Friends Auto Repair Services Inc. v. Her Majesty the Queen in Right of Ontario, 2016 ONSC 5792

CITATION: Friends v. HMTQ, 2016 ONSC 5792

COURT FILE NO.: DC-15-29-00

DATE: 2016-09-15

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

B E T W E E N:

FRIENDS AUTO REPAIR SERVICES INC. and HARPREET SINGH MATHARU

Carlin McCoogan, for the Applicants/Respondents to Motion

Applicants/Respondents to Motion

• and -

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO AS REPRESENTED BY THE MINISTER OF THE ENVIRONMENT AND CLIMATE CHANGE

Isabelle O’Connor and Kathleen Clements, for the Respondent/Moving Party

Respondent/Moving Party

HEARD: June 8, 2016, at Brampton, Ontario

Price J.

REASONS FOR ORDER

NATURE OF PROCEEDING

1The Ontario Ministry of the Environment and Climate Change (“the Ministry”) moves to quash an application by Friend’s Auto Repair Service Inc. (“Friend’s”) and its owner, Harpreet Singh Matharu (“Mr. Matharu”), for judicial review of an Award of an Arbitrator dated January 7, 2015, dismissing their appeal from the decision of the Director of the Drive Clean program terminating the accreditation of Friend’s as a Drive Clean testing facility and revoking the certification of Mr. Matharu as a Drive Clean Inspector and Technician.

BACKGROUND FACTS

2The Drive Clean testing program in Ontario is a mandatory vehicle emissions inspection and maintenance program. It is established by regulation under the Environmental Protection Act¹ to control vehicle emissions, and is administered by the Director of the Drive Clean Office of the Ministry.

3Drive Clean testing can only be performed by certified Drive Clean Inspectors at accredited Drive Clean Facilities. Drive Clean Facilities are private garages accredited by the Province. To become accredited, a facility must sign a Performance Contract with the Province. Regulations made pursuant to the Environmental Protection Act² set out the process that a mechanic must undergo to become certified as a Drive Clean Inspector or Repair Technician.

4Friend’s entered into a Performance Contract with the Province in April 2013, to become accredited as a Drive Clean Facility (“the Performance Contract”). The Performance Contract was subject to lengthy standard terms entitled “Standard Operating Procedures”. According to the Standard Operating Procedures, if the Ministry suspended or terminated the contract, Friends could appeal the decision to a single arbitrator under the terms of the Arbitration Act. The Standard Operating Procedures provides:

7.3.3 Drive Clean Facilities have the right to appeal a suspension or termination to a single arbitrator under an arbitration established pursuant to the Arbitration Act, 1991 (Ontario), following the execution of an Arbitration agreement. The only issue in the Appeal is whether the DCF was properly and validly suspended or terminated under the Performance Contract and, if applicable, whether the conditions imposed for ending the suspension are appropriate.

5Mr. Matharu is the sole owner of Friend’s and its sole Drive Clean Inspector. He was certified as a Drive Clean Inspector on December 28, 2012, and as a Repair Technician on March 7, 2013.

6The Director of the Drive Clean program terminated Friend’s’ Performance Contract on March 19, 2014. The Ministry claims that Friend’s fabricated testing results on seven occasions, by issuing pass reports for vehicles that did not pass properly conducted emissions tests. The Director revoked Mr. Matharu’s certification as a Drive Clean Inspector and Repair Technician in March and April 2014, on the ground that he created the false results reported by Friend’s.

7Friend’s appealed the Director’s decision to terminate its Performance Contract to an arbitrator, as provided for by the Standard Operating Procedures. Mr. Matharu also appealed the Director’s decision to revoke his certification to an arbitrator. The Ministry states that Mr. Matharu did not have a statutory or other right to appeal to an arbitrator, but it did not challenge his appeal.

8On July 25, 2014, Friend’s and Mr. Matharu and the Ministry entered into an Arbitration Agreement authorizing Harinder Singh Gahir (“Mr. Gahir”) to act as an Arbitrator in determining whether Friend’s Performance Contract was properly and validly terminated under the applicable legislation, and whether Mr. Matharu’s status as a Drive Clean Inspector and Repair Technician was properly and validly revoked pursuant to Subsection 1.1(4) of the Regulation. The Arbitration Agreement provided:

5.1 The Arbitrator agrees to issue a decision in writing within 30 days of the final hearing date of the arbitration and will set out the reasons for his decision in the written decision.

