CITATION: Griffin v. Dell Canada Inc., 2010 ONCA 29

DATE: 20100120

DOCKET: C50137 & C50474

COURT OF APPEAL FOR ONTARIO

Winkler C.J.O., Doherty, Feldman, Sharpe and Gillese JJ.A.

BETWEEN

Thaddeus Griffin

Plaintiff (Respondent)

and

Dell Canada Inc.

Defendant (Appellant)

Mahmud Jamal, Jean-Marc Leclerc and Catherine Weiler, for the appellant

Joel P. Rochon, Sakie Tambakos and Sonya Diesberger, for the respondent

Heard: November 26, 2009

On appeal from the judgment and order of Justice Joan L. Lax of the Superior Court of Justice dated February 3, 2009 and April 21, 2009 respectively.

Sharpe J.A.:

[1]              These appeals involve a proposed class action arising from the sale of allegedly defective Dell notebook computers.  The class action involves a large number of claims for relatively small amounts.  Dell’s standard-form sales agreement contains a clause requiring that all disputes be submitted to arbitration.  On the certification motion, the motion judge found that it was “fanciful to think that any claimant could pursue an individual claim in a complex products liability case” and that enforcing Dell’s arbitration clause would have the effect of immunizing Dell “from accounting to class members for any wrong it may have caused”.  She refused Dell’s request to stay the class action in favour of arbitration, granted a certification order conditional on the plaintiff filing an improved litigation plan, and also gave the plaintiff leave to amend to add a second representative plaintiff.  The motion judge subsequently refused Dell’s request for a reconsideration of the refusal of a stay in the light of new developments in the jurisprudence.  Dell appeals both the initial refusal to grant a stay and the subsequent refusal to reconsider that decision.

[2]              A second representative plaintiff has now been added who falls within the definition of “consumer” under the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A (“CPA”). That Act bans mandatory arbitration clauses in consumer agreements.  The second representative purchased his computer before the effective date of the CPA.  However, his claim against Dell did not arise until after the CPA’s effective date, when his computer failed.  The central issue on these appeals is whether the CPA applies to the claim of the second representative plaintiff.

FACTS

[3]              This action involves Dell Inspiron computers (models 1100, 1150, 5100, 5150 and 5160) sold in Canada online and by telephone between March 2003 and May 2005.  Dell sold 118,629 of the Inspiron computers at a price of approximately $2,000 each. These computers came with Dell’s standard one-year limited warranty covering defects in workmanship and materials. Purchasers also had the option of buying an enhanced or extended warranty.

[4]              The first representative plaintiff, Thaddeus Griffin, leased a Dell Inspiron 5150 notebook, primarily for business purposes, through his business, Griffin Leasing, from a leasing company, National Equipment Leasing Inc.  Before leasing the computer, Griffin looked at various Dell products on Dell’s website and agreed to be bound by Dell’s Terms and Conditions of Sale.  Those Terms and Conditions disclaim express or implied warranties, except as provided in the standard one-year limited warranty or in any optional enhanced warranty purchased.   Griffin did not purchase the optional extended warranty.  The Terms and Conditions also contain a choice of law and choice of forum clause stating that the agreement is to be governed by Ontario law and that the parties agree “to the non-exclusive jurisdiction of the courts” of Ontario.  Finally, the Terms and Conditions contain the following mandatory arbitration clause:

ANY CLAIM, DISPUTE, OR CONTROVERSY (WHETHER IN CONTRACT, TORT, OR OTHERWISE, WHETHER PREEXISTING, PRESENT OR FUTURE, AND INCLUDING STATUTORY, COMMON LAW, INTENTIONAL TORT AND EQUITABLE CLAIMS CAPABLE IN LAW OF BEING SUBMITTED TO BINDING ARBITRATION) AGAINST DELL, its agents, employees, officers, directors, successors, assigns or affiliates (collectively for purposes of this paragraph, “Dell”) arising from or relating to this Agreement, its interpretation, or the breach, termination or validity thereof, the relationships between the parties, whether pre-existing, present or future, (including, to the full extent permitted by applicable law, relationships with third parties who are not signatories to this Agreement), Dell’s advertising, or any related purchase SHALL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM (“NAF”) under its Code of Procedure and any specific procedures for the resolution of small claims and/or consumer disputes then in effect (available via the Internet at http://www.arb-forum.com, or via telephone at 1-800-474-2371). The arbitration will be limited solely to the dispute or controversy between Customer and Dell. Any award of the arbitrator(s) shall be final and binding on each of the parties, and may be entered as a judgment in any court of competent jurisdiction. Information may be obtained and claims may be filed with the NAF at P.O. Box 50191, Minneapolis, MN 55405, or by e-mail at file@arb-forum.com, or by online filing at http://www.arb-forum.com.

[5]              The statement of claim, issued in January 2007, alleges that in 2006, Griffin’s computer began to experience overheating problems and that it eventually failed.  The statement of claim also alleges that five models of Dell Inspiron computers sold in Canada were defective and asks for certification of the claim as a class proceeding. Claims are asserted in negligence, breach of contract, unjust enrichment, waiver of tort and breach of the Competition Act, R.S.C. 1985, c. C-34, s. 52.

