Agreement containing arbitration clause is ‘unconscionable’: Manitoba Court of King’s Bench

The Manitoba Court of King’s Bench has refused to stay an action in favour of arbitration, finding that the agreement containing the arbitration clause is “unconscionable.”

At the center of the dispute in Pokornik v SkipTheDishes Restaurant Services Inc, 2024 MBCA 3, is a technology company based in Winnipeg, SkipTheDishes Restaurant Services Inc. The company has operations in more than 100 cities across Canada. It provides a platform connecting vendors, couriers and consumers for online ordering and delivering food and beverages. Through the Skip platform, food and beverage orders are delivered by individuals who contract to drive as couriers.

Each courier must sign a courier agreement to access and provide services through the platform. The plaintiff, Charleen Pokornik, signed the courier agreement in 2014 when she started working for Skip. The agreement did not contain a requirement for arbitration or class action waiver.

In 2018, Skip amended the 2014 agreement to include mandatory arbitration for all disputes and to exclude class actions. The plaintiff contested the application of the 2018 agreement, but Skip advised her that she could not continue to work unless she accepted the 2018 agreement.

The plaintiff asked the court for a declaration that she was an employee of Skip and not an independent contractor, that Skip had breached the terms of applicable employment standards legislation and for damages. She also applied for an order that the claim proceed as a class action.

Skip filed a motion for a stay of the action, arguing that the plaintiff’s claim was subject to an arbitration agreement requiring that disputes be resolved. Skip contended that the court had no jurisdiction and that the action must be stayed in favour of arbitration with the issue of jurisdiction determined by an arbitrator, not a judge.

The motion judge dismissed Skip’s motion for a stay of proceedings in favour of arbitration, finding that the plaintiff’s action did not fall within s. 7(1) of the Arbitration Act. The judge said there was no arbitration agreement in place when the proceeding commenced because the action was brought under the 2014 agreement, which did not contain any arbitration provision.

The judge further found that the 2018 agreement did not apply because the plaintiff never accepted its terms. The judge noted that the plaintiff sent an email to a Help Centre representative employed by Skip saying that she did not agree with the amendments but was going to click “Agree” to continue working for Skip.

Nonetheless, the motion judge said that if he was wrong in his analysis and the 2018 agreement applied, he would have stayed the proceeding because the arbitration clause was unconscionable and unsupported by consideration. The judge noted that there was an inequality of bargaining power because the plaintiff was powerless to negotiate any of the terms of the 2018 agreement.

The judge’s dismissal of Skip’s motion for a stay in favour of arbitration allowed the plaintiff to pursue her claim through a class action in the courts. Skip elevated the matter to the Manitoba Court of King’s Bench, which ultimately found that the motion judge committed an error in his analysis of s. 7(1) of the Arbitration Act.

The Court of King’s Bench found that the plaintiff’s continued use of the Skip platform would constitute consideration to support the 2018 agreement. The plaintiff also received benefits for the 2018 agreement. Accordingly, the court concluded that the motion judge made an error in finding that the 2014 agreement prevailed and denying a stay in favour of arbitration.

Nonetheless, the court noted the motion judge’s finding that the arbitration agreement was invalid because the plaintiff had shown, on a balance of probabilities, that the 2018 agreement was unconscionable. The court said that the finding of unconscionability ultimately barred an appeal under s. 7(6) of the Arbitration Act. Consequently, the court concluded that it had no jurisdiction to hear Skip’s appeal.