
did not have the power under subsection 50(3) of the Federal Courts Act
to rescind his earlier decision. This decision was final, and therefore could
not be later set aside by the order lifting the stay (Appellants’ Memorandum at
paras. 14 and 15).
[18]
In a similar vein, the Federal Court judge could
not relieve the parties from their obligation to submit the dispute to
arbitration, as ordered by this Court. This order is in the nature of a
mandatory injunction, which thus falls outside the purview of subsection 50(3)
of the Federal Courts Act (Appellants’ Memorandum at para. 16).
[19]
According to the appellants, the Federal Court
judge’s earlier decision, as upheld by this Court, had the effect of
“permanently staying” the respondent’s action. This is how these decisions must
be understood given the interim order issued by Gauthier J.A. on December 24,
2013 (Compagnie Amway Canada v. Murphy, A-357-13 at p. 2) (Appellants’ Memorandum
at paras. 17 to 19).
[20]
Furthermore, assuming that the stay could be lifted
pursuant to subsection 50(3) of the Federal Courts Act, the appellants
contend that the test for lifting the stay was not met.
[21]
Subsection 50(3) of the Federal Courts Act
requires that the moving party show that the “facts upon
which the stay was originally granted have so changed as to justify a lifting …
of the stay” (Appellants’ Memorandum at para. 25, citing Del Zotto v.
Canada (Minister of Revenue) (1996), 96 DTC 6222 at p. 6225 (FCA) (Del
Zotto)). The appellants submit that nothing occurred outside the amendment
of the respondent’s statement of claim and that this amendment cannot be viewed
as a new fact, as the respondent knew from the outset that he was precluded
from bringing a class action for claims above $1,000 (Appellants’ Memorandum at
paras. 27 and 28).
ANALYSIS
Standard of review
[22]
The question as to whether the Federal Court
judge could lift the stay when regard is had to his prior pronouncement is a
question of law reviewable on a standard of correctness (Housen v.
Nikolaisen, 2002 SCC 33 at para. 8). However, once it is established
that he had the authority to lift the stay, the Federal Court judge’s exercise
of discretion pursuant to subsection 50(3) of the Federal Courts Act
calls for deference (Elders Grain Co. v. Ralph Misener (Ship), 2005 FCA
139 at para. 13).
Jurisdictional
issue
[23]
The appellants focus on the effect of the
decision of the Federal Court judge, as upheld by this Court, giving effect to
the arbitration clause and holding that the Federal Court had no jurisdiction
over the respondent’s action. The appellants’ position as I understand it is that
this decision had the effect of permanently staying or dismissing the respondent’s
action. As a result, the Federal Court was functus
officio and the respondent was estopped from
re-litigating the issue under the doctrine of res judicata.
[24]
In my view, these arguments are based on a mischaracterization
of the decision of the Federal Court judge, as confirmed by this Court, which
only concerned the respondent’s class action proceeding as described in the initial
statement of claim, that is for individual claims in the amount of $15,000.
Given the procedural history, it is clear that the debate between the parties
was premised throughout on individual claims for that amount and that an
amendment bringing the matter below the arbitration clause threshold was never foreclosed.
[25]
For example, in the case management decision
issued May 5, 2010 (2010 FC 498), Mainville J. acknowledged at paragraph 26 that
“[t]he [p]laintiffs themselves recognized that if the
[d]efendants are successful in having the arbitration agreement applied to
their claim, they may be required to limit their damages in a class action
to an amount not exceeding $1,000”. [My emphasis] Mainville J. made
a similar observation in his subsequent decision issued July 2, 2010
(2010 FC 724) at paragraph 22 where he said that “subsection 7(5) of the Ontario
Arbitration Act, 1991 would in any event allow this Court to
continue to proceed with the class action for claims not exceeding $1,000 even
if the limited class action waiver was eventually found to be enforceable and
applicable” [My emphasis] (see also paras. 20 to 27).
[26]
Also, a fair reading of the Federal Court
judge’s decision giving effect to the arbitration clause (2011 FC 1341) leaves
no doubt as to scope of his conclusion:
[28] The Court finds the parties’
arbitration agreement to be clear. First, section 11.3.9 of the Rules of
Conduct allows class actions for an amount not exceeding $1,000. Second, claims
over $1,000 are subject to a class action waiver. Third, as stated in section
11.3.10, class actions are not arbitrable under the Rules of Conduct under any
circumstances. Finally, for claims under $1,000, in the event a court declines
to certify a class, all individual plaintiffs shall resolve any and all
remaining claims in arbitration.
…
[31] Against this background, and
considering the clear wording of both sections 11.3.9 and 11.3.10, the Court
rejects the plaintiff’s contention that the Court has jurisdiction over its
class action claim and accordingly concludes that the plaintiff’s claim for
$15,000 must be heard (i) by an arbitrator and (ii) on an individual basis
in accordance with the parties’ arbitration agreement.
[My
emphasis]
[27]
Similarly, in its decision dated February 14,
2013 (2013 FCA 38), this Court agreed with the Federal Court judge’s findings,
commenting that (Reasons at para. 38):
… the Rules of Conduct include both an
arbitration agreement and a class action waiver. Class actions are actually
permitted for amounts below $1,000. However, class actions that exceed $1,000
are expressly prohibited by the Arbitration Agreement. The appellant, with
his $15,000 claim, is barred from bringing a motion for certification of a
class proceeding by reason of this provision.