[6]              The representative plaintiff sought to certify a national class of purchasers who bought Dell Inspiron notebook computers between March 2003 and May 2005.  At the same time, Dell sought an order staying the action pursuant to the arbitration clause and the Arbitration Act, 1991, S.O. 1991, c. 17, s. 7.

REASONS OF THE MOTION JUDGE

1.  Certification motion and motion for stay

[7]              A central issue before the motion judge was whether the decisions of the Supreme Court of Canada in two Quebec appeals, Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, and Rogers Wireless Inc. v. Muroff,  [2007] 2 S.C.R. 921, required her to grant a stay of the class proceeding.  Dell involved the same arbitration clause at issue here.  The Supreme Court of Canada held that under Quebec law, the right to arbitrate was a substantive right that did not yield to the procedural right to bring a claim by way of class action.  The court also held that, as in an individual action, the enforceability of an arbitration clause in a class action should be determinative.  If an individual claim would be referred to arbitration, aggregating claims through a class action cannot change this result.  Applying the “competence-competence” principle that clothes arbitrators with primary jurisdiction to determine their own competence to deal with a dispute, the court held that the appropriate course was to stay the class proceeding and refer the matter to arbitration.

[8]              The motion judge held that unless this court said otherwise, she was bound to apply Smith v. National Money Mart Co. (2005), 258 D.L.R. (4th) 453 (Ont. C.A.), leave to appeal to S.C.C. refused [2005] S.C.C.A. No. 528 (“Smith OCA 2005”), adopting an approach “consonant with” the decision of the five-judge panel of the British Columbia Court of Appeal in MacKinnon v. National Money Mart (2004), 50 B.L.R. (3d) 291 (B.C.C.A.) (“MacKinnon BCCA 2004”) where the court held, at para. 57:

An arbitration agreement can be said to be “inoperative” [under the B.C. Commercial Arbitration Act, s. 15(2)] only after the court has determined that a class proceeding must be certified because it is the preferable procedure and has met the other requirements for certification. The decision whether to grant a stay of an intended class proceeding should not be made before the court determines whether the action will be certified as a class proceeding.

[9]              In Smith OCA 2005, Weiler J.A. followed MacKinnon BCCA 2004 and rejected the submission that where a consumer agreement provides for arbitration, a class action should automatically be stayed. She stated, at para. 14, that the “legality of the arbitration provision should be determined at the certification hearing and that it is premature to attempt to stay the action beforehand”.  Proceeding in this manner allows the judge to consider the language and underlying policies of class action and arbitration legislation and permits the judge to decide upon the enforceability of the arbitration clause and the appropriateness of class action on the basis of a full record.

[10]         Taking that approach, the motion judge found, at paras. 92-93:

It is fanciful to think that any claimant could pursue an individual claim in a complex products liability case. The defendant does not propose the alternative of individual actions, but relying on the arbitration clauses in Dell’s Terms and Conditions, submits that adjudication through arbitration administered by “NAF”, the National Arbitration Forum, is preferable to a class proceeding. Adjudication through arbitration is simply a form of individual adjudication and each claimant will be required to bring separate proceedings before an arbitrator or arbitration panel instead of in the courts. This will achieve maximum judicial economy, but this is not what the legislators had in mind: [Markson v. MBNA Canada (2007), 85 O.R. (3d) 121, at paras. 73-74].

NAF is a U.S. – based administrator of alternative dispute resolution services in Minnesota. NAF’s Code of Procedure governs all arbitrations and while NAF offers several methods of dispute resolution including a documentary hearing, the arbitration process under its Code is a formal and relatively expensive process that includes discovery and can involve a full participatory hearing with oral testimony and argument. It is not the kind of process that would be easy for class members to navigate without legal representation. The multitude of individual issues that Dell says is involved in determining liability will inevitably lead to more complex and therefore more costly arbitration hearings, disproportionate to the small amounts in issue. I do not believe that class members will embark on a NAF arbitration to adjudicate their disputes with the result that Dell will effectively be immunized from accounting to class members for any wrong it may have caused. Access to justice will not be served. On the other hand, aggregating similar individual actions in a class proceeding avoids unnecessary duplication of fact-finding and analysis and distributes fixed litigation costs among class members, making it economical to prosecute this claim, thereby improving access to justice. [Emphasis added]

2. Motion for reconsideration

[11]         Following the release of Dell and Rogers, counsel in the two Money Mart cases asked the British Columbia Supreme Court and the Ontario Superior Court to find that Dell and Rogers had effectively overruled MacKinnon BCCA 2004 and Smith OCA 2005. Both courts rejected this submission.  In MacKinnon v. National Money Mart (2008), 293 D.L.R. (4th) 478 (B.S.S.C.), at para. 35, Brown J. of the British Columbia Supreme Court held that Dell and Rogers “do not specifically address the issues determined in [MacKinnon BCCA 2004], nor do they by necessary implication overturn [MacKinnon BCCA 2004]”.  She added that, in any event, she would exercise her discretion to refuse re-litigation on this issue on the basis of issue estoppel.

