Kenneth Smith, Estate Trustee of the Last Will and Testament of Margaret Smith, deceased, et al. v. National Money Mart Co. et al.

[Indexed as: Smith Estate v. National Money Mart Co.]

92 O.R. (3d) 641

Court of Appeal for Ontario,

Winkler C.J.O., Sharpe, Gillese, Blair and MacFarland JJ.A.

November 3, 2008

Judgments and orders -- Issue estoppel -- Plaintiffs bringing class action against defendant payday loan providers alleging that they charged criminal interest rate -- Defendants moving unsuccessfully to stay action on basis of arbitration clause in some loan agreements -- Court of Appeal dismissing defendants' appeal and leave to appeal to Supreme Court of Canada denied -- Defendants subsequently renewing motion for stay on basis that two decisions of Supreme Court of Canada had changed law in Ontario and that they were entitled to benefit of that change -- Motion judge properly dismissing motion -- Doctrine of issue estoppel applying -- Litigant having no automatic or presumptive right to relitigate issue on account of change in law -- Granting stay at this late stage of proceedings would be fundamentally unjust to plaintiffs.

The defendants were in the business of providing "payday" loans. In 2001, the defendants began inserting a class action waiver into their payday loan agreements whereby the borrower purportedly waived the right to bring a court action with respect to the loan and was required to submit any dispute to binding arbitration. The plaintiffs brought a class action against the defendants alleging that they charged a criminal interest-rate. The defendants moved unsuccessfully to stay the claim pursuant to s. 7(1) of the Arbitration Act, 1991, S.O. 1991, c. 17. An appeal from that decision was dismissed in 2005. The Court of Appeal agreed with the motion judge that the issue of whether to stay the action on account of the arbitration clause should be dealt with at the certification hearing. The Supreme Court of Canada refused the defendants' request for leave to appeal. The case proceeded to a certification hearing, and the action was certified as a class proceeding. The defendants again moved for a stay under the Arbitration Act and added a request for decertification, arguing that two 2007 decisions of the Supreme Court of Canada had changed the law in Ontario and that they were entitled to the benefit of that change. The motion was dismissed. The motion judge held that the two Supreme Court decisions were distinguishable and inapplicable in Ontario; that provisions of the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A allowing the plaintiffs to pursue their claim in court despite the arbitration clauses applied retroactively; and that the stay should be refused pursuant to s. 7(2)5 of the Arbitration Act. In the alternative, he held that the defendants were estopped from renewing their stay motion under the doctrine of issue estoppel. The defendants appealed.

Held, the appeal should be dismissed.

The appeal could and should be resolved solely on the basis of issue estoppel. For the purposes of the appeal, it was assumed without deciding that the two Supreme Court of Canada decisions changed the law of Ontario and that ss. 7 and 8 of the Consumer Protection Act, 2002 did not have retroactive effect. The preconditions at the first stage of the test for issue estoppel were met. The same question was decided when the Court of Appeal held that the defendants were not [page642] entitled to a stay and that the issue of whether the dispute should be resolved by way of arbitration or class proceedings was a matter to be decided at the "preferable procedure" stage of the certification hearing. The decision on that issue was final. The parties or their privies were the same. At the second stage of the test, it was clear that issue estoppel ought to be applied. A litigant has no automatic or presumptive right to relitigate an issue on account of a change in the law. The matter rests upon the discretion of the court to ensure that the finality principle is applied in a manner consistent with the interests of justice. In this case, the defendants' loss of the benefit of the purported change in the law was clearly outweighed by the adverse consequences to the plaintiffs of revisiting the stay issue at this late stage in the proceedings. A stay would almost certainly defeat the claims subject to arbitration clauses, not on the merits but for reasons of practicality. Enforcing the arbitration clauses would not lead to arbitration but would immunize the defendants from any claims. Even if the claims subject to arbitration clauses were stayed, the defendants would almost certainly still have to defend a reconstituted class action by the class of borrowers who did not sign similar agreements or who signed agreements after the Consumer Protection Act, 2002 provisions came into force. The motion judge did not err in exercising his discretion in favour of applying issue estoppel in the circumstances of this case.

APPEAL from the order of Perell J., [2008] O.J. No. 2248, 2008 CanLII 27479 (S.C.J.) dismissing a motion for a stay of class action.

