Although there are many different types of civil (non-criminal) proceedings heard in Canada's courts, this section highlights aspects of Canadian law and legal procedure affecting only some of the most common claims involving businesses.
1. Breach of Contract
1.1 General
A contract is a promise or a set of promises that when performed create a legally recognized obligation and when breached generally necessitate a remedy. Contract law in Canada is, for the most part, governed by the common law of the provinces and territories or, in the case of Quebec, by the civil law as set out in the CCQ. However, certain types of contracts are impacted by statute and the enforcement of all contracts is subject to statutory limitation periods.
1.2 Formalities
Courts look to the parties’ bargain to determine the parties’ objective or manifest intent to be bound.
Except for certain contracts that must be in writing or signed under seal, Canadian law recognizes the enforceability of promises, whether oral or written, provided there is “consideration” or a mutuality of promises flowing from the promisee to the promisor. Courts look to the parties’ bargain to determine the parties’ objective or manifest intent to be bound. Courts will also determine whether there has been an “offer” and “acceptance” based on the type and transmission of communication between the parties.
1.3 Overview of Remedies
In addition to self-help remedies, such as rights of set-off or termination for anticipatory repudiation, contracting parties have access to the courts for enforcement or redress with respect to agreements that are not being honoured. However, other than certain types of equitable remedies, the most common and usual remedy for breach of contract is an award of damages.
1.4 Damages
The general rule for recoverable loss in breach of contract cases is that the courts award damages to place the aggrieved parties in the same position they would have been in had the contract been performed. Damages for mental distress or hurt feelings are not typically awarded, although Canadian courts have shown a willingness in recent years to award punitive damages for certain types of breached contracts (for example, employment and insurance). Nevertheless, because of the courts’ reluctance to award punitive damages for the breach of private agreements, and the fact that most breach of contract cases are heard by a judge and not a jury, the vast majority of broken contracts result in damages governed by the general rule mentioned above.
1.5 Equitable Remedies
As a general principle, Canadian courts will not compel the performance of a contract. However, where it can be established that damages will be an inadequate remedy, Canadian courts have the power to order specific performance of a contract or issue injunctions preventing the temporary or permanent breach of an agreement. In addition to, or in lieu of, equitable relief, courts may award equitable damages, but the calculation of these damages does not follow the same principles that govern common law damages. For example, damages might be awarded in lieu of an injunction where the injury that will result from a future unlawful action (such as a threatened trespass on land) can be adequately compensated in damages. Further, the breach of certain types of contracts, such as a distribution of licensed goods, may entitle the aggrieved party to elect an accounting of the breaching party’s profits.
1.6 Liquidated Damages
In some contracts, the parties may choose to specify a liquidated sum of damages in the event of a breach. The caveat here is that the specification of liquidated damages cannot be a penalty. If the liquidated damage clause is enforceable, then it will preclude the aggrieved party from having to prove its actual damages. In the absence of a liquidated damages clause, the aggrieved party will be entitled to damages directly resulting from the breach, as well as consequential damages that were, or ought to have been, in the minds of the parties at the time of contract.
1.7 Excuses for Non-Performance
Excuses for non-performance can include a mistake (with or without rectification), misrepresentation, unconscionability, fraud, illegality or rendering the contract void for reasons of public policy. As mentioned above, certain contracts, such as consumer agreements, can be set aside for statutorily prescribed reasons. In some cases, performance of the contract may not be possible because events that neither party anticipated have changed the circumstances that existed when the contract was undertaken and thus rendered the agreement radically different from what the parties originally contemplated.
1.8 Other Restrictions
Statutory limitation periods may impact the enforceability of a contract depending on when the breach occurred. The ability to enforce may also be affected by waiver or estoppel, although most commercially written contracts will contain express provisions dealing with such matters. The assertion of collateral contracts affecting the primary contract may also affect enforcement.
2. Negligence
This section addresses the common law tort of negligence as it exists in all Canadian provinces and territories except Quebec. Under the CCQ, actions arising out of negligence can be brought as actions for extra-contractual liability, as discussed in section VI, “Extra-Contractual Liability in Quebec.”
2.1 Elements
To establish a common law cause of action for negligence, a plaintiff must prove that the defendant owed the plaintiff a duty of care, the defendant breached that duty and the plaintiff suffered damage resulting from the breach.
