Uber arbitration clause unconscionable, a class action over a price fixing conspiracy, and a costs award for a protracted taxation
This week on Legally Speaking with Michael Mulligan:
The Supreme Court of Canada has declared an arbitration clause, used by Uber, to be unconscionable, and therefore invalid.
The clause, included in a 14-page agreement that prospective Uber drivers were required to click “I accept” on, twice, purported to require any disputes with Uber to be dealt with by arbitration, in the Netherlands, rather than going to court.
While not specified in the 14-page agreement, it turned out that in order to start the arbitration process, there was a $14,500 USD fee. A driver making a claim would also need to travel to the Netherlands.
If it had been found to be enforceable, the other effect of the arbitration clause would have been to prevent the case from being certified as a class action. Every claim would have to proceed separately and would be subject to the $14,500 fee.
As a result of the Supreme Court of Canada decision, the case, which involves a dispute as to whether Uber drivers are employees or independent contractors, can proceed.
Also discussed is a class action case from British Columbia involving a claim that a group of companies that transport vehicles on ships conspired to fix higher prices for this service. The alleged impact was to raise the price of cars sold in British Columbia.
The British Columbia Court of Appeal held that two of the companies involved could still be sued, even though they didn’t deliver cars to British Columbia. The companies didn’t deny that they were involved in a price-fixing conspiracy. The British Columbia Court of Appeal held that the two companies could still be liable on the basis that their participation in the price-fixing conspiracy artificially raised the price charged by other companies that did deliver cars to British Columbia.
Finally, a case involving a principal, and several companies associated with Bear Mountain development is discussed. The case involved the taxation of a law firm’s account. A taxation, in this context, is supposed to be an expeditious way to determine if a lawyer’s bill is correct and reasonable.
Unfortunately, the former clients made no effort to narrow the focus of the review and demanded a full refund of all fees paid for a complex case that went on for an extended period of time. This resulted in a protracted, 11-day hearing and, ultimately, an award of costs against the client in the amount of $36,465.
Costs, in the civil litigation context, are intended to encourage parties to make reasonable concessions, narrow issues, and resolve disputes. Unfortunately, they don’t always have the desired effect.
Legally Speaking with Michael Mulligan is live on CFAX 1070 every Thursday at 10:30 am.
An automated transcript of the show:
Legally Speaking July 2, 2020
Adam Stirling [00:00:00] Time for our weekly chat with Michael Mulligan barrister and solicitor with Mulligan Defence Lawyers, legally speaking, of CFAX 1070. Good morning, Michael. How are you doing?
Michael Mulligan [00:00:08] I’m doing great. How about yourself?
Adam Stirling [00:00:10] Oh, you know, same old. Same old. Another day in paradise, as it were.
Adam Stirling [00:00:16] What’s on the agenda today?
Michael Mulligan [00:00:18] Well, the first piece on the agenda is a brand new decision out of the Supreme Court of Canada. And this is a case that the parties involved were Uber International. And David Heller, the David Heller being a fellow who lives in Ontario who was doing driving for Uber eats. And so, to become a driver for Uber eats, what you need to do is download the Uber eat app, scroll through a 14 page agreement. Tap, I agree, I agree a couple of times. And off you go to becoming a Uber eats driver. And that’s what Mr. Heller did. Mr. Heller, however, after some time doing that, I had a dispute with Uber and he wished to allege that Uber should have been treating him like an employee rather than a contractor. That was really the basis of the dispute. And so off off he went to court. David shows up in court. And unfortunately for David, the 14 page agreement that he clicked, I agree, I agree on, included what’s referred to as an arbitration clause. Now, this particular arbitration clause, the general idea is that an arbitration clause would say, look, if you have a dispute, you can’t go to court. You have to go to an arbitrator. And in a fair way, I suppose the concept there would be that could be expeditious, cheap, and fast. But that’s not how it was used here. The arbitration clause in the 14 page Uber eats agreement required that the arbitration that no case you go to court have to go to arbitration in the Netherlands. And in this case, to start the arbitration, you were required to pay a fee of fourteen thousand five hundred dollars U.S. That’s not legal fees, that’s just the administrative fees to start the process.
