An appeal was allowed of a case management judge’s decision to dismiss an application for a stay of a potential class proceeding, in the presence of an arbitration clause; the case was remitted to the case management judge for reconsideration in accordance with the Court of Appeal’s reasons. While certification of a class proceeding would render an arbitration agreement inoperative, that decision cannot be made before the court determines whether the proceeding will be certified.

Administrative law – Judicial review – Class proceedings – Certification – Arbitration agreements – Statutory interpretation – Compliance with legislation – Stay of proceedings

MacKinnon v. National Money Mart Co., [2004] B.C.J. No. 1961, British Columbia Court of Appeal, September 24, 2004, Esson, Saunders, Low, Levine and Thackray JJ.A.

The sole named Plaintiff had brought an action, which he intended to turn into a class proceeding, against a number of “payday loan” establishments, alleging that they levied fees and charges on short term payday loans that amounted to a criminal rate of interest. The Appellant Money Mart had introduced an arbitration clause into its standard form payday loan agreement under which the parties agreed that either could elect to submit their disputes to arbitration. The Plaintiff had entered into 25 agreements with Money Mart, each of which contained the arbitration clause. After the Plaintiff commenced his action against Money Mart and their co-defendants, Money Mart advised the Plaintiff that they were electing arbitration of the Plaintiff’s claims. The Plaintiff refused to agree to arbitration and Money Mart refused to agree to the Plaintiff’s suggestion of a class arbitration.

Section 15 of the Commercial Arbitration Act, R.S.B.C. 1996, c. 55, provides that a party to an arbitration agreement may apply to the court to stay legal proceedings that have been brought in respect of a matter that was agreed to be submitted to arbitration. Competing against this statutory mandate is section 4 of the Class Proceedings Act, R.S.B.C. 1996, c. 50, which provides that a court must certify a proceeding as a class proceeding, on an application, if certain requirements are met.

The court rejected the Appellant’s argument for a sequential approach to the interpretation of the two statutes, which considers the timing of their enactment and the timing of certain steps in the proceedings. The court held that this approach fails to consider the entire context, or the scheme, object or legislative intention of both statutes. An intended class proceeding is not an “ordinary action” but an action “with ambition”, bringing into play all of the provisions of the Class Proceedings Act. When these provisions are considered in their context, giving effect to their objectives, it is apparent that they conflict with the scheme and objects of the Commercial Arbitration Act, thereby requiring resolution by the application of the principles of statutory interpretation to both statutes.

The court held that the Class Proceedings Act is remedial legislation that is to be interpreted liberally. The court is required by statute and precedent to consider whether a class proceeding provides the best available alternative (including arbitration as an alternative procedure) for the fair and efficient resolution of the dispute, taking into consideration the principles and objectives of judicial economy and efficiency, access to justice, and deterrence of wrongdoers through finality of litigation.

In considering the Commercial Arbitration Act, the court held that its jurisdiction to refuse a stay of an action in favour of arbitration is limited. The approach of the courts has been deferential to arbitration agreements in the interests of freedom of contract, international comity and expected efficiency and cost-savings. In this case, there was no international element to the dispute, and the arbitration agreements in question were not negotiated between parties of equal bargaining power. Thus, the objectives of freedom of contract and certainty and predictability in the international context had limited applicability.

The court went on to consider whether the arbitration agreement was inoperative in the face of a procedure that the court found preferable. The case management judge had considered only two of the factors set out in section 4(2) of the Class Proceedings Act to make a preliminary or prima facie finding that a class proceeding was the preferable procedure. While the Court of Appeal agreed with the case management judge’s analysis, it held that other factors and requirements must be considered. It is only when the court has completed its analysis of the certification application and determines that it must certify the proceedings as a class proceeding that it can legally conclude that the arbitration agreement is “inoperative”. In those circumstances, it is inoperative because the court, following the direction of the legislature, has determined that the class proceeding is the “preferable procedure” and any other requirements for certification have been met.

Applications for a stay of an action in the presence of an arbitration agreement and for certification of a class proceeding must be dealt with together. The outcomes of the two applications are interdependent and the mandatory terms of the Class Proceedings Act mean that arbitration and class proceedings cannot operate at the same time with respect to the same dispute. However, if the proceeding is not certified as a class proceeding, there may be no basis for saying that the arbitration agreement is “inoperative”. The apparent procedural conflicts between section 15 of the Commercial Arbitration Act and the certification provisions of the Class Proceedings Act may be resolved through appropriate directions or orders during the certification process.

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