Blakes Guide to Litigation and Dispute Resolution in Canada

1. Overview

Canada is a federal system comprising ten provinces and three territories. In addition to a federal government, each province and territory has its own government. At the federal level, the seat of government is in Ottawa, where members of Parliament from across Canada convene. Additionally, the people of each province elect members to a Provincial Legislative Assembly or a Provincial Parliament.

Canada’s Constitution Act, 1867 specifies the areas that each level of government can enact legislation. The federal government has authority over the regulation of trade and commerce, banking, patents, copyrights, criminal law and taxation, among other matters. The most noteworthy areas over which the provinces have authority are property and civil rights and the administration of justice. As expected, there are areas of overlap. The division of powers between the federal and provincial governments has been a long-standing source of contention.

Due to Canada’s federal structure, both federal and provincial legislation may need to be considered depending on the subject matter of a dispute. Because the provinces have authority over the administration of justice, there may be instances when it is more advantageous or appropriate to bring or defend an action in a particular province.

The first type of court, the Superior Court of each province and territory is the court that most commonly decides cases involving commercial litigants. These are courts of general and inherent jurisdiction that hear both civil and criminal matters. Depending on the province, the trial level is referred to as the Court of King’s Bench, the Supreme Court or the Superior Court. Each province has its own appeal court, which is referred to as the Court of Appeal of the particular province. Appeals from the Court of Appeal of any province are heard by the Supreme Court of Canada.

The second type of court in Canada is the provincial court, which obtains its jurisdiction from provincial legislation. As with Superior Courts, provincial courts have different names depending on the province. For example, Alberta recently renamed its provincial court from the Alberta Provincial Court to the Alberta Court of Justice. Typically, the provincial court will have jurisdiction over some civil, criminal, family and provincial law matters. The provincial court’s jurisdiction over civil disputes is significantly restricted as compared to the Superior Court’s jurisdiction. For instance, in Alberta, the provincial court has no jurisdiction over land disputes, and it can only hear disputes where the value of the claim does not exceed C$100,000. Appeals from the provincial court generally go to the Superior Court of the particular province or territory. For example, appeals from the Alberta Court of Justice generally go to the Alberta Court of King’s Bench. Similarly, appeals from the Provincial Court of British Columbia, which is the name of that province’s provincial court, generally go to the Supreme Court of British Columbia, which is the name of that province’s Supreme Court.

The third type of court is the federal court. The federal courts have jurisdiction over federal legislation, such as the Income Tax Act and the Trademarks Act, certain issues under the purview of the federal government pursuant to the division of powers and, importantly, over all federally administered administrative boards, commissions and tribunals. The Federal Court of Canada and Tax Court of Canada are both trial-level courts whose decisions can be appealed to the Federal Court of Appeal. Appeals from the Federal Court of Appeal are heard by the Supreme Court of Canada.

The final appellate court is the Supreme Court of Canada, Canada’s highest court. In certain circumstances, predominantly in criminal law, appeals to the Supreme Court of Canada are as of right. In most circumstances, however, litigants in civil cases can only appeal if they obtain permission — or leave — through an application to the Supreme Court of Canada.

3. Common Law and Civil Law

Understanding the hierarchy of the courts in Canada is important to understand the role of precedent in Canadian law. With the exception of Quebec, all Canadian provincial jurisdictions follow the “common law.”

In a common law system, the principle of stare decisis applies, which means that precedents, or prior decisions from higher-level courts, are binding on all lower-level courts within the same jurisdiction. A decision of the Superior Court of one province is persuasive in the Superior Court of another, but it is not binding. Similarly, a decision of the Court of Appeal in one province is only binding in its own province, although it may be persuasive in other provinces. There are many instances in which two provincial Courts of Appeal have made different determinations on similar points of law. A decision of the Supreme Court of Canada, however, is binding on all other courts in Canada, no matter the type or level.