5.2 The award of the Arbitrator shall be final and binding on the parties, on questions of law, on questions of fact, and on questions of mixed fact and law. [Emphasis added]

9Mr. Gahir, as Arbitrator, received affidavit and viva voce evidence, but did not cause the arbitration to be recorded. By an Award dated January 7, 2015, he upheld the Director’s decisions, finding that Friend’s and Mr. Matharu had indeed falsified test results.

10Friend’s and Mr. Matharu applied for judicial review of Mr. Gahir’s decision. They submit that he unfairly imposed on them the burden of proving how the falsified clean drive results had been produced without their complicity. They seek an order, in the nature of certiorari, setting aside Mr. Gahir’s decision, and an order, in the nature of mandamus, remitting the matter, with directions, back to Mr. Gahir for reconsideration.

11The Ministry moves for an order quashing Friend’s’ and Mr. Matharu’s application on the ground that the Divisional Court has no jurisdiction to review the Arbitrator’s decision. In the alternative, the Ministry seeks an order striking out portions of Mr. Matharu’s affidavit, on the ground that it seeks to introduce evidence that was not before the Arbitrator.

12The Ministry argues that the Divisional Court has no jurisdiction because the arbitration was a private consensual process from which the parties agreed there would be no recourse. The Ministry argues that, in any event, the recourse from an Arbitrator’s decision, under the Arbitration Act, is not by judicial review.

13Friend’s and Mr. Matharu respond that the Performance Contract, whose Standard Operating Procedures mandate arbitration, and the Arbitration Agreement, a standard form agreement which precludes appeal from the Arbitrator’s Award, were not negotiated private agreements, but were contracts of adhesion, imposed on them as a condition for becoming accredited and certified. They argue that the decisions terminating the accreditation of Friend’s, and revoking Mr. Matharu’s certification, were licensing decisions, which cannot be shielded from judicial review by contracts of adhesion mandating an arbitration process from which there is no recourse.

14The application raises two issues of importance to the public, namely:

1. Whether a decision to terminate the accreditation of a Drive Clean facility, or to revoke the certification of a Drive Clean Inspector and Repair Technician, being licensing decisions, are subject to judicial review; and

2. Whether a contract of adhesion, by imposing arbitration as the only means of challenging the termination or revocation, and providing no recourse from the Arbitrator’s decision, can effectively shield such decisions from judicial review.

15For the reasons that follow, I find that the accreditation of a Drive Clean facility, and the certification of a Drive Clean Inspector and Repair Technician, are licensing decisions. However, there is no statute, equivalent to the Consumer Protection Act, prohibiting mandatory arbitration clauses in licensing contracts, or preserving judicial review of licensing decisions in the face of a mandatory arbitration clause. The relevant jurisprudence from the Supreme Court of Canada and the Court of Appeal for Ontario makes it clear that a court, before disregarding a mandatory arbitration clause, must find a legislative intention to preserve judicial review notwithstanding such a clause. Friend’s and Mr. Matharu have not offered evidence of such a legislative intention. Their application for judicial review has no prospect of success, in the face of the mandatory arbitration clause in the Performance Contract, and the absence of recourse provided for in the Arbitration Agreement.

16The Performance Contract, which provides that the Director’s decisions can be reviewed only by an Arbitrator, and the Arbitration Agreement, which provides that there will be no recourse from the Arbitrator’s Award, are contracts of adhesion. However, in the absence of a legislative intention to preserve judicial review for all licensing decisions, the court may not disregard a mandatory arbitration clause, even one contained in a contract of adhesion, on the ground that public policy demands that the Director’s licensing decisions must be subject to judicial review. Such an argument has no reasonable prospect of success, and the application advancing it must be quashed.

ISSUES

17The motion raises the following issues to be determined by this court:

1. Does the Divisional Court have jurisdiction to review the arbitrator’s decision?

2. Should the impugned portions of Mr. Matharu’s affidavit be struck?

PARTIES’ POSITIONS

a) Does the Divisional Court have jurisdiction to review the Arbitrator’s decision?

The Ministry

18The Ministry submits that Mr. Gahir’s decision did not involve the exercise of a statutory or public power, and that the Divisional Court has no jurisdiction to review it. The Ministry characterizes the Performance Contract, with its Standard Operating Procedures, as a private agreement, and argues that it contains a dispute resolution clause which permits the parties to submit disputes to arbitration, and contains no alternative to arbitration.

Friend’s and Mr. Matharu

19Friend’s and Mr. Matharu assert that the Divisional Court has jurisdiction. They argue that the Director’s power to accredit a Drive Clean facility, or to certify an Inspector or Repair Technician, or to terminate their accreditation or revoke their certification, is a licensing power and subject to judicial review. They assert that the issue of whether the Drive Clean program is a licensing system has not been judicially considered, and is a matter of public importance which deserves the attention of the Divisional Court.

