The Courts and their Jurisdiction
Court Officials
Actions and Applications
Parties to an Action
Commencing an Action - Pleadings
Discovery
Oral Examination
Mandatory Mediation
Settlement Conference
Pre-Trials
Trials
Costs Awarded in the Litigation
Offers to Settle

The Courts and their Jurisdiction

The Courts within Ontario are created and governed by the Courts of Justice Act. This Act creates a series of Courts and Court officials. As well, it defines the monetary jurisdiction and sets for the administrative and geographic areas for some of the Courts.

The civil litigation Courts in Ontario are essentially divided into four. First is the Small Claims Court which, at present, has jurisdiction up to $10,000.00. If the amount in issue is greater than $10,000.00, you can issue a claim in the Small Claims Court provided you agree to waive any award greater than $10,000.00. Given the costs and time of litigating in the Courts, you might find that giving up part of the amount sought has a net economic advantage in the end.

The next three Courts are part of the Superior Court of Justice, but fall into three separate branches.

The first branch is the former General Division Court of Justice which is continued as the Court of record and simply referred to as the Superior Court of Justice. Most civil litigation proceedings are commenced in this Court which is not bound by any monetary jurisdiction. However, if the amount being claimed is less than $10,000.00, you might find that the costs awarded to you in the end are based upon the scale governed in the Small Claims Court, rather than the scale expected in the Superior Court of Justice. As a rule, a single Judge presides over the major steps within this branch.

The second branch of the Superior Court of Justice is the Divisional Court. The Divisional Court has jurisdiction to hear certain administrative law matters and to hear appeals from lower Courts where the total amount involved is less than $25,000.00. As a rule, three Judges preside at formal Divisional Court hearings, while a single Judge may preside at interim matters such as motions. Judges appointed to the Superior Court of Justice will also sit, from time to time, as Judges of the Divisional Court.

The last branch is the Court of Appeal for Ontario which hears appeals from both the Superior Court of Justice and from the Divisional Court. The Courts of Justice Act sets forth when appeals are to be available, whether the right of appeal is automatic or first requires permission of the Court, and the routes of appeal from one Court to another.

Civil litigation matters with the Superior Court of Justice are further split into three types of lawsuits.

First, there is the ordinary action. Here, the pleadings are exchanged, discoveries are conducted, and the matter will proceed to trial after completion of certain other interim steps. This method is available in all cases where the amount in issue is greater than $50,000.00. There are certain claims which must fall under the ordinary action, even though they involve less than $50,000.00. More will be said about this procedure below.

Second, for certain matters where the amount in issue is less than $50,000.00 the action must follow the Simplified Rules under Rule 76 of the Rules of Civil Procedure. This is designed to fast track the case, avoid certain steps, and lower the total costs of litigation. The options for trial are different than those for an ordinary action. The Simplified Rules is optional for cases exceeding $50,000.00 provided that the defendant does not object. Rule 76 does not apply to actions under the Class Proceedings Act, 1992, actions under the Construction Lien Act (except trust claims), or actions under Rule 77.

Third, there is the Commercial Court branch of the Superior Court of Justice, which, as the name implies, hears certain commercial litigation matters. Going to the Commercial Court, as opposed to being in an ordinary action, is optional. However, in some instances, the Commercial Court can streamline and better manage commercial litigation matters.

Court Officials

There are various Court Officials, each of whom have a range of authority, depending on to which Court they are appointed, and in what role.

For most civil litigation in the Superior Court of Justice, the important categories are the Court Registrars, Assessment Officers, Masters and then Judges.

The Registrars administer the particular office, whether it be the Court of Appeal, Divisional Court, or a local branch of the Superior Court of Justice. They have the power to grant certain Orders. In certain circumstances, they can award default judgment and costs to a party.

The Assessment Officers conduct hearings to determine the amount which one party should pay to another, or the amount which a client should pay to his or her lawyer. Those hearings may be conducted in an informal manner, or with the formality of a proper trial.