Cases referred to Danyluk v. Ainsworth Technologies Inc., [2001] 2 S.C.R. 460, [2001] S.C.J. No. 46, 2001 SCC 44, 201 D.L.R. (4th) 193, 272 N.R. 1, J.E. 2001-1439, 149 O.A.C. 1, 34 Admin. L.R. (3d) 163, 10 C.C.E.L. (3d) 1, [2001] CLLC ¶210-033, 7 C.P.C. (5th) 199, 106 A.C.W.S. (3d) 460, apld Hockin v. Bank of British Columbia, 1995 CanLII 6268 (BC CA), [1995] B.C.J. No. 688, 123 D.L.R. (4th) 538, 57 B.C.A.C. 255, 3 B.C.L.R. (3d) 193, 10 C.C.E.L. (2d) 157, 54 A.C.W.S. (3d) 784 (C.A.) [Leave to appeal to S.C.C. refused [1995] S.C.C.A. No. 256], distd Dell Computer Corp. v. Union des consommateurs, [2007] 2 S.C.R. 801, [2007] S.C.J. No. 34, 2007 SCC 34, 284 D.L.R. (4th) 577, 366 N.R. 1, J.E. 2007-1426, 34 B.L.R. (4th) 155, 44 C.P.C. (6th) 205, 158 A.C.W.S. (3d) 870, EYB 2007-121973; Minott v. O'Shanter Development Co. (1999), 1999 CanLII 3686 (ON CA), 42 O.R. (3d) 321, [1999] O.J. No. 5, 168 D.L.R. (4th) 270, 117 O.A.C. 1, 40 C.C.E.L. (2d) 1, 99 CLLC ¶210-013, 85 A.C.W.S. (3d) 351 (C.A.); Rogers Wireless Inc. v. Muroff, [2007] 2 S.C.R. 921, [2007] S.C.J. No. 35, 2007 SCC 35, 284 D.L.R. (4th) 675, 365 N.R. 177, J.E. 2007-1409, 36 B.L.R. (4th) 79, 44 C.P.C. (6th) 373, 158 A.C.W.S. (3d) 869, EYB 2007-121974, consd

Other cases referred to Angle v. Canada (Minister of National Revenue), 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248, [1974] S.C.J. No. 95, 47 D.L.R. (3d) 544, 2 N.R. 397, 74 D.T.C. 6278; Arnold v. National Westminster Bank plc, [1991] 3 All E.R. 41, [1991] 2 A.C. 93 (H.L.); Frey v. Bell Mobility Inc., [2008] S.J. No. 105, 2008 SKQB 79; Huras v. Primerica Financial Services Ltd., 2000 CanLII 16892 (ON CA), [2000] O.J. No. 3772, 137 O.A.C. 79, 100 A.C.W.S. (3d) 184 (C.A.); MacKinnon v. National Money Mart Co., [2008] B.C.J. No. 1026, 2008 BCSC 710, 293 D.L.R. (4th) 478, 166 A.C.W.S. (3d) 629 [Leave to appeal to B.C.C.A. granted [2008] B.C.J. No. 1285, 2008 BCCA 292, 295 D.L.R. (4th) 304, 168 A.C.W.S. (3d) 10 (C.A.)]; M.J. Jones Inc. v. Kingsway General Insurance Co. (2003), 2003 CanLII 37356 (ON CA), 68 O.R. (3d) 131, [2003] O.J. No. 4388, 233 D.L.R. (4th) 285, 178 O.A.C. 351, 41 C.P.C. (5th) 52, 127 A.C.W.S. (3d) 9 (C.A.); Smith v. National Money Mart Co., 2005 CanLII 36153 (ON CA), [2005] O.J. No. 4269, 258 D.L.R. (4th) 453, 204 O.A.C. 47, 12 B.L.R. (4th) 29, 20 C.P.C. (6th) 345, 142 A.C.W.S. (3d) 718 (C.A.), affg [2005] O.J. No. 2660, [2005] O.T.C. 547, 8 B.L.R. (4th) 159, 18 C.P.C. (6th) 1, 140 A.C.W.S. (3d) 29 (S.C.J.) [Leave to appeal to S.C.C. refused [2005] S.C.C.A. No. 528, 223 O.A.C. 394n]; [page643] Smith v. National Money Mart Co. (2006), 2006 CanLII 14958 (ON CA), 80 O.R. (3d) 81, [2006] O.J. No. 1807, 266 D.L.R. (4th) 275, 209 O.A.C. 190, 18 B.L.R. (4th) 22, 28 C.P.C. (6th) 34, 147 A.C.W.S. (3d) 748 (C.A.), affg [2005] O.J. No. 2660, [2005] O.T.C. 547, 8 B.L.R. (4th) 159, 18 C.P.C. (6th) 1, 140 A.C.W.S. (3d) 29 (S.C.J.) [Leave to appeal to S.C.C. refused 2006 CanLII 33458 (SCC), [2006] S.C.C.A. No. 267, 227 O.A.C. 397n]; Smith v. National Money Mart Co., [2007] O.J. No. 46, 37 C.P.C. (6th) 171, 29 E.T.R. (3d) 199, 154 A.C.W.S. (3d) 25 (S.C.J.) [Leave to appeal to Div. Ct. refused [2007] O.J. No. 2160, 30 E.T.R. (3d) 163 (Div. Ct.)]; Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77, [2003] S.C.J. No. 64, 2003 SCC 63, 232 D.L.R. (4th) 385, 311 N.R. 201, J.E. 2003-2108, 179 O.A.C. 291, [2003] CLLC ¶220-071, 17 C.R. (6th) 276, REJB 2003-49439, 59 W.C.B. (2d) 334, 120 L.A.C. (4th) 225; V.K. Mason Construction Ltd. v. Canadian General Insurance Group Ltd. (1998), 1998 CanLII 14615 (ON CA), 42 O.R. (3d) 618, [1998] O.J. No. 5291, 116 O.A.C. 272, 42 C.L.R. (2d) 241, 84 A.C.W.S. (3d) 829 (C.A.)