20Friend’s and Mr. Matharu submit that the Performance Contract and Standard Operating Procedures, which provide for arbitration, and the standard form Arbitration Agreement, which provides no recourse from the Arbitrator’s Award, were not negotiated by the parties, but were imposed on Friend’s and Mr. Matharu as a condition of becoming accredited and certified. They submit that they were not private agreements, but contracts of adhesion, which cannot shield the Arbitrator’s Award from judicial review.

b) Should the impugned portions of Mr. Matharu’s affidavit be struck?

The Ministry

21The Ministry seeks, in the alternative, to strike portions of Mr. Matharu’s affidavit on the ground that they are outside the scope of evidence in a judicial review and do not conform to the Rules of Civil Procedure.³

Friend’s and Mr. Matharu

22Friend’s and Mr. Matharu submit that the impugned affidavit material is permissible because the arbitration was not recorded. They say that they would be prejudiced by the lack of an official transcript or audio recording if Mr. Matharu were not permitted to give his evidence in the form of an affidavit.

23Friend’s and Mr. Matharu submit that there is no support for the Ministry’s contention that Mr. Matharu is introducing new evidence or providing a different view of the evidence than was submitted to the Arbitrator. Mr. Matharu deposes that the evidence in his affidavit is the evidence he gave at the hearing.

24Friend’s and Mr. Matharu argue that Mr. Gahir ignored Mr. Matharu’s evidence. They say that they need to set out his evidence in the form of an affidavit in order to support that aspect of their argument. They argue that they will be significantly prejudiced if they are not permitted to do so.

ANALYSIS AND EVIDENCE

a) Does the Divisional Court have jurisdiction to review the Arbitrator’s decision?

25The Divisional Court does not possess inherent jurisdiction to judicially review the decision of a public official or arbitrator.⁴ Its jurisdiction to conduct judicial review is conferred by s. 2 of the Judicial Review Procedure Act⁵ (JRPA). That section empowers the Court to judicially review decisions made in the exercise of statutory power. Section 2 of the JRPA provides:

2.(1) On an application by way of originating notice, which may be styled “Notice of Application for Judicial Review”, the court may, despite any right of appeal, by order grant any relief that the applicant would be entitled to in any one or more of the following:

1. Proceedings by way of application for an order in the nature of mandamus, prohibition or certiorari.

2. Proceedings by way of an action for a declaration or for an injunction, or both, in relation to the exercise, refusal to exercise, or proposed or purported exercise of a statutory power. [Emphasis added]

26The Director exercises statutory power, derived directly from the Environmental Protection Act and the Regulations made under it, when he accredits Drive Clean facilities or certifies Drive Clean Inspectors and Repair Technicians, or terminates such accreditations or revokes such certifications. The Arbitrator exercises similar power when he reviews the Director’s decision. He derives his power indirectly from the Act and Regulations, by means of the Performance Contract that a Drive Clean facility is required to sign in order to become accredited under the licensing system set out in the Act and Regulations.

27Licensing decisions, made in the exercise of statutory power, are normally subject to judicial review. In Re Prysiazniuk and Regional Municipality of Hamilton-Wentworth, in 1985, the Divisional Court allowed an application for judicial review and quashed a decision of the Commissioner of Social Services terminating an agreement between a lodging-home for the elderly and homeless and the regional municipality of Hamilton-Wentworth on the ground that the home was not in compliance with the fire regulations under the city's lodging-houses license by-law. Rosenberg J., speaking for the Court, stated:

Counsel for the respondent submitted that cancellation was permitted as a matter of contract and that the actions of the respondent herein are not subject to judicial review. However, reading the relevant statutes together with the agreement, it is clear that the agreement was merely a licensing apparatus for dealing with persons in need and providing hostels for them. The persons in need are not parties to the contract, and their rights take the contract beyond what otherwise might be similar to a contract for the sale of goods and services. Accordingly, there was a requirement for a procedural fairness in deciding whether to cancel the licence….

Even if the rights of the parties are covered by a contract there is, nevertheless, a duty to act fairly: Re Webb and Ontario Housing Corp. (1978), 22 O.R. (2d) 257, 93 D.L.R. (3d) 187 (C.A.).