[12]         In Smith Estate v. National Money Mart Co. (2008), 57 C.P.C. (6th) 99, Perell J. of the Ontario Superior Court reached the same conclusion after an extensive review of the arbitration and class actions regimes of B.C., Ontario and Quebec.  Perell J. held that Dell and Rogers were explicitly decided on the basis of Quebec law, made no reference to the jurisprudence from the common law provinces, and, at para. 284, that they “do not overrule the law that a court in Ontario or British Columbia may determine whether to stay or not stay an action within the context of the preferable procedure analysis of a certification motion”. Perell J. also dismissed the stay motion on the basis of issue estoppel.  This court dismissed Money Mart’s appeal from that decision on the basis of issue estoppel without deciding whether or not Dell and Rogers changed the law of Ontario: (2008), 92 O.R. (3d) 641 (Smith OCA 2008).

[13]         In MacKinnon v. National Money Mart Company (2009), 304 D.L.R. (4th) 331  (MacKinnon BCCA 2009”), the British Columbia Court of Appeal affirmed the decision of Brown J., refusing to stay the action on the ground of issue estoppel, but after an extensive review of the jurisprudence concluded, at para. 2, that Dell and Rogers “effectively overruled” its earlier decision in MacKinnon BCCA 2004 that the validity of an arbitration agreement should to be determined at certification.  The court held, at paras. 69-70, that as there was no legislation in British Columbia prohibiting arbitration clauses in consumer agreements, the Supreme Court’s reasoning in Dell and Rogers extends logically to B.C and that the Dell and Rogers holding that “a valid agreement to arbitrate removes the dispute from the court’s purview” applies. In Seidel v. Telus Communications Inc., [2009] 5 W.W.R. 466 (B.C.C.A.) (“Telus”), a case decided at the same time as MacKinnon BCCA 2009, the British Columbia Court of Appeal applied Dell and stayed a proposed class action pursuant to an arbitration clause.  The Supreme Court of Canada has granted leave in Telus and will likely determine in that appeal the extent to which Dell applies outside Quebec: [2009] S.C.C.A. No. 191.

[14]         Following the release of MacKinnon BCCA 2009 and Telus, Dell asked the motion judge to reconsider her earlier decision to conditionally certify the proceeding.  The motion judge refused that request and that order is the subject of Dell’s second appeal to this court.

ADDITIONAL FACTS

[15]         Since the motion judge’s decisions, there have been two significant developments. The first relates to the application of the CPA, outlawing mandatory arbitration clauses in consumer contracts.  It was common ground before the motion judge that as the representative plaintiff Griffin had purchased his computer for business purposes, he was not a “consumer”, defined in s. 1 of the CPA as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes”. Accordingly, the motion judge did not consider the effect of the CPA.

[16]         However, in her certification decision, the motion judge granted the plaintiff leave to add a second representative plaintiff who was a direct purchaser of a computer and who purchased a computer online.  That order has now been granted and Ian Andrews, a purchaser who does fall within the definition of “consumer”, has been added as a second representative plaintiff.  Andrews was a student at the time he purchased a Dell Inspiron 5160 notebook, in November 2004.  His computer failed in January 2007. The statement of claim was also amended to include details about the material facts giving rise to a claim under the CPA.  At a case conference, the motion judge approved the Plaintiff’s revised litigation plan and certified the action as a class proceeding.  Dell sought leave to appeal the decision to certify this action, but a single judge of the Divisional Court dismissed the motion for leave to appeal on July 31, 2009. 

[17]         The CPA came into effect on July 30, 2005.  Dell submits that the CPA does not apply to Andrews’ claim because he purchased his computer before the effective date. Andrews submits that the CPA does apply because the facts giving rise to his claim against Dell did not arise until after the effective date.

[18]         The second development is that the National Arbitration Forum (“NAF”), the body specified in Dell’s arbitration clause to administer the exclusive and final arbitration clause, has ceased to function with respect to consumer disputes following allegations of serious impropriety.  In a consent judgment entered into between NAF and the State of Minnesota, dated July 17, 2009, NAF agreed to cease accepting or administering any new consumer arbitrations.  The consent judgment was entered to settle a suit brought by the Attorney General of Minnesota for declaratory and injunctive relief. While the consent judgment contains no admission of wrongdoing, the suit it settled alleged that NAF had significant conflicts of interest and that it did not provide impartial, independent and neutral adjudicators for consumer disputes.

MOTION TO QUASH

[19]         The respondents move to quash Dell’s appeal on the following grounds:

(1)  The demise of NAF renders the arbitration clause unenforceable;

(2)  The appeals are precluded by the Arbitration Act, s. 7(6); and

(3)  The orders under appeal are interlocutory in nature.

ANALYSIS

1. Motion to quash

(a) The demise of NAF

[20]         The respondents argue that the fact that NAF has ceased to accept consumer arbitrations renders these appeals moot.  They submit that the matter is covered by the Arbitration Act, s. 16(5), which provides that the court has no power to appoint a substitute arbitrator “if the arbitration agreement provides that the arbitration is to be conducted only by a named arbitrator”.