Adam Stirling [00:02:14] Wow.
Michael Mulligan [00:02:14] And then you would have to go to the Netherlands, probably get a lawyer and so forth. And all of this represented basically a complete year’s income for David. Not very fair.
Adam Stirling [00:02:26] No. Doesn’t seem so at least.
Michael Mulligan [00:02:28] And so he went to court and say, well, that’s not fair then. Originally, the trial judge disagreed with him. I said, well, no, if you’ve got some argument about the arbitration clause, you need to take that to arbitration. Go to the Netherlands David, being unsatisfied with that result, he pressed on and eventually now the case got to the Supreme Court of Canada. The Supreme Court of Canada, at least from my perspective, happily concluded that the arbitration clause in this case was unconscionable. And because it was unconscionable, it was invalid. And the Supreme Court talked about what is required for a clause to be found to be unconscionable in a contract. And the Supreme Court of Canada pointed out that there are two requirements for that. One, that there be an inequality of bargaining power. And secondly, that the as a result of that inequality of bargaining power, there must be a resulting improvident bargain. Well, what exactly does that mean for you to stay or go to the definition of what is improvident from an ordinary sense and then look at some of the decisions, but broadly, that would mean something that’s not carefully planning for the future, particularly with respect to money and being very unwise.
Adam Stirling [00:03:45] Interesting.
Michael Mulligan [00:03:45] The Supreme Court of Canada rejected suggestions that to be unconscionable, more was required of The Supreme Court of Canada, found that to meet that requirement of unconscionability and therefore be invalid, the person does not need to show that the agreement was grossly unfair. They do not need to show that there is an overwhelming imbalance of bargaining power, nor do they need to show that the stronger party intended to take advantage of the vulnerable party.
Adam Stirling [00:04:12] Interesting. So, it could be incidental. That’s fascinating.
Michael Mulligan [00:04:15] Yeah, that’s right. You don’t have to prove that Uber set out to do in David when they had drafted this contract. You need only show this inequality of bargaining power and the result of that was this improvident bargain. So, I think that’s a very positive decision. What it’s going to mean now is that David’s going to be able to carry on in Ontario to sue Uber there. And in fact, he’s so looking to have this certified as a class action. And so, we may then get a decision in Ontario concerning whether people who are Uber drivers are employees or whether they’re contractors. And David won’t have to pay a year’s income to go to the Netherlands to have an arbitrator decide that. So, I think that’s really healthy.
Adam Stirling [00:05:01] Yes.
Michael Mulligan [00:05:02] And the other thing that it calls to mind, I must say, it’s great that the courts are using principles like this to override unconscionable agreements.
Adam Stirling [00:05:15] Indeed.
Michael Mulligan [00:05:16] There is something that district view is just fundamentally unfair with many of these agreements. All of us have dealt with them. Right. You know, are pages and pages of things. You must click. I agree. I agree in order to do anything in a modern world. And I think it was Seinfeld said, look, you could insert the entire text of mine, come into the iTunes agreement and everyone be clicking, I agree, I agree, I agree.
Adam Stirling [00:05:38] I agree. It would be a fascinating social experiment to start a timer when the insertion of that text occurred and wait to see how long it took a complaint to roll in.
Michael Mulligan [00:05:46] Yes, it’s, you know, very you know, no one is spending the time necessary to sort of pick apart and read the 14 page agreement. Moreover, as the Supreme Court of Canada pointed out, the 14 page agreement didn’t include information like you will need to pay fourteen thousand five hundred dollars U.S. in order to use the arbitration agreement. It would just say things like this must go to arbitration and you can’t start an action in court. And, you know, the other thing that this calls to mind is that there’s probably scope for legislative restrictions on the use of conditions like this, because very commonly now they’re used as a way to try buy large corporations to try to prevent people from getting access to the courts.
