Canada: British Columbia Court Of Appeal Rules That Arbitration Clauses In Standard Form Contracts Are Presumptively Enforceable In The Province

In Williams v. Amazon.com Inc. (Williams),¹ the British Columbia Court of Appeal distinguished Uber Technologies Inc. v. Heller (Uber),² confirming that in British Columbia, the courts will generally respect mandatory arbitration clauses, even within a contract of adhesion in the consumer context.

Background

The plaintiff, John Williams, was a customer of Amazon.ca (Amazon) who created an Amazon.ca account in 2015. In doing so, as later confirmed by the British Columbia Court of Appeal, he contractually agreed to Amazon's Conditions of Use. At the time, the Conditions of Use included an arbitration clause requiring consumers to arbitrate all disputes other than small claims actions and actions relating to intellectual property rights.³ The arbitration agreement also included a waiver of the right to commence actions in a class or representative proceeding, as well as a "choice of law" clause providing that U.S. law governed the agreement between the parties, which we understand was removed from Amazon.ca's arbitration clause as of March 2022.

The plaintiff commenced an action in the amount of $100 against Amazon in the British Columbia Supreme Court, alleging that third-party sellers of books, videos, music and DVDs on Amazon were required to enter arrangements which unjustly favoured Amazon. In particular, the plaintiff alleged that Amazon made its books easier to access than those sold by third-parties. The plaintiff claimed that these arrangements eliminated competition and resulted in consumers paying higher prices for books. The plaintiff alleged that these practices breached the British Columbia Business Practices and Consumer Protection Act (BPCPA). In particular, the plaintiff claimed relief under section 172 of the BPCPA, as well as for damages under the Competition Act; damages for the tort of conspiracy; an accounting and restitution; or alternatively disgorgement of benefits Amazon received; and punitive damages.

The plaintiff intended to take steps to certify the claim as a class action, but before his application for certification could be heard, Amazon moved for a stay of proceedings under British Columbia's Arbitration Act. Given a previous Supreme Court of Canada case finding that claims under section 172 of the BPCPA cannot be mandatorily arbitrable, Amazon only requested that the Court stay the plaintiff's other claims.

The Supreme Court's decision

The chambers judge found that to grant the stay, Amazon had to make an arguable case that (i) a party to the arbitration agreement had started legal proceedings against another party to the agreement; (ii) the legal proceedings were in respect of a matter the parties agreed to be arbitrated; and (iii) the application was brought in a timely manner (in other words, before Amazon had taken a step in the proceeding). Upon making that case, the judge found that she was required to grant the stay unless the arbitration agreement was void, inoperative, or incapable of being performed.

The plaintiff argued in response that the arbitration clause was indeed void, because (i) it was contrary to public policy by permitting damages claims under the Competition Act to be adjudicated under foreign law in a foreign jurisdiction; and (ii) it was unconscionable.

The chambers judge found that Amazon had made an arguable case that the pre-requisites for a stay were met (therefore satisfying its burden), and rejected the plaintiff's argument that the arbitration clause was void. She thus granted Amazon's application for the partial stay.

The Court of Appeal's decision

The plaintiff appealed the Supreme Court's decision, arguing that the chambers judge erred in finding that the arbitration agreement was not unconscionable and/or contrary to public policy, and therefore not void.

With respect to the standard of review, the Court of Appeal found that the questions of whether the arbitration clause was unconscionable or contrary to public policy were a matter of mixed fact and law, and as a result, the chambers judge's decision required deference and should only be overturned for reason of "palpable and overriding error".

The Court of Appeal found that, as the chambers judge's decision was released prior to the release of the Supreme Court of Canada's decision in Uber, her unconscionability and public policy analyses did not fully align with the current state of the law as dictated by Uber. In spite of the shortcomings of the chambers judge's decision, the Court of Appeal affirmed the chambers judge's overall unconscionability and public policy assessments, and found that those assessments should be granted deference: the chambers judge was alive to the core issues and her conclusions were not unreasonable. The Court of Appeal, with the benefit of the Uber decision, went on to state that considerations of whether an arbitration agreement is unconscionable and contrary to public policy are fact-specific and must be considered in context.