The decision of the commissioner effectively deprives the applicant of his livelihood and seriously threatens the well-being of the residents being cared for by the applicant. The respondent is a public body acting as a delegate of the Legislature in determining the manner in which public funds shall be allocated for the care of persons with special needs. Under these circumstances the applicant was entitled to a clear statement of the concerns of the respondent, a reasonable time to meet these concerns and a reasonable opportunity to respond to any allegations, and to argue as to the appropriate consequences of any finding against him.⁶ [Emphasis added]

28Some indicators that a contract creates a de facto licensing regime are:

1. The existence of an effective monopoly, such that the cancellation of the contract deprives the applicant of its livelihood;

2. The existence of broad, public purposes for the contract, including the protection of third-party interests; and

3. The status of the respondent as a public body, acting pursuant to an Act of the Legislature.⁷

29The system of accrediting garages as Drive Clean facilities, and of certifying mechanics as Drive Clean Inspectors or Repair Technicians, effectively creates a monopoly over determinations as to whether vehicles comply with emission standards. Regulation 361/98 provides:

2.(1) For the purpose of enforcing the Act and this Regulation, no person other than a Drive Clean inspector for light vehicles or a Drive Clean inspector for heavy vehicles shall determine compliance with the maximum emission standards prescribed in sections 7 and 10.

(5) The testing to determine compliance with the standards prescribed in section 7, 8, 9.0.1, 10, 11 and 12 for the purpose of enforcing the Act and this Regulation shall take place at an Ontario Drive Clean testing facility. [Emphasis added]

30Termination of a garage’s accreditation as a Drive Clean facility, or revocation of a mechanic’s certification as a Drive Clean Inspector or Repair Technician, may effectively deprive the facility or mechanic of their livelihood. The Ministry’s argument that a garage can operate without doing Drive Clean testing, or that a mechanic can conduct his trade without doing emission inspections, overlooks the fact that the Province, by mandating emission standards, has made emission-testing a substantial part of a garage’s business, and of a mechanic’s trade. The inability of a garage or mechanic to do emissions testing may well deprive them of the viability of their business or trade.

31A reading of the Performance Contract, in light of Regulation 361/98 under the Environmental Protection Act, supports the conclusion that it is part of a licensing system for dealing with motorists who are required to conform to emissions standards for their vehicles. Motorists are not parties to the Performance Contract, yet require access to Drive Clean facilities and Inspectors in order to comply with emission standards. The Director’s decision to terminate a garage’s accreditation as a Drive Clean facility, or to revoke a mechanic’s certification as a Drive Clean Inspector or Repair Technician, reduces public access to such facilities and inspectors. This takes the Performance Contract beyond what otherwise might be simply a contract for the supply of services to the Province, and imposes a requirement for procedural fairness for such decisions.

32The decision of the Director, and of the Arbitrator, effectively deprived Mr. Matharu of his livelihood as a Drive Clean Inspector and Repair Technician, and diminished the access that motorists in Brampton had to facilities and inspectors that could test their vehicles for compliance with emission standards. The Director acts as a delegate of the Legislature with regard to ensuring compliance with emission standards, in determining whether a vehicle complies, and in deciding which facilities and Inspectors are authorized to make that determination.

33The mandatory arbitration clause in the Performance Contract provides redress if the Director makes an error of law or of mixed fact and law, in coming to his or her decision to terminate the accreditation of a Drive Clean facility. The central issue in the present motion is whether the mandatory arbitration clause precludes the judicial review that would otherwise be available to Friend’s.

34Judicial review is not generally available to challenge a private arbitration. The Arbitration Act, 1991, provides:

1. In this Act,

“arbitration agreement” means an agreement by which two or more persons agree to submit to arbitration a dispute that has arisen or may arise between them.

2.(1) This Act applies to an arbitration conducted under an arbitration agreement unless,

(a) the application of this Act is excluded by law; or

(b) the International Commercial Arbitration Act applies to the arbitration.

6. No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act:

7. To assist the conducting of arbitrations.

8. To ensure that arbitrations are conducted in accordance with arbitration agreements.

9. To prevent unequal or unfair treatment of parties to arbitration agreement.

10. To enforce awards.

7.(1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

(2) However, the court may refuse to stay the proceeding in any of the following cases:

1. A party entered into the arbitration agreement while under a legal incapacity.

2. The arbitration agreement is invalid.

3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.

4. The motion was brought with undue delay.

5. The matter is a proper one for default or summary judgment.⁸

35An appeal to the court is available from an arbitration award only if the Arbitration Agreement allows. The Arbitration Act provides, in this regard:

45.(1) If the arbitration agreement does not deal with appeals on questions of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that,

(a) The importance to the parties of the matters at stake in the arbitration justifies an appeal and

(b) Determination of the question of law at issue will significantly affect the rights of the parties.

