Ruling strengthens consumer protection law in Ontario

For the London Free Press - March 1, 2010 Read this on Canoe

Companies have been sent a clear message — deal with complaints because dispute resolution is too impractical to pursue.

A recent Ontario Court of Appeal ruling confirms an evolving trend to protecting consumers from enforcement of mandatory arbitration clauses in consumer agreements.

The plaintiff in Griffin v. Dell Canada alleged Dell had sold computers with latent defects that made them prone to overheating, power failure, inability to "boot up" and unexpected shutdowns.

Griffin sought certification of the case as a class action. In reply, Dell moved to stay the proceeding in favour of private individual arbitration under the mandatory arbitration clause in each consumer contract. The arbitration clause directed that complaints must be taken to the (now defunct) National Arbitration Forum in Minnesota.

Dell relied on sec. 7(1) of the Ontario Arbitration Act, which requires the court to stay a proceeding where there is a valid mandatory arbitration clause.

A lower court had dismissed Dell's motion and conditionally certified the case as a class action. The appeal court dismissed Dell's appeals and refused to stay the class proceeding.

The appeal court relied on provisions of the Consumer Protection Act that invalidate mandatory arbitration clauses in consumer contracts. These provisions took effect in 2005, after the consumer contracts with Dell were entered into. But the court chose to rely on them because damages did not arise until after the provisions took effect.

Interestingly, the court also ensured the rights of non-consumers within the class were protected. The Consumer Protection Act restricts the definition of a "consumer" to an individual who "acts for personal, family or household purposes and does not include a person who is acting for business purposes". But the court found it unreasonable to separate the claims of consumers and non-consumers.

In applying the consumer protection law, the appeal court made a point of noting that Dell's mandatory arbitration clauses were simply unfair to Canadian consumers.

Writing for the court, Justice Robert Sharpe said: "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."

The appeal court has sent a clear message that consumer rights must be taken seriously. Large corporations will now have more difficulty avoiding responsibility for addressing consumer complaints by making dispute resolution too impractical to pursue.