2.2 Duty of Care
The law requires people and entities to take reasonable care to avoid acts or omissions that can be reasonably foreseen as likely to injure their neighbours.
Whether or not a potential defendant owes a plaintiff a duty to take care is based on the “neighbour principle.” The law requires people and entities to take reasonable care to avoid acts or omissions that can be reasonably foreseen as likely to injure their neighbours.
To determine who, in law, is a neighbour, the following two questions must be considered:
1. Is there a sufficiently close relationship between the parties so that, in the reasonable contemplation of the defendant, carelessness on the defendant’s part might cause damage to that person?
2. If so, are there any considerations that ought to negate or limit:
- The scope of the duty
- The class of persons to whom it is owed
- The damages to which a breach of it may give rise
In considering the second part of the two-part test, the Supreme Court of Canada has indicated that policy issues should be considered in determining whether any factors exist to justify denying liability. Policy issues to be considered include, among other things, the effect of recognizing the duty of care on legal obligations generally, the impact on the legal system and any general societal effect of imposing liability.
The courts repeatedly emphasize that the categories of negligence are not closed and that a novel theory of duty must be assessed against the two-part test set out above.
2.3 Standard of Care
In considering whether the standard of care was breached, the courts use the fictional reasonable person.
The standard of care is the measure against which the defendant’s conduct is assessed. It is an objective measure. In considering whether the standard of care was breached, the courts use the fictional reasonable person. The question is whether the conduct complained of fell below the standard of conduct of a reasonable person similarly situated.
The reasonable person standard has been diluted for certain types of less capable actors, such as children, youth and persons with a disability. The standard has also been strengthened for certain individuals of superior capacity. Professional people, for example, cannot escape liability by merely performing up to the capacity of the ordinarily prudent layperson. A lawyer is obliged to act like a reasonably prudent lawyer, and a medical doctor is obliged to act like a reasonably prudent doctor. Rather than asking whether the performance was to the best of the defendant’s ability, the courts assess whether their conduct was up to the standard of a competent professional in exercising that individual’s particular profession.
In considering whether a party’s conduct is negligent, the court may consider any relevant prevailing custom or behaviour. Those who act in accordance with the general practice of their trade, industry or profession often avoid civil liability. However, it is possible for a court to find that the prevailing custom or practice itself falls below the required standard of care, so that acting in accordance with the prevailing custom or practice will not preclude a finding of breach.
Likewise, a statute setting out the conduct required in certain circumstances or of a particular profession may provide a useful standard of reasonable conduct and some evidence of breach, but it does not provide prima facie evidence of negligence. A violation of a statute alone does not equate to liability.
2.4 Burden of Proof
The plaintiff must plead and prove negligence on the balance of probabilities to succeed in an action for negligence. Canada has rejected the doctrine of res ipsa loquitur that provides that the elements of the duty of care and a breach of duty can sometimes be inferred from the very nature of an accident or other event even without direct evidence of how the defendant behaved.
2.5 Damage and Causation
The courts have declared that causation need not be proven with “scientific precision,” although the question of causation must be proved to the satisfaction of the court on the balance of probabilities.
There can be no liability for negligence unless the plaintiff has suffered damage as a result of the defendant’s act or omission. The specific breach of the standard of care must be the conduct that gives rise to the damage. The courts have declared that causation need not be proven with “scientific precision,” although the question of causation must be proved to the satisfaction of the court on the balance of probabilities. The most employed technique for determining causation is the “but for” test — if the accident would not have occurred but for the defendant’s negligence, the defendant’s conduct is a cause of the injury.
In circumstances that there may be more than one cause of an injury, defendants who have caused loss will not be excused merely because other causes or factors have helped to produce the harm. It is sufficient if the defendant’s negligence was one of the causes of the harm. If the negligent acts of two persons are both materially contributing causes of an injury, then liability is imposed on both persons. In certain exceptional cases, a plaintiff may prove causation by showing that multiple defendants “materially contributed to the risk” of injury, even if “but for” causation cannot be proved for any individual defendant.
2.6 Remoteness
Courts will generally restrict a plaintiff's recovery if a consequence of the defendant's act or omission is thought to be too “remote.” The doctrine of remoteness attempts to draw an appropriate line between the consequences for which the negligent defendant will be held liable and those for which the defendant will escape liability. Whether a consequence is too remote or is “proximate” enough to result in a finding of liability often turns on the facts of the case.
