Litigation in Canada
Introduction
While the legal systems of Canada and the United States have much in common, there are some fundamental differences. The legal systems of most of Canada and the U.S. are based on the common law. Many aspects of the litigation process are similar. Indeed, the Ontario Rules of Civil Procedure were modeled after the U.S. federal court rules. But there are many noteworthy distinctions, primarily because of constitutional or other historical differences.
For instance, Canada has had a constitutional Charter of Rights and Freedoms since 1982.
Canadian (other than Quebec) courts often adhere to long-standing common-law principles, including those developed in other Commonwealth countries such as England, Australia, and New Zealand.
Though litigation procedures vary across the Canadian provinces and territories, some of the chief aspects of litigating in Canada, and their differences from the usual U.S. experience, are canvassed below.
Court Structures
As in the U.S., there is a federal court system and a provincial court system in Canada. The jurisdiction of Canada’s Federal courts is much more limited than U.S. federal courts.. In contrast to the U.S. federal courts, the Federal Court of Canada is a statutory court whose jurisdiction is limited by the empowering statute, primarily to matters involving the federal government (e.g. federal income tax, competition law, immigration, aeronautics and telecommunications), appeals from various federal administrative tribunals, admiralty matters, appeals from the Tax Court of Canada, and intellectual property disputes.
There is no such thing as “diversity jurisdiction” for federal courts in the Canadian system. In addition to federal trial courts, there is also a federal court of appeal.
The Supreme Court of Canada is Canada’s highest court. Similar to the U.S. Supreme Court, the Supreme Court of Canada has discretionary authority to hear an appeal and exercises that discretion in only a small percentage of cases.
Provincial courts in Canada have trial courts of general jurisdiction, as well as courts of limited jurisdiction, such as small claims courts, municipal courts, family courts, juvenile courts, and criminal courts. The provincial superior courts have inherent jurisdiction in matters of law and equity and are the superior level of trial courts. In Ontario, the court is called the Superior Court of Justice. In Toronto the Commercial Court, a division of the Superior Court of Justice, adjudicates such matters involving insolvency, corporate governance, creditors’ priorities, and windings-up.
As most civil litigation in Canada falls within provincial jurisdiction, there is no procedure for referring related actions commenced in different provinces to a single court, as may happen in the U.S. federal courts in a referral from the Judicial Panel on Multidistrict Litigation (such as in class actions).
All criminal matters are tried in provincial courts only, never in federal courts. Each province also has a court of appeal of last resort.
Appointed Judges
In Canada, judges are not elected. They are appointed by the government. A Judicial Appointments Advisory Committee comprising of a senior lawyers appointed by the bar first conduct a review and approval process.
In contrast, in many U.S. states (though not in the U.S. federal courts) judges are elected.
Lawyers’ Fees Are Generally Recoverable in Canada
Unlike in the U.S., where attorneys’ fees generally are not recoverable (unless specifically permitted by statute or contract), in Canada, lawyers’ fees are awarded to the winning party in almost every action. The loser pays. The winning party at trial or on appeal can expect the opposing party to be ordered to pay a percent of the winning party’s actual legal costs.
Lawyers’ fees can also be awarded to the winning party on a motion. For instance, if a defendant’s motion to strike the plaintiff’s statement of claim or for summary judgment fails, the defendant can be ordered to pay the plaintiff’s legal fees incurred in responding to the motion.
The guiding principle is that “costs follow the event”. Judges have wide discretion in deciding whether to award costs. Some judges may be reluctant to award lawyer’s fees against a sympathetic plaintiff, even if the plaintiff’s claim lacked merit.
The general rule that the loser pays the winner’s costs does not mean that the winning party will receive a complete indemnification from the losing party. Generally, in Ontario, these “costs on a partial indemnity basis.” will cover about one-third of the costs that the winning side actually incurs (including part of the lawyer’s fees and disbursements such as expert reports, court filing fees, and copying).
In some cases, the court will award “costs on a substantial indemnity basis”, which requires the losing party to pay a most of the winning party’s legal costs. Substantial indemnity costs can be awarded where the losing party’s position has been frivolous or vexatious or the losing party has instructed its lawyer to engage in inappropriate, such as using sharp tactics or acting abusively. In extreme cases, the losing party’s lawyer is required to pay costs personally.
The Ontario rules shift the burden of costs depending on pretrial settlement offers and trial outcomes; the same applies to interlocutory motions. A party who declines a reasonable pre-trial settlement offer, then loses at trial, will typically have to pay an increased costs award in Canada. This is not a common practice in U.S. federal courts.
Because of the significant consequences that can result from losing in court, litigants in Canada tend to be more cautious when suing. The cost rules have a significant impact on litigation strategy in Canada. Frivolous litigation is discouraged. The parties can predict their potential liability exposure to some degree to help them decide whether to pursue or settle a matter.
