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B E T W E E N : |
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MARGARET SMITH |
Harvey T. Strosberg, Q.C. |
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- and - |
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NATIONAL MONEY MART COMPANY and DOLLAR FINANCIAL GROUP INC. |
F. Paul Morrison and |
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Heard: September 15, 2005 |
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On a motion to quash the appeal from the judgment of Justice Ellen M. Macdonald of the Superior Court of Justice dated June 22, 2005, reported at [2005] O.J. No. 2660.
[1] National Money Mart (Money Mart) is appealing the dismissal of its motion to compel Margaret Smith to proceed with mediation and/or arbitration of her disputes. [1] Margaret Smith seeks to quash that appeal as being devoid of merit pursuant to s. 134(3) of the Courts of Justice Act [2] on the basis that the appeal precluded by statute, specifically s. 7(6) of the Arbitration Act. [3] In the alternative, the appellant submits the order of Justice Macdonald is interlocutory and this court has no jurisdiction to hear it.
[2] Margaret Smith, whose only source of income is her Canada Pension, has used Money Mart’s “Fast Cash Advance” service several times. Fast Cash Advance allows customers to borrow a maximum of 30% of their net pay cheque until their next payday for a maximum term of thirty-one days. The customer signs a Fast Cash Advance agreement and provides Money Mart with a post-dated cheque drawn on the customer’s bank account in an amount equal to the principal of the Advance, the interest on the Advance, and Money Mart’s standard first party cheque cashing fee.
[3] These Fast Cash Advance agreements contain an independent arbitration agreement and more recently, including at least three of Smith’s agreements, an independent mediation agreement. On behalf of herself and other borrowers, Smith commenced an action under the Class Proceedings Act, 1992, [4] which has yet to be certified, for a declaration that the interest rate charged on her loan is effectively in excess of sixty percent and in contravention of s. 347 of the Criminal Code. Money Mart brought a motion under s. 7(1) of the Arbitration Act to dismiss or stay Smith’s action on the basis that the agreements she signed required her to mediate and/or arbitrate her dispute. [5]
[4] In detailed and comprehensive reasons, the motions judge exercised her discretion to refuse to stay the proceedings pursuant to s. 7(2) of the Arbitration Act and dismissed the motion. She held that the broad wording of Money Mart’s arbitration clause was an attempt to immunize itself from the Class Proceedings Act and more generally the jurisdiction of the Superior Court. Under the Class Proceedings Act, only a justice of the Superior Court has jurisdiction over class proceedings and arbitrators cannot assume jurisdiction.
[5] She further held that the appropriate time at which to determine whether the matter should be arbitrated or litigated was at the certification motion when the court decides whether proceeding under s. 5 of the Class Proceedings Act is the preferable procedure.
[6] In her reasons, the motions judge noted that Smith is seeking a declaration that the interest rate charged by Money Mart exceeds the maximum permitted by s. 347 of the Criminal Code and referred to jurisprudence holding that she could not be prohibited from pursuing her right to obtain such a declaration on the ground of public policy.
[7] The motions judge’s comments, that she would in any event have refused to stay the action on the basis that the legality of the interest rate was not capable of being the subject of arbitration under Ontario law, were obiter in view of the fact that she had already decided that the final choice of the forum for resolution of the dispute should be left to the certification hearing.
[8] When Money Mart’s motion was dismissed, it appealed. Smith brought this motion to quash the appeal under s. 7(6) of the Arbitration Act which states simply:
There is no appeal from the court’s decision.
[9] Money Mart submits that the order of the motions judge is a final order and relies on the decision of this court in Huras v. Primerica Financial Services Ltd., [2000] O.J. No. 3772 (C.A.) in support of its position that the appeal should not be quashed.
[10] In Huras, a sales representative for Primerica, who had successfully completed the company’s three-week training program, brought an action under the Class Proceedings Act. She alleged, on behalf of herself and all others, that Primerica violated the Employment Standards Act [6] by not paying her during the training program. Primerica brought a motion to stay the proceedings on the basis that Huras had signed an agreement containing a clause agreeing to arbitrate all disputes in good faith. That agreement was signed after the training program was completed. The motions judge found that the agreement could not apply retroactively. Accordingly, he dismissed Primerica’s motion to stay on the basis that the claims only applied to the training period and held that the arbitration clause was inapplicable. On an alternative basis, the motions judge also held that the agreement to arbitrate was unconscionable and unenforceable pursuant to s. 3(1) of the Employment Standards Act.
[11] Primerica appealed and Huras brought a motion to quash its appeal. On behalf of the court, Finlayson J.A. held at para. 10:
[I]f the court has decided that the Act is not applicable, then the prohibition against an appeal in s. 7(6) is equally not applicable: [footnotes omitted].