36Judicial review is not available where an arbitrator’s decision is based on a private arbitration agreement. Justice Swinton, on behalf of the Divisional Court in Universal Settlements International v. Dusckio, in 2011, stated:

The Divisional Court has no jurisdiction to award the relief sought under the JRPA against a private consensual arbitrator. Subsection 2(1) provides that the Court, on judicial review, may grant relief that the applicant would be entitled to in proceedings by way of an application for an order of mandamus, prohibition or certioriari or proceedings in an action for a declaration or injunction in relation to the exercise, refusal to exercise or proposed or purported exercise of a statutory power of decision. An application for judicial review is thus a public law remedy, and is not available to challenge the award of a private consensual arbitrator (see Sharecare Homes Inc. v. Cormier, [1010] N.S.J. No. 367, at para. 51; Alaimo v. Di Maio, [2008] O.J. No. 3570 (S.C.J.) at paras. 53 and 58; Blustein v. Blustein, 2010 ONSC 6897 (Div. Ct.)).

37The court may provide relief from the terms of contracts of adhesion where strict enforcement would be unfair and would undermine public policies that legislative enactments were intended to implement. In Corless v Bell Mobility Inc., in 2015, Bell Mobility Inc. appealed from the certification of a class action by customers who claimed to have been over-billed because of the way in which Bell Mobility had calculated their “per minute” charges. Bell Mobility argued that it had negotiated contracts with each of its customers, whose claims therefore had to be litigated individually, based on the terms of their contracts. Lederer J. rejected this argument, on the ground that the contracts were not individually negotiated but, rather, were contracts of adhesion. He stated:

Counsel for Bell submits that these were not contracts of adhesion and that whether they were is not in issue on this procedural motion and does not assist in the “commonality analysis”. I do not agree. As a general understanding, a contract of adhesion is one that is so imbalanced it cannot be said to have been freely bargained. Often, contracts of adhesion are standard form contracts. They may offer goods or services without giving the consumer any true opportunity to negotiate terms to his or her benefit. The consumer, in this case the user, is unable to purchase the service unless he or she acquiesces to the form of the contract.⁹ [Emphasis added]

38The Ministry notes that Mr. Matharu was not required to appeal to the Arbitrator, but nevertheless chose to do so. It therefore argues that Friend’s and Mr. Matharu did not submit the Director’s decision to the Arbitrator solely because the Performance Contract and Standard Operating Procedures, which they were required to sign, mandated arbitration as the only means of challenging the Director’s decisions. I do not agree. The Standard Operating Procedures provided that an appeal to an arbitrator was the only avenue for challenging a termination of Friend’s accreditation. Mr. Matharu’s role as a Drive Clean Inspector and Repair Technician depended on his employment with Friend’s, and on Friend’s accreditation as a Drive Clean Facility. He could not, practically speaking, work as a Drive Clean Inspector and Repair Technician unless Friend’s was an accredited Drive Clean facility. The Director’s decision terminating Friend’s’ accreditation as a Drive Clean facility was, for Mr. Matharu’s purposes, inseparable from the Director’s decision revoking Mr. Matharu’s certification as a Drive Clean Inspector and Repair Technician. Mr. Matharu’s remedy was therefore inseparable from Friend’s remedy.

39Courts have permitted judicial review of decisions that are subject to mandatory arbitration, even in situations that fall outside those enumerated in s. 7(2) of the Arbitration Act, 1991, when there is a clearly expressed legislative intention that the decisions be reviewed only by the court. An example is a decision that threatens the rights of consumers. In such a case, the court must review the decision to maintain the public scrutiny that is necessary to protect consumers. However, the courts have made it clear that only a clearly expressed legislative intention will justify not giving effect to a mandatory arbitration clause, even where the clause is found in a contract of adhesion.

40In Seidel v. TELUS Communications Inc., in 2011, a consumer contract which the court found to be a contract of adhesion contained a mandatory arbitration clause. When a consumer began a class action, asserting that the contract contravened the B.C. Consumer Protection Act, the B.C. Court of Appeal stayed the action based on the mandatory arbitration clause. The Supreme Court lifted the stay only in relation to rights protected by the Consumer Protection Act. Justice Binnie, speaking for the majority of the Court, stated:

2The choice to restrict or not to restrict arbitration clauses in consumer contracts is a matter for the legislature. Absent legislative intervention, the courts will generally give effect to the terms of a commercial contract freely entered into, even a contract of adhesion, including an arbitration clause. The important question raised by this appeal, however, is whether the BPCPA manifests a legislative intent to intervene in the marketplace to relieve consumers of their contractual commitment to “private and confidential” mediation/arbitration and, if so, under what circumstances.

