Fundamentals of Civil Procedure – Litigation #1

In Ontario, civil litigation follows a set of procedural rules known as the Rules of Civil Procedure. These rules establish how cases should be conducted to ensure fairness and efficiency. Two fundamental principles govern the civil litigation process:

1. Avoid litigation when possible, and if litigation is necessary, resolve disputes in the most efficient and cost-effective way.
   • The legal system encourages parties to settle disputes outside of court whenever possible. If a lawsuit must proceed, it should be handled in a manner that is fair, swift, and minimizes unnecessary costs. The court system is not designed to encourage prolonged legal battles but to facilitate just and expedient resolutions.
2. The court must handle cases in proportion to their importance and complexity.
   • Not every legal dispute requires the same level of resources. The courts will assess each case and ensure that its complexity and financial stakes justify the time and effort spent on it. A minor contract dispute should not be treated with the same level of scrutiny as a multi-million-dollar commercial litigation case. This principle ensures that court resources are used efficiently and that smaller cases are not burdened with unnecessary legal procedures.

What is ADR? Why ADR?

While litigation is sometimes necessary, alternative dispute resolution (ADR) methods are often preferred. Understanding the basic principles of civil litigation and the benefits of ADR can help individuals make informed decisions when faced with legal disputes. The legal system prioritizes efficiency and fairness, and while litigation remains a necessary tool in some cases, exploring ADR can often lead to more favourable outcomes, as ADRs offer several advantages:

1. Cost-Saving:
   • Even though ADR may involve expenses, such as mediator fees, it can still be significantly cheaper than a full trial.
2. Possibility of Win-Win Solutions:
   • ADR allows parties to craft creative solutions that a court may not be able to provide.
3. Time-Saving:
   • Court cases can take months or years, while ADR can provide a resolution in a fraction of the time.
4. Choice of Decision-Maker:
   • In some ADR processes, parties can select their mediator or arbitrator, unlike a court trial where a judge is assigned.
5. Preserving Relationships:
   • Disputes often arise in business or family settings. ADR can help maintain relationships by resolving conflicts in a less adversarial manner.
6. Confidentiality:
   • Unlike court proceedings, which are generally public, ADR can be conducted privately, keeping sensitive information out of the public record.
7. Flexibility:
   • ADR allows for solutions that courts may not have the jurisdiction to impose.

Types of ADR:

1.  Negotiation:
   • The simplest form of ADR, where parties communicate directly or through their lawyers to reach a settlement.
   • Approaches can be cooperative or competitive.
   • Parties should assess their Best Alternative to a Negotiated Agreement (BATNA), what they stand to gain or lose inside and outside of court.
2.  Mediation:
   • A structured process where a neutral third party helps facilitate a resolution.
   • It can be voluntary or mandatory in some cases.
   • Unlike court proceedings, mediation is cooperative rather than adversarial.
3.  Arbitration:
   • A more formal ADR process where a neutral arbitrator renders a decision.
   • Can be binding (final and enforceable) or non-binding (advisory only), depending on the agreement between the parties.
   • Often used in commercial disputes, where contracts may require arbitration instead of litigation.
   • Governed by the Arbitration Act, 1991, which limits court intervention in arbitrator decisions.

ADR offers a practical alternative to litigation, providing flexibility, cost savings, and faster resolutions. However, whether ADR is suitable depends on the specifics of each case, and there are many situations where litigation remains the only viable solution.

In civil litigation, an LBA is a formal letter sent before initiating legal proceedings, typically used in civil disputes to demand compliance or resolution without immediately resorting to litigation. It serves as both a warning and an opportunity for the recipient to address the issue before being taken to court. Here’s how it works from both perspectives:

As a Client Considering Sending an LBA

If you are a prospective plaintiff consulting your lawyer about whether an LBA is suitable, the key considerations are:

• Efficiency and Cost-Effectiveness: One of the fundamental principles of civil litigation is to resolve disputes in the most efficient and least expensive way possible. If an LBA can resolve the issue without further legal action, it aligns with this principle and avoids unnecessary litigation costs.

• S.M.A.R.T. Requirements in the LBA (This is my own idea, inspired by my previous 10+ years in IT management roles):

  • Specific:
    • Clearly outline what the issue is and what must be done to resolve it.
  • Measurable:
    • Quantify the demands (e.g., pay an outstanding balance of $50,000).
  • Attainable:
    • Ensure the demand is reasonable and achievable.
  • Relevant:
    • The demand must relate to the core issue at hand.
  • Time-bound:
    • Set a clear deadline (e.g., “You must comply within 14 days, or legal proceedings will commence”).

• Legal Position & Tone: Your litigation lawyer will ensure that the letter is professionally drafted, firm but not unnecessarily aggressive. The letter should also refer to any legal grounds supporting your claim.

