Showing posts with label small claims court. Show all posts
Showing posts with label small claims court. Show all posts

Monday, December 6, 2010

Changes to the Small Claims Court Rules

This just in: Effective January 1, 2011, the Small Claims Court Rules will be amended.

There are a few changes coming, and this isn't a comprehensive examination of them, but some of the big ones involve recovery of legal costs, which I've blogged about before.

Some of the more technical rules are being changed. For example, there used to be a minimum of $500 on the claim in order to trigger certain costs provisions, and that will be gone. Also, there used to be a provision for successful parties to recover up to $50 for preparing and filing the pleadings. This is gone, replaced by a provision allowing the successful party to recover up to $100 for disbursements associated with preparing the pleadings.

Minor points. The 15% cap is still there for representation fees, so allowing representation costs on a less-than-$500 claim means that the successful represented party can go for up to a whopping amount of legal fees still under $75, by default. (By contrast to self-represented litigants, who can get up to $500 for inconvenience.)

Here's a big one, though: There is currently a half-costs rule for "agents" (i.e. paralegals) and students-at-law, so the 15% cap gets reduced by half for non-lawyers. That's gone. As of January 1st, 2011, a paralegal or student-at-law will be capped at 15%, same as lawyers.

Of course, it still has to be a "reasonable" representation fee - there's nothing automatic about 15%. That said, even at paralegal or student-at-law rates, it will be the rare case where 15% of the amount claimed at Small Claims Court is much more than a 'reasonable' representation fee.

This amendment is a coup for paralegals - whereas, in many cases before, a successful litigant would have to swallow a larger amount of legal fees by hiring a paralegal than by hiring a lawyer, now it will be quite the opposite, that a successful party will likely have a larger proportion of their legal fees covered by a cost award.

*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Wednesday, May 26, 2010

Double Costs at the Small Claims Court

Landmark decision by the Divisional Court. But first, some background.

Small Claims Court has always had a limited ability to award costs. s.29 of the Courts of Justice Act limits the costs to be recovered to 15% of the amount claimed, unless the Court thinks it necessary to punish a litigant for unreasonable behaviour in the course of the litigation. This has not been changed.

Note that it's the amount claimed, not the amount recovered. If a plaintiff claims $25,000, and only recovers $5000, then the s.29 cap is still 15% of the $25,000. (No guarantee on getting that full amount, but still useful. If you've got a strong case, it can be a good idea to inflate the amount of the claim to increase the Court's costs jurisdiction.) Also, if there's a counterclaim, that amount is considered cumulatively. If I sue you for $25,000, and you counterclaim for $25,000, then the maximum costs awardable is 15% of $50,000.

The Old Rules

Until July 2006, however, the Rules of the Small Claims Court set a dollar-figure cap for costs. If you retained a lawyer to represent you from start to finish, and you were completely successful in your claim after a full-day trial, then - aside from your disbursements (some of which will be awarded fully and some orders which you would find woefully inadequate) - you might have recovered $50 for preparing and filing the pleadings, and you might have recovered up to $300 as a representation fee. For paralegals or articling students the representation fee cap for your recovery was reduced to $150.

Let's do some hypothetical math here: Suppose your lawyer bills $200 per hour, and the trial took 4 hours. You're already $450 in the hole on your legal fees if you get that maximum, without even considering the many hours your lawyer spent prior to the trial preparing the case, preparing the pleadings, meeting with you, reviewing and preparing documents, etc. Thousands of dollars easily. At a time when the jurisdiction of the Small Claims Court was $10,000, a lawyer would often cost more than what you would get at the end of the day if successful.

But then there's Rule 14, which deals with Offers to Settle. If you make an offer to settle (which meets certain criteria) which the other party doesn't accept, then you do better at trial, you can get "double costs". So the above-noted $300 representation fee becomes $600. Nice, but still doesn't make much of a dent in the actual legal fees.

And everything was considered to be subject to the 15% provision from the CJA. After all, that's what s.29 meant, that despite the dollar amounts listed in the Rules, it couldn't exceed 15%.

The New Rules

The $300 costs maximum was replaced by "a reasonable representation fee". The $150 costs maximum for paralegals/students was replaced by "half of the maximum costs that may be awarded under section 29 of the Courts of Justice Act."

The double costs provisions from Rule 14 remained unchanged, however, as did s.29 itself (the 15%).

So the question becomes this: If, in the ordinary course, I can obtain a costs award for 15% of the claim amount, and I make a Rule 14 offer which is not accepted, then I do better at trial...what is the consequence of Rule 14? Can I get double the 15%? Or does the 15% cap 'trump' the double cost provision?