3… Respectfully, I believe the Court’s job is neither to promote nor detract from private and confidential arbitration. The Court’s job is to give effect to the intent of the legislature as manifested in the provisions of its statutes.

5… My opinion is that to the extent Ms. Seidel’s claim in the Supreme Court invokes s. 172 remedies in respect of “rights, benefits or protections” conferred by the BPCPA, her court action must be allowed to proceed notwithstanding the mediation/arbitration clause….

6… The clear intention of the legislature is to supplement and multiply the efforts of the director under the BPCPA to implement province-wide standards of fair consumer practices by enlisting the efforts of a whole host of self-appointed private enforcers. In an era of tight government budgets and increasingly sophisticated supplier contracts, this is understandable legislative policy. An action in the Supreme Court will generate a measure of notoriety and, where successful, public denunciation, neither of which would be achieved to nearly the same extent by “private, confidential and binding arbitration”.

7Private arbitral justice, because of its contractual origins, is necessarily limited. As the BPCPA recognizes, some types of relief can only be made available from a superior court. Accordingly, to the extent Ms. Seidel’s complaints shelter under s. 172 of the BPCPA (and only to that extent), they cannot be waived by an arbitration clause and her court action may continue, in my opinion….¹⁰

41In 1146845 Ontario Inc. v. Pillar to Post Inc., in 2014, Justice Perrell stayed a franchisee’s class action based on an arbitration clause in a franchise agreement which Justice Perrell found to be a contract of adhesion.¹¹ Justice Perrell relied on the Supreme Court’s decision in Seidel, stating:

65Justice Binnie for the five-judge majority held that absent legislative intervention, courts will give effect to the terms of an arbitration clause freely entered into, even in a contract of adhesion. The whole court was unanimous in confirming that Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34; Rogers Wireless Inc. v. Muroff, 2007 SCC 35 and Desputeaux v. Éditions Chouette (1987) Inc., 2003 SCC 17 establish that absent legislative language to the contrary, courts must enforce arbitration agreements. [Emphasis added]

67The contemporary legislation is a shift away from a policy where courts had a broad discretion about whether to stay a court action and toward a policy supporting the resolution of disputes outside of court proceedings where parties have agreed to arbitrate their disputes. Under the contemporary approach, the court must stay the action, unless the matter comes within a limited list of exceptions: Deluce Holdings Inc. v. Air Canada (1992), 12 O.R. (3d) 131 (Gen. Div.); Bouchan v. Slipacoff (2009), 94 O.R. (3d) 741 (S.C.J.), or unless the legislature confers an exclusive jurisdiction on the court to resolve the dispute: Seidel v. TELUS Communications Inc., supra.

77The legislatures and courts across the country have endorsed as public policy that where parties have agreed to arbitrate their claims, then they should be held to their bargain and not resort to the courts. (Citations omitted) [Emphasis added]

42The Supreme Court’s decision in Seidel does not require explicit legislation prohibiting mandatory arbitration as a ground for the court undertaking judicial review of a decision. It requires a finding of a legislative intention to preserve judicial review in the face of a mandatory arbitration clause.

43Courts have declined to enforce arbitration clauses based on public policy considerations, even when such policies are implicit in legislative enactments. In Griffin v. Dell Canada Inc., in 2010, the Court of Appeal for Ontario dismissed an appeal from Lax J.’s decision refusing to stay a class action by Griffin, a representative claimant who had purchased an allegedly defective computer from Dell Canada for business purposes (a transaction deemed not to be a “consumer purchase”), on the ground that Dell’s standard form sales contract contained a mandatory arbitration clause.¹²

44The motion judge in Griffin v. Dell noted that the Consumer Protection Act, 2002, (“CPA”) outlawed mandatory arbitration clauses in consumer agreements. Justice Lax held that the claims of the non-consumer purchaser should not be stayed, having regard to the fact that another of the representative plaintiff’s claims fell within the CPA; that a partial stay of claims of non-consumer purchasers would lead to inefficiency, potential multiplicity of proceedings, and added cost and delay; and that non-consumer purchasers were unlikely to resort to arbitration, given the relatively small amount of their claims; and that a partial stay would have the effect of immunizing Dell from liability in respect of those claims.

45Justice Sharpe, speaking for the Court of Appeal, stated:

28Contracting 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.