[21]         A partial answer to this submission is that the consent judgment only bars NAF from conducting “consumer” arbitrations, defined as including “any arbitration involving a dispute between a business entity and a private individual which relates to goods, services, or property of any kind allegedly provided by any business entity to the individual, or payment for such goods, services, or property”.  Presumably, NAF would still be available to administer arbitrations that fall outside that definition.

[22]         Second, in my view, s. 16(5) does not apply, as the agreement does not name NAF as the arbitrator. The agreement specifies only that the arbitration is to be “administered” by NAF.  NAF’s Code of Procedure prescribes a method for the selection of the arbitrator. I agree with Dell’s submission that the gap created by the demise of NAF with respect to the appointment of the arbitrator is filled by the Arbitration Act, s. 10:

10.  (1)  The court may appoint the arbitral tribunal, on a party’s application, if,

(a)       the arbitration agreement provides no procedure for appointing the arbitral tribunal; or

(b)       a person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days notice to do so. 

[23]         By requiring that claims be submitted for “final and binding arbitration administered by NAF”, the agreement gives NAF the power to appoint the arbitral tribunal, and the situation falls under s. 10(1)(b). As NAF is no longer accepting consumer arbitrations, it obviously will not exercise its power under the agreement to appoint an arbitrator and s. 10(1)(b) will thereupon come into play.  

[24]         While the demise of NAF erects a practical hurdle in the way of consumer arbitrations, as a matter of law, I do not agree that the appeal has been rendered moot.

(b) Arbitration Act, s. 7(6)

[25]         The Arbitration Act, s. 7(6) provides that “there is no appeal from the court’s decision” on a stay application under the section.  It is now well-established that this provision does not preclude an appeal from an order refusing to grant a stay on the ground that the matter is not subject to arbitration: Huras v. Primerica Financial Services Ltd. (2000), 137 O.A.C. 79 (C.A.); Mantini v. Smith Lyons LLP (2003), 64 O.R. (3d) 505 (C.A.); Inforica Inc. v. CGI Information Systems and Management Consultants Inc. (2009), 97 O.R. (3d) 161 (C.A.); Smith OCA 2008. As the motion judge found that the matter was not subject to arbitration, on the authority of these cases, it follows that s. 7(6) does not bar an appeal to this court.

(c) Final or interlocutory order

[26]         I agree with Dell’s submission that Smith OCA 2008 and the cases it cites decide that an order denying a s. 7 stay is final for the purposes of appeal and therefore that an appeal lies to this court pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(1)(b).

(d) Motion to quash: conclusion

[27]         Accordingly, I would dismiss the motion to quash these appeals.

2. Does the Consumer Protection Act, 2002 apply?

[28]         Contracting parties often specify that any disputes arising from their relationship are to be arbitrated rather than litigated in the courts.  When they do, they are ordinarily entitled to have their chosen method of dispute resolution respected by the courts.  The modern approach, reflected by Dell, is to require parties to adhere to their choice and to view arbitration as an autonomous, self-contained and self-sufficient process, presumptively immune from judicial intervention: Inforica, at para. 14.

[29]         The enactment of the CPA reflects the legislature of Ontario’s determination that problems arise when this dominant model is applied in the consumer setting.  The dominant model is premised upon freedom of contract and party autonomy.  Consumer contracts tend to be contracts of adhesion where the suppliers of services and sellers of goods are in a position to impose their own terms unilaterally.  Both academic research and the common sense reflected by the findings of the motion judge in this case indicate that suppliers and sellers regularly insert arbitration clauses in order to defeat claims rather than out of a genuine desire to arbitrate disputes with consumers.  Such disputes often involve small claims that are not individually viable. Such claims only become viable if they can be aggregated by way of a class proceeding.  

[30]         Clauses that require arbitration and preclude the aggregation of claims have the effect of removing consumer claims from the reach of class actions.  The seller’s stated preference for arbitration is often nothing more than a guise to avoid liability for widespread low-value wrongs that cannot be litigated individually but when aggregated form the subject of a viable class proceeding: see Theodore Eisenberg, Geoffrey P. Miller and Emily Sherwin, “Mandatory Arbitration for Customers but not for Peers: A Study of Arbitration Clauses in Consumer and Non-Consumer Contracts” (2008), 92 Judicature 118.  When consumer disputes are in fact arbitrated through bodies such as NAF that sell their services to corporate suppliers, consumers are often disadvantaged by arbitrator bias in favour of the dominant and repeat-player corporate client: “Developments in the Law: Access to Courts” (2008), 122 Harvard Law Rev. 1151, at pp. 1170-75.  I have already noted that allegations of precisely that nature forced NAF to terminate its activities in the field of consumer arbitration.  I agree with the observation made by Jonnette Watson Hamilton in “Pre-Dispute Consumer Arbitration Clauses: Denying Access to Justice?” (2006), 51 McGill L.J. 693, at p. 734:

Deference to arbitration is largely based on freedom of contract and the value of personal autonomy. How can such values come into play in contracts of adhesion where that autonomy is only exercised by one of the parties? There is no reason to defer to businesses that seek to advance only their own self-interests and evade laws not to their liking. [Emphasis added]