Statutes referred to Arbitration Act, 1991, S.O. 1991, c. 17, s. 7(1), (2), (6) Canadian Charter of Rights and Freedoms, s. 7 Civil Code of Quebec, C.C.Q. Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1)(d) Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A, ss. 7, (2), 8, (1) Consumer Protection Statute Law Amendment Act, 2002, S.O. 2002, c. 30 Criminal Code, R.S.C. 1985, c. C-46, s. 347 [as am.]

F. Paul Morrison, Mahmud Jamal and Christopher M. Hubbard, for appellants. Harvey T. Strosberg, Q.C., David Stratas and Trevor Guy, for respondents.

The judgment of the court was delivered by

SHARPE J.A.: -- Overview

[1] The central issue on this appeal is whether a class proceeding involving thousands of small claims by "payday" loan borrowers for allegedly illegal interest should be stayed on the ground that the loan agreements contain arbitration clauses. The appellants, the lenders, have already unsuccessfully litigated that issue all the way to the Supreme Court of Canada.

[2] The appellants nonetheless renewed their request for a stay in the court below and asked that the class proceeding be decertified. They argued that two subsequent decisions of the Supreme Court of Canada in cases from Quebec, Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, [2007] S.C.J. No. 34, and Rogers Wireless Inc. v. Muroff, 2007 SCC 35, [2007] 2 S.C.R. 921, [2007] S.C.J. No. 35, [page644] changed the law in Ontario and that they were entitled to the benefit of that change. The respondents, the borrower class, countered with a motion for summary judgment.

[3] The motion judge dismissed both motions. He held that Dell and Rogers were distinguishable and inapplicable in Ontario; provisions of the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A allowing the respondents to pursue their claim in court despite the arbitration clauses applied retroactively; and the stay should be refused pursuant to s. 7(2)5 of the Arbitration Act, 1991, S.O. 1991, c. 17. In the alternative, he held that the appellants were estopped from renewing their stay motion under the doctrine of issue estoppel.

[4] The appellants come to this court asking that the motion judge's decision be set aside and that the class proceeding be stayed and decertified. For the reasons that follow, I conclude that even if Dell and Rogers have changed the law of Ontario, and even if the Consumer Protection Act, 2002 provisions do not have retroactive effect, the motion judge properly exercised his discretion to apply the doctrine of issue estoppel and deny the appellants' motion to stay and decertify the class proceeding.

Facts

(i) The class action

[5] The appellants, National Money Mart and its American parent Dollar Financial Group, are in the business of providing "payday" loans. These are small, short-term loans with due dates connected to the borrower's payday. The rate of interest is specified at 59 per cent and there are other fees payable by the borrower at the time of repayment.

[6] The plaintiff class, estimated to include 210,000 members and to involve over four million transactions, seeks damages estimated at more that $300 million, alleging that the rate of interest and fees charged by the appellants for these loans exceed the rate of interest prescribed by s. 347 of the Criminal Code, R.S.C. 1985, c. C-46.

(ii) The arbitration clauses

[7] In 2001, the appellants began inserting a class action waiver clause into their payday loan agreements whereby the borrower purportedly waives the right to bring a court action with respect to the loan and is required to submit any dispute for resolution to binding arbitration. Margaret Smith, who has since died, was formerly one of the representative plaintiffs. She entered into various loan agreements containing arbitration [page645] clauses. The first agreement, dated February 13, 2003, contained the following clause:

Any claim, dispute or issue whether in contract, tort or otherwise, arising out of or in connection with the Loan or this Loan Agreement or any prior or future loan agreement between the parties, including any issue regarding related fees, advertising, promotion or any oral or written statement or the absence thereof, default of payment, and/or the relationship between the parties shall, upon election by either party be resolved by binding arbitration in accordance with The Arbitration Act of Ontario as amended ("the Act"). No joinder or consolidation of claims with other persons are permitted without the consent of the parties hereto. In the event of a conflict between this arbitration provision and the Act, the terms of this arbitration provision shall govern.