There is no specific formula to be applied in determining whether any damage is too remote to be recovered. While specific rules have developed for situations that commonly arise, the general approach to the question of remoteness is a pragmatic one: in the chain of cause and effect, when can the consequences of an act no longer be fairly accepted as attributable to the defendant’s act?
The most commonly recurring situations in assessing remoteness include:
- Thin-skulled plaintiffs: Negligent defendants must take their victims as they find them.
- The rescuer: A negligent wrongdoer is liable to reimburse a rescuer for losses incurred during a rescue attempt.
- Intervening forces: Wrongdoers are not immune from responsibility even if there are intervening forces. The question becomes whether it is fair to hold a negligent actor liable when the conduct of others is also involved in bringing about the accident.
2.7 Contributory Negligence
If the plaintiff’s own negligence contributes to a loss, the right to recover damages for negligence is affected. The court will attempt to quantify the relative degrees of responsibility for the damage as between the wrongdoer and the contributorily negligent plaintiff, and the defendant will be liable for only that portion of the damages attributable to their degree of responsibility.
3. Trademark, Copyright and Patent
The Federal Court and the provincial superior courts generally have concurrent jurisdiction over the litigation of intellectual property disputes in Canada. The Federal Court’s jurisdiction is purely statutory and exclusive with respect to making in rem declarations (declarations against property) as to the invalidity of a registered intellectual property right. Provincial superior courts may only rule on the validity of rights between the parties to the litigation. As well, appeals of decisions of the Commissioner of Patents and Registrar of Trademarks are exclusively within the jurisdiction of the Federal Court. Fresh evidence can be filed on appeal to the Federal Court from decisions of the Registrar of Trademarks.
Since the Federal Court’s jurisdiction is purely statutory, where the subject matter of a lawsuit involves elements both covered and not covered by an applicable federal statute, it may be necessary to sue in provincial court. For example, franchise disputes often involve claims relating to registered trademarks that the Federal Court has jurisdiction over, but they may also have a contractual element that the Federal Court does not have jurisdiction over.
Alternative dispute resolution is generally available for intellectual property disputes in Canada, except for matters that the Federal Court has exclusive jurisdiction over.
Disputes over internet domain names can be adjudicated by arbitrators pursuant to the dispute resolution procedures promulgated by the Canadian Internet Registration Authority (CIRA), the provincial superior courts or the Federal Court if a trademark owner is alleging that the use of a domain name violates its registered or common law trademark rights.
In certain cases, exclusive licensees have standing to sue. However, it may be necessary to name the owner of the applicable intellectual property right as a party to any such action.
Interlocutory injunctions, Mareva injunctions, Anton Piller orders and comparable extraordinary remedies are generally available if the appropriate thresholds are met.
Both the Trademarks Act and the Copyright Act provide for the ability to file a request with the Minister for assistance in pursuing remedies with respect to imported and exported goods. A Canadian customs officer may detain, on an interim basis, goods imported into Canada or exported from Canada that appear to infringe on intellectual property rights and, if the Minister has accepted a request for assistance, may provide the owner of the property with samples of the copies and information that would assist them in pursuing remedies under the respective act . These provisions increase the ability of brand owners to prevent counterfeit products from entering Canada, but requests cannot be made for goods transiting through Canada. The request is valid for two years. Once goods are detained, Canadian customs will hold the goods for up to 10 business days. If a lawsuit is commenced during that time, Canadian customs will hold the goods until the court proceedings are determined or settled or until the court directs that they should no longer be held.
Bifurcation orders involve ordering separate trials on liability and, if liability is found, a separate trial on damages. They are generally available on consent but are unlikely to be granted in the absence of consent.
Special rules govern pharmaceutical litigation relating to the issuance of notices of compliance (NOCs) for generic versions of drugs that are the subject of patent rights. In some limited cases, applications can be made in the Federal Court to prohibit the Minister of Health from issuing an NOC. However, in most other cases, an NOC prohibition application is unavailable. Instead, a patent infringement action must be brought against the generic version of a patented drug.
In Canada, unlike in some other jurisdictions, there are generally no jury trials in intellectual property proceedings.
In Canada, unlike in some other jurisdictions, there are generally no jury trials in intellectual property proceedings. As well, with respect to patent proceedings, there are no preliminary proceedings (referred to as Markman hearings in the United States) to determine the construction of a patent prior to trial.