[31]         Concerns about the unfairness of mandatory arbitration clauses led the Ontario legislature to enact the CPA provisions outlawing mandatory arbitration clauses in consumer agreements.  As the announcement from the Ministry of Consumer Services stated, the effect of these clauses is “to diminish consumer protections and in some cases to make satisfactory resolution impossible.”  The CPA provisions are in keeping with what Geneviève Saumier describes in “Consumer Arbitration in the Evolving Canadian Landscape” (2008) 113 Penn St. L. R. 1203, at p. 1226, as a “convergence in most western legal systems against the enforcement of pre-dispute mandatory arbitration clauses in consumer contracts and in favor of the maintenance of consumers’ access to state courts for the resolution of their disputes.” [Emphasis in original]

[32]         The relevant provisions of the CPA are as follows:

7.  (1)  The substantive and procedural rights given under this Act apply despite any agreement or waiver to the contrary.

      (2)  Without limiting the generality of subsection (1), any term or acknowledgment in a consumer agreement or a related agreement that requires or has the effect of requiring that disputes arising out of the consumer agreement be submitted to arbitration is invalid insofar as it prevents a consumer from exercising a right to commence an action in the Superior Court of Justice given under this Act.

      (3)  Despite subsections (1) and (2), after a dispute over which a consumer may commence an action in the Superior Court of Justice arises, the consumer, the supplier and any other person involved in the dispute may agree to resolve the dispute using any procedure that is available in law.

      (4)  A settlement or decision that results from the procedure agreed to under subsection (3) is as binding on the parties as such a settlement or decision would be if it were reached in respect of a dispute concerning an agreement to which this Act does not apply.

      (5)  Subsection 7 (1) of the Arbitration Act, 1991 does not apply in respect of any proceeding to which subsection (2) applies unless, after the dispute arises, the consumer agrees to submit the dispute to arbitration.

8.  (1)  A consumer may commence a proceeding on behalf of members of a class under the Class Proceedings Act, 1992 [S.O. 1992, c. 6,] or may become a member of a class in such a proceeding in respect of a dispute arising out of a consumer agreement despite any term or acknowledgment in the consumer agreement or a related agreement that purports to prevent or has the effect of preventing the consumer from commencing or becoming a member of a class proceeding.

      (2)  After a dispute that may result in a class proceeding arises, the consumer, the supplier and any other person involved in it may agree to resolve the dispute using any procedure that is available in law.

      (3)  A settlement or decision that results from the procedure agreed to under subsection (2) is as binding on the parties as such a settlement or decision would be if it were reached in respect of a dispute concerning an agreement to which this Act does not apply.

      (4)  Subsection 7 (1) of the Arbitration Act, 1991 does not apply in respect of any proceeding to which subsection (1) applies unless, after the dispute arises, the consumer agrees to submit the dispute to arbitration.

[33]         These CPA provisions resolve the tension between the Arbitration Act and the Class Proceedings Act in favour of class proceedings and, if applicable, constitute a complete refutation of Dell’s insistence that the Arbitration Act must prevail.

[34]         The CPA came into force on July 30, 2005.  Ian Andrews, the added representative plaintiff, purchased his computer in August 2003.  His computer allegedly failed in January 2007.

[35]         Dell submits that as Andrews’ claim relates to a computer purchased before July 30, 2005, Dell acquired a “vested right” to enforce the arbitration clause and that the CPA does not apply retroactively to deprive it of that right.  The respondent plaintiff argues that as the defect in Andrews’ computer – the fact upon which his claim is based – did not arise until after July 31, 2005, he is entitled to claim the benefit of the CPA.

[36]         On this issue, the representative plaintiff relies on passages from Dell, where the Supreme Court considered the application of an amendment to Quebec’s Consumer Protection Act, R.S.Q. c. P-40.1, that was enacted after the case had reached the Supreme Court.  Like the CPA, the Quebec legislation prohibited stipulations in consumer agreements that required the consumer to refer disputes to arbitration or prohibited a consumer from becoming a member of a group bringing a class action. The representative plaintiff submits that Deschamps J.’s analysis of this issue in Dell, when applied to the facts of this case, is dispositive in his favour.

[37]         Dell involved a dispute with respect to the online price of two laptop computers.  Dell erroneously advertised two models at prices of $89 and $118 rather than $379 and $549 respectively and took steps to correct the error a day later.  The representative plaintiff sued to enforce his right to purchase a computer at the lower advertised price.  Applying well-established rules of statutory interpretation, the court held that the legislation had immediate effect and applied to all claims that arose after its effective date.  As the legislation did not expressly state that it applied retroactively, it did not apply to claims that arose before its effective date.  On the facts of the case before the court, all the facts giving rise to the claim had occurred before the effective date of the legislation, and accordingly the legislation did not apply to the claim.

[38]         In my view, the inevitable conclusion that flows from the court’s discussion of the issue is that where, as in the present case, not all the facts giving rise to the claim arose until after the effective date of the legislation, the legislation governs, even though the contract was concluded prior to the effective date. 