I was at a conference last year where this was discussed. Some Deputy Judges have found that the 15% cap is doubled by Rule 14. Some Deputy Judges have found that Rule 14 is subject to s.29, so 15% can not be exceeded.

At least one judge, in a clever bit of sophistry, held that the refusal to accept an offer that's better for you that what you eventually get at trial is inherently unreasonable conduct worthy of punishment, thus getting into the s.29 exemption for the 15% cap.

Thus, it wasn't established law.

More Recent Developments

As of January 1, 2010, the Small Claims Court has jurisdictions over claims of up to $25,000. Before, it was $10,000. When cost caps are determined by percentage of the claim amount, suddenly costs are looking a lot more significant.

The Landmark Case

Barrie Trim v. Heath et al., 2010 ONSC 2598 (CanLII)

BTM was sued in Small Claims Court for $10,000. In November 2007 they formally offered to settle the matter on the basis of a dismissal of the action without costs. The offer was not accepted, and the matter went to trial. The plaintiffs were successful at trial, but BTM appealed to the Divisional Court and the judgment was set aside. This decision by the Divisional Court regarded costs, both on the appeal and at the Small Claims Court.

BTM sought $3000 for its representation fee at the Small Claims Court - 30% of the amount claimed - and therefore the question became the effect of the November '07 offer. Ultimately, obtaining a dismissal of the action was clearly a more favourable result than was obtained in the offer, so the Divisional Court finally had to wrestle with the question of whether or not the current Rule 14 could relieve against the limit in s.29.

The Divisional Court looked at a persuasive Small Claims Court decision: "if the 15% “cap” could not be doubled under Rule 14.07 without offending s.29, then the effectiveness of the cost consequences aspect of Rule 14 is undermined and in many cases would be drained of any real meaning." The Court found this reasoning persuasive, and held that Rule 14 can relieve against the s.29 limit.

Food for Thought

I sue you for $25,000. You counterclaim for $25,000. I serve an offer to settle that involves you paying me $20,000, and you refuse to take it. At trial, I win the full amount of my claim and your counterclaim is dismissed.

I can be awarded a representation fee of up to ([$25,000 + $25000] * 15%) * 2, or $15,000.

That's not bad, actually. Considering that the Small Claims Court process is relatively brief and expedient, and considering that even at the Superior Court you're usually only looking at getting a contribution towards legal fees, we're starting to get into numbers in Small Claims Court that could actually reflect reasonable legal expenses - certainly a stark contrast to the $300 cap of four years ago.

With the expansion of the Small Claims Court jurisdiction, more and more claims for significant amounts of money will be made in the Small Claims Court venue. If a client comes to me with a $25,000 claim, I can now tell her that, with a good offer to settle, and if successful at trial, she might recover up to $7500 in legal fees, which could be a significant portion of the total fees. In the past, retaining a lawyer for Small Claims Court was a problem because, even if you win, you still lose after paying legal fees. Nowadays that is not necessarily the case.

*****

This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

Tuesday, April 27, 2010

Legal DIY

I find that I'm ending almost every entry with "consult a lawyer". It's not designed to be shameless self-promotion. I mean, I'll freely admit that marketing is one objective of this blog, but the primary purpose is to inform, not to sell. To prove it, this entry is about the things for which you shouldn't necessarily consult a lawyer.

A lot of the calls I take are from people who just...need help. Advice, guidance, not necessarily legal expertise. I like to help people; at the same time, there's something a little distasteful about billing my hourly rate to do something that doesn't utilize my significant education, license, or even professional insurance. Sometimes it's common sense. Sometimes the answers to questions are easily found in a fairly brief Google search. Sometimes it's a matter of just picking up the phone to call whatever institution the person is dealing with, and navigating their bureaucratic phone system.

Lawyers serve a purpose. A very important purpose, in fact. But we don't work magic. I absolutely understand the frustration of having to maneouver a company's bureaucracy to get a straight answer, but a lawyer is unlikely to do it with much more ease than the client. (In fact, the representational problem is one more hurdle. Many institutions resist dealing with anybody other than the named individual, or might legitimately need information not immediately available to the lawyer. This makes the interaction even more difficult.) So, rather than sitting on hold with various call centre reps for three hours yourself, your lawyer will do it and charge you several hundred dollars for the privilege.

I once took a call from a person who had successfully navigated the Small Claims Court system up to the point of obtaining a judgment, and had taken several steps to try to enforce the judgment, but found that she wasn't having any success. She wondered if it would be worthwhile to retain me. My answer was simply No. Not a chance. Even assuming that I was ultimately able to help her collect on the judgment, I'd be charging her a lot more money than was at stake in that matter in order to do so. Moreover, it sounded to me like she was handling the system pretty competently herself. So I told her that there's nothing magic that we lawyers can do.