If a plaintiff in Canada is successful in an action for infringement of its patent, trademark or copyright rights, it is generally entitled to the following remedies:
- An injunction to restrain the continued infringement
- Compensation for the infringement committed up to the date of the order, typically in the form of an election between the plaintiff’s damages and an accounting of the infringer’s profits; in the case of patents, additional compensation for infringing activities that occur between the date of publication of the application in Canada and the date the patent was granted. The Copyright Act also provides for statutory damages
- Destruction or delivery up of the infringing goods
- Punitive damages (in rare cases where the defendant’s conduct has been egregious)
- Pre- and post-judgment interest and legal costs
4. Defamation
Defamation is a notoriously complex tort.
Defamation is a notoriously complex tort. This section provides only an outline of the common law tort of defamation as it exists in the common law provinces of Canada. Quebec’s defamation law is similar, but it has a few significant variations that are not addressed in this guide.
4.1 Elements
To establish a cause of action for defamation, a plaintiff must prove that the defendant has made a defamatory statement to a third party about the plaintiff. A defamatory statement is any statement that would damage the reputation of the plaintiff in their community in the estimation of “reasonable” persons.
Defamation is a strict liability tort. Once the plaintiff has established that defamatory words were published, the onus shifts to the defendant to prove that the words complained of are defensible. The usual defences to a defamation claim are that the words claimed to be defamatory were true (justification), fair comment, published on an occasion of absolute or qualified privilege, or constitute responsible communication on a matter of public interest.
4.2 Justification
Truth, or justification, is an absolute defence to a defamation claim. Plaintiffs have no right to have their character or reputation protected from imputations that are true.
Unlike in the United States where the impact of the First Amendment places the onus on the plaintiff to prove that what has been written is false, in Canada the onus is on the defendant to prove that the words complained of are substantially true.
Unlike in the United States where the impact of the First Amendment places the onus on the plaintiff to prove that what has been written is false, in Canada the onus is on the defendant to prove that the words complained of are substantially true. Similarly, Canadian common law does not afford any special recognition to “public figures” other than in the context of meeting a “public interest” test for the defences discussed below. In other words, Canada does not have a New York Times Co. v. Sullivan defence.
4.3 Fair Comment
The fair comment defence protects expressions of opinion on matters of public interest that are based on facts. Although some Canadian courts have suggested that the comment must be fair, the better view is that the opinion can be obstinate or prejudiced as long as it is an opinion that can honestly be held by any person on the proven facts. It is not necessary for the speaker to honestly hold the expressed opinion.
4.4 Privilege
Provincial statutes provide a defence of privilege regarding various forms of reports, such as the statutory privilege for fair and accurate reports on court proceedings. In addition to court proceedings, legislation also protects fair and accurate reports on public meetings and communications, and decisions made by bodies that represent governmental authority. In some cases, the privilege is absolute, but in others it applies as long as the defendant does not act with malice.
In addition to statutory privilege, the common law recognizes a qualified privilege that protects defamatory statements where the defendant had a legal, moral or social duty in making the statement, and the recipient of the information had a corresponding interest in receiving the information. Qualified privilege has been recognized in numerous situations, including employment, family, union, business-to-business, litigation and medical communications. The question in each case is whether there is an interest in publishing and receiving the information.
4.5 Responsible Communication on a Matter of Public Interest
A relatively recent development in Canadian libel law is the protection of news reports on matters of public interest where those news reports were prepared and published responsibly and relate to a matter of public interest. The Supreme Court of Canada recognized the defence in the landmark decision of Grant v. Torstar. The court has termed this defence “responsible communication on a matter of public interest” and is available where (1) the publication is on a matter of public interest, and (2) the publication was responsible, in that the defendant was diligent in trying to verify the allegations, having regard to all of the relevant circumstances. Where these two elements are present, a defence will be available, even if what was published is false.
4.6 Malice
Where the defences of fair comment, qualified privilege or responsible communication are established, they can only be defeated if the plaintiff proves that the defendant acted maliciously, in the sense that the dominant motive for the publication was not to comment on a matter of public interest but rather to injure the subject of the comment.