Masters are officials who hear many motions within the context of an action and perform other duties which are assigned to them. They gain an expertise in the procedural aspects of actions. In some scenarios they can determine the outcome of an action by awarding judgment to one of the parties. In a situation such as a construction lien action which is held in Toronto, it is expected that the action, including the trial will be heard by a Master. There are some areas which are reserved to Judges and exceed the authority granted to a Master.

The last category are the Judges of the Superior Court of Justice. In essence, they have no limits on their jurisdiction.

Actions and Applications

Civil litigation proceedings in the Superior Court of Justice will fall into one of two categories. The most common form of proceeding is referred to as an “action”. The other form of proceeding is referred to as an “application”. The initial difference between the two is substantial. It is always open for the Court to convert an application into an action.

Most any type of claim can be initiated in an action. The Rules of Civil Procedure set forth certain claims which may be initiated as an application. As well, some provincial statutes provide for a resolution of certain issues by means of an application to the Court. For example, the interpretation of an agreement, such as a lease, is well suited for an application where the amount of evidence to be tendered is not substantial. The collection of an outstanding account must be commenced as an action. In some cases, the matter may start by way of application and then be converted to an action.

Depending on the type of case presented, there may be a choice whether you should proceed by way of application or action. Even when there is a choice, consideration of your particular case may dictate that one process is more advantageous to you. As a rule, the decision on how to start a case is dictated by the result intended, and the expectation of how that result will be generated. Depending on the type of case, consideration is given to whether the matter should be initiated in the Commercial Court or regular Court.

Parties to an Action

We start with a description of the people who are involved in the action (the parties) since they are often referred to by their status as a party.

The person or corporation that initiates the lawsuit is called the plaintiff.

The person or corporation against whom the plaintiff seeks relief is called the defendant.

Under certain circumstances, a defendant can join other persons or corporations against whom the defendant seeks relief, but who are not already parties to the action. Such additional person or corporation is called a third party.

Third parties can also join other persons or corporations against whom they seek relief, but who are not already parties to the action. These other parties are called fourth parties.

Similarly, fourth parties can add additional persons or corporations as fifth parties. Every added party can repeat the process of adding additional persons or corporations and these subsequently added parties are referred to by the next number. Such subsequent parties are most often found in complex cases, such as products liability or construction claims, where there are a number of persons or corporations which may be liable for the damages sought.

The goal is to ensure that all of the proper persons are before the Court for the adjudication on the relevant issues.

Commencing an Action - Pleadings

Whether you are initiating a claim against another person, or responding to a claim brought against you, there is always a set of documents that serve to define the issues which are to be put before the Court. Those documents are referred to as the pleadings. In total, they will set out the factual allegations of each party so that the issues can be well defined. As the pleadings define the issues, they, by implication, determine the scope of relevant evidence that may be required or permitted throughout the litigation process. Though the action may involve many documents and there may be some interim proceedings before trial, you should expect that the pleadings will be the only material that the Trial Judge will read before actually starting the Trial.

Within the action, the first document most commonly generated within the group of pleadings is the Statement of Claim. It names the parties to the action, namely the Plaintiff as the person who is suing, and the Defendant as the person who is being sued. There is a brief portion which identifies the parties and, in most cases, the city or province where they reside. The identification of the residence is important as, under the Rules of Civil Procedure, there may be certain implications if either the Plaintiff or the Defendant is not resident in Ontario.

The Statement of Claim will then set out the factual basis for the claim being made against the Defendant and then proceed to detail the amount sought from the Defendant. In order to properly prepare the Statement of Claim, it is important that you work with us to deliver all of the material which might be required to properly draft the allegations. This is a somewhat interactive process and one that we will guide you through.

Once the Statement of Claim is completed, it is taken to the appropriate Court office for the Registrar to issue. You should appreciate that, as a rule, the Statement of Claim then becomes a public document.

