Business Law in Canada

Twelfth Edition

Chapter 3
The Resolution of Disputes:
The Courts and Alternatives
to Litigation

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Learning Objectives
When you complete Chapter 3, you should be able
to:
1. Examine the alternative dispute resolution (ADR)
methods: negotiation, mediation, and arbitration
2. Describe the court system in Canada
3. Outline the process of civil litigation
4. Explain the nature and function of regulatory
bodies

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Alternatives to Court Action (1 of 2)
• Alternative Dispute Resolution (ADR)
• Processes for resolving disputes as an alternative
to the courts
• Main methods
– Negotiation: decision making is left in the hands of the
disputing parties to work out for themselves
– Mediation: neutral third party assists the parties in
coming to a resolution on their own
– Arbitration: party makes a binding decision in the
matter under dispute
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Alternatives to Court Action (2 of 2)
Table 3.1 Summary and Comparison of Litigation and ADR
Methods
Blank Litigation Arbitration Mediation Negotiation
Control Low Low High Highest
Delay Lengthy Moderate Brief Briefest
Cost High Moderate Low Low
Privacy Low Moderate High Complete
Flexibility Low Moderate High Highest
Goodwill Unlikely Possible Likely Ensured
Predictability Low Low Reasonable High
Appealability Usually Low None None
Visibility High Moderate None None

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Advantages of ADR Versus Litigation
• Advantages
– Parties to dispute maintain control of the solution
– Fewer scheduling and procedural delays
– Less distraction in ADR
– Lower costs than associated with court process
– Diminishes risk of adverse judgments
– Preserves good will

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Disadvantages of ADR Versus Litigation
• Disadvantages
– Judicial fairness and impartiality are not ensured
– Courts have more power to extract information
– Decisions do not follow precedent
– Resolutions may not be enforceable
– No public record of dispute or decision

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Negotiation
• Should be the first recourse for people who find
themselves in a disagreement
• Parties discuss the problem with each other in
order to find a solution
• Requires cooperation and compromise
• May be conducted through representatives
• Process may enhance relationship
• Concessions and admissions made without
prejudice will not hurt future litigation
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Mediation (1 of 2)
• Neutral third party helps parties settle the dispute
• Communication facilitated by mediator
– Finds common ground
– Encourages compromises
• Parties are not bound to accept solutions offered
by mediator
• Successful mediators require considerable
specialized training

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Mediation (2 of 2)
Disadvantages:
• Not the process to use where blame or liability for
injury must be determined
• Parties must be willing to disclose information
• When power is imbalanced, mediation may just
exacerbate the weakness of one party

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Arbitration (1 of 2)
• Parties agree on an independent third party to
make a binding decision
• Often specified as means of resolving dispute in
original contracts
• Arbitrators may be specialists in the matter under
dispute

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Arbitration (2 of 2)
• Decision cannot be appealed but process may be
reviewed by a court
• Process is faster, less costly and more private
than litigation
• But more formal, more adversarial than mediation,
and more costly than other forms of ADR

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Internet Transactions
• Online dispute resolution (“ODR”) programs have
been developed to help resolve disputes between
parties
• Using ADR for online disputes:
– Overcomes geographical issues
– Reduces costs
– Enables a quick resolution

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Question for Discussion (1 of 3)
• Consider the advantages and disadvantages of
the alternative dispute resolution processes.
Would a businessperson benefit from using such
a process in a dispute over the delayed delivery of
material required in the manufacturing process?

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The Courts (1 of 2)
• Procedures vary by province
• Trials are open to the public; justice must be seen
to be done
• All litigants have equal access to the courts
• Civil matters:
– Two private persons use the court as a referee to
adjudicate a dispute
– Decide the matter on the balance of probabilities

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The Courts (2 of 2)
• Criminal proceedings:
– The government pursues the matter and prosecutes
the accused
– The judge (or jury) must be convinced beyond a
reasonable doubt of the guilt of the accused
• May face both criminal trial and civil action over
same conduct
• Regulatory offences include fines and
imprisonment
– For laws that have been enacted under the powers that
have been given under the Constitution Act, 1867
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Trial Courts of the Provinces
• Provincial Court:
– Lowest level in the Canadian court hierarchy
– Criminal jurisdiction over the less serious criminal
matters
– Small claims courts and family court are separate
bodies but a division of Provincial Court system
• Superior court of a province:
– Highest trial level court
– Unlimited monetary jurisdiction in civil matters and
deals with serious criminal issues
– Administration of wills and estates and bankruptcy
courts
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Outline of Canada’s Court System

