B.C. Court Of Appeal Provides Guidance On The Enforceability Of Class Action Waiver Clauses Post-Uber v. Heller

• Published date: 24 May 2021
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Class Actions
• Law Firm: McCarthy Tétrault LLP
• Author: Canadian Appeals Monitor and Connor Bildfell

In Uber Technologies Inc. v. Heller¹ (summarized here), the Supreme Court of Canada set out an analytical framework for determining the enforceability of an arbitration clause in a standard form services contract. More recently, in Pearce v. 4 Pillars Consulting Group Inc.,² the B.C. Court of Appeal applied this framework to a class action waiver clause in a standard form consumer agreement. Pearce illustrates that, post-Heller, the enforceability of such a clause is suspect.

Background

The plaintiff filed a proposed class action on behalf of over 8,200 consumers struggling with debt to recover fees they paid to the defendants for debt restructuring services. The plaintiff alleged statutory and common law causes of action based on alleged breaches of the B.C. Business Practices and Consumer Protection Act and the federal Bankruptcy and Insolvency Act. These claims centered on the allegation that the defendants operated their debt restructuring business illegally and charged unconscionable fees.

The defendants applied to stay the claims of proposed class members who signed a standard form contract containing a class action waiver clause purporting to prevent them from participating in any class action, class arbitration, or other consolidated proceeding relating to the contract. The chambers judge dismissed this application and certified the proceeding.

Court of Appeal's Decision

The Court of Appeal took Heller as the starting point for its analysis. The majority in Heller relied on the unconscionability doctrine to find that the arbitration clause at issue was unenforceable, while a concurring judge relied on the public policy doctrine to reach the same result. The Court of Appeal in Pearce held that both doctrines are available to challenge a contract or clause, and in this case each led to the same result: the clause was unenforceable.

Unconscionability

Heller established that the unconscionability doctrine applies where: (i) there was inequality of bargaining power between the parties; and (ii) the resulting bargain was improvident. Both elements are assessed at the time of the agreement. Inequality of bargaining power exists where one party is unable to protect their interests in the contracting process. An improvident bargain requires either an undue advantage to the stronger party or an undue disadvantage to the weaker party.

Inequality of Bargaining Power

In finding that there was inequality of bargaining power between the defendants and the...