Small-claims court – little justice, huge problem

Rob Kruyt photo

Thousands of British Columbia businesses find themselves fighting cases in the small-claims court every year. So, here’s a point of view that might come as a shock. You will not find true justice there. But, before we tell you why, a story.

On a hot day in August 1926, May Donoghue and a friend visited the Wellmeadow Café in Perth, Scotland, where Miss Donoghue ordered ice cream and root beer so she could make herself a float. Her first helping was so good she poured some of the root beer over a second scoop and, woe betide, out slithered a partially decomposed snail, whatever was left after she’d eaten some of it already. Ms Donoghue had a proper fit then came down with a severe case of gastroenteritis. She sued both the Café’s proprietor and the root beer’s bottler.

Ms Donoghue failed in the lower courts. When her case got to the U.K.’s highest appeals court, they ordered a new trial, but guided by brand new principles of law. She won and those new principles have become the foundations upon which huge volumes of negligence and product liability cases are resolved wherever “English law” applies, including in this province.

What’s wrong with the small-claims court should alarm the public generally, but especially the business community, because, except in a relatively few cases, that court is the first and last resort for suits filed by and against tradespeople, professionals, retailers, commercial landlords, financial institutions, insurers and businesses in every other sector of our economy. That is if the monetary value of the claim is $35,000 or less. More than that and cases are heard in the BC Supreme Court.

But the small-claims court a system of injustice? How can that be?

The merits of a case

The merits of a case, as Donoghue vs. Stevenson illustrates, do not hinge on the money at stake.

The law of contracts, torts, trusts and other civil matters are the everyday concern of the small-claims court just as they are in our higher courts. In our courts, the procedural laws and the substantive law are both meant to be bound by precedent. But the binding force of precedent has broken down in the small-claims court. There is altogether too much ad hockery.  

The rules of court

Everything that goes on in the small-claims court is determined by its rules, which are to be read in the context of its statutory purpose which, with the lay litigant in mind, is meant to resolve cases in a “just, speedy, inexpensive and simple manner.”

But recently, the court has been subdivided to push claims for $5,000 or less to a Civil Resolution Tribunal while cases over that amount go to the main court, where, if the value is up to $10,000, the parties can opt for what is called a simplified trial process.

Prior to these changes, the rules of court were already verging on the byzantine, but now, given the stated purposes of the court, they have become more complex than most lay litigants can comprehend. Indeed, there ought to be a sign over the door: “Beware all ye who enter here without a lawyer – and a damn good one at that.”

Every litigant who is unrepresented by a lawyer is at a complete and utter disadvantage in this court, especially if the other side is represented by a lawyer. And not just because lay litigants will be befuddled and mystified by the court’s processes, but because they are subject to the whims of the court’s Judges.

The whims of judges

The rules of the small-claims court bestow an enormous amount of discretion on the judges who hear cases. Example: the rules relax the traditional and hard-won rules of evidence, almost to the point of suspension. However, the ambit of judicial discretion goes much further and much wider than that.

Business litigants would be shocked, for instance, to learn how often small-claims court Judges routinely disregard the fact of corporate existence – and, therefore, the principle of limited liability. The long arm of the law may reach right through the fences your incorporation was supposed to have erected around your business and grab you personally by your unsuspecting throat.

Legal judgment is best exercised by the intelligent, the careful and the empathetic, but also by people thoroughly educated in the law. Although there are may good judges in the small-claims court, it is obvious that our best and most learned lawyers do not apply to be judges there. There are too many bureaucrats in judicial clothing and judicial discretion is too often used in the way of a royal prerogative, not as a precious gift that should not be squandered.

When bad things happen

If your case goes to trial and you think the judge made a legally wrong, final decision, you can appeal the decision to the Supreme Court of BC. If you don’t like that court’s decision you can appeal to the BC Court of Appeal. Don’t like that court’s decision, well there’s always the Supreme Court of Canada. It’s the usual path.