[8] Subsequent agreements contained differently worded clauses providing for mediation and arbitration of disputes, as well as the following class action waiver:

Each party also agrees not to commence or participate in any class action either as a representative plaintiff or as a member of a plaintiff class, and to opt out of any class action, if the class involves, directly or indirectly, any Claim [arising out of the Loan Agreement].

[9] The appellants concede that not all loan agreements covered by the class proceeding have arbitration clauses.

(iii) Prior proceedings

[10] In 2005, the appellants moved to stay the representative plaintiff's claim pursuant to s. 7(1) of the Arbitration Act. That section provides:

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.

[11] That motion, and a motion to stay the action against Dollar Financial Group for want of jurisdiction, was dismissed by E.M. Macdonald J.: [2005] O.J. No. 2660, 18 C.P.C. (6th) 1 (S.C.J.). She held that the Ontario courts did have jurisdiction to entertain the claim against Dollar Financial Group and that the request for a stay should be determined by the judge hearing the certification motion when deciding whether a class proceeding was the "preferable procedure" under s. 5(1)(d) of the Class Proceedings Act, 1992, S.O. 1992, c. 6.

[12] On October 7, 2005, this court quashed an appeal from that decision: 2005 CanLII 36153 (ON CA), [2005] O.J. No. 4269, 258 D.L.R. (4th) 453 (C.A.). Writing for the court, Weiler J.A. held that the motion judge had correctly held that the issue of whether to stay the action on account of the arbitration clause should be dealt with at the [page646] certification hearing. As the stay issue had been deferred to the certification judge, the order denying the stay was interlocutory in nature and this court had no jurisdiction to entertain the appeal. The Supreme Court of Canada refused the appellants' request for leave to appeal: [2005] S.C.C.A. No. 528, 223 O.A.C. 394n.

[13] In 2006, the appellants brought a second appeal to this court, this time against E.M. Macdonald J.'s ruling that Ontario had jurisdiction to entertain the action against Dollar Financial Group. This court dismissed the appeal and application for leave to appeal to the Supreme Court of Canada was refused: (2006), 2006 CanLII 14958 (ON CA), 80 O.R. (3d) 81, [2006] O.J. No. 1807 (C.A.), leave to appeal to S.C.C. refused 2006 CanLII 33458 (SCC), [2006] S.C.C.A. No. 267, 227 O.A.C. 397n.

[14] The case then proceeded to a certification hearing. On January 5, 2007, Hoy J. certified the action as a class proceeding: [2007] O.J. No. 46, 37 C.P.C. (6th) 171 (S.C.J.). With respect to the arbitration clause and the appellants' submission that the respondents were obliged to arbitrate and were precluded from litigating, Hoy J. held, at para. 132:

I am satisfied that a class proceeding is preferable to arbitration or mediation. Money Mart itself says that the cost of proving individual claims would exceed any possible recovery by class members. Money Mart does not concede that it has breached section 347 of the Criminal Code or offer to fund counsel for borrowers who elect to mediate or arbitrate. The uncontradicted evidence of plaintiffs' counsel is that, if retained, the cost to prepare for and attend an individual mediation or arbitration would exceed $15,000 and $20,000, respectively. The plaintiffs cannot afford such legal fees. The legal fees would be disproportionate to the amount [in] issue in an individual mediation or arbitration. Ms. Smith's claim, by way of example, involves only about $83. Plaintiffs' counsel is acting on a contingency basis in this action, and the plaintiffs have obtained funding from the Class Proceedings Fund. Money Mart has never elected to arbitrate any dispute with any of its customers at any time; it has instead chosen to resort to the courts, instituting over 137,000 [sic] actions during the class period against customers who did not repay their loans. Nor has a customer ever asked for arbitration or mediation. I do not believe that any class member would spend the time, or expend the effort, necessary to mediate or arbitrate.

[15] The appellants' request for leave to appeal to the Divisional Court from the certification order was dismissed by Jennings J.: [2007] O.J. No. 2160, 30 E.T.R. (3d) 163 (Div. Ct.). At paras. 6-7 of his reasons, he stated:

This matter has been alive since 2003. It has been the subject of numerous motions, appeals, and even, I was told, two trips to the S.C.C. Discoveries are yet to be had, although scheduled for next July.

In the interim, the activities of the defendants which form the basis for this class action continue on a daily basis. In my opinion, it is now time for the issues raised to be sent on for trial. The interests of justice and I would have thought, the parties, demand resolution. [page647]

[16] The matter has since proceeded to discovery, has been set down for trial and is scheduled to be tried in April 2009. Consequently, this appeal was heard on an expedited basis.

