Supreme Court of Canada “unfriends” Facebook’s forum selection clause: Privacy action can proceed in British Columbia

In a surprising and closely divided decision, the Supreme Court of Canada has declared that Facebook is not entitled to rely on a forum selection clause to resist a class action commenced for breach of privacy in British Columbia.

The decision opens the door to claims in Canadian courts, even where a consumer has agreed to terms including forum selection which require that disputes be resolved outside of Canada.

In this case, the provisions in Facebook’s terms of use requiring that disputes be heard in California under California law did not, under the BC Privacy Act, bar a claim from being heard in British Columbia.

Strong cause not to limit consumer privacy rights

The BC Court of Appeal had previously enforced the forum selection clause, and stayed the BC class action, applying the well-established Z.I. Pompey test,¹ which requires that there be “strong cause” before a court declines to enforce the parties’ choice of forum.

Overturning that decision, three Supreme Court judges found that Facebook had established that the forum selection clause was enforceable but that it should not bar a claim in this case.  The Court considered the public policy considerations relating to the “gross inequality of bargaining power”² exercised “without any opportunity to negotiate,”³ and the nature of the rights at stake.

The Court identified privacy as a quasi-constitutional right that plays an essential role in a free and democratic society and that embodies key Canadian values. The public policy value in having such rights adjudicated by a local court weighed heavily against enforcing the choice of forum provisions.⁴ The Court also found support in secondary considerations, being the interests of justice and the convenience of litigating in local courts.

These factors will exist in respect of many standard form agreements, including standard terms of use and privacy provisions for various electronic products and services. This decision will therefore have broad implications.

This decision casts a shadow over the enforceability of forum selection clauses in online consumer contracts.  Abella J., in concurring with three justices to make the majority, went further, concluding that the forum selection clause was simply unenforceable as a result of the inequality of bargaining power at play.⁵  

A divided court

Three Supreme Court justices (and the BC Court of Appeal) took a different view, concluding that there were not sufficient public policy grounds to override the jurisdiction selection clause.  Rather, forum selection clauses are supported by strong policy considerations.  For the minority, holding parties to their bargains—whether in the consumer context or not—remained a more important consideration.

Given that no single opinion garnered support from more than three justices, the decision is far from being a clear and definitive statement on Canadian law.  Nonetheless, for the time being, any business in Canada seeking to rely on a forum selection clause in a standard form agreement ought to consider the prospect that they will not be enforced where constitutional and quasi-constitutional rights are engaged.

Footnotes

¹ Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27.

² Douez v. Facebook, Inc., 2017 SCC 33 at para. 38, 53.

³ at para. 33.

⁴ at para. 59.

⁵ at para. 117.