There is a great deal that lay people can do on their own without legal assistance in many circumstances.

(1) Early Stage Conflict Resolution

Talk to the other side. If you feel that you have been wronged, then talk to the responsible party yourself first. Be reasonable, be calm, don't threaten, don't bluster, and don't make any concessions you're not prepared to be held to. (In some circumstances you can argue that such concessions shouldn't be used against you later, but not always.) The limitation here is that, if you're operating without legal advice, you may not know what your rights and remedies are. But in many cases, it doesn't take a legal expert to know what needs to be fixed.

Often, folks will call me just to engage in the negotiation stage on basic disputes like a bill being too high, etc. They want me to do it because they think a letter from a lawyer will have more impact. People expect others to be intimidated by lawyers. Sometimes this is true. I don't consider myself to be necessarily intimidating. As a matter of style, I think I'm more effective in resolving conflict by trying to get the other side to be reasonable than trying to get them to be afraid. The only really intimidating thing about being contacted by a lawyer is that it shows how seriously the client is taking the problem, in that they're prepared to pay the lawyer a whole lot of money to handle it.

Sometimes it may help. In my estimation, it's rare that the resolution achieved that way is so much better as to make the legal help worthwhile.

Of course, when dealing with more complicated legal questions, like "What's a dismissed employee entitled to?" or "What are the scale of damages on this breach of contract?", that's a different matter. Maybe you need a lawyer to put together a demand letter...but that's because the lawyer knows better than you what to ask for, as opposed to knowing how to ask.

(2) Google is Your Friend

Not that Google is the only search engine, but this is Blogspot, and Google is my usual first line of searching. Many times, where there's a problem to be solved, the answer is on the internet. Even quasi-legal questions have abundant resources on the internet. A question about your statutory employment rights? Look at the Ministry of Labour web site. (A caution: That only deals with statutory rights; sometimes, an employee will have additional rights, and can actually lose those rights in some cases by going to the Ministry.) A question about crossing the border? Check out the CBSA web site.

When I was in high school, I took a job in which I wasn't getting paid for "training" or various other activities. Training was on-the-job, being shown how to do the job and being supervised while you did it. Well, not even that, sometimes. On one occasion, when I was still an unpaid trainee, I ended up closing my section of the store myself; everyone else had gone home.

Ridiculous. I knew that this was wrong. I knew that I had entitlements that weren't being met. Trouble is that I didn't know what the recourse was, what could be done about them. This was in the early days of the internet, when there wasn't a great deal of information online. Now, it's easy for any tech-savvy lay person to find abundant information on how to respond to this sort of thing. Don't spend money on a lawyer when you can do it yourself.

(3) User-Friendly Venues

Part of my job is to help people navigate elaborate legal processes. The Rules of Civil Procedure are not exactly accessible to your average lay person, and it usually takes experience to turn the contents of that rather lengthy document into the real tangible steps of a legal proceeding.

But not everything needs to go to the Superior Court. The Small Claims Court in Ontario now has a monetary jurisdiction of up to $25,000, and it is designed to be accessed by self-represented litigants. Again, lots of resources online to help with this. That's not to say that it's an easy process, and you're still limited in that you don't have a lawyer to help you understand and address the strengths and weaknesses of your case, but if you have a claim worth a few thousand dollars, you're still usually going to be better off going to Small Claims yourself than to pay a lawyer to do it.

Likewise, you don't necessarily need a lawyer to make a complaint to the Ministry of Labour. The paperwork for making an Application to the Human Rights Tribunal of Ontario is fairly straightforward, and all their jurisprudence is published online for free. (Though free legal assistance is available to Applicants in that kind of process.)

(4) Paralegals

Less expensive, sometimes even more experienced in some venues. As noted earlier, make sure they're licensed.

(5) Letting it slide

Sometimes, the cost of fixing a problem simply isn't worth getting it fixed. When you have a car worth $500 that needs $1500 worth of work put into it...you get rid of the car, right? Same thing with law. If you have a claim worth $1000, why on earth would you pay a lawyer $10,000 to make it for you? If you can't pursue it yourself, it isn't likely to be worth pursuing at all.

As a professional I aim to deliver value for money. If my services are more expensive than they're worth, then not only will you not be happy at the end of the day, but neither will I.

My job isn't to intimidate, nor to put on a show. My job is to provide expert advice and representation on legal issues. And this is important. If you want an assessment of whether or not you have a case, you need a lawyer. If you need an opinion as to what kind of damages you might be able to seek, talk to a lawyer. If the case is worth the cost of having it presented in an expert fashion, retain a lawyer. But when deciding to consult a lawyer, you need to understand the limitations of the role of a lawyer, the purpose of a lawyer, and the cost of a lawyer.

*****

This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.