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Recent Developments
• Drug treatment courts
• Domestic violence courts
• Unified family courts
• Mental health courts
• Indigenous courts
• Sentencing circles
– used primarily for cases involving cases involving
Indigenous offenders and victims
• Nunavut Court of Justice
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Provincial Courts of Appeal
• Appellate courts hear appeals from the lower
courts of that province
• An appeal court will consider a case only when
questions of law are in dispute, not questions of
fact
• Not a new trial (usually)
• Appeal court judges
– Read the transcript of the trial as well as the trial
judge’s decision
– Deal with the specific objections to the trial judge’s
decision submitted by the appellant’s lawyers
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Courts at the Federal Level
• Federal Court and the Federal Court of Appeal
serve a function similar to that of the provincial
superior courts
• Tax Court of Canada was established to hear
disputes about federal tax matters
• Supreme Court of Canada:
– Highest court in the country
– Strictly appellate function
– Nine judges appointed by the Government of Canada
– Decisions set binding precedent

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The Process of Civil Litigation
• Before a decision is made to sue, all avenues for
settling should be tried
• Often the court requires the disputing parties to
have tried dispute resolution mechanisms (ADR)
before a trial procedure will be instigated

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Process of Civil Litigation

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Limitation Periods
• Court action must be brought within a relatively
short period of time from the event giving rise to
the complaint or plaintiff is barred from pursuing
the action
• The plaintiff must commence an action by filing
the appropriate pleadings with the appropriate
court
• Varies depending on the jurisdiction and the
nature of the complaint involved

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Jurisdiction (1 of 2)
• Must determine which court will assume jurisdiction
to hear the action
– Prove “real and substantial connection” by identifying a
connecting factor that links the litigation to the court
• Court consider what is fair to the parties and an
efficient resolution of the dispute
– courts will consider “all the circumstances”

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Jurisdiction (2 of 2)
• Location of parties is not clear over internet
– must be a connection or degree of interactivity before a
local court will take jurisdiction
• Online businesses can specify in their contracts
which courts will hear disputes arising out of the
contracts and the law governing the contract
• Must choose what court to use
– Small claims is simpler but awards are restricted

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Pre-Trial Procedures (1 of 2)
• Documents used to start and defend a lawsuit
constitute the pleadings
• Pleadings
– Statement of Claim (plaintiff)
– Statement of Defence (defendant)
– Counterclaim/Defence to Counterclaim
• Applications for directions: concern what details
have to be disclosed, what questions have to be
answered, etc.

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Pre-Trial Procedures (2 of 2)
• Discovery
1. Documents/ records
2. Examination for discovery: verbal examination of
witnesses under oath
• Pre-trial conference: meeting to determine which
issues remain to be tried and whether the parties
can themselves resolve the dispute
• Offer to settle: Either party can make an official
offer to settle; if it is accepted, that ends the
matters
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Recent Initiatives
• Reforms to speed up the litigation process,
especially when smaller amounts involved
– Summary trials with evidence by affidavit
• Make justice system is more accessible
– By reducing costs and delay
• All jurisdictions have created small claims courts
with dramatically simplified procedures and
reduced costs

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Question for Discussion (2 of 3)
• The pre-trial process is long and involved and
adds greatly to the expense of having a matter
decided by the court. Consider the advantages
and disadvantages of the various steps and
suggest how they might be simplified.