[39]         Writing for the majority, Deschamps J. wrote, at paras. 113-115:

Professor P.‑A. Côté writes in The Interpretation of Legislation in Canada (3rd ed. 2000), at p. 169, that “retroactive operation of a statute is highly exceptional, whereas prospective operation is the rule”.  He adds that “[a] statute has immediate effect when it applies to a legal situation that is ongoing at the moment of its commencement:  the new statute governs the future developments of this situation” (p. 152).  A legal situation is ongoing if the facts or effects are occurring at the time the law is being modified (p. 153).  A statute of immediate effect can therefore modify the future effects of a fact that occurred before the statute came into force without affecting the prior legal situation of that fact.

To make it clear what is meant by an ongoing situation and one whose facts and effects have occurred in their entirety, it will be helpful to consider the example of the obligation to warrant against latent defects cited by professors P.‑A. Côté and D. Jutras in Le droit transitoire civil:  Sources annotées (loose‑leaf), at p. 2‑36.  This obligation comes into existence upon the conclusion of the sale, but the warranty clause does not produce tangible effects unless a problem arises with the property sold.  The warranty comes into play either when the vendor is put in default or when a claim is made.  Once all the effects of the warranty have occurred, the situation is no longer ongoing and the new legislation will not apply to the situation unless it is retroactive.

Can the facts of the case at bar be characterized as those of an ongoing legal situation?  If they can, the new legislation applies.  If all the effects of the situation have occurred, the new legislation will not apply to the facts. [Emphasis added]

[40]         Deschamps J. found, at para. 116, that once the representative plaintiff had notified Dell of his claim, “[a]ll the facts of the legal situation had…occurred”.  As that had happened before the effective date of the legislation, and as there was nothing in the legislation to indicate that it applied retroactively, the legislation did not govern the claim.  Deschamps J. concluded this portion of her reasons as follows, at para. 120:

I accordingly conclude that since the facts triggering the application of the arbitration clause had already occurred before s. 2 of Bill 48 came into force, this provision does not apply to the facts of the case at bar.

[41]         In the case at bar, until the computers failed, there was no claim but rather “an ongoing legal situation” that only came to an end when the claims of the purchasers arose upon the failure of the computers.  As “the facts triggering the application of the arbitration clause” did not occur until after July 31, 2005, it follows from Dell that the CPA applies and governs those claims.

[42]         I do not agree with Dell’s submission that these passages from Deschamps J.’s judgment should be read as being subject to its “vested rights” argument.  At para. 10, Deschamps J. specifically refers to Dell’s argument that it “had a vested right to the arbitration procedure provided for in the contract with [the purchaser]” and from the balance of her judgment one can only conclude that her analysis of the “vested rights” submission is subsumed in her discussion of the application of the legislation that I have set out above.

[43]         I conclude accordingly that the CPA applies to exclude the application of Dell’s arbitration clause to all “consumer” claims where the alleged defect of malfunction occurred after July 31, 2005, and that as the motion judge found that the unusual certification requirements are satisfied, those claims may proceed by way of class action.

2. Should we grant a partial stay of the non-consumer claims?

[44]         The evidence before the motions judge was that approximately 70% of purchasers of the Dell Inspiron laptops were “consumers”.  Assuming, without deciding, that Dell applies in Ontario and that Dell would require the non-consumer claims to proceed by way of arbitration, should the non-consumer claims be stayed?

[45]         The Arbitration Act, s. 7(5) confers a discretion to grant a partial stay where an action involves some claims that are subject to an arbitration and some claims that are not:

(5)  The court may stay the proceeding with respect to the matters dealt with in the arbitration agreement and allow it to continue with respect to other matters if it finds that,

(a)       the agreement deals with only some of the matters in respect of which the proceeding was commenced; and

(b)       it is reasonable to separate the matters dealt with in the agreement from the other matters.

[46]         In my view, it would not be reasonable to separate the consumer from the non-consumer claims.  We should, therefore, refuse a partial stay and allow all the claims to proceed under the umbrella of the class proceeding.

[47]         Granting a stay of the non-consumer claims would lead to inefficiency, a potential multiplicity of proceedings, and added cost and delay.  This would be contrary to the Courts of Justice Act, s. 138, which provides that “[a]s far as possible, a multiplicity of legal proceedings should be avoided”, and contrary to the jurisprudence on the reasonableness of partial stays under s. 7(5) of the Arbitration Act.  

[48]         In Radewych v. Brookfield Homes (Ontario) Ltd., [2007] O.J. No. 2483 (S.C.), one party to the dispute was subject to an arbitration clause and another set of parties implicated in the same dispute were not subject to the arbitration clause.  Gray J. decided against granting a partial stay, at para. 23:

To do so would potentially delay the resolution of the entire matter, and could produce a significant duplication of resources and potentially inconsistent findings. Such a course would be contrary to the policy reflected in section 138 of the Courts of Justice Act which, simply stated, provides that “as far as possible, multiplicity of legal proceedings shall be avoided”. It is preferable, in my view, that all of the various claims, against all of the defendants, be determined in one proceeding.