Contingency Fees
While Canada allows contingency fees, the practice is not as prevalent as in the U.S. The availability of contingency payments is relatively recent. They are generally not as large in Canada. Despite the availability of contingency fees and without limits on lawyer’s fees in Canada, the risks of negative costs awards discourage specious litigation.
Personal Jurisdiction in Canada is Determined Based on the Forum’s Connection to the Claim
Canadian courts approach personal jurisdiction differently than the U.S. under the Due Process analysis. There are ten provinces and three territories in Canada. Like each of the fifty states of the United States, each province/territory is a distinct judicial jurisdiction. In the U.S., lawsuits can only be brought in a state where the defendant has sufficient minimum contacts. In Canada lawsuits are to be heard in the province/territory that has the most “real and substantial connection” to the matter in dispute.
The suitability of suing in the jurisdiction of the defendant’s residence or where the defendant has contacts depends on the forum’s overall connection to the claim.
In determining whether a jurisdiction has a real and substantial connection to the dispute, courts consider several factors. They include the parties’ connection to the forum, where the witnesses are located, where the dispute arose, and where the substance of the dispute is located.
Canadian courts want to protect their residents’ legal rights. Thus, an injured plaintiff is allowed generous access to courts in his home jurisdiction to recover damages. So, if the defendant has engaged in any activity within the jurisdiction that bears upon the plaintiff’s claim, Canadian courts will be more likely to assume jurisdiction over the defendant.
For instance, in a tort action, if the damages complained of occurred in the forum, the tort is deemed to have been committed in the forum, even though the alleged tortious conduct occurred elsewhere. Suppose an Ontario resident were injured in a car accident in Michigan with a Michigan driver.
Then she returned to Ontario where she had pain and suffering and received medical treatment for her injuries. An Ontario court would probably conclude it has jurisdiction over the Michigan driver, even if the driver had no contacts with Ontario. Hence, the Canadian approach to personal jurisdiction can lead to unexpected results for U.S. litigants.
Enforcing U.S. Arbitral Awards
Canadian courts have demonstrated a strong judicial deference to arbitration agreements. Every common law province except Ontario has passed legislation implementing the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Ontario instead adopted the United Nations’ Model Law on International Commercial Arbitration.
In Activ Financial Systems, Inc. v. Orbixa Management Services Inc., 2011 ONSC 7286, the court held that the Model Law has replaced the common law respecting the enforcement of foreign judgments and that international commercial arbitration awards must be enforced exclusively under the Model Law.
The Ontario court will enforce an international commercial arbitration award even where the arbitrator did not give reasons for the award, if the court can determine on the record before it that the arbitrator dealt with the dispute within his jurisdiction and that the award is not contrary to public policy.
Nature of Pleadings
Pleadings generally consist of a statement of claim, a statement of defence, and a reply.
Pleadings in Canada tend to be less declamatory and rhetorical than their U.S. counterparts. They are generally limited to a more neutral recitation of the facts and the legal arguments. Later in the proceeding, written submissions (known as “factums” or “facta”) often include more eloquent elements and are an important piece of advocacy.
Limited Oral Depositions and Broader Documentary Disclosure
The U.S. has depositions. In Canada, they are called “examinations for discovery”. They are much more limited in Canada than in the U.S. In the U.S. information is considered discoverable as long as it is reasonably calculated to lead to the discovery of admissible evidence. In contrast, in Canada, to be discoverable, information must be actually relevant to material facts at issue in the dispute. Consequently, the amount of information exchanged between the parties is usually much less than what normally would occur in the U.S.
A party adverse in interest to another party must submit to an oral examination before trial upon request. When a party is a corporation, the examining party may examine any officer, director, or employee on the corporation’s behalf (but only one individual).
Where a witness being examined does not know the answer to a particular question or advises that there may be other relevant documents, the practice is to provide an undertaking to make inquiries and to provide the answer or to produce the document at a later date.
The Ontario rules provide for written interrogatories. Counsel cannot request them and also conduct an examination for discovery. When the rules were enacted, this provision was included to avoid the U.S. practice of two waves of discovery. Thus, written interrogatories are rarely made in Ontario.
Retained expert witnesses are not subject to oral discovery. Thus, there is much less expert witness discovery before trial in Canada than in the U.S. An examining party may obtain disclosure of an expert’s findings and opinion, however, unless the party being examined undertakes not to call that expert as a witness at trial.
According to the implied undertaking rule, information disclosed in the course of discovery may not be used by the party receiving the information for any purpose other than the prosecution of the proceeding in which the evidence was obtained. A breach of the implied undertaking rule may amount to contempt of court, resulting in fines or imprisonment.