• Compliance vs. Litigation: If the recipient complies, the matter is resolved without the need for further action. If not, you are already in a stronger position to proceed with litigation.

As a Client Receiving an LBA

If you have received an LBA, consulting a litigation lawyer is crucial to assess the seriousness of the letter:

• Is the Sender Bluffing or Serious? Your lawyer will analyze whether the LBA is a genuine prelude to litigation or merely an empty threat. Some parties send LBAs as a negotiation tactic without real intent to sue.

• Assessing the Legal and Financial Risks:

  • If the sender has a strong legal basis and the matter is serious, ignoring the letter could lead to costly litigation.
  • If there are legal or factual weaknesses in the claim, you may have grounds to challenge the letter or negotiate a settlement.

• Taking the Right Action:

  • If the LBA is a legitimate claim, your lawyer can help you respond effectively—either by complying, negotiating a resolution, or preparing a defense.
  • If it is baseless or contains threats without legal merit, your lawyer may advise on a formal response to challenge it.

With or without prejudice

In the context of an LBA, it is often marked “with prejudice” or “without prejudice”, which affects how the letter can be used in future legal proceedings:

• With Prejudice:
  • If an LBA is sent with prejudice, it means the contents of the letter can be used as evidence in court. This is usually the case when the sender wants to make a firm demand and create a record that could support a future claim.
• Without Prejudice:
  • If an LBA is sent without prejudice, it means the letter’s contents cannot be used as evidence in court (except in limited circumstances, such as proving a settlement agreement). This is often used when the sender is open to negotiating a settlement and does not want the letter to be seen as an admission of liability.

A lawyer can advise on whether to send the LBA with or without prejudice, depending on the strategy and desired outcome.

Before initiating a lawsuit, several key questions must be considered to ensure the action is properly structured and legally viable.

• Is a Demand Required Before Litigation?
  • Certain types of legal actions require a formal demand before commencing a proceeding. For example, in commercial loan or mortgage actions, lenders typically send a notice before declaring a default. Understanding whether a demand is required can prevent procedural missteps that might delay or weaken a case.
• Are There Notice Requirements Before Filing?
  • Certain statutes mandate that notice be given before filing a lawsuit. Lawyers must verify whether a pre-litigation notice requirement applies and the relevant time limits. One common example is claims against municipalities, where statutory notice provisions must be strictly followed to preserve the right to sue.
• Does the Plaintiff Need Permission to Act?
  • In some instances, plaintiffs must obtain permission before proceeding with a lawsuit. This applies to:
    • Litigation guardians acting on behalf of minors or individuals lacking mental capacity.
    • Representative plaintiffs in class actions under the Class Proceedings Act. In these cases, while a plaintiff can initiate the claim, the case cannot proceed until they are certified as the representative plaintiff for the class.
• Does the Case Involve a Constitutional Issue?
  • If a case raises a constitutional question, specific procedural requirements may apply. Under s.109 of the Courts of Justice Act and Rule 4.11 of the Rules of Civil Procedure, a notice of constitutional question may need to be served. This ensures that the federal and provincial governments, who may have an interest in the outcome, are notified and given an opportunity to respond.

When initiating a legal proceeding, there are two primary methods:

Action
An action is the more common way to commence litigation, this is what people typically mean when they talk about “going to court.” It generally involves plaintiff(s) and defendant(s) who engage in formal legal proceedings.

In an action, the parties:

• Exchange pleadings, and
• Participate in discovery, and
• Proceed to trial if a settlement cannot be reached.

Application
Applications are only available if the case falls under Rule 14.05(2) or (3) of the Rules of Civil Procedure.

An application is often used in cases where a judge can decide the matter based on written materials rather than live witness testimony. This is particularly common in areas of “state litigation,” such as:

• Judicial review of government decisions,
• Will and estate disputes (e.g., interpreting a will), and
• Certain corporate or regulatory matters requiring court approval.

A proceeding is commenced by a notice of application, and a judge makes a decision based on:

• Affidavit evidence,
• Cross-examinations on those affidavits, and
• Transcripts of those cross-examinations.

Unlike actions, applications generally do not involve live witness testimony. 

Proceeding commenced by way of an application can be converted to an action, but not vice versa.

In Ontario civil litigation, service refers to the formal delivery of legal documents to the opposing party, ensuring they are properly notified of proceedings that may affect them. The method of service depends on the nature of the document being served, as outlined in Rule 16 of the Rules of Civil Procedure.​

Originating Process: Personal Service
An “originating process” includes documents that initiate legal proceedings, such as a Statement of Claim or Notice of Application. According to Rule 16.01(1), these documents must be served personally, meaning they should be delivered directly to the individual or entity named. Personal service ensures that the party is unequivocally aware of the legal action. Specific methods for effecting personal service are detailed in Rule