[49]         This court quashed an appeal from that decision and expressly approved of this passage in Gray J.’s reasons: 2007 ONCA 721, at para. 3.  The same principle has been applied in other cases: see Johnston v. Mlakar (2006), 212 O.A.C. 79 (C.A.), at para. 18; Penn-Co Construction Canada (2003) Ltd. v. Constance Lake First Nation, [2007] O.J. No. 3940 (S.C.), at para. 31; New Era Nutrition Inc. v. Balance Bar Co. (2004), 245 D.L.R. (4th) 107 (Alta. C.A.), at paras. 37-38.  In Frambordeaux Developments Inc. v. Romandale Farms Ltd., [2007] O.J. No. 4917 (S.C.), at para. 34, Thorburn J. summarized the thrust of this jurisprudence in the following way:

The courts have held that where one of the parties to the action is not subject to an arbitration clause, and the claim involving the non-party to the arbitration clause and the claim sought to be submitted to arbitration both contain closely related facts and issues in dispute, a partial stay is not reasonable. The court should instead exercise its discretion to deny the stay of proceedings and allow the entire matter to proceed in one forum.

[50]         Seventy per cent of the claims in this case are consumer claims.   Those claims will be litigated in the class proceeding.  The liability and damages issues to be litigated are the same for both consumer and non-consumer claims.  As the consumer claims dominate, it is reasonable that the remaining claims should follow the procedural route that the consumer claims must take.

[51]         A partial stay would require an examination of each claim and a determination of whether it was a consumer or non-consumer claim.  This is bound to be contentious in the case of many purchasers, as laptop computers are portable and regularly used for a variety of purposes.  Dividing the claims as between those to be litigated and those to be arbitrated would be costly and time-consuming.  That cost and delay can be avoided by refusing a partial stay.

[52]         The motion judge’s finding that claims cannot be efficiently litigated through the arbitration process is another factor supporting the conclusion that it would not be reasonable to grant a partial stay.  

[53]         The motion judge’s finding is amply supported by the evidence.  The representative plaintiff Griffin deposed as follows:

As director and officer of Griffin Leasing, I am not in a position to take time away from my business to pursue arbitration.  I have never participated in an arbitration dealing with a product defect or any other matter before, let alone an arbitration to establish the defective nature of the Computer. Without the advice of counsel, I would not know how to proceed or what type of evidence I would need to present.  There is no reasonable prospect of me pursing an individual arbitration if Dell’s motion succeeded.  Furthermore, I cannot envision a situation where any other class member would pursue arbitration to recover modest sums.

[54]         Likewise, the added representative plaintiff Andrews, a student at the time he purchased his computer, deposed:

I am not in a financial position to pursue my dispute with Dell over the failure of the Computer to arbitration.  I have never participated in an arbitration dealing with a product defect or any other matter before, let alone an arbitration to establish the defective nature of the Computer.  Without the advice of counsel, I would not how to proceed or what type of evidence I would need to present.  There is no reasonable prospect of me pursing an individual arbitration if Dell’s motion succeeded.

[55]         Kelly Reid, another student, is a class member who had purchased a Dell computer for school and personal use.  She deposed:

As I am a university student, I am not in a financial position to pursue my dispute with Dell over the failure of the Computer to arbitration.  I have never participated in an arbitration dealing with a product defect or any other matter before, let alone an arbitration to establish the defective nature of the Computer.  Without the advice of counsel, I would not know how to proceed or what type of evidence I would need to present.  There is no reasonable prospect of me pursuing an individual arbitration if Dell’s motion succeeded.

[56]         Dell offered no evidence to indicate that the arbitration of these claims would be anything other than cost-prohibitive.  Dell’s witness was unable to answer a question posed on cross-examination as to whether any Dell customer had been able to take a claim to arbitration. 

[57]         In my view, it is clear beyond any serious doubt on this record that staying any claims advanced in the action will not result in any of the stayed claims being arbitrated.  I agree with the motion judge that there is a lack of reality to Dell’s argument that the claim should proceed by way of arbitration.  There will be no arbitration.  The choice is not between arbitration and class proceeding; the real choice is between clothing Dell with immunity from liability for defective goods sold to non-consumers and giving those purchasers the same day in court afforded to consumers by way of the class proceeding.

[58]         It may be argued that the complexity and cost of the arbitration process selected by Dell will effectively neutralize the risk of multiple proceedings by eliminating arbitration as a viable means of pursuing a claim.  This is no doubt true.  However, allowing one party to erect economic and procedural barriers which trump substantive rights and deny the other party access to justice is not what the jurisprudence has in mind when it speaks of promoting judicial economy and efficiency and avoiding multiple proceedings: see Markson v. MBNA Canada Bank (2007), 85 O.R. (3d) 321 (C.A.) at para. 73.