(iv) The Dell and Rogers decisions and the appellants' renewed stay motion

[17] In early 2008, the appellants again moved for a stay under the Arbitration Act to which they added a request for decertification, relying on the Supreme Court of Canada's decisions in Dell and Rogers. The appellants submit that these decisions stand for three propositions: (1) class action rights are mere procedural rights that can be waived under the Quebec Civil Code of Quebec, C.C.Q.; (2) Quebec legislation requires a court to stay a class action where there is an arbitration clause; and (3) under Quebec legislation, challenges to an arbitrator's jurisdiction are to be resolved by the arbitrator, not the court.

[18] The appellants contend that the arbitration and class action legislation in Ontario and Quebec are identical in all relevant aspects. They submit that the principles in Dell and Rogers are therefore applicable in Ontario and that these cases overrule this court's 2005 decision that the stay issue is to be determined under the "preferable procedure" branch of the test for certification.

[19] The respondents, on the other hand, argue that the decisions in Dell and Rogers were based on Quebec legislation and are not applicable in Ontario.

(v) The Consumer Protection Act, 2002

[20] The respondents rely on provisions of the Consumer Protection Act, 2002, which they say apply retroactively. In particular, they rely on s. 7(2) which declares any term in a consumer agreement to be invalid "insofar as it prevents a consumer from exercising a right to commence an action in the Superior Court of Justice". In addition, they rely on s. 8(1) which provides that a consumer may commence a class action despite any term in a consumer agreement "that purports to prevent or has the effect of preventing the consumer from commencing or becoming a member of a class proceeding". These provisions came into force on July 30, 2005: see Consumer Protection Statute Law Amendment Act, 2002, S.O. 2002, c. 30, in force July 30, 2005 (O. Gaz. 2005.1207).

[21] On the eve of the hearing of the appeals in Dell and Rogers, Quebec enacted similar legislation. Neither the Ontario nor the Quebec legislation explicitly applies retroactively. In Dell, the [page648] Supreme Court held that as the Quebec legislation took away a substantive contractual right, in the absence of specific language making the legislation retroactive, it only applied prospectively.

The Motion Judge's Decision

[22] The motion judge held that Dell and Rogers were distinguishable and thus inapplicable in Ontario and that ss. 7 and 8 of the Consumer Protection Act, 2002 have retroactive effect. He also held that as the matter was "a proper one for summary judgment" (despite the fact that he refused to grant the respondents' motion for summary judgment), the stay should be refused pursuant to s. 7(2)5 of the Arbitration Act.

[23] The motion judge held, in the alternative, that the doctrine of issue estoppel prevented the appellants from relitigating the issue of whether the class proceeding should be stayed on the basis of the arbitration clauses. At para. 180, he held that "in all the circumstances of this very particular case, it does not seem unfair to deny Money Mart a referral to arbitration". Among the specific factors he mentioned was the fact that since not all loan agreements contained arbitration clauses, the class action would proceed in any event. In addition, he held, at para. 181, that "the [p]laintiffs and other class members were bound to follow the law [as decided by this court] until it was changed, and with a considerable investment of time and expense, they did so, before the law they relied on was overruled".

[24] In dismissing the respondents' motion for summary judgment, the motion judge stated that two defences raised by the appellants, namely the "voluntary payment" defence and the argument that s. 347 of the Criminal Code violates s. 7 of the Canadian Charter of Rights and Freedoms, were without merit.

Issues

[25] The appellants argue that the motion judge erred by (1) holding that ss. 7 and 8 of the Consumer Protection Act, 2002 have retroactive effect; (2) concluding that Dell and Rogers did not change the law in Ontario; (3) denying a stay on the ground that the action was "a proper one" for summary judgment under s. 7(2)5 of the Arbitration Act; and (4) refusing the stay on grounds of issue estoppel.

[26] The respondents argue that this court does not have jurisdiction to hear the appeal, and that if it does, the motion judge did not err in refusing to grant a stay and decertify the class proceeding. [page649]

[27] With respect to the respondents' motion for summary judgment, the appellants argue that the motion judge erred in rejecting the two defences referred to above.

Analysis

[28] In my view, the appeal against the refusal to grant a stay can and should be resolved solely on the basis of issue estoppel. Accordingly, for the purposes of this appeal, I will assume without deciding that Dell and Rogers do change the law of Ontario and that ss. 7 and 8 of the Consumer Protection Act, 2002 do not have retroactive effect. Before discussing issue estoppel, I will briefly address the jurisdictional issues.

1. Jurisdiction to entertain the appeal from the refusal to grant a stay

[29] The respondents rely on s. 7(6) of the Arbitration Act which provides that "[t]here is no appeal from the court's decision" from an order made on an application for a stay under s. 7. In Huras v. Primerica Financial Services Ltd., 2000 CanLII 16892 (ON CA), [2000] O.J. No. 3772, 137 O.A.C. 79 (C.A.), at para. 10, this court affirmed a line of authority to the effect that where a stay is refused on the ground that the dispute lies beyond the reach of s. 7 and the Arbitration Act is not applicable, the prohibition in s. 7(6) against an appeal is equally not applicable. Here, the motion judge ruled that the Arbitration Act was not applicable in the face of the Consumer Protection Act, 2002 provisions that rendered the waiver of the right to bring an action invalid. It follows, in my view, that s. 7(6) does not apply to deny the appellants a right of appeal.

