In Murphy v Amway Corporation (2013 FCA 38) the Federal Court of Appeal considered whether class claims brought under the Competition Act are arbitrable. Justice Nadon, writing for a unanimous court, affirmed the lower court's decision that a claim advanced under Section 36 of the Competition Act is arbitrable. The decision reiterates prior jurisprudence in Canada that in the absence of legislative language to the contrary, Canadian courts will enforce arbitration agreements and class action waivers.

Background

Kerry Murphy was a small business owner registered as an independent business owner with Amway Canada, a wholesaler of home, personal care, beauty and health products. Amway sold its products through a multi-level marketing plan. Amway required its independent business owners to sign a registration agreement, which included an arbitration agreement and incorporated by reference rules of conduct, which included procedural provisions applicable to arbitration between the parties.

Murphy sought to certify a class action claiming violations of Sections 36, 52 and 55 of the Competition Act (which is federal rather than provincial legislation). Murphy alleged that Amway had failed to provide its distributors with accurate information regarding the compensation that could be earned, and that Amway operated an illegal pyramid-selling scheme in violation of Section 55(1) of the Competition Act. Murphy sought damages of C$15,000 and certification of a proposed class.

In response, Amway sought a stay of proceedings and to compel arbitration on the basis that the Federal Court lacked jurisdiction to hear the matter on the basis that Murphy's claims were subject to compulsory arbitration under the terms of the parties' arbitration agreement. Amway relied on a waiver in the rules of conduct providing that no class claims were permitted for an amount over C$1,000.

At first instance, the Federal Court stayed the proceedings in favour of arbitration (2011 FC 1341), noting that Canada was an "arbitration-friendly jurisdiction" and that without express legislative language to the contrary, courts must give effect to the parties' agreement to arbitrate.

Federal Court of Appeal jurisdiction

The Federal Court of Appeal first addressed the threshold question of whether Murphy had a right to appeal the decision of the Federal Court to the Federal Court of Appeal and found that he did, despite Section 7(6) of the Ontario Arbitration Act providing that the parties have no right of appeal from a court's decision on a motion to stay proceedings in favour of arbitration. Although the parties had agreed to the application of the Ontario Arbitration Act before the Federal Court, the appeal court determined that because the act was a provincial law, it was not bound by it. It held that the parties' agreement to have the Ontario Arbitration Act apply could not oust the jurisdiction of the Federal Court of Appeal, as provided by the Federal Courts Act.

Arbitrability of claims under Competition Act

The principal issue before the court was the question of the arbitrability of the proposed class proceedings based on a private claim for damages, pursuant to Section 36 of the Competition Act. Section 36 provides recourse for private parties for violations under Part 6 of the Competition Act relating to offences such as bid-rigging, false or misleading representations and multi-level marketing plans.

Murphy, the appellant class representative, contested the application of the class action waiver, arguing that it was only in the event that the court refused to certify class proceedings that the parties would be required to proceed to arbitration. The appellant opposed the arbitrability of his class claims on the basis of the alleged compelling public policy reason that to arbitrate such claims would undermine the legislative intent of the Competition Act.

Both parties raised the Supreme Court's recent decision in Seidel v Telus Communications Inc (2011 SCC 15). That decision considered whether provisions in the British Columbia Business Practices and Consumer Protection Act, similar to those contained in the Competition Act, were subject to arbitration. The Federal Court of Appeal applied Seidel and found that Section 36 of the Competition Act did not resemble the relevant provisions of the British Columbia act, given that it did not provide for injunctive relief, third-party claims or conditions on which rights under the Competition Act may be waived. The court emphasised that the applicable sections of the British Columbia act:

  • provide a right of recourse to "virtually anyone";
  • highlight the public interest nature of the remedy provided in the legislation; and
  • therefore contain specific language excluding recourse to arbitration, which is not found in the Competition Act.

Comment

The Federal Court of Appeal's affirmation of Seidel, in particular, that "arbitration clauses were to be enforced unless there was language in the statute at issue which militated against their enforcement", is yet another example of the arbitration-friendly approach taken by the majority of Canadian courts. With respect to even public interest-related remedies, Canadian courts are inclined to defer to arbitration unless there is express language in a statute barring the arbitration of such claims. In Murphy the court held that there was nothing sacrosanct about competition law that would make it incompatible with private arbitration, thereby holding that Murphy's claim should be stayed before the Federal Court and referred to arbitration.

For further information on this topic please contact Daniel Grodinsky at Borden Ladner Gervais LLP by telephone (+1 514 879 1212), fax (+1 514 954 1905) or email (dgrodinsky@blg.com).

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