[59]         The fact that NAF is now barred from administering “consumer” arbitrations adds another layer of complexity standing in the way of a customer wishing to assert a claim for a defective laptop.  The definition of “consumer” in the CPA is not the same as the definition of “consumer” in the consent judgment barring NAF from conducting consumer arbitration. Under both definitions, it will often be difficult to determine whether or not, on the facts, a customer is a “consumer”.   Given Dell’s adamant insistence upon arbitration, I have little doubt that Dell would insist that a disappointed customer who falls into any arguable grey area created by these different definitions of “consumer” must proceed first to arbitration.  The customer would then  be required to take the following steps: (1) file a claim with NAF and ask to NAF appoint an arbitrator; (2) if NAF refused to do so to avoid the risk of contravening the consent judgment, after seven days, the customer would have to launch a court proceeding pursuant to the Arbitration Act, s. 10 to ask the court to appoint an arbitrator; (3) proceed before the arbitrator to argue the jurisdiction of the arbitrator; (4) if the arbitrator accepted jurisdiction, argue the claim on the merits before the arbitrator; or (5) if the arbitrator refused jurisdiction, return to the court. These additional steps, easily avoided if no partial stay is granted, would make it even more difficult to imagine how a customer could advance a claim that his or her $2000 computer does not function as promised by Dell. 

[60]         It is important to note in this regard that Dell’s arbitration clause not only requires all claims to be arbitrated, but also provides that “[t]he arbitration will be limited solely to the dispute or controversy between Customer and Dell”, thereby precluding the possibility of a class arbitration.  I would have found Dell’s position much more persuasive had Dell been prepared to submit to an arbitration that would allow for the efficient adjudication of the claims on a group or class basis.  However, in oral argument, Dell’s counsel confirmed that his client would insist upon the enforcement of this provision and resist any attempt before an arbitrator to join together the claims of a group or class of consumers.  In my view, this provides further evidence, if further evidence is required, that Dell does not genuinely seek to have the claims advanced against it determined by way of arbitration.  Dell is simply seeking to exploit the inefficiency of arbitrating individual claims. As that inefficiency can be avoided if all the claims proceed by way of the class proceeding, I conclude that a granting a partial stay would not be reasonable.

[61]         In Smith OCA 2008, we faced the issue of whether to exercise our discretion to relieve the defendant of the application of issue estoppel in view of an alleged change in the law and to grant a stay in favour of arbitration. Our comments, at paras. 50-51, are applicable here:

As the certification judge observed, the claim of each class member is small. For instance, the representative plaintiff’s claim is for $83. As the certification judge found, it is simply not economically feasible to arbitrate a claim of that size. In addition, some of the loan agreements signed by the representative plaintiff preclude the “joinder or consolidation of claims with other persons ... without the consent of the parties” and other agreements contain class action waivers. When asked during oral argument, counsel for the appellants could not assure us that their clients would agree to waive their right to object to any form of joinder or consolidated arbitration. It is almost certainly the case that a stay would defeat the claims subject to arbitration clauses, not on the merits but for reasons of practicality. Enforcing the arbitration clauses would not lead to arbitration but would immunize the appellants from any claims. This is hardly a compelling case for the exercise of judicial discretion.

Furthermore, even if the claims subject to arbitration clauses were stayed, the appellants would almost certainly still have to defend a reconstituted class action by the class of borrowers who did not sign similar agreements or who signed agreements after the Consumer Protection Act, 2002 provisions came into force. I fail to see the justice in an exercise of discretion that would stay these claims at this late stage. It would surely be in the interests of justice to have all claims resolved in one proceeding.

[62]         Accordingly, I would refuse a partial stay of the claims not covered by the CPA.

3. Application of Dell in Ontario

[63]         I turn finally to the issue that was front and centre before the motion judge and that was the main focus of oral argument before this court: does Dell apply in Ontario?

[64]         On more than one occasion, this court has applied some of the general principles relating to the interpretation and application of arbitration clauses that emerge from the Supreme Court’s judgment in Dell: see Dancap Productions Inc. v. Key Brand Entertainment Inc. (2009), 55 B.L.R. (4th) 1 (Ont. C.A.), at paras. 34; Jean Estate v. Wires Jolley LLP (2009), 310 D.L.R. (4th) 95 (Ont. C.A.), at paras. 6-8. However, by enacting the CPA and by outlawing mandatory arbitration clauses in consumer agreements, the Ontario legislature has excluded the application of the reasoning in Dell to agreements covered by the CPA.  As I have concluded that the CPA applies to the claim of the representative plaintiff Andrews and that a partial stay of the claim of the representative plaintiff Griffin should be refused, it is not necessary for me to decide whether, apart from the CPA, Dell would have applied in Ontario.  As the CPA will apply to all consumer claims arising after July 31, 2005, consideration of the application of Dell in Ontario has been rendered largely academic.  To the extent that the application of Dell does remain a live issue, we are likely to receive further guidance from Supreme Court of Canada when it decides the appeal in Telus.

CONCLUSION

[65]         For these reasons, I would dismiss Dell’s appeals. If the parties are unable to agree as to the costs of these appeals, the respondents may file brief written submissions within fifteen days of the release of these reasons and the appellant may respond with brief written submissions within ten days thereafter.

RELEASED:  January 20, 2010                                         “Robert J. Sharpe J.A.”

            “WW”                                                                        “I agree W. Winkler C.J.O.”

                                                                                                “I agree Doherty J.A.”

                                                                                                “I agree K. Feldman J.A.”

                                                                                                “I agree E.E. Gillese J.A.”