[30] During oral argument, the panel raised the question of whether the order denying a stay was an interlocutory order. That proposition was also rejected, at para. 12, in Huras on the ground that an order denying a s. 7 stay "finally determines the forum in which the dispute between the parties is to be resolved" and deprives the party seeking the stay of the substantive contractual right to arbitration. Similarly, orders denying a stay for want of jurisdiction or on the ground of forum non conveniens have been held to be final for the purposes of appeal: see, e.g., M.J. Jones Inc. v. Kingsway General Insurance Co. (2003), 2003 CanLII 37356 (ON CA), 68 O.R. (3d) 131, [2003] O.J. No. 4388 (C.A.). By denying the appellants' request to "go back to square one" on the stay issue and by refusing the stay, the motion judge finally disposed of the appellants' claim for a stay and finally determined the forum in which the dispute will be resolved. It follows that the order was final in nature for the purposes of this appeal. [page650]

2. The summary judgment appeal

[31] At the conclusion of oral argument on the summary judgment issue, we indicated that that appeal from the motion judge's comments regarding the defences would be dismissed for want of jurisdiction. The motion judge's order dismissing the respondents' motion for summary judgment is an interlocutory order from which no appeal lies to this court. The statements or findings made by the motion judge to the effect that the appellants failed to make out certain defences to the claim are obiter, they do not bind the parties and this court has no jurisdiction to entertain an appeal against them: V.K. Mason Construction Ltd. v. Canadian General Insurance Group Ltd. (1998), 1998 CanLII 14615 (ON CA), 42 O.R. (3d) 618, [1998] O.J. No. 5291 (C.A.).

3. Issue estoppel

[32] I come now to issue estoppel which, in my view, is dispositive of the remaining issues on this appeal.

[33] The doctrine of issue estoppel precludes a party from relitigating a legal or factual issue that has been conclusively resolved in a prior proceeding. The doctrine rests on the finality principle, "a compelling consideration" that ordinarily limits a litigant "to one bite at the cherry": Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, [2001] S.C.J. No. 46, at paras. 18-19. Once a point has been decided, the winning litigant is entitled to rely on the result, to be assured of peace and to be able to plan the future on the basis of the court's decision. The finality principle is fundamental to a secure legal order. It avoids "[d]uplicative litigation, potentially inconsistent results, undue costs, and inconclusive proceedings": Danyluk, at para. 18.

[34] On the other hand, issue estoppel "is a doctrine of public policy that is designed to advance the interests of justice" and where the application of issue estoppel would itself produce an injustice, courts have a discretion to relieve against it: Danyluk, at para. 19.

[35] In Danyluk, the Supreme Court of Canada set out a two-step test designed to ensure that issue estoppel and the finality principle are applied so that justice is done. At para. 33, Binnie J., for the court, held:

The rules governing issue estoppel should not be mechanically applied. The underlying purpose is to balance the public interest in the finality of litigation with the public interest in ensuring that justice is done on the facts of a particular case. (There are corresponding private interests.) The first step is to determine whether the moving party . . . has established the preconditions to the operation of issue estoppel . . . . If successful, the court [page651] must still determine whether, as a matter of discretion, issue estoppel ought to be applied. (Emphasis in original; citations omitted)

[36] Binnie J. held, at para. 25, that the preconditions at the first stage of the test are those set out by Dickson J. in Angle v. Canada (Minister of National Revenue), 1974 CanLII 168 (SCC), [1975] 2 S.C.R. 248, [1974] S.C.J. No. 95, at p. 254 S.C.R.: (1) that the same question has been decided; (2) that the judicial decision which is said to create the estoppel was final; and, (3) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

[37] In this case, the prior determination that the appellants are not entitled to a stay on account of the arbitration clauses meets all three requirements.

[38] First, the same question was decided when this court held in 2005 that the appellants were not entitled to a stay and that the issue of whether the dispute should be resolved by way of arbitration or class proceedings was a matter to be decided at the "preferable procedure" stage of the certification hearing. The certification judge rejected the contention that arbitration was preferable to a class proceeding and the appellants exhausted their rights of appeal.

[39] Second, the decision on that issue was final. The appellants' application for leave to appeal to the Supreme Court of Canada was dismissed, the matter proceeded to certification and the appellants' application for leave to appeal the certification order was also dismissed. While the claim of the respondents has yet to be resolved on its merits and, in that sense, remains "in the system", the issue of arbitration or class proceeding has been finally resolved and is no longer in play.