As an alternative to using the Statement of Claim, the first document may be a Notice of Action. The Notice of Action lacks the detail and allegations typically found in a Statement of Claim. The primary purpose of the Notice of Action is to physically start the litigation in a very short time. For example, if you were faced with a limitation problem where the action must be commenced within the next day or two, then the Notice of Action would satisfy that obligation. The Claim, with the full details, would then follow within 30 days after the Notice of Action is issued.

Following the Statement of Claim being issued, it must be served upon each Defendant. Normally, the Statement of Claim will be served by a process server handing it directly to the Defendant. The Rules of Civil Procedure provide for alternative methods of service. The important point is to have the document served in accordance with the Rules of Civil Procedure. In some instances, Defendants make themselves unavailable and difficult to serve. In those cases, we would apply to the Court for permission to serve the Statement of Claim in some other manner. This is referred to as substituted service of the Statement of Claim. In some instances, the Court may permit the Statement of Claim to be sent by ordinary mail, provided the Court is first satisfied that you could not effect personal service and that the Statement of Claim will come to the attention of the Defendant if sent by that method.

Once served, the Defendant has various options. They may file a Notice of Intent to Defend, which automatically gives them an extra 10 days to defend against the Statement of Claim. They may challenge whether the allegations in the Statement of Claim are complete and properly particularize the claim being made. They may challenge whether the Statement of Claim even discloses a cause of action against the Defendant. They may request that the Plaintiff produce any document which is referred to in the Statement of Claim. Each of these challenges or requests may delay their delivery of a Statement of Defence. If challenges are not made, then the Statement of Defence is to be delivered within 20 days after the Defendant has been served. If the Defendant is not resident in Ontario, then that time period is extended. The amount of extension depends on whether the Defendant resides in another province or another country.

If the Defendant does not respond to the Statement of Claim within the required time frame, the Plaintiff may proceed to note the Defendant in default. This is the first step in closing the door on the Defendant. From there, the Plaintiff might ask the Registrar to sign default judgment against the Defendant. Depending on the nature of the Claim, the Registrar may have the authority to award default judgment. In cases where the Registrar does not have the authority to award default judgment, the Plaintiff might be required to assemble some evidence and submit same to a Master or Judge who may award judgment based upon the Statement of Claim and the evidence filed. In some instances, it may still be necessary to have an actual trial before a Judge in order to satisfy the Judge as to the Plaintiff’s claim and amount requested.

For a Defendant who wishes to respond, there are several options available. First, they must address the Statement of Claim. As a rule, they will respond by denying many of the allegations made against them in the Statement of Claim. Then, they ought to be setting out their factual allegations as to why they are not liable and/or why the amounts claimed are not appropriate.

In some cases, the response of the Defendant is not only defensive, but set out in the offensive. They may have a claim against the Plaintiff. That claim may be related directly to the reason why they have not paid the Plaintiff the amount sought, or it may be unrelated. The Defendant may not only seek to avoid payment to the Plaintiff, or reduce the amount owing, but, in addition, may seek an even larger amount from the Plaintiff.

When a Defendant makes a Counterclaim against the Plaintiff, the titles of the parties expand somewhat, as their respective roles change. The Defendant becomes the Plaintiff by Counterclaim, while the Plaintiff also becomes the Defendant to the Counterclaim. Sometimes it seems that more work is spent on the titles than on the substance. Where the Plaintiff is met with a counterclaim, then that Plaintiff has an obligation to deliver a Statement of Defence to the Counterclaim.

In some cases, a Defendant may allege that other persons were responsible for the Defendant being liable to the Plaintiff. One example is a motor vehicle accident where car number 3 hits car number 2 from behind, pushing it into car number 1. The Plaintiff in car number 1 sues the driver of car number 2, who might admit hitting number 1, but then alleges that it was really the fault of number 3. Another example is a home renovation with problems. The owner may blame the contractor, who in turn blames the particular trade who did the actual work.

Where a Defendant alleges that another person is at fault, then a claim is made against that other person. If that other person is the Plaintiff, then the Defendant delivers the counterclaim as described above. If that other person is already named as a Defendant in the action, then a Crossclaim is made by the Defendant against the other Defendant. If that other person is not yet named in the action, then they are brought into the action by issuing a Third Party Claim against them. The Third Party Claim is issued by the Registrar in the same office where the original Statement of Claim was issued.

