Major Changes to Ontario Small Claims Court

Michael Rappaport for The Lawyers Weekly

December 11, 2009

The stakes in small claims courts have been rising across Canada. Ontario is the latest province to increase the monetary jurisdiction of small claims from $10,000 to $25,000, effective Jan. 1, 2010 - following the lead of Alberta, British Columbia, Nova Scotia and the Yukon. Provincial governments have justified hiking the monetary limit of small claims on the grounds that it will expand access to justice. Making the legal system easier to access and more affordable for litigants are laudable objectives. But to what extent will transferring claims in Ontario from Superior Courts to small claims courts compromise procedural fairness?

Access to justice and procedural fairness

Small claims court has been dubbed "the people's court" since it is a more accessible and more affordable for people to resolve disputes, often without hiring a lawyer. In November 2007, the Civil Justice Reform Project, spearheaded by the former Associate Chief Justice of Ontario, Coulter Osborne, made several key recommendations regarding Ontario's small claims courts, including: raising the monetary jurisdiction from $10,000 to $25,000; granting deputy judges limited jurisdiction to grant equitable remedies in relation to matters heard by the small claims court; eliminating the right to appeal from a judgment of less than $1,500; and retaining the limit on costs recoverable in small claims court to 15 percent of the amount claimed.

In an interview with The Lawyers Weekly, Osborne says that the main rationale for increasing the monetary jurisdiction of small claims court was to "get cases that were caught up in the costly procedures of the superior court system into a more economic forum for their disposition."

According to the Office of the Attorney General's website, in 2005 to 2006 in Ontario, 75,041 new proceedings were commenced in small claims court. By comparison, in the same timeframe, 63,251 new proceedings were commenced in the Superior Court of Justice. More than 10 percent of the claims launched in superior courts were for amounts between $10,000 and $25,000.

"In excess of 8,000 claims could be transferred from superior courts to small claims," Osborne says, after the monetary limit is raised to $25,000. To transfer claims under $25,000 commenced in superior courts to small claims courts will require consent of the parties, however.

Small claims procedure is simplified with no strict pleadings requirements, no formal discovery process and parties' costs may be limited - all of which make small claims court an attractive forum for self-represented litigants.

"It's far easier to start an action in small claims court than superior court. The rules are not complicated, and people will be able to resolve disputes more cost-effectively," Osborne says.

Justice Marvin Zuker, author of Ontario Small Claims Court Practice 2010, praises the decision to raise the monetary jurisdiction for small claims in Ontario to $25,000, calling it "long overdue." However, Zuker is skeptical about the small claims courts' ability to handle the anticipated increased case load due to a chronic shortage of full-time judges and support staff.

According to Zuker, there are only two full-time judges appointed to Ontario's small claims courts. In lieu of full-time judges, the vast majority of small claims in Ontario are heard by about 400 lawyers sitting as deputy judges who are paid a per diem per appearance in court. In contrast, all other provinces' small claims courts are presided over by full-time judges.

Furthermore, Zuker is critical of the administration of small claims courts for failing to institute proper case management, whereby one deputy judge would have control of a case from beginning to end.

"Instead of a claim being assigned to a single judge, we have dozens of deputy judges dealing with the same matter," Zucker says. He adds, "Deputy judges who only hear a fraction of the case may not be familiar with the facts of the case or the parties."

In addition, while Zuker does not oppose the recommendation to give deputy judges in small claims courts the discretion to grant limited equitable relief, such as ordering the return of property, he does fear that it "could open a can of worms."

Perhaps the main potential obstacle to getting a fair trial in small claims court is the lack of a formal discovery process. Ontario's Rules of the Small Claims Court stipulate that if a claim is based upon a document, it must be attached to the plaintiff's pleading. Furthermore, the rules state that parties must exchange any documents not attached to the pleadings at least 14 days before a trial. However, the rules are not rigidly enforced.

Sergiy Timokhov, a lawyer based in Toronto who specializes in small claims litigation, says that the rules for documentary disclosure often are not heeded and, as a result, trials tend to be "full of surprises."

Will lawyers still be needed?

Currently, the vast majority of plaintiffs and defendants in small claims court are self-represented, according to Osborne. Even bulk users of the small claims court system, such as collection agencies, tend to be represented by paralegals rather than lawyers, Osborne says.

Generally, legal fees for engaging a lawyer will exceed the amount claimed in small claims court in Ontario. According to the Ontario Office of the Attorney General, during 2008-2009, there were 63,753 new proceedings launched in small claims courts. By monetary range, the total claims filed in 2008 to 2009 can be broken down as follows: three percent were between $0 to $500; six percent were between $501 to $1,000; 71 percent were between $1,001 to $5,000; and 20 percent were between $5,001 to $10,000.

Once the stakes in small claims court are raised to a maximum of $25,000, will claimants be more likely to retain a lawyer? Or will claimants still represent themselves or turn to paralegals for more affordable representation?

Timokhov says that the smallest claim that a client retained his services for was a $500 claim by a landlord who was suing a former tenant for damage to carpeting.

"Very often it is not about the money but about justice," Timokhov says. He adds that the majority of small claims that he has handled have been for sums around $8,000 to $9,000.

Even under the current limit, small claims files make up about 40 percent of Timokhov's practice, with the remainder generated by litigation in superior courts.

Timokhov is a 2008 call who cut his teeth learning the in-and-outs of small claims court litigation while he was still a law student at Osgoode Hall Law School of York University, where he served as a community legal aid small claims court duty counsel at the Toronto Small Claims Court in 2003 to 2004, assisting self-represented litigants with paperwork. He was also assigned many small claims court collection files while he was an articling student.

Over the past two years since going solo in July 2008, Timokhov has represented over 100 claimants and attended about 50 settlement conferences and 20 trials in small claims courts. He has collected thousands of dollars before the Toronto Small Claims Court, Richmond Hill Small Claims Court, Barrie Small Claims Court and the Newmarket Small Claims Court.

Although Timokhov says that it is hard to compete with paralegals in terms of fees and that below a certain amount it doesn't pay to retain a lawyer, he thinks lawyers will have a larger role to play in litigation in small claims courts after the monetary limit is increased.

"People are more attracted to lawyers when it comes to a difficult case," Timokhov says. "People will want lawyers even more so when the stakes are raised to $25,000." 

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