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The Trial
• Plaintiff presents case
– Burden of proof rests with plaintiff
– The plaintiff’s case and witnesses are presented first
– Cross examination by defendant’s lawyer
– Plaintiff’s lawyer is prohibited from asking leading
questions
• Rules of evidence must be followed
• Defendant presents case
• Both parties summarize evidence and make argument
to court
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Judgment
• If there is a jury, the judge will instruct it on
matters of law
• The function of the jury is to decide questions of
fact; the judge decides questions of law
• Judge-alone decisions may be delivered
immediately; more common for judge to hand
down a judgment in writing later

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Costs
• Litigation costs are high
• Judgments may award legal costs
– Usually awarded to the victor but this is always at the
discretion of the court
• Costs cover only a portion of actual costs
– Party and party
– Solicitor and client

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Remedies
• Damages (monetary compensation)
– General: pain and suffering or for future lost wages
– Special: reimburse the litigant for expenses or costs
incurred before the trial
– Punitive: not to compensate the victim but rather to
punish the wrongdoer
• Other remedies
– Accounting
– Injunction
– Specific performance
– Declaration
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Enforcement (1 of 2)
• There is no guarantee that the amount awarded in
a judgment will be paid
• Examination in aid of enforcement / execution
• Seizure of personal property
• Sale of real property
• Garnishment of wages, accounts, debts
• Equitable receiver
• Prejudgment remedies / attachment
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Enforcement of Judgment (2 of 2)

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Seizure of Property
• Execution process allows seizure and sale
• Proceeds shared by creditors
– Secured creditors
– Preferred creditors
• Necessities of life are exempt from seizure
• Funds owed to a debtor can be garnished

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Judicial Remedies Before Judgment
• Extraordinary remedies granted only when there is
risk that the debtor’s property will be removed
from the jurisdiction
– Bank accounts and other debts
– Property, other than money, at risk of being removed or
sold
• Interim order granted by the court before the
actual trial

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Class Actions
• Identifiable class of persons with a common issue
• Reduces the number of lawsuits and avoids
inconsistent results
• Lowers costs for parties and court system
• Court must certify the litigation as a class
proceeding and appoint a representative plaintiff
• Judgment binds every member of the class

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Regulatory Bodies (1 of 2)
• Executive branch of government delegates to
public administrators and regulators
• Complaints against the actions of regulators and
administrators are usually heard by administrative
tribunals
– Labour relations boards
– Human rights commissions
– Workers’ compensation boards

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Regulatory Bodies (2 of 2)
• Advantages of tribunals:
– Decision-making panels usually have specific expertise
in the matter
– More discretion than judges
– More efficient, quicker, and less costly process
• Tribunal processes may be reviewed by courts to
protect public interest

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Procedural Fairness in Tribunals
1. From where did the tribunal derive its authority?
2. Was the decision-making process fair?
3. What recourse is there if there has been a failure
in jurisdiction or procedure?

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1. The Authority of the Decision Maker
• Decision makers must be able to point to statutory
authority that empowers them to make a decision
• Rules of statutory interpretation used to guide
reading in harmony with the objective and other
provisions of the statute
• Statutes must be passed by appropriate level of
government and be compliant with Charter

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2. The Fairness of the Process
• Rules of Natural Justice set basic standard
1. Fair hearing: complainant must have notice and
opportunity to be heard
2. Decision must be made by persons hearing the
evidence
3. Impartiality: no bias, or appearance of bias in decision
makers
• Principles of fundamental justice include:
– Procedural fairness and natural justice rules
– If statute offends our basic concepts of justice it is likely
to be overturned
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3. Reviewing a Decision
• Judicial review: not the decision, but the process
by which it was made
• One of the following must be present:
1. Invalid statute
2. Decision or remedy goes beyond power set out in
legislation
3. Errors of law on the record
4. Failure to follow procedural fairness (natural justice)
5. Abuse of power

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Methods of Judicial Review (1 of 2)
• Prerogative Writs - when a public official or
tribunal has breached their duty
– Certiorari: nullifies a tribunal’s decision
– Prohibition: prohibits a tribunal from proceeding
– Mandamus: an order compelling a government to
perform its duties
• Declaratory Judgment: declaration of the law and
providing remedies such as damages or an
injunction to enforce that declaration

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Methods of Judicial Review (2 of 2)
• Privative clauses may constrain judicial reviews:
– The courts interprets it to apply only when the board is
acting within its jurisdiction
– Court retains right to interpret statutory provisions
– Also subject also to the Charter
• Challenging administrative decisions may costly
and remedy may be hollow

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Question for Discussion (3 of 3)
• Administrators who make decisions affecting
people must follow minimum standards of
procedural fairness. Is this appropriate, or should
administrators remain unfettered by these rules so
they have discretion to do the right thing in each
individual case?

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