The addition of other persons as parties serves to protect those who are not liable on their own. As well, it gives the Court the opportunity to adjudicate fully and completely on the issues.

Depending on the allegations contained in the Statement of Defence, the Plaintiff may want to respond by preparing and serving a document entitled a Reply. The Reply does not repeat the allegations contained in the Statement of Claim. A Reply is not necessary if it is merely to deny the allegations in the Statement of Defence. A Reply is necessary if the Statement of Defence alleges events beyond merely denying what was originally alleged in the Statement of Claim.

The primary goal of the pleadings is to define the issues to be tried by the Court. Once the exchange of pleadings is completed, the next step in the litigation process is the discovery of documents and the discovery of the parties.

Discovery

The first step in the discovery process is the production of documents by each party. This means the gathering of, and production of, all documents which might be relevant to any issue involved in the litigation. The individual documents are then listed in a document known as an Affidavit of Documents.

The Affidavit of Documents is broken into 3 parts.

In the first part, the party will list all documents in their possession, control, or power which are relevant to any issue raised in the action and which the party agrees to produce to the other parties. These are listed in Schedule “A” to the Affidavit of Documents.

In the second part, being Schedule “B”, the party will list documents in their possession or control which are relevant, but which the party will not produce.

The third Schedule, being Schedule “C”, lists documents that are relevant to an issue in the action, but cannot be produced for certain reasons. The reasons are to be listed in the Schedule.

If the action is proceeding under the Simplified Rules, being Rule 76 of the Rules of Civil Procedure, there is a fourth part, Schedule “D”, where the party must list, to the best of their ability, the names and addresses of persons who might reasonably be expected to have knowledge of the issues in the action.

A few comments about the Schedule “A” documents. The goal is for full, fair and open disclosure of documents. The first issue is whether the document is relevant to any issue raised. This includes an issue raised by you or any other party. You will note that there is no reference to whether the document is favourable or unfavourable to any particular party. The sole question is relevancy. The relevancy is based upon the pleadings discussed above. If there is any doubt as to whether a document is relevant, it is best that we review it and then make that decision.

Another Schedule “A” issue is whether the document is in your possession, control or power. The first criterion, possession, is obvious. The other two, control or power, are not always that clear. As an example, financial statements might be stored in an off-site storage facility, or be with your accountant. Though not in your possession, you would have the ability to bring them into your possession. The Rules of Civil Procedure stop short of making you obtain a document not in your possession, if the other party has a reasonable ability to obtain possession on their own.

The next part is Schedule “B”. Documents are to be listed, though not produced if there is some form of privilege attached. The most common example would be correspondence between you and your lawyer wherein legal advice is sought or received. Another example might be a letter containing a settlement proposal to the other party. All of these should be reviewed to determine whether they are relevant and under which Schedule they should be listed.

The third part, Schedule “C”, is to list a document which normally would be under Schedule “A” but, for some reason, cannot be produced. Common instances of Schedule “C” documents are documents which might have been lost, or an original letter which was sent out without a copy being retained.

Completion of the Affidavit of Documents is impossible without a clear understanding of whether an item should be considered a document within the Rules of Civil Procedure. The catch is the Rules do not actually define the term “document”. Rather, and to avoid some confusion, they state what is to be included within the definition. One would expect that letters and agreements are clearly to be considered documents. As well, books of account, cheques, invoices and delivery receipts are documents. Over the years, the items to be included have expanded to sound recording, videotape and data stored electronically. You must keep in mind that the goal is for full and fair disclosure of the information.

Where an individual is acting on his or her own, then the issue of whether a document is in their possession, power or control should be fairly easy to answer. Where a party is a corporation, then the person nominated to complete the Affidavit of Documents on behalf of the corporation must make reasonable enquiry from other persons who might have documents relevant to the action. For example, the accounting department would have documents such as invoices, while the design department may have documents such as drawings or plans.