29The 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.

31Concerns 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 [page493] Evolving Canadian Landscape" (2008), 113 Penn St. L. Rev. 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].

46The issue in the present case is whether enforcement of the mandatory arbitration clause in the Performance Contract would undermine a public policy that the Environmental Protection Act, or regulation 361/98, made under it, was intended to implement. The Performance Contract is not a consumer agreement of the kind the Supreme Court in Seidel found could only be reviewed by the court.

47Friend’s and Mr. Matharu have offered no basis from which the court can infer a legislative intention to over-ride the mandatory arbitration clause in the Performance Contract or Arbitration Agreement. The court must therefore look to the applicable legislation, being the Environmental Protection Act, and Regulation 361/98, made under it.

48The Environmental Protection Act evinces a legislative intention to protect and conserve the natural environment. The Act provides, in part:

Purpose of Act

3. (1) The purpose of this Act is to provide for the protection and conservation of the natural environment. R.S.O. 1990, c. E.19, s. 3.

Prohibition, contamination generally

6. (1) No person shall discharge into the natural environment any contaminant, and no person responsible for a source of contaminant shall permit the discharge into the natural environment of any contaminant from the source of contaminant, in an amount, concentration or level in excess of that prescribed by the regulations. R.S.O. 1990, c. E.19, s. 6 (1).

Prohibition, discharge of contaminant

14. (1) Subject to subsection (2) but despite any other provision of this Act or the regulations, a person shall not discharge a contaminant or cause or permit the discharge of a contaminant into the natural environment, if the discharge causes or may cause an adverse effect. 2005, c. 12, s. 1 (5).

15. (1) In this Act,

“adverse effect” means one or more of,

(a) impairment of the quality of the natural environment for any use that can be made of it,

(b) injury or damage to property or to plant or animal life,

(c) harm or material discomfort to any person,

(d) an adverse effect on the health of any person,

(e) impairment of the safety of any person,

(f) rendering any property or plant or animal life unfit for human use,

(g) loss of enjoyment of normal use of property, and

(h) interference with the normal conduct of business; (“conséquence préjudiciable”)

“contaminant” means any … gas… resulting directly or indirectly from human activities that causes or may cause an adverse effect; (“contaminant”)

“discharge”, when used as a verb, includes … emit and, when used as a noun, includes … emission…; (“rejet”, “rejeter”)

17. Where any person causes or permits the discharge of a contaminant into the natural environment, so that … human health or safety is injured, damaged or endangered, or is likely to be injured, damaged or endangered, the Director may order the person to,

(a) repair the injury or damage;

(b) prevent the injury or damage; or

(c) where the discharge has damaged or endangered or is likely to damage or endanger existing water supplies, provide temporary or permanent alternate water supplies. R.S.O. 1990, c. E.19, s. 17; 2005, c. 12, s. 1 (7).

Motors and motor vehicles, environmental controls

Sale of motor vehicle that does not comply with regulations

22. (1) No person shall sell, or offer, expose or advertise for sale, a motor or motor vehicle that does not comply with the regulations.

Operation of motor or motor vehicle

23. (1) Except where necessary for test or repair purposes, no person shall operate or cause or permit the operation of a motor or motor vehicle or any class or type thereof that does not comply with the regulations. [Emphasis added]

49Regulation 361/98 evinces a legislative intent to invest the Director with substantial discretion in the enforcement of emission standards as a means of preserving the environment. The Regulation provides, in part:

1.1(1) A person is a Drive Clean inspector for light vehicles for the purposes of this Regulation if he or she has successfully completed, within the previous 24 months, a course satisfactory to the Director with respect to the testing of air emissions….

(2) A person is a Drive Clean inspector for heavy vehicles for the purposes of this Regulation if he or she has successfully completed, within the previous 24 months, a course satisfactory to the Director with respect to the testing of air emissions….

(3) A person is a Drive Clean repair technician for the purposes of this Regulation if,

(b) the person has successfully completed, within the previous 36 months, a course satisfactory to the Director with respect to the repair of on-board diagnostic systems, emission control systems and components of light vehicles.

(3.1) If the Director is satisfied that a Drive Clean repair technician has incompetently performed repairs intended to bring a vehicle more nearly into compliance with the maximum emissions standards or test standards prescribed by this Regulation, the Director may, by giving written notice to the repair technician, require the repair technician to successfully complete one or more courses satisfactory to the Director to address the incompetence.

