Section XVIII: Dispute Resolution

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• Independence of the Courts

• Litigating Through the Courts

• Costs

• Class Actions

• Alternative Dispute Resolution

Like the United States and the United Kingdom, Canada has two parallel court systems — federal and provincial. Accordingly, Canada’s 10 provinces and three territories have both federal and provincial (or territorial) courts. The province of Quebec is unique in that it administers the civil law of Quebec for private law matters, while the courts of the remaining provinces and territories administer the common law.

Provincial Superior Courts have inherent jurisdiction to hear any case unless a statute assigns the matter to another court or tribunal. For example, the Federal Court of Canada is assigned jurisdiction over specialized matters, including litigation relating to the Income Tax Act (Canada) and intellectual property rights. 

Provincial and federal courts each have two levels — a trial division and an appeal court. The Supreme Court of Canada is the final court of appeal for all decisions of provincial and federal courts. The Blakes Guide to Litigation and Dispute Resolution in Canada contains a more detailed discussion of dispute resolution.

1. Independence of the Courts

While judges are appointed by elected officials, Canadian courts are independent from the legislative and executive branches of government. The principle of judicial independence means that judges are able to make decisions free from influence and based solely on fact and law.

Government actions are subject to review by the courts and, in particular, to scrutiny under the Constitution of Canada, including the Canadian Charter of Rights and Freedoms. The Charter protects fundamental freedoms and equality rights and encompasses principles of fundamental justice that include procedural fairness for anyone facing an adjudicative process that affects their rights and freedoms.

Canada’s courts are generally open to the public unless there are compelling reasons for a closed hearing.

2. Litigating Through the Courts

Each province and territory has rules of procedure for the conduct of matters that come before the courts. For example, prior to trial, all parties to civil litigation are required to produce documents that are relevant to the issues being litigated. Documents are broadly defined and include information in electronic form, such as emails and computer files, sound recordings, videos, photographs, charts, maps and data. In most provinces, the primary onus is on each party to produce all relevant documents. In Quebec, however, parties need only produce the documents they rely on at first instance or are asked to produce pursuant to a specific request. 

Following documentary disclosure, each party is generally entitled to examine one representative of an opposing party. Unlike in the American system, Canadian provincial rules often do not provide for automatic rights of discovery of more than one person or of non-parties.

For example, in Ontario, a party requires leave of the court to examine more than one representative of a corporation or witness in an action.
 
Some provinces have special case management rules that apply to the litigation process. These rules provide for greater involvement by the judiciary in the conduct of an action, such as the imposition of mandatory timetables.

3. Costs

The Canadian court system generally uses the "loser pays" principle for costs following litigation. (Some provinces, however, do not apply this principle to all aspects of class actions.) Many provinces have a system in which the court can award costs at different scales. The most common scale of costs is called partial indemnity, where the successful party will receive approximately 25-35% of its legal costs from the unsuccessful party. If a party’s behaviour has been particularly egregious, or if the plaintiff succeeds in obtaining an award higher than its proposed offer to settle prior to trial, the court may award a higher scale of costs called substantial indemnity, which is equivalent to 1.5 times partial indemnity costs. While most fixed costs like disbursements are generally fully reimbursed, experts’ fees are subject to a similar review as lawyers’ fees and the compensable amount may be reduced. 

Courts ultimately have discretion on whether to award costs and the amount awarded. While rare, courts can also award costs against the winning party in favour of a losing party depending on the circumstances, the offers to settle made and the successful party’s behaviour during the litigation. In some cases, such as where the litigation has a public interest component, the parties may be ordered to bear their own costs. 

Contingency fees are permitted in all provinces subject to local rules and, sometimes, court approval. In some provinces, public funding is available for class actions. Contingency fees are permitted in all provinces subject to local rules and, sometimes, court approval. In some provinces, public funding is available for class actions.

4. Class Actions

All Canadian provinces and the Federal Court of Canada have legislation or rules that expressly permit class proceedings. In a class proceeding, a person or group of persons takes on the role of representative plaintiff and represents the interests of a wider class. In some provinces, it is possible, though rare, for a representative defendant to defend an action on behalf of a class of defendants. 

Early in the litigation, the action must first be certified by the court as a class proceeding. Generally, the certification order will identify common issues to be tried together in a common issues trial, and any individual issues will be resolved afterwards through separate proceedings to be established by the common issues trial judge. If the court denies certification, the action may proceed as a regular action. Class actions are case managed by one judge in most provinces. However, the case management judge will not typically be the trial judge if the action proceeds through to trial.

Plaintiffs’ counsel in Canada are increasingly bringing class actions across several subject areas, including competition (antitrust), product liability and securities matters, as well as mass torts, consumer disputes and, more recently, digital privacy cases. To date, very few class proceedings have proceeded through to trial and judgment. Most cases are either disposed of through preliminary motions or are settled in the process of or following certification. Class actions have become a concern for commercial businesses because they are time consuming, expensive to defend and create the risk of substantial settlements or court awards.

5. Alternative Dispute Resolution

Due to the expensive and time-consuming nature of litigation, (ADR) – dispute resolution outside of traditional court processes – is firmly established in Canada. ADR processes such as mediation and arbitration are increasingly used to resolve commercial and other disputes.

Mediation, a form of negotiation facilitated by a neutral third party, is a confidential process in which parties engage a mediator to assist them in clarifying the issues and facilitating a resolution to the dispute. The mediator can neither decide the dispute nor force the parties to accept a settlement. The parties enter mediation willingly on the understanding that if they do not reach an agreement, they can walk away and continue the litigation.

Arbitration involves the parties appearing in front of a single arbitrator or arbitration panel who adjudicates the dispute and issues a decision (or arbitral award) that is enforceable by the court. Arbitration is typically a binding process where the arbitrator’s decision can only be reviewed by courts on limited grounds.
 
ADR mechanisms are most often voluntary. However, Ontario has introduced mandatory mediation for actions commenced in Toronto, Ottawa and Windsor, requiring parties engaged in litigation to attend a mediation session prior to trial. Similarly, British Columbia has a procedure whereby one party in the litigation can require all parties to attend mediation.
 
In the right case, ADR can be more effective and less expensive than traditional litigation. ADR can offer less formality and expense, more efficiency and more privacy than court proceedings. It may also help the parties achieve a reasonable solution that will enable them to preserve their business relationship.
 
Many commercial agreements in Canada now provide for binding arbitration or other forms of ADR as an alternative to court proceedings for addressing disputes arising from the agreement.