It is not uncommon that, during the litigation, a party realizes or finds a document that is relevant and not previously produced. When that happens, you have a duty to produce that newly found document. Usually, this is not a problem provided that the other side has a reasonable opportunity to review the document and, if appropriate, ask questions about the document.

Not disclosing a relevant document can generate various problems. If the document is favourable to your case, the Court might not allow you to rely upon the document at trial. If the document is unfavourable and not produced, then you run a serious risk of being reprimanded by the Court. The reprimand could be very costly. At all times, the Court expects parties, and their counsel, to act with honesty, diligence and integrity.

Once the Affidavit of Documents is completed, the Rules of Civil Procedure provide that it is to be served on the other parties. They then have an opportunity to inspect all of the Schedule A documents. Often, counsel co-operate by making copies of the documents and sending them to the other side. Subject to the volume, it is likely that a reasonable photocopy charge would be billed to the other side.

The Simplified Rules of the Rules of Civil Procedure mandates a slight difference. Once the Affidavit of Documents is completed, it, along with copies of the Schedule “A” documents, are sent to the other parties, without charge.

Oral Examinations

The first part of the discovery process was the documentary stage which was completed by the exchange of the Affidavit of Documents. The second part is the examination of the opposing parties, unless your action is under the Simplified Rules in which case oral examinations are not allowed. Usually this is conducted by an oral examination.

The examination is recorded by a reporter who can then transcribe the examination if requested. The examination may be in a private office, or may be at the offices of any number of reporting services. Often, it is an informal process of the lawyers sitting down with one of the parties and asking questions of that party. While the process is somewhat informal, and sometimes relaxed, never disregard the importance of the process and the fact that each word spoken is being recorded.

There are several goals sought in conducting an oral examination.

- Prior to trial, each party will learn something about the evidence that the other party intends to rely upon.

- It will enable each party to examine and assess the strengths and weaknesses of the other party’s case.

- By learning the evidence to relied upon, and the strengths and weaknesses, the parties may be more inclined to settle some or all of the issues.

- To avoid being surprised at trial.

There are rules to be followed by parties being examined. The most important rule being that one should answer honestly. Another rule is to not answer any question unless you clearly understand the question. As we near the date for any examination, we will review the procedure in detail and set out all of the rules with meaningful examples.

During the oral examination for discovery, you might be asked to search for a particular document, or be requested to ask someone else a particular question. We will deal with all of those scenarios and, where appropriate, have you complete any task agreed upon.

Oral examinations can be time consuming and costly. Proper preparation will serve to minimize the total time required.

If your action was commenced under the Simplified Rules of the Rules of Civil Procedure, then oral examinations are not permitted. This reflects the fact that the cost of the oral examination is significant in comparison to the amount in issue, which most likely is under $50,000.00. Unfortunately, this also means that your ability to learn the case of the other party, and to avoid being surprised at trial, is diminished. Fortunately, the Court recognizes these issues and takes them into account during the course of a trial.

Mandatory Mediation

Throughout any action, the parties are always encouraged to consider and negotiate a settlement of some or all of the issues raised in the action. This goal is never absent during the course of your legal representation.

As an added incentive to encourage settlement, an attendance before a mediator is mandatory for most civil actions commenced in Toronto. Initially, the choice of the mediator is left to the parties. However, where the parties do not co-operate in the selection of the mediator, the Court will assign a mediator.

Mediators may be practising lawyers, or retired Judges. They possess skill in negotiating and bringing about a successful mediation. For some cases, the selection of a particular mediator may not be crucial. In other cases, one might want to be assured that the mediator has some prior experience in that particular area of law under which your action falls.

There are costs to the mediation. First, there is the set cost of a mediator selected from the Court roster of mediators. The cost of a mediator who is not on the roster may be considerably higher. Second, there may be a charge for the facilities where the mediation is held. The parties to the action share these costs. Third, there is the cost of preparing material for the mediation and attending at the mediation.