[My
emphasis]
[28]
That the above decisions were premised on a
claim of $15,000 is explained by the fact that the appellants framed their
position by reference to this distinction (Motion to Stay and to Compel
Arbitration (as amended), Appellants’ Written Representations, June 1, 2011,
Appeal Book, Vol. I at pp. 76 and 77):
23. As a result of the above, Murphy
claims that he has suffered damages of $15,000 and that he is entitled
to claim these damages under s. 36 of the Act.
24. Amway Canada vigorously denies each
and every one of these allegations.
25. As is apparent from the above, Murphy’s
claim is in respect of a matter to be submitted to arbitration under the
Arbitration Agreement, since it arises out of an relates to Murphy’s
Independent Business, the IBO Compensation Plan and the Rules of Conduct, it
involves Support Materials, and it is against Amway Global. Thus, these
proceedings must be dismissed or stayed permanently.
25.1 Furthermore, since Murphy’s claim
herein exceeds $1,000, it cannot, under the Class Action Waiver provided
for in Rule 11.3.9 of the Rules of Conduct, be asserted as a class, collective,
or representative action.
25.2 Thus, the parties’ intent is clear
namely, that Murphy’s claim being for an amount of $15,000, it must be
heard (a) by an arbitrator and (b) on an individual basis. In flagrant
violation of the dispute resolution procedure agreed to between the parties, Murphy
seeks to have the claim heard instead (a) by a state-appointed court and (b) as
a class action.
[My
emphasis]
[29]
That no definitive end was brought to the
respondent’s action is consistent with the fact that subsection 50(1) of the Federal
Courts Act is the power that was invoked by the appellants to stay the
respondent’s action (see para. 27 of the Appellants’ Motion to Stay and Compel Arbitration,
Appeal Book, Vol. I at p. 68). Pursuant to subsection 50(3), “any stay” granted
pursuant to subsection 50(1) may be subsequently lifted where the circumstances
which gave rise to its issuance are no longer present. The Federal Court judge relied
on section 50 both for the initial grant of the stay and its subsequent removal.
[30]
During the hearing of the appeal, counsel for
the appellants placed great reliance on an interim order issued by Gauthier
J.A. on December 24, 2013 staying the decision of the Federal Court judge
pending the disposition of the present appeal. Counsel points to the passage of
the order which reads:
Upon considering the overall context, including
the fact that a permanent stay had been ordered by the Federal Court and
confirmed by this Court, I am satisfied that the stay should be granted …
[31]
Counsel insists on the fact that Gauthier J.A.
was a member of the panel who heard the appeal from the decision of the Federal
Court judge and on the fact that she herself emphasized the word permanent.
According to counsel, the order of Gauthier J.A. leads to the inescapable
conclusion that the stay issued by the Federal Court judge, as confirmed by
this Court, was intended to be permanent in nature.
[32]
I note that Gauthier J.A. was sitting as a
single judge and, as is made clear by the case law to which she refers, her
task was limited to determining whether there was a serious issue to be tried (Manitoba
(A.G.) v. Metropolitan Stores Ltd., [1987] 1 S.C.R. 110 at pp. 127 and 128).
Indeed, she was to refrain from opining on the merits of the appeal (RJR –
MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 at p.
337). I therefore reject the appellants’ contention that Gauthier J.A.
purported to express a definitive view of the matter now before us.
[33]
The better view is that she was simply noting the
fact that the decision of the Federal Court, as confirmed by this Court, to the
effect that an action for $15,000 fell outside the jurisdiction of the
Federal Court was final. No pronouncement was made as to the impact of the
reduced claim other than the recognition that the appellants had raised a
serious issue to be tried.
[34]
In light of the above, the appellants’ argument that
the respondent’s action for the reduced amount of $1,000 was bared by the
issuance of the prior stay cannot succeed.
Exercise of
discretion
[35]
The appellants’ central argument on this second
issue is that the Federal Court judge misapplied the legal test under subsection
50(3), by lifting the stay in the absence of “new facts”.
[36]
The appellants emphasize the unprecedented
nature of the order appealed from, highlighting the fact that the respondent “could not cite a single case where this Court, or the Federal
Court, accepted that a [p]laintiff’s initiative to amend his [s]tatement of
[c]laim – without anything new outside the amendment itself having actually
occurred – constituted a ‘new fact’ under [sub]section 50(3) [of the Federal
Courts Act]” (Appellants’ Memorandum at para. 28). However, the
appellants themselves do not point to any principle or authority that would
preclude a party’s amendment to its statement of claim from being considered as
a new fact under subsection 50(3) of the Federal Courts Act.
[37]
There is no express requirement for the
existence of new facts in subsection 50(3). However, as explained by this Court
in Del Zotto (at p. 6225):
…, once an order for a stay is made the
jurisdiction to lift it, as we have observed, is conferred by subsection 50(3)
of the [Federal Courts Act] and, unless the circumstances be exceptional
or non-controversial, that jurisdiction is to be exercised upon motion
supported by appropriate evidence showing that the facts upon which the stay
was originally granted have so changed as to justify a lifting or partial
lifting of the stay. …
[38]
In the present case, the circumstances were
non-controversial as the announced reduction of the claim from $15,000 to
$1,000 brought the action below the arbitration threshold thereby eliminating
the ground on which the stay was predicated. The appellants’ only real concern
appears to be that this factual change was entirely in the hands of the
respondent. That is so. However, I do not see what impropriety flows from this
given that the procedural history shows that the option of reducing the claim remained
open throughout.
[39]
I would dismiss the appeal, with costs.
“Marc Noël”
“I agree.
Pierre Blais C.J.”
“I agree.
A.F. Scott J.A.”
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