(4) Despite subsections (1) to (3), a person is not a Drive Clean inspector or Drive Clean repair technician for the purposes of this Regulation if the Director gives the person written notice indicating that the Director is satisfied that,

(a) the person has submitted false or misleading personal information to the Director;

(d) the person has previously been given notice under subsection (3.1) and the Director is satisfied that the person has, on an occasion other than the occasion that is the subject matter of that previous notice, incompetently performed repairs intended to bring vehicles more nearly into compliance with the standards prescribed in this regulation.

(5) The Director shall not give a person notice under subsection (3.1) or (4) unless the Director has advised the person in writing of the proposal to give notice and has afforded the person a reasonable opportunity to make written or oral submissions to the Director. [Emphasis added]

8.(4) The procedure to be used for testing a motor vehicle’s compliance with the maximum emission standards prescribed in this section is the preconditioned two speed idle test, as described in the Drive Clean Guide, or a test that the Director considers equivalent. [Emphasis added]

50I find in the foregoing provisions no legislative intention to diminish the Director’s authority by precluding a mandatory arbitration clause in a Drive Clean facility’s Performance Contract or a clause in the Arbitration Agreement which precludes recourse from the Arbitrator’s decision. On the contrary, I find a legislative intent to invest the Director with broad authority to grant or revoke certification to Drive Clean Inspectors and Technicians, subject only to the obligation on him or her to give notice of an intention to revoke certification and an opportunity to be heard.

51There is no reasonable prospect that the Divisional Court would find that public policy demands that the Director’s decision to terminate the accreditation of Friend’s as a Drive Clean facility or to revoke the certification of Mr. Matharu as a Drive Clean Inspector or Repair Technician is subject to judicial review because they are part of a licensing system, notwithstanding that the contract of adhesion which the parties signed provides that such decisions can be reviewed only by an arbitrator, with no recourse from the arbitrator’s decision. On this basis, I find that the application of Friend’s and Mr. Matharu has no reasonable prospect of success.

52A motion to quash an application to the Divisional Court will succeed where it is plain and obvious that the application cannot succeed.¹³

53Based on these findings, it is unnecessary for me to determine whether the Arbitration Agreement resulted in unfair treatment of Friend’s or Mr. Matharu by depriving them of a recourse from the Arbitrator’s decision on the basis that, in effect, it imposed an onus on them to prove how the falsified results could have been produced without their complicity. It is also unnecessary for me to determine whether the impugned portions of Mr. Matharu’s affidavit should be struck out.

CONCLUSION AND ORDER

54For the reasons stated above, it is ordered that:

1. The Ministry’s motion to quash the application by Friend’s and Mr. Matharu for judicial review is allowed. The application by Friends and Mr. Matharu is quashed.

2. If the parties are unable to agree on the costs of the motion, and of the application, they may submit written arguments, not to exceed 4 pages, and a Costs Outline, by September 30, 2016.

Price J.

Footnotes

1. 1Ontario Regulation 361/98, pursuant to the Environmental Protection Act, R.S.O. 1990, Ch. E. 19
2. 2Environmental Protection Act, R.S.O. 1990, Ch. E. 19
3. 3Rules of Civil Procedure, R.R.O. 1990, Reg. 194
4. 4Adams v. Canada (Attorney General, 2011 ONSC 325 (Ont. Div. Ct.), para. 22
5. 5Judicial Review Procedure Act, R.S.O. 1990, c. J.1
6. 6Re Prysiazniuk and Regional Municipality of Hamilton-Wentworth, 1985 ONSC 2162
7. 7Prysiazniuk, at para. 24
8. 8Arbitration Act, 1991, S.O. 1991, C. 17
9. 9Corless v Bell Mobility Inc., 2015 ONSC 7682, para. 23
10. 10Seidel v. TELUS Communications Inc., [2011] 1 SCR 531, 2011 SCC 15
11. 111146845 Ontario Inc. v. Pillar to Post Inc., 2014 ONSC 7400
12. 12Griffin v. Dell Canada Inc., 2010 ONCA 29
13. 13Adams v. Canada (Attorney General), 2011 ONSC 325, [2011] O.J. No. 207 (Ont. Div. Ct.), at paras. 18-19, reconsideration denied 2011 ONSC 7592, [2011] O.J. No. 6068 (Div. Ct.); Dolan v. Ontario, 2011 ONSC 1376, [2011] O.J. No. 1028 (Ont. Div. Ct.), at paras. 36-29; Assn for the Protection of Amherst Island v. Ontario (Ministry of the Environment), 2014 ONSC 4574, [2014] O.J. No. 4056 (Ont. Div. Ct.), at para. 2.