Going to court can be expensive. However, in some circumstances, a lower-cost option is available.
The Small Claims Court is a branch of the Ontario Superior Court of Justice that is designed to be a people’s court and a “court of equity.” It was created to increase access to justice by providing a more efficient, cost-effective, and less formal forum to resolve disputes.
Small Claims Court is seen as a place where an individual can readily and inexpensively access justice, without the use of a lawyer. It includes features such as simpler procedures and relaxed rules of evidence to facilitate access to justice. Because the monetary limit for Small Claims Court is $25,000, a plaintiff with a claim above $25,000 must abandon its claim for the amounts beyond $25,000 in order to come within the monetary jurisdiction of the Small Claims Court.
Although the Small Claims Court is intended to be a more cost-effective forum, defendants may find themselves in a lose-lose situation. Unlike plaintiffs, defendants have no choice but to defend the action or face the risk of being the subject of a default judgment. Even if a defendant retains a lawyer and successfully defends the claim, he or she may have incurred more legal fees than the monetary value of the claim.
A defendant has several options when sued, depending on the circumstances of the case and the amount of money the defendant is able and willing to spend, including:
• Pay all or part of the claim;
• Ignore the claim;
• Retain a lawyer;
• Act as a self-represented litigant;
• Negotiate a settlement.
Pay all or part of the claim
Needless to say, paying the amount claimed is the simplest way to resolve a claim. However, it is also the least likely route that most defendants will choose. A defendant may consider paying part of the claim, or negotiating a payment plan with the plaintiff to pay all or part of the claim. If a claim cannot be settled with the plaintiff, the defendant must dispute the claim or the amount being claimed, and the following alternatives must be considered.
Ignore the claim
While it may be tempting in the heat of the moment to toss a claim out the window upon receipt, it is risky to ignore a claim that has been properly served on you. A defendant has 20 days from the date of service of the claim to provide a defence, failing which the plaintiff is entitled to obtain a default judgment. That judgment can then be enforced against the defendant through various enforcement proceedings, including garnishment proceedings, judgment debtor examinations, and writs of seizure and sale.
A default judgment can be set aside only if the plaintiff can demonstrate to the court that the motion was brought as soon as is reasonably possible in the circumstances, that there was a reasonable explanation for the default, and that there is a meritorious defence to the claim. While the court will often set aside a default judgment if the three conditions are met, there are no guarantees that it will do so and every case depends on the specific facts.
The headache and expense of setting aside a default judgment can be avoided by defending the claim within the timelines. Accordingly, even if you are infuriated at being sued and believe there is no merit to the claim, do not sit on it. Instead, do your best to respond to the claim promptly and properly.
Retain a lawyer
When served with a claim, it is always helpful to speak with a lawyer to obtain advice regarding the applicable rules, timelines, and legal procedures. Of course, the problem with retaining a lawyer to defend a relatively modest claim is that you must pay legal fees. Good lawyers can be expensive. As well, it is often difficult to predict how the litigation will progress and how much it will ultimately cost. The conduct of the opposing party along with other unpredictable factors can make a “simple” claim become much more complicated and time-consuming, and therefore, more expensive.
Because a defendant’s legal fees may surpass the amount of the claim, a defendant may look back and regret not having simply paid the amount claimed. However, the decision to defend a claim may have been based on notions of principle and fairness rather than on the legal costs involved than they are about letting the plaintiff succeed.
It is important to note that only a small portion of legal costs can be recovered by the successful party in Small Claims Court. The amounts awarded are limited by the Small Claims Court Rules and the Courts of Justice Act. Successful parties are entitled to recover a “reasonable representation fee” if they are represented by a lawyer, which is capped at a maximum of $3,750. The amount allowed is subject to the discretion of the court, and is often more modest than the maximum allowed.
While retaining a lawyer is often beneficial because of his or her knowledge, expertise and familiarity with legal procedures and principles, as an alternative to retaining a lawyer a defendant can act as a self-represented litigant.
Small Claims Court is intended to be easily accessible by lay citizens without the assistance of lawyers. Accordingly, there are various resources available to the public to assist self-represented litigants. For example, the Ministry of the Attorney General website includes general information and guides for different elements and procedures involved in a lawsuit. The Small Claims Court Rules, which provide all the rules and procedures for Small Claims Court matters, are also available online. Self-represented litigants are able to gain a good understanding of the process and procedures through these resources and to navigate the justice system effectively.
Self-representation is not cost free. Court fees must be paid to defend a claim. There may also be expenses involved with preparing and delivering documents to other parties or taking time off work to attend court. Self-represented litigants can request a maximum of $500.00 as compensation for “inconvenience and expense.”
It is important to keep in mind that at any point of the proceedings before trial, the parties can settle the claim to avoid further litigation. There are many reasons why a plaintiff may agree to settle for less than the amount claimed, including that:
• The plaintiff may want to obtain immediate payment now rather than waiting until trial;
• The claim, or the amount being claimed, may be difficult to prove;
• The plaintiff may want to avoid the trouble and time of going through the full legal proceedings;
• The plaintiff may want to minimize legal costs by avoiding having to go through the full legal process and prepare for trial if they have retained a lawyer; and
• The plaintiff may be more likely to get money from the defendant through a mutual settlement, rather than through a court judgment which may require the plaintiff to take enforcement proceedings and incur costs if the defendant refuses to pay.
It is always advisable to remain open to discuss and negotiate, and to be reasonable in order to make it possible to negotiate a settlement. Often, an amicable resolution of the dispute will result in less disgruntled parties than will a full-fledged trial where there is inevitably a winner and a loser.
Consider the options
Do not fret if you are served with a Small Claims Court claim. Try to understand the claim and what the plaintiff is trying to achieve by suing you. Critically assess your position and consider the options and resources available to you before you take any action, but be aware of the applicable deadlines. Should you decide to act as a self-represented litigant, ensure that you understand the court’s rules and procedures and take them seriously. They are not mere technicalities. If you decide to retain a lawyer to represent you, be sure to have an open discussion about legal fees with your lawyer. In either case, consider whether the legal fees or legal costs may outweigh the value of defending the claim.
Angela Kwok is a lawyer at Lawrences Lawyers, Brampton, Ont.