4.7 Jurisdiction
Given the First Amendment and the impact of New York Times Co. v. Sullivan in the United States, Canada is a more “plaintiff-friendly” jurisdiction than the U.S. Consequently, U.S.-based defendants have sometimes attempted to bring claims in Canada. This tactic has increased with the advent of the internet. The Supreme Court of Canada recently considered the issue of jurisdiction in Haaretz.com v. Goldhar in the context of an internet-defamation case. The court noted that given the ease with which jurisdiction may be established in a defamation case, judges must conduct a robust and carefully scrutinized review of the issue of forum non conveniens (inconvenient forum). In that case, the court found that the appropriate forum was Israel, not Ontario.
Even in cases where it is established that the appropriate jurisdiction is Canada or a Canadian province, when online material is viewed in Canada, the plaintiff’s damages may be limited to the loss of the plaintiff’s reputation in Canada. American courts have been reluctant to enforce Canadian libel judgments, having regard to the fact that Canada does not have protections for free speech akin to those provided by the First Amendment. Accordingly, even if a libel judgment is obtained in Canada against a U.S.-based defendant, it may be very difficult to enforce in the United States.
4.8 Damages
Damages are presumed in defamation cases. Canadian awards are much smaller than awards in the United States. The largest award in a Canadian case was for C$2.5-million. Most Canadian damage awards for libel are less than C$100,000.
5. Tax Litigation
The Tax Court of Canada is a superior court of record that has jurisdiction over the litigation of most federal income tax and commodity tax disputes in Canada. The Tax Court’s jurisdiction is purely statutory and generally covers all matters relating to assessments and reassessments of tax, interest or penalties. Appeals of Tax Court of Canada decisions are exclusively within the jurisdiction of the Federal Court of Appeal.
Federal tax dispute litigation is commenced by a taxpayer filing a notice of appeal in the Tax Court of Canada. Cases may proceed either by way of informal or general procedure. For income tax appeals, the informal procedure is limited to cases where the amount of federal tax and penalties in dispute for each taxation year, excluding interest, is C$25,000 or less. For goods and services tax (GST) appeals, the amount in dispute cannot exceed C$50,000. The general procedure is available in any other instance where you do not qualify for and do not choose to follow the informal procedure, regardless of the disputed amount. In general procedure cases, discovery is held by the exchange of documents followed by the examination, without a judge, of one witness on behalf of each party. One or both parties may then apply for a hearing date, where witnesses will be examined and cross-examined before a judge and documents will be formally entered into evidence. Trials in the Tax Court of Canada typically take one day or less, particularly where the parties have agreed on all or substantially all of the facts. However, the trial may not be completed for several weeks or months in more complex and contentious cases. A decision by the Tax Court of Canada made under the general procedure may be appealed as of right to the Federal Court of Appeal. However, a decision made under the informal procedure is subject only to judicial review by the Federal Court of Appeal.
In the Tax Court of Canada, the onus is on the taxpayer to prove that the taxation assessment (or reassessment) was in error and to show that the assumptions that the Canada Revenue Agency used in its taxation assessment (or reassessment) are erroneous.
In the Tax Court of Canada, the onus is on the taxpayer to prove that the taxation assessment (or reassessment) was in error and to show that the assumptions that the Canada Revenue Agency used in its taxation assessment (or reassessment) are erroneous. Once the taxpayer establishes a prima facie (at first sight) case, the burden shifts to the Canada Revenue Agency to prove the accuracy of its assumptions on a balance of probabilities.
There is an exception with respect to civil penalties or assessments beyond the normal reassessment period, in which case the Canada Revenue Agency carries the burden of proof. Further, if the Minister alleges new facts other than those that formed the basis of the assessment (or reassessment), the onus is on the Canada Revenue Agency to prove the new facts. Generally, the Minister of National Revenue is represented by specialized tax litigation counsel from the Department of Justice.
The decision of whether, and on what basis, to accept a settlement offer in any case is made on a collaborative basis between the Canada Revenue Agency and the Department of Justice. Settlements are generally based on a principled approach to the matter rather than as a percentage of the dollar amount at stake. This differs from the rules of general civil litigation, but it does offer the opportunity to develop creative settlement strategies, particularly if multiple taxation years or issues are involved.
In granting judgment in favour of a taxpayer, the Tax Court of Canada may order the Minister of National Revenue to reassess, as directed by the judge. Where the assessment or reassessment is wholly incorrect, the assessment or reassessment may be vacated entirely.
Historically, costs have been recoverable only in accordance with rather modest tariff amounts, but certain recent decisions have reflected a greater effort to indemnify successful litigants. Reasonable disbursements incurred by the successful party (including expert witness costs) are generally fully recoverable.