Adam Stirling [00:06:34] Yes.
Michael Mulligan [00:06:35] You know, they know that if you put these sort of impediments in place, it makes that much harder. And particularly large corporations can be concerned with class actions because many people aren’t going to be able to spend the time and money and energy required to individually advance a claim which for them may only be worth a modest amount. And that’s really the whole point of class action proceedings. And if you can try to insulate yourself from all of those things by saying, look, you know, if you have any dispute with your plumbing part or your car or your anything, you must go to arbitration and you cannot go to court. One of the effects of that is to stop people from, if those are enforceable, to stop people from being able to utilize class actions in order to get a remedy for large groups of people who are potentially hard done by. And so I think there is scope for perhaps more legislation restricting these things and also restricting things like conditions that require people to resolve their dispute in some other jurisdiction, because often times that, of course, makes it a practical impossibility for people. I know, for example, in British Columbia, we had some new franchises, legislation a few years ago. And one of the things that did was restrict the ability of franchisors to say you must have your dispute resolved in you name some foreign jurisdiction, which has the practical effect for the person who’s bought the, you know, burger franchise or whatever be able to say, look, I’m sorry, I just can’t go to the Netherlands or I can’t go to, you know, Waco, Texas, to start my claim. It’s just not on unless the claim is a very substantial one.
Adam Stirling [00:08:24] Yeah.
Michael Mulligan [00:08:24] And so, you know, there’s a real risk that these things are used in a way that’s completely contrary to what would have been envisioned with the concept of arbitration. Arbitration is supposed to be, you know, efficient, inexpensive, and fast. Right. That’s the idea. But really, they’re used in these kind of agreements to often prevent people from having access to the courts and to make that make it so burdensome that you’re unable to bring your claim against Uber. So, good for the Supreme Court of Canada. And this particular provision is clearly unconscionable and therefore not an effect. And, you know, we can all say to David, good luck. I don’t know what the result will be in terms of whether Uber drivers or properly employees or not. But I think we should all be able to agree that if you want to make that argument, you should be able to do so without having to pay many thousands of dollars and fly to the Netherlands.
Adam Stirling [00:09:18] Michael Mulligan, we’ll take a quick break and return, legally speaking. Coming up in just a moment, we continue with the legally speaking, Michael Mulligan from Mulligan Defence Lawyers. Now, Michael, the intersection between the justice system, bargaining power and the economy is always a fascinating one to me, because bargaining power often exists only through the prospect of one being able to seek a legal remedy in court if indeed a dispute arose that could not be resolved through otherwise satisfactory means. Absent that prospect, you find unfair and is proliferating far more off than any of us would prefer to hear about a class action in B.C. alleging that operators of roll on roll off marine shipping vessels. They conspired to limit competition and inflate prices. What’s the story?
Michael Mulligan [00:10:03] Yeah, this is, I think. I think a really interesting fact pattern in case. So, this was a proposed class action brought in British Columbia against this whole collection of very large multinational shipping companies who would ship cars to various different places. And the basis for that claim is the allegation that this conglomeration of shipping companies had conspired to set higher prices to transport cars between different locations. And the theory of the class action would be because this group of large companies allegedly conspired in this way. It had an effect on customers who purchased cars in British Columbia that had ever been shipped by any of these entities. And the idea was, well, because they conspired to fix prices. It means that you that the car dealership perhaps that imported the car would have paid more and you would have paid more to buy the car ultimately.
Adam Stirling [00:11:08] Yes.
Michael Mulligan [00:11:09] And so this was a class action alleging that all these people engaged in a conspiracy. Are companies engaged in a conspiracy and seeking compensation for that. Exactly the sort of thing which the class action process is intended to deal with.