[40] The third requirement that the parties or their privies are the same is now subject to the abuse of process doctrine: see Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, [2003] S.C.J. No. 64. In any event, it is clear here that the parties are the same and that the third requirement is met.

[41] I turn to the second stage of the Danyluk test, namely, whether, as a matter of discretion, issue estoppel ought to be applied. The appellants submit that the change in the law brought on by Dell and Rogers entitles them to avoid the prior determination and to relitigate the stay issue and that the motion judge erred in exercising his discretion against them. [page652] Strong reliance is placed on the following sentence from Minott v. O'Shanter Development Co. (1999), 1999 CanLII 3686 (ON CA), 42 O.R. (3d) 321, [1999] O.J. No. 5 (C.A.), at p. 340 O.R.: "If the decision of a court on a point of law in an earlier proceeding is shown to be wrong by a later judicial decision, issue estoppel will not prevent relitigating that issue in subsequent proceedings." That sentence, however, must be read in the context in which it is found, at pp. 340-41 O.R.:

Issue estoppel is a rule of public policy and, as a rule of public policy, it seeks to balance the public interest in the finality of litigation with the private interest in achieving justice between litigants. Sometimes these two interests will be in conflict, or at least there will be tension between them. Judicial discretion is required to achieve practical justice without undermining the principles on which issue estoppel is founded. Issue estoppel should be applied flexibly where an unyielding application of it would be unfair to a party who is precluded from relitigating an issue.

That the courts have always exercised this discretion is apparent from the authorities. For example, courts have refused to apply issue estoppel in "special circumstances", which include a change in the law or the availability of further relevant material. If the decision of a court on a point of law in an earlier proceeding is shown to be wrong by a later judicial decision, issue estoppel will not prevent relitigating that issue in subsequent proceedings. It would be unfair to do otherwise. In Arnold v. National Westminster Bank plc, [1991] 3 All E.R. 41 at p. 50 (H.L.), Lord Keith wrote:

. . . there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings. One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result . . . (Emphasis added)

[42] Particularly when read in the light of Danyluk, Minott does not lay down an iron-clad guarantee that a litigant who has fought an issue and lost will always be accorded the benefit of a change in the law. A litigant has no automatic or presumptive right to relitigate an issue on account of a change in the law: the matter rests upon the discretion of the court to ensure that the finality principle is applied in a manner consistent with the interests of justice. The "special circumstances" qualification on issue estoppel from Minott and Arnold [Arnold v. National Westminster Bank plc, [1991] 3 All E.R. 41, [1991] 2 A.C. 93 (H.L.)] is consistent with Danyluk. It qualifies the rigorous application of issue estoppel, not with another strict exception, but rather with a discretion to ensure that the interests of justice are met. [page653]

[43] In my view, in the circumstances of this case, the motion judge did not err in exercising his discretion in favour of applying issue estoppel and against allowing the appellants to upset the prior determination with the consequence of unravelling all that had happened since.

[44] In reliance on this court's 2005 decision, the respondents have prosecuted this action through a series of costly and time consuming stages:

• they successfully fought a challenge to the court's jurisdiction all the way to the Supreme Court of Canada;
• they fought and won a strongly contested motion for certification;
• discoveries have been held and are near completion;
• substantial disbursements have been incurred and a significant amount of time has been docketed; and
• the action has been set down for trial.

[45] In sum, after several years of motions, three appeals to this court and two applications for leave to appeal to the Supreme Court of Canada, the respondents have finally advanced the matter to the point of trial.

[46] Against the respondents' reliance on the prior determination, one must consider the fact that the appellants will lose the benefit of the purported change in the law brought about by Dell and Rogers. For the following reasons, I conclude that this loss is clearly outweighed by the adverse consequences to the respondents of revisiting the stay issue at this late stage in the proceedings.

[47] The appellants strongly rely on Hockin v. Bank of British Columbia, 1995 CanLII 6268 (BC CA), [1995] B.C.J. No. 688, 123 D.L.R. (4th) 538 (C.A.), a case which, in my view, is distinguishable. There, employees claimed surplus funds in a pension fund. It had been determined on a preliminary point of law that the employer was entitled to the funds. That decision was affirmed by the Court of Appeal and the Supreme Court of Canada denied leave to appeal [[1995] S.C.C.A. No. 256]. Before the remaining issues came to trial, the Supreme Court of Canada decided another appeal and expressly disagreed with the Court of Appeal's decision in Hockin that the employer was entitled to the surplus. On appeal by the employees from a decision that they were bound by the prior determination under the doctrine of issue estoppel, the Court of Appeal [page654] held, at paras. 35-36, that the "special circumstances" referred to in Arnold were met, that the employees should not be "denied a hearing on the merits" and that the interests of justice required that they be given the benefit of the change in the law despite the prior ruling.