As the goal is to resolve some or all of the action, the discussions at the mediation, along with any proposals for settlement, are strictly without prejudice to the parties and cannot be used against any party at a later time.

The specific procedure at the mediation will be reviewed with you at the appropriate time.

Settlement Conference

If the action has been commenced under the Simplified Rules of the Rules of the Civil Procedure, then it is mandatory that the lawyers representing the parties conduct a settlement conference. This can be done with the formality of an actual meeting, or by telephone call. The goal is to try to generate a settlement, or, at least, try to simplify and narrow the issues.

Pre-Trials

After the action is ready for trial, the Court will assign a date when parties and their counsel are to attend at a judicial pre-trial. The pre-trial will often be held before a Judge. In Toronto, the pre-trial might be held before a Judge or a Master. Prior to the pre-trial, the parties are required to file material which, in addition to including a synopsis of the action and setting out that party’s position, also informs the Court about that party’s view on their readiness for trial and the management of the trial.

If the pre-trial is conducted by a Judge, then that Judge is not allowed to conduct the Trial. This gives the parties and their counsel the opportunity for a full and frank discussion, without fear that the Judge might form an opinion which might be used against one party at Trial. Interestingly, this long standing rule is expected to change in 2010 to permit the pre-trial Judge to conduct the Trial, if the parties consent.

At the pre-trial, the topics will include the possibility of a settlement of all or some of the issues, methods by which the Trial can be streamlined and conducted in a cost efficient manner, whether there are any special circumstances which might affect the Trial from proceeding in an expeditious manner.

The pre-trial will often be a mixture of a mediation session and advance management of the Trial. If a resolution is not reached on the action, a Trial date will probably be assigned. By having the parties and their counsel present, the Court expects that everyone will be available and ready to proceed on that assigned date.

A word of caution about assigned trial dates. You might be assigned a specific Monday. In many instances, the Court will contact counsel on the prior Thursday or Friday to confirm whether the Trial will start on that Monday. Managing the Trial calenders is a daunting task as there are so many variables that come into play. Do not be surprised if the Friday call is to inform you that your Trial will not start on Monday, but might start on Tuesday. In the world of litigation, it is not unusual to be “on call”.

Trials

Despite the best of efforts to settle, the mediation, and the pre-trial, there remain instances when parties want or need their day in Court and proceed to Trial.

Considerable work is often required to prepare for the Trial. The actual attendance tends to represent only a portion of the total time.

The procedure undertaken at Trial is in the discretion of the Trial Judge. Typically, the Plaintiff will start with an opening statement, identifying the main issues and inform the Trial Judge of some of the evidence that will be introduced during the course of the Trial. The witnesses for the Plaintiff, and usually the Plaintiff, will then give their evidence. Each witness will be examined by their counsel, and then cross-examined by opposing counsel. Where the cross-examination raises new issues, the first counsel might want to examine the witness as to those new issues.

Once the Plaintiff has introduced all of its evidence, the Defendant and their witnesses give their evidence. Again, we have the main evidence, the right to cross-examine, and the possible reply.

To the extent that the Defendant has introduced new evidence, as opposed to merely denying the evidence of the Plaintiff and its witnesses, the Plaintiff is permitted to call witnesses to deal with that new evidence.

Following the completion of the evidence, counsel will make submissions to the Trial Judge as to what findings of fact the Trial Judge ought to make, and on how the law applies to the case, given the facts as found.

All of this procedure is governed by various rules, from the Rules of Civil Procedure to the Evidence Act of Ontario. The procedure is designed to be fair to both sides, though, admittedly, not everyone after Trial easily shares that conclusion.

Costs Awarded in the Litigation

In Ontario, the initial rule is that the winning party will be awarded an amount to compensate them for what they have paid to their own legal counsel to conduct the litigation. That award is generically referred to as the Costs. The Costs which are awarded are often, but not always, related to the invoices which might be issued by your legal counsel.

As with many of the Court Rules, there are several factors which come into play, any all of which can generate a particular level of compensation to the winning party.