Adam Stirling [00:11:24] Yes.
Michael Mulligan [00:11:24] Says good luck to the individual consumer who might have paid a few hundred dollars too much for their car, trying to take on some consortium of international shipping companies. It’s simply never happening. And so, this is the only process by which anyone is going to be able to get any potential compensation if that’s, in fact what was going on. Now, that that process, a third in British Columbia. And this was the interesting element. Two of these very large shipping companies were there, two entities. But it’s Hoegh Autoliners, which are interesting if you look it up. They own dozens of ships and ship thousands of cars all over the world, didn’t actually ship cars to British Columbia. Now, those particular defendants didn’t deny that they were parties to this alleged conspiracy. But their defense was, well, hey, we didn’t ship cars to British Columbia. Therefore, you shouldn’t be able to include us in this class action. And that’s the issue that the B.C. Court of Appeal had to sort out. Right. Is there a you know, can this claim proceed against those particular entities? Because, well, they ship cars all over the place. They don’t happen to ship them to British Columbia. Well, the BC Court of Appeal concluded that, yes, indeed, those two those entities that Hoegh Autoliner that represent that comprise Hoegh Autoliners can in fact, be sued. And the concept that they used is that there’s a substantial connection between all of these defendants, including those ones and British Columbia. And because the pleadings allege that these entities and they don’t deny this, engaged in this conspiracy to fix prices, to transport cars, even though they may not have transported cars to British Columbia as a result of engaging in that conspiracy, which is what’s alleged, it would have had the effect of raising the price of cars in British Columbia. And on that basis, the Court of Appeal found that those entities could, in fact, be part of the class action, which I think is a really interesting analysis. And it provides, I think in the context of the last case we talked about with Uber, a good example of how and why it’s so important that we have access to the courts and the scheme that permits people to advance a claim in this collective way. Otherwise, there’s no hope that somebody is going to be able to go and arbitrate or sue in small claims court in all these large multinational companies.
Adam Stirling [00:14:02] Yeah.
Michael Mulligan [00:14:02] And so this will create a way in which that claim can be tested, a decision be made. And I think it’s another example of how that that is to say, the class action scheme really as a benefit to consumers, because without it, all of this sort of activity could go on simply with complete impunity.
Adam Stirling [00:14:22] Yeah, I was from matters of territorial competence and jurisdiction to be interesting because, of course, the civil law here in Canada, it’s a provincial responsibility. So, we see non uniformity even going from province to province in terms of certain torts. And there are remedies being either fully recognized or not being recognized. You add to that the additional layer of complexity of international corporations and well, I can see why some lawyers are able to command such hefty sums for being able to navigate these laborious Michael because they are anything but simple.
Michael Mulligan [00:14:50] That’s for sure. They’re in B.C. One of the things that happened just recently was a change to the class action legislation. Which will perhaps provide some simplicity in that it would allow class actions that are asserted in British Columbia to include people who don’t live in British Columbia. Right. For example, if there was a in other provinces of Canada. So, for example, if a class action started over, you know, let’s say a defective part or something of that sort. You could by default include anyone who lived in Canada is as part of the group of people that would be involved in the class action prior to those legislative changes. You could only include people who lived in British Columbia or other people who actively found out about the case and took an affirmative step to opt in. Like saying, hey, by the way, I bought that ten dollar part that broke. And of course, that’s going to miss all kinds of people.
Adam Stirling [00:15:48] Yeah.
Michael Mulligan [00:15:49] So, one of the changes that was made would permit class to be defined in a way that would include people who don’t live in B.C., even for a claim that started only in British Columbia. And the idea there would be to avoid duplicate claims all across the country. They capture all the different people who, for example, paid too much for their car to be imported with the idea there that it could simplify things and avoid duplicate litigation.