While oral discovery is more limited in Canada, documentary disclosure is broader than in the U.S. Counsel must review a client’s records for any relevant material.
Litigants in Canada have an affirmative duty to determine on their own what documents in their possession or under their control are relevant to the matters at issue. Litigants then must provide an affidavit that describes each document (“affidavits of documents”). Documents are broadly defined to include things such as tape recordings, video tapes, film, and any data recorded or stored on a computer. Unless the other side takes issue with the substance of the disclosure, as a practical matter, the parties’ own determination of what should be disclosed often stands.
These documents (except for privileged documents) must be produced to the adverse party relatively early in the proceeding (mandatory production).
The obligation of production is continuing. Any documents that come into a party’s possession, control, or power after delivering the affidavit of documents must be disclosed. There is also the ability to obtain, in certain circumstances, an order compelling the production of documents from non-parties.
Obtaining documents and testimony from non-parties is much more restricted in Canada. To be entitled to examine or obtain documents from a third-party witness, litigants must obtain leave of court and must show a compelling need for the information.
Mandatory Mediation
Pre-trial mediation is mandatory in most provinces to encourage settlement. The parties often pick a mediator or judge conduct the mediation. If a judge, he or she will not be the judge hearing the case at trial.
Jury Trials in Civil Cases Are Relatively Rare in Canada
Unlike in the U.S., jury trials in Canadian civil matters are extremely rare. The only types of litigation where civil juries are still seen with any frequency are defamation and personal injury cases. There is no constitutional right to a jury trial in Canada.
Further, in Ontario, certain claims are statutorily prohibited from being tried by a jury, including claims for injunctive relief, the partition of real property, foreclosure of a mortgage, specific performance of a contract, liens, trusts, rectification of an agreement, declaratory relief, and claims against municipalities or the Ontario provincial government. In any trial, the trial judge can order that the case proceed without a jury. Determining whether to strike the jury is generally based on whether “justice will be better served” by proceeding with or without a jury.
Cases involving complex legal or factual disputes are generally seen to be unsuited to be decided by a jury. For instance, a case that involves scientific or medical testimony, a lot of documents, multiple parties, or a long trial is not appropriate for a jury.
There is no constitutional right to a jury trial in Canada.
Courtroom Demeanor is Much More Formal
In Canada courtroom proceedings tend to be more formal and more cordial than in some U.S. courts. For instance, in most circumstances, the judges, lawyers, and some court personnel all wear formal black robes and white collars. It is common practice to bow to the judge when entering and leaving the courtroom. As in the U.S., all judges are addressed as “Your Honor.”
Damages
In general, damage awards in Canada are much smaller than those in the U.S. For instance, in a Canadian tort action, an award for compensatory damages for loss of income, pain and suffering, and cost of future care would rarely be in the hundreds of thousands or millions of dollars. An individual’s expenses for cost of care are a lot less in Canada than in the U.S. because of Canada’s socialized healthcare system, which absorbs a lot of those costs.
The notion of “treble damages” does not exist in Canadian law. In contrast, in the U.S., treble damages may be awarded in some situations, where provided by statute. A statute will authorize a judge to multiply the amount of monetary damages awarded by a jury by three, and to order that a plaintiff receive the tripled amount. For example The Clayton Act of 1914 (15 U.S.C.A. §§ 12 et seq.) directs that treble damages be awarded for violations of federal antitrust laws.
See Types of Damages in Civil Litigation
Punitive Damages
Punitive damages are less prominent in Canadian litigation. Even if the losing party’s conduct is egregious, large awards of punitive damages are rare. To succeed in a claim for punitive damages in Canada, the plaintiff needs to show that the defendant acted with “high-handed, malicious, arbitrary or highly reprehensible misconduct,” according to the Supreme Court of Canada in Whiten v. Pilot Insurance Co., 2002 SCC 18. Punitive damages awards seldom exceed C$1 million.
Security for Costs
Non-Canadian (foreign) parties to litigation may be required to post security for costs that could be awarded against them.
Conclusion
While the legal systems of both Canada and the U.S. are based in the long-standing English common law tradition, their procedural rules and substantive rights differ. Knowing about the key differences will help to develop a winning strategy if a U.S. litigant has to resolve a dispute in a Canadian court.
Caveat
The above discussion generally applies to the nine common-law provinces and three territories in Canada. The 10th province, Quebec, is civil law jurisdiction, with a legal system derived from the Napoleonic Code. Thus, its laws and procedures can differ radically from the rest of Canada. As with all cases, but particularly cases in Quebec, HLF recommends that you obtain specific legal advice from a lawyer qualified in the province at issue and familiar with local practices.
This document is provided for informational purposes only. It is not legal advice or a substitute for consulting with a licensed lawyer in a particular case or situation.