In Quebec, there is a “civil law” system deriving from the French Civil Code of 1804. The Civil Code of Québec (CCQ) establishes the law in Quebec pertaining to disputes between individuals in society. The principle of stare decisis is not as influential since the CCQ itself is intended to be clear and easy to apply. While integration into the federal system poses some difficulty when decisions applying the CCQ are appealed, the Supreme Court of Canada maintains full jurisdiction over cases decided pursuant to the CCQ.

4. Alternatives

As an alternative to the court system, litigants can resort to alternative dispute resolution methods, such as mediation or arbitration, to resolve disputes. In many cases, parties can agree by contract to resolve all of their disputes through arbitration. In most cases, Canadian courts will enforce a pre-dispute arbitration clause in a contract by prohibiting the parties from litigating the dispute in court and requiring them to arbitrate. Typically, parties wishing to arbitrate or mediate disputes are required to do so by agreement, although it is sufficient if that agreement is a provision in a pre-dispute contract.

5. Jurisdictional Issues in Canadian Courts

5.1 Jurisdiction of Canadian Courts

5.1.1 When Will a Court Entertain an Action Brought by a Foreign Plaintiff?

A Canadian court will entertain an action brought by any legal person, provided such person has an address for service in the province that the action is brought. A foreign plaintiff, however, may be required to post security for the defendant’s costs to defend the proceeding, the amount of which will vary from province to province and depend on the circumstances.

5.1.2 When Will a Court Take Jurisdiction Over a Foreign Defendant?

A Canadian court will take jurisdiction over a foreign defendant if the defendant resides in or is served within the court’s jurisdiction, or when the defendant voluntarily submits to the court’s jurisdiction. A court will also take jurisdiction over a foreign defendant when the defendant is served outside the jurisdiction, but there is a real and substantial connection between the subject matter of the litigation, the parties and the court’s jurisdiction.

5.1.3 When Will a Court Decline to Exercise Jurisdiction in Favour of a More Convenient Forum?

In Canada, a court may decline to exercise jurisdiction if another forum is clearly more convenient and appropriate for the pursuit of the action and securing the ends of justice.

Foreign defendants will often seek to have the Canadian court decline jurisdiction in favour of their home territory. Canadian courts look to a number of factors to determine which jurisdiction has the closest and most substantial connection to the case. For example, while a court may have jurisdiction over a defendant served within the court’s territorial jurisdiction, the court will likely decline to exercise jurisdiction if the defendant has a mere fleeting presence in the territory of the court.

5.2 Enforcement of Extra-Provincial Orders

A judgment given in one Canadian province is entitled to recognition and enforcement in another Canadian province if:

There is a real and substantial connection between the original province and the subject matter or defendant
The defendant submits to the jurisdiction of the original court, or
There is some other basis on which the original court took jurisdiction, such as a presence or ordinary residency of the defendant

All common law provinces have reciprocating legislation that facilitates the recognition and enforcement of judgments from other provinces. There is similar reciprocating legislation between some Canadian provinces and certain American states.

Since Quebec is the only civil law province in Canada, it is not a party to any reciprocating legislation that facilitates the recognition and enforcement of judgments from other provinces. The substantive requirements for the recognition and enforceability of non-Quebec judgments are found exclusively in the CCQ (Civil Code of Québec), while the procedural requirements are found exclusively in the CCP (Civil Code of Procedure). Other Canadian provinces are considered foreign states for the purposes of Quebec law.

Quebec courts will typically recognize and enforce non-Quebec judgments unless (1) the issuing court lacked jurisdiction, (2) the judgment is not final, (3) the judgment is contrary to the fundamental principles of procedure, (4) a decision was already rendered or is pending between the same parties, based on the same facts and the same cause of action, (5) the judgment is manifestly inconsistent with public order, or (6) the judgment enforces obligations arising from the taxation laws of a state that does not also recognize and enforce the taxation laws of Quebec.