Adam Stirling [00:16:15] Speaking of litigation, litigation at all times can be expected to consume resources, which is why it’s often a last resort in terms of dispute resolution mechanisms. I see a story on the docket here that has to do with legal fees when they can be challenged and why such a challenge may end up causing the amount of money owed to actually increase. How does it all work?
Michael Mulligan [00:16:36] Yeah, I must say I smiled as they read this decision, which just came out from the B.C. Supreme Court. This was a case that involved the local developer, Mr. Matthews, and a bunch of companies, some of which were associated with the Bear Mountain development. And it’s a case that involved was described as complex litigation concerning the sounds like the sale of properties. All the details aren’t set out, but it’s a complex piece of litigation where Mr. Matthews and a whole bunch of companies he was associated with were being sued. And Mr. Matthews and the companies hired a law firm statement, Elliott, to defend the claim and the things that went on and on with Mr. Matthews, at least as described here, being very engaged in the process, wanting to do things like review letters and, you know, approve this. And that’s being helpful, quote unquote, to the litigation process. And the effect of all of that were a whole bunch of legal bills, which eventually, as sounds like, came to a head when money and some of these entities that was paying them ran dry and Mr. Matthews had to, I think, go to some of his partners to contribute to the cost of this litigation.
Adam Stirling [00:17:50] Mm.
Michael Mulligan [00:17:51] Eventually, the case settled and then Mr. Matthews and these companies asked for a review of the law firms accounts. And there’s a provision for that in the Legal Profession Act that allows for a review of lawyers bills to make sure that they are fair and reasonable. Right. Or if there’s error in them. It’s designed to be sort of an efficient way to review those things.
Adam Stirling [00:18:14] Yes.
Michael Mulligan [00:18:15] Now, all that’s fine, but the way, in which Mr. Matthews and the companies decided to pursue that was described as wanting to review every dollar paid, wanting a complete refund of all the moneys that were paid by way of legal fees over the long, complex dispute and refusing to narrow the focus of that in any way, such as resulting in an eleven day hearing and all manner of time and expense reviewing the bills. The net outcome of all of that was a very small reduction in the bill and ultimately the bill was four hundred and thirty two thousand dollars and there were some, I think twenty three thousand dollar adjustment to that on the basis that the conclusion was that lawyers should have pointed out in writing that conducting a defense of the claim in the most vigorous way could have resulted in spending more than the claim was worth. But because of how Mr. Matthews and the companies decided to challenge every dollar spent and conduct an eleven day hearing reviewing it, they wound up having the fees reduced by twenty two thousand five hundred dollars, by then include it then resulted in them getting a bill of costs of an additional thirty six thousand four hundred sixty five dollars as a result of that, conducting an unfocussed 11 day review of every dollar spent in this complex piece of litigation. So, I must say, as a lawyer, I smiled reading this thing both in terms of the sort of, quote, helpful client wanting to review every letter and thing that was done. And then also the unfortunate way that it sounds like both the original litigation was defended and then also the way the. What was supposed to be sort of an expeditious review of a bill to make sure it was fair and correct resulted in this unnecessary or very long at least a review that wound up costing more than the amount of money involved. So the big takeaway for people is when you’re engaged in litigation of any sort or any kind of a dispute, you always should keep in mind the scope of the dispute in relation to the costs of pursuing it. And when you’re having a dispute over money, you should always bear in mind the cost of defending or bringing an action versus the amount of money actually involved and are civil litigation scheme is designed to encourage that by means of costs awards. But obviously, it doesn’t always have exactly that desired effect.
Adam Stirling [00:20:51] Michael Mulligan barrister and solicitor with Mulligan Defence Lawyers here in Victoria, appreciate your knowledge and insight as always, legally speaking. During the second half of our second hour every Thursday on CFAX 1070. Michael, thank you for your time.
Michael Mulligan [00:21:03] Thank you so much. Have a great day.
Adam Stirling [00:21:04] You too. Bye now.
Automatically Transcribed on July 2, 2020 – MULLIGAN DEFENCE LAWYERS