But here’s the rub. Under small-claims court rules, judges can make hundreds of different kinds of decisions that are not “final decisions made at trial”. Any number of those decisions – called interlocutory decision – can mess up your case very badly indeed and deprive you of a fair result on the merits. Evidence may be let in or excluded improperly. You may have missed a deadline you did not know about so your case is stopped in its tracks with you as the loser. An order might be made that makes you personally responsible for your company’s acts.

Sure, you can apply to another judge of the small-claims court to correct the mistake, but while one Judge may take pity on you and let you pursue your case, another may be pitiless and take extra time to cast aspersions on your character. Consistency, no.

So, what do you do about bad interlocutory decisions? Well, you either accept your fate, or you can file a petition for judicial review in the Supreme Court of British Columbia. However, most lay litigants will not learn about this remedial process because it is very well hidden in the legal bullrushes, which deters uncountable litigants who never find their way to review from seeking redress. Bad decisions are rarely undone.

Whether you appeal a final order at trial or find your way to a judicial review, you immediately step into the judicial big leagues. Two things happen. First, that part where the legislature says it wants you to enjoy an inexpensive resolution of your case becomes unpardonably expensive and second, the rules get tougher, the road gets meaner, the judges get more demanding and the lawyer who is representing the other side is way up on his or her toes gunning for a win.

And consider this: the appeal court and the review court will base their decision on one question: was the decision of the small-claims court judge “reasonable”? The usual answer is “yes” because – wait for it – the wide discretion vested in small-claims court judges makes too much of what they do “reasonable” in that context.

No check on the system

The really rotten, horrible, no-good thing about the system is that there is virtually no supervisory check on what goes on in small-claims court. Cases and matters that involve matters of tremendous legal import too often result in questionable decisions and hardly any of them get to appeal or review courts. Cases as “trivial” as May Donoghue’s almost never break through to establish new precedents that meet the needs of a dynamic, evolving society.

Apart from the impact the small-claims court has on individual litigants, it is a system that will inevitably erode and undermine confidence in our justice system, so something needs to be done and done soon.

Fortunately, the small-claims court does not have to be burned to the ground.  It can be rebuilt with its good wood. Here are a few proposals.

Restating the court’s purpose

To reduce and control the discretion vested in small-claims court judges, the court’s purpose should be restated to enable “the resolution of claims within the constraints and traditions of Canadian law in a manner that is just, speedy, inexpensive and simple.”

No monetary limit

Permit cases of any monetary value to be brought to the small-claims court, with the proviso that all cases with a monetary value of $50,000 or less be initiated in the court. The Civil Resolution Tribunal should be eliminated.

Stream cases online

Over the next three to five years, transition case management so that all cases can be managed online from start to finish. At the end of the transition period, require all cases to be initiated online. During the transition period, litigants without the necessary technology and skills initially should be able to use current paper-based methods of filing claims or responding to them.

Library and computer lab

A library and computer lab staffed with legal clinic or legal aid lawyers and qualified students should be provided to assist litigants with online case management including the initiation of claims.

Precedent database and rules manual

To ensure and enable judicial consistency, the decisions of the court and any appeals from those decisions should be continuously databased with appropriate notations concerning procedural and substantive decisions and be made accessible to the public. An online version of the rules of court should be continuously noted-up with decided cases for use by litigants and Judges.

Notification of claim and first reply

The file-opening procedures should consist of a claimant filing a notification of claim that will be delivered to the defendant with a statement by the claimant that they are or are not interested in settlement and mediation. The notification of claim will provide a short statement with the central allegations against the defendant. The defendant will reply with a short statement stating why the claim should be denied and a statement of their disposition towards mediation and settlement.

One-time truthfulness oath

When a claimant initiates a claim and a defendant replies they should be required to promise to be truthful in all ways and at all times from the beginning to the end of the case and to further promise to fully disclose all relevant evidence the court in all ways at all times with respect to written or oral testimony and with respect to documents submitted as evidence. If the oath is made online, then litigants should print, sign and deliver the oath to the registry. Breaches of these oaths should be sanctioned by appropriate orders including the possibility of making a default order against a breaching litigant.