There is an inherent policy within the Court system to discourage litigation and encourage settlement or out of Court resolution. To further that policy, the Rules of Civil Procedure create two scales of Costs.

First is the Partial Indemnity. On this scale a party might expect to receive an award of Costs to partially indemnify or cover the actual amounts payable to their legal counsel. Historically, this scale was referred to as party and party costs. Though there is never a precise percentage, it is fair to say that Costs, on a Partial Indemnity basis, will represent something in the range of 50% - 60% of the actual charges incurred. Of course, an immediate qualification must be made that, if your counsel has expended hours which are non-productive, it would not be realistic to expect any compensation for same.

Second is the Substantial Indemnity, or what was previously referred to as the solicitor and client costs. As the title implies, it is designed to substantially cover one’s actual legal costs. An award on this scale might cover 80% - 90% of the actual charges incurred. It is unusual to recover 100% of the charges.

What options are available to the Court? The simple answer is anything and everything. It is entirely within the discretion of the Court as to the scale of award and the amount. However, fairness to the parties means that one should be able to form fair and reasonable expectations for any given situation. Remember, the fair and reasonable is to be applied equally to both sides.

In a typical scenario, two parties proceed through litigation, one of whom will be awarded judgment in its favour. Initially, one would expect the Court to award the winning party costs on a Partial Indemnity basis. For the winner, they receive some compensation. For the non-winner, they not only have to pay their own lawyer, but have to pay the Costs awarded to the winning party.

This initial presumption may not hold true if the winning party acted in a manner which was quite unreasonable. It is possible that the winning party is denied any award of Costs. Indeed, it is possible that the winning party might have to pay Costs to the non-winning party. Sometimes, the Court will utilize its jurisdiction and power to send a message, and that message is sent by the award of Costs.

To shift from an award of Partial Indemnity to Substantial Indemnity, the Court would look at various factors.

One such factor is whether there is a contractual obligation to pay costs on a particular scale. In almost every mortgage document, there is a provision that the borrower will pay to the lender the legal costs of the latter, on a Substantial Indemnity basis. Similar provisions may be found in other contracts. The Court would be very inclined to make an award of Costs on a scale to which the parties previously contracted. While the Court does have the power to not award Costs on the agreed upon rate, the Court might have to be strongly persuaded as to why the contractual rate should not be followed.

Next, the conduct of one of the parties may encourage the Court to send a message and award costs on a Substantial Indemnity basis. An example of this scenario is when one party makes very nasty allegations against the other party and then fails to prove any substantial portion of the allegation. A particular example is the allegation of fraud or other criminal offence. While the Pleadings afford the parties certain protection from making nasty allegations, there is a balance at the end for failing to prove same. Frivolous allegations, or allegations designed to embarrass the other party, are never looked upon by the Court with favour.

Another example is when a party causes a substantial amount of wasted time. While counsel should always vigorously represent his or her client, there is a point where it might be regarded as abusive to the other side.

Last, and perhaps most common, is the consideration of whether the parties made an Offer to Settle. As the Courts are always encouraging settlement, the proper utilization of an Offer to Settle is a power tool employed in the category of awarding costs. More will be said of this below.

Who determines the amount of costs? At any time, the Judicial Officer hearing the particular matter has the discretion to fix or determine the amount of Costs. For example, after a motion is completed before a Master, or a Judge, they would be in a very good position to appreciate how much time was, or ought to have been, devoted to that motion and fix the amount of Costs. For shorter Trials, one would expect the Judge to also be willing to fix the Costs of the action after some submissions and evidence as to the Costs. For longer and complicated actions, the Trial Judge might refer the determination to an Assessment Officer who then conducts an informal hearing to make the determination. In referring the matter, the Judge will also instruct the Assessment Officer as to which scale of Costs should be applied and, perhaps, provide specific instructions to the Assessment Officer.

