The court, in a 4-3 ruling, stressed that in consumer contracts in which basic rights are at stake, social-media companies cannot simply demand that their users sign away their rights to be heard in Canadian courtrooms.
Deborah Douez of Vancouver launched the lawsuit in British Columbia on behalf of up to 1.8 million Facebook members in 2012, accusing the company of using her name and portrait without her consent in an advertisement known as "Sponsored Stories."
Most important to her case, Justice Richard Wagner, Justice Andromache Karakatsanis and Justice Clément Gascon said in a jointly written decision, was "the gross inequality of bargaining power between her and Facebook and the quasi-constitutional privacy rights engaged by her claim." A fourth judge, Justice Rosalie Abella, supported the ruling but wrote separate reasons.
One legal observer called the ruling a breakthrough for rights protection in the Internet age.
"It provides the clearest recognition to date that the court's pretty uncomfortable with the imbalance that exists with the myriad of online contracts we sign up for," University of Ottawa law professor Michael Geist said in an interview.
"Millions of Canadians click 'I agree,' and sometimes they're not even asked to click, for dozens or hundreds of contracts. The court explicitly recognized that these are non-negotiated contracts. They're all take it or leave it."
He said that Facebook, which is free to users and relies mostly on advertising for revenue, has personal information on nearly two billion users. "It's been remarkably successful in being able to monetize that data through advertising and other means. But given that personal information is at the heart of the company, what it can do and which laws apply to it become really important."
The class-action lawsuit against Facebook can now proceed in British Columbia.
"We continue to believe that the underlying claims are without merit, and will continue to defend ourselves vigorously," a Facebook spokesman said in an e-mail. (The spokesman asked not to be identified by name.)
Ms. Douez told The Globe and Mail that she was thrilled by her legal victory. "I think if we don't start standing up for our privacy rights, we're going to lose them."
She said she learned that her name and portrait were being used in Facebook advertising by accident – when a friend asked her if she had gone to work for a particular business. She then discovered that, having clicked the "like" button on a business, her name was popping up on her friends' home pages in endorsements of that business.
She uses Facebook, she said, because it's a "really easy way to stay connected with friends and family. All I want to do is force these large corporations to respect our laws, especially as it relates to privacy." Under the B.C. Privacy Act, individuals or companies can be held liable for using the names or portraits of others without their consent. A British Columbia lower-court judge who first heard the case certified the class-action lawsuit and said it could proceed in B.C. But the B.C. Court of Appeal said Ms. Douez had not shown that California's courts were not competent to hear her lawsuit.
In dissent, Chief Justice Beverley McLachlin and Justice Suzanne Côté wrote jointly, supported by Justice Michael Moldaver. They argued that the "forum selection clause" – spelling out which court is to be used in the event of a dispute – provides certainty in international business transactions. They said the majority had departed from a 2003 Supreme Court precedent on how to deal with such clauses in contracts, and had not followed the court's own guidelines for breaking with precedent.
But the three judges writing in favour of the lawsuit proceeding in B.C. said forum selection clauses "encroach" on the "public good," and the precedent-setting case involved two sophisticated shipping companies, judges are not bound to accept them. "Online consumer contracts are ubiquitous, and the global reach of the Internet allows for instantaneous crossborder consumer transactions." The law needs to keep up with societal changes, it said.