Unconscionability

The Court found that for an agreement (such as an agreement to arbitrate) to be unconscionable, there must be both inequality of bargaining power and a resulting improvident bargain. While the Court did find that there was unequal bargaining power, the Court emphasized that in this case, the plaintiff was not dependent on Amazon for his livelihood or financial well-being, no serious consequences would result from failing to enter the contract, and the parties were not in a special relationship of trust and confidence — and that the bargain was therefore not improvident.

In its analysis, the Court emphasized the differences between the arbitration clause in Uber and the clause in this case. In the Uber arbitration clause, a driver seeking to start an arbitration dispute was required to pay US$14,500 up front to commence the arbitration, which represented almost the entirety of the plaintiff's yearly income. In addition, the Uber arbitration clause provided that arbitrations would take place in the Netherlands, requiring drivers to travel to the Netherlands to bring their case. Furthermore, drivers were required to pay the full costs of their legal expenses for their claims, which were typically low-value.

Conversely, the 2015 Amazon arbitration agreement was tailored to the consumer context. For instance, consumers could bring a small claims action rather than engaging in arbitration. Arbitrations were subject to American Arbitration Association rules, under which the cost to commence an arbitration was US$225. Amazon agreed to reimburse the consumer's administration and filing fees, as well as the arbitrator's fees, up to $10,000 and would not seek legal fees or damages, provided that the arbitrator did not find that the claim was frivolous. In addition, the arbitration could be conducted by telephone, in writing, or in person in the country in which the consumer lived or another location agreed upon by the parties. The Court found that these terms mitigated the power imbalance between the parties by removing many of the costs of arbitrating.

Public policy

When considering whether the arbitration agreement was contrary to public policy, the Court held that inequality of bargaining power is only one consideration of many. Courts will also consider a plaintiff's vulnerability at the time of contract formation, the nature of the relationship between the parties, hardship caused by the arbitration agreement, and a balancing of all the relevant circumstances.

Among other things, the Court considered whether the class waiver included in the arbitration clause contravened public policy. The Court emphasised that British Columbia chose not to preclude class waivers in its arbitration legislation, and found that the class waiver was consistent with the intention and policy rationale of the Arbitration Act.

Furthermore, the Court held that the class waiver was non-severable from the arbitration agreement as a whole: consumers only agreed to be barred from bringing class proceedings by virtue of their agreement to arbitrate. As a result, if the arbitration clause was found to be invalid, the class waiver would be as well. The Court held that including a class waiver as part of an otherwise valid arbitration agreement does not by itself contravene public policy.

The Court found that the plaintiff had failed to demonstrate that the chambers judge made a palpable and overriding error, and upheld the stay of proceedings for all disputes not covered by the BPCPA.

Key takeaways

Williams establishes that the courts in British Columbia treat arbitration agreements as presumptively enforceable, and will uphold those agreements unless there is clear legislative intent to the contrary.

Further, this decision shows that Uber was fact- and context-specific. In spite of the finding in that case, Williams suggests that British Columbia courts will, even for standard form contracts, generally enforce arbitration agreements — unless the process contemplated by the arbitration clause is manifestly impractical and inaccessible to the realities of one of the parties entering the contract. Further, the courts in British Columbia have clarified that a class action waiver can be upheld, even in the consumer context, where it is part and parcel of an otherwise valid arbitration clause.

When drafting arbitration agreements in the consumer context, particularly in standard form contracts — which clauses can take many forms — parties should work with legal counsel to ensure that their proposed arbitration scheme is sufficiently reasonable, accessible and workable so that it will be upheld by the presumption in favour of arbitral jurisdiction articulated by the Court of Appeal.

Footnotes