Lawyers’ obligations

To reduce the adversarial nature of proceedings, lawyers representing litigants should be bound by their client’s truthfulness oath and by their duties as officers of the court and should not be able to suppress, conceal or mischaracterize evidence in support of the opposing party.

Corporate validation process

Corporate litigants should file a corporate registry certification to establish the validity of their current corporate status. A corporate claimant whose corporate filings are not up to date shall not be permitted to continue with a case until they are. The directors of a corporate defendant whose filings are not up to date should be subject to personal liability if they do not bring their company’s filings up to date within a specified period.

Lifting the corporate veil

No orders should be made against a corporation associated with a litigant but otherwise not involved unless and until it can be shown that a litigant has created the corporation for illegitimate purposes and/or is using it improperly to protect and preserve money and/or other assets that in the litigant’s hands would be exigible in satisfaction of a judgment.

Settlement and mediation

Where both parties indicate interest in settlement mediation, the court should convene a mediation. If the parties settle, then the court should certify the results and permit the parties to avail themselves of the court’s enforcement procedures should the other party breach the settlement agreement as if the breaching party was in default of an order of the court.

Litigant college

Require all lay claimants and defendants to attend a litigant “college” with regularly scheduled classes where they can learn about the small-claims judicial process, court rules, application of limitation periods, failure to meet court deadlines, evidentiary matters, litigant conduct, the availability of settlement mediation and other matters that can affect the outcome of their cases.

Case managers

Assign managers to review filed cases and to assist litigants with the drafting of claims and replies to claims, the identification of required evidence and its production, the writing and swearing of affidavits and other matters germane to the conduct of the case and to examine the litigant for the possibility of settlement.

Case classification

Using the online system, case managers for claimants and defendants and a judge should meet to discuss how to classify cases, first by area of law (contract, tort, trusts etc), by the legal issues involved, by level of complexity, then by monetary value and lastly by likelihood of outcome. Complex cases with important issues should be referred to BC Supreme Court regardless of monetary value. Other cases will continue with the small-claims court process.

Interlocutory applications

Litigants requiring the direction of the registrar, a judicial justice or a judge should be able to apply online for a hearing. The system should enable notifications of applications to be delivered to the other party. Scheduling software should enable parties to set an agreed date for the hearing.

Case managers should be available to guide litigants through interlocutory applications and assist with preparation of documents to be used in the proceeding.

Satisfaction of judgments

At the conclusion of their statement of defence, defendants should be required to state their preferred method of payment of a judgment if one is awarded against them. Those opting for payment by instalment should pay the claimant’s filing fees and an additional 5% of the award plus interest on the outstanding balance to encourage lump sum payments.

Case packages

Once litigants whose cases are proceeding to an application hearing or a trial have completed the necessary forms online, the online system should enable them to print all documents in the prescribed order as a package. Registry staff can print, bind and deliver the same package for the judge hearing the matter.

Appeals of small-claims court decisions

Appeals should be heard within the small-claims court by panels of three judges who do not sit as judges in hearings or trials within the small-claims court, preferably retired judges or judges currently active in the BC Supreme Court, to determine the reasonability of the decision being appealed, including questions concerning errors of law. Appeals should be heard in a BC Supreme Court courtroom. Litigants should be able to appeal decisions of these panels to the BC Court of Appeal in the form of a judicial review with a further right of appeal to the Supreme Court of Canada.

Costs of appeals

A special tariff, consistent with the stated purposes of the small-claims court and which considers appeals as an extension of small-claims court proceedings, should be created under the small-claims court rules that are applicable to small-claims court appeal hearings and to any appeals to the BC Court of Appeal. •

Vian Andrews, BA, LLB, is a Vancouver writer with a background in business and law.