When are the costs awarded? Whenever the parties attend in Court, whether it be on an interim motion or the Trial, there is an opportunity to ask for Costs of that attendance. For example, after a motion is heard and the decision made by the Court, counsel will be invited to make submissions as to the Costs of that motion. After a decision is rendered at Trial, counsel will be invited to make submissions as to the Costs of the action, which will include Trial, but not include any motions where Costs have already been determined by the Judicial Officer hearing that motion. After receipt of submissions from both parties, and receipt of any Offer to Settle, the Court will make an award of Costs as it deems appropriate.

When are costs payable? The trial completes the action and any award of costs would be immediately payable, subject to whether an appeal is being taken.

For attendances such as interim motions, the Court has several options as to when the costs are payable. Here, the discretion of the Court is broad and often applied to reflect the Court’s view on whether the motion was necessary and/or brought in an efficient and expeditious manner. The easiest examples are shown by first presuming that the Court has determined or fixed the amount of the costs. Then the costs could be made payable in any of the following manners:

- to the party that won the motion within a very short time (“fixed and to the winner forthwith”);

- to the party that won the motion at the end of the action (“fixed and to the winner in any event of the cause”);

- to the party that won the motion, but only if that party also wins the action, (“fixed and to the winner/party in the cause”);

- to whichever party wins the action (“fixed and in the cause”).

As you can see, a party who loses the motion might avoid having to pay those costs if that party wins the lawsuit.

Offers to Settle

One method by which parties can often propel themselves to a better award of Costs is the effective use of an Offer to Settle. As the Courts want to encourage settlement, an Offer to Settle is almost always considered and used as a tool to award additional cost compensation.

At any time during the litigation process, each party may submit to the other party a formal Offer to Settle. For now, we will leave aside the technical aspects of an Offer to Settle and briefly review the overall process.

First, and most important, the terms of an Offer to Settle are never disclosed to the Court until the Court determines the issue of liability. All too often, clients are hesitant to make an Offer for fear of whether a Judge may interpret the Offer and react in a negative manner towards the party. The Judge has already made his or his decision before learning the terms of the Offer.

The Court will compare the Offer to Settle to the actual award made. At that point, the Court may quickly determine that the other side should have accepted the Offer when it was made and, thus, avoided the additional litigation. While the winning party should normally receive costs on a Partial Indemnity basis, a winning party who is awarded more than what it was willing to settle for as contained in the Offer, may be awarded costs on a Substantial Indemnity basis for all steps taken after the Offer was served. For example, you sue someone for $100.00 and, one-third of the way through the action, offer to settle for $80.00. At Trial, the Court awards you $95.00. You would expect to be awarded Partial Indemnity Costs to cover your legal costs up to the date of the Offer, and then Substantial Indemnity Costs for all steps taken after the date of the offer. This reflects the fact that the Defendant, who could have walked away by accepting the offer at $80.00, pushed the matter further, and ended up having to pay $95.00.

The Rules also cover when a Defendant submits an Offer to Settle and, at Trial, achieves a result more favourable than the Offer. Unfortunately, the Rules for the Defendant do not exactly mirror the Rules for the Plaintiff. Consider a Defendant who is sued for $100.00, part way through the action offers to pay $80.00 and, at Trial, is ordered to pay to the Plaintiff $60.00. The Plaintiff was right to sue the Defendant. However, the Plaintiff refused to accept a reasonable offer and pushed the matter further. As a result, the Plaintiff might find that it is awarded some Costs up the to date of the Offer, but has to pay the Defendant some Costs for steps taken after the date of the Offer.

Submitting an Offer to Settle early in the action gives the party an early opportunity to settle. As well, the number of steps taken after the Offer to Settle will exceed the number of steps prior to the Offer, which, hopefully, will generate a greater recovery of Costs.

A few words of caution. Submitting an Offer which is quite high may be of little value unless the party is quite certain that the final Court award will be more favourable than that Offer. Submitting an Offer which is quite low may mean the party is certain to be awarded a greater amount by the Court. However, that low Offer might be quickly accepted by the other side with the result that there is some regret about making the Offer that low.

Proper use of the Offer to Settle should always be considered as an effective tool, not only to promote settlement, but to maximize the probability of recovering a majority of legal Costs expended.