[12] He then held that s. 7 of the Arbitration Act did not operate and that the order was final. At para. 12 of his reasons he stated:
It is clear that the order under appeal finally determines the forum in which the dispute between the parties is to be resolved. It terminates any possible proceedings before an arbitral body. In addition, by denying Primerica’s motion to stay the plaintiff’s class action, the motions judge has deprived Primerica of a substantive right - the right to resolve its dispute with the plaintiff by good faith negotiation and arbitration. [7]
[13] Huras does not apply to the case before us because in this case the motions judge did not make a final determination as to whether arbitration was the appropriate forum in which to resolve the issues in the litigation. She concluded that the issue of whether the dispute should proceed to mediation and/or arbitration would be determined on the preferable procedure analysis at the certification stage of the action. At that time, the agreement to arbitrate would be one of the factors that the court would consider in deciding the preferable procedure for resolving the dispute. Thus, Huras does not apply because a final determination has yet to be made as to whether or not the claims of Smith and others will be arbitrated. Consequently, the decision is interlocutory. Inasmuch as the order is not a final order, s. 7(6) of the Arbitration Act applies.
[14] My conclusion that the motions judge correctly held 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 is consonant with the decision of the five judge panel of the British Columbia Court of Appeal in MacKinnon v. National Money Mart Co., [2004] B.C.J. No. 1961. That panel dismissed the appeal from the dismissal of an application to stay a proposed class action against the same company. The court rejected the “sequential approach” to the interpretation of two statutes. This would have resulted in the validity of the arbitration clause being determined first and only if the clause was “inoperative” under the Commercial Arbitration Act [8] would a classaction be considered. Instead, the court opted for an examination of the words of both the Class Proceedings Act and the Commercial Arbitration Act in the context of their schemes and underlying policies and held that such examination should take place at the certification hearing.
[15] Here, at the certification hearing, the Superior Court judge will want to consider the wording of Ontario’s Class Proceedings Act, the slightly different wording of s. 7(2) of the Arbitration Act that permits a judge to refuse a stay if the court finds that the arbitration agreement was “invalid”, and s. 7 of the Consumer Protection Act, 2002, [9] proclaimed in force July 30, 2005, which states:
s. 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 the Act.
(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.
s. 8.(1) A consumer may commence a proceeding on behalf of members of a class under Class Proceedings Act, 1992 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.
[16] Accordingly, I would grant the motion to quash the appeal. Costs of the motion are to Smith, fixed in the amount of $7500, all-inclusive.
“Karen M. Weiler J.A.”
“I agree M. Rosenberg J.A.”
“I agree E. E. Gillese J.A.”
[1] The order also dismissed National Money Mart’s request for an order staying or dismissing the action against Dollar Group, a financial services company incorporated in the United States, on the basis that there was no legal relationship between it and Money Mart that would justify service out of the jurisdiction. It is the subject of a separate appeal to this court.
[2] Courts of Justice Act, R.S.O. 1990, c. C.43
[3] Arbitration Act, 1991, S.O. 1991, c. 17.
[4] Class Proceedings Act, 1992, S.O. 1992, c. 6.
[5] In early 2003, Money Mart revised the arbitration clause found in Fast Cash Agreements. This new “Alternative Dispute Resolution” clause provides at paragraph 6:
The parties agree that “Claim” includes any claim, dispute, or controversy arising out of or relating to this agreement or the construction thereof either directly or indirectly, whether in contract or in tort, or for restitution of whatever kind, and whether arising pursuant to a statue or regulation, or otherwise. Mediation – The parties agree that, if any party requests mediation to resolve any Claim, then such mediation shall be a pre-condition to any party commencing or continuing any court proceedings of whatever kind. The Claim will be referred to private and confidential mediation before a single mediator jointly appointed by the parties and the cost of the mediator will be paid by Money Mart. The parties may elect to proceed with the mediation in person, in writing only or electronically using an Internet or online arbitration service jointly appointed by the parties. Arbitration – In the event that the parties are unable to resolve such Claim by mediation, the parties agree to have the Claim determined by private and confidential arbitration before a single arbitrator jointly appointed by the parties and the cost of the arbitrator will be paid by Money Mart. The parties may elect to proceed with the arbitration in person, in writing only, or electronically using an Internet or online arbitration service jointly appointed by the parties.
[6] Employment Standards Act, 2000, S.O. 2000, c. 41.
[7] When Huras’ appeal was heard on the merits, Borins J.A. agreed with the motions judge that the dispute between the parties did not fall within the arbitration clause. He did not find it necessary to review the correctness of the motions judge’s conclusion that the arbitration clause was unenforceable. Huras v. Primerica Financial Services Ltd. (2001), 55 O.R. (3d) 449 (C.A.).
[8] Commercial Arbitration Act, R.S.B.C. 1996, c. 55.
[9] Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A.