[48] While I acknowledge that Dell and Rogers characterize the contractual right to arbitrate as a substantive right, one must not lose sight of the fact that, in the end, it is a right to have a dispute resolved by way of a different process. Although the application of issue estoppel will deprive the appellants of that right, the loss of this right is considerably less serious than in Hockin. There, issue estoppel went to the merits of the claim and effectively deprived the employees of any remedy. In a class proceeding, the appellants would not be denied any defence to the claim that they could raise in arbitration. Simply put, although the appellants would lose the right to arbitrate, they would suffer no loss of rights in relation to the merits of the claim.

[49] In my view, the loss of the appellants' right to arbitrate pales into insignificance when measured against the impact that a contrary ruling would have on the respondents. Such a ruling would force the respondents to radically alter the scope of the class proceeding to exclude those claims that are subject to arbitration clauses and to forgo all or part of the significant cost of advancing the class proceeding to its present stage. The respondents' efforts to this point would be forgone in the name of individual arbitration, a procedure that has no air of practical reality given the nature of the claims they advance.

[50] As the certification judge observed, the claim of each class member is small. For instance, the representative plaintiff's claim is for $83. As the certification judge found, it is simply not economically feasible to arbitrate a claim of that size. In addition, some of the loan agreements signed by the representative plaintiff preclude the "joinder or consolidation of claims with other persons . . . without the consent of the parties" and other agreements contain class action waivers. When asked during oral argument, counsel for the appellants could not assure us that their clients would agree to waive their right to object to any form of joinder or consolidated arbitration. It is almost certainly the case that a stay would defeat the claims subject to arbitration clauses, not on the merits but for reasons of practicality. Enforcing the arbitration clauses would not lead to arbitration but would immunize the appellants from any claims. This is hardly a compelling case for the exercise of judicial discretion.

[51] Furthermore, even if the claims subject to arbitration clauses were stayed, the appellants would almost certainly still [page655] have to defend a reconstituted class action by the class of borrowers who did not sign similar agreements or who signed agreements after the Consumer Protection Act, 2002 provisions came into force. I fail to see the justice in an exercise of discretion that would stay these claims at this late stage. It would surely be in the interests of justice to have all claims resolved in one proceeding.

[52] I would also weigh in the balance the fact that the appellants appear to lack a genuine interest in arbitration. As the certification judge found, they never seek arbitration when enforcing their own rights and routinely bring court actions against borrowers to enforce the loan agreements. It is difficult to avoid the inference that the appellants insist upon arbitration, not with any serious intention of arbitrating, but simply as a way to defeat the respondents' class proceeding.

[53] I conclude that the motion judge did not err in exercising his discretion in favour of applying issue estoppel in the circumstances of this case. Even if Dell and Rogers would now compel a court to stay a class proceeding in the face of a consumer agreement providing for arbitration, when all of the circumstances of this case are considered, I agree with the motion judge that it would not be unjust to apply issue estoppel and to hold the appellants to the prior determination.

[54] I note in passing that Brown J. reached a similar conclusion in MacKinnon v. National Money Mart Co., 2008 BCSC 710, [2008] B.C.J. No. 1026, 293 D.L.R. (4th) 478 (S.C.), leave to appeal to B.C.C.A. granted 2008 BCCA 292, [2008] B.C.J. No. 1285, 295 D.L.R. (4th) 304 (C.A.). While a stay was granted following Dell and Rogers in Frey v. Bell Mobility Inc., [2008] S.J. No. 105, 2008 SKQB 79, Gerein J. noted, at para. 10, that although he had determined before Dell and Rogers were decided that a class proceeding was preferable to arbitration, the certification motion was "in limbo" and had been adjourned sine die, so issue estoppel did not arise. For the reasons discussed above, the same cannot be said in this case.

Conclusion

[55] Even if the Consumer Protection Act, 2002 provisions do not have retroactive effect and even if the Supreme Court of Canada's decisions in Dell and Rogers have changed the law in Ontario, I conclude that the doctrine of issue estoppel precludes the appellants from relitigating the issue of whether this action should be stayed on account of the arbitration clauses. The appellants have fully litigated the issue all the way to the Supreme Court of Canada and lost. Following that loss, the action proceeded to certification, discovery and it is now set down for trial. It would be fundamentally unjust at this late [page656] stage of the proceedings to grant the appellants a stay that would not, in fact, send this case to arbitration but rather would have the effect of denying any remedy to borrowers who are subject to arbitration clauses.

[56] Accordingly, I would dismiss the appellants' appeal against the motion judge's refusal to grant a stay and decertify the class proceeding as well as their appeal from the order dismissing the respondents' motion for summary judgment. If the parties are unable to resolve the issue of costs, we will entertain written submissions from the respondents within 20 days of the release of this judgment and from the appellants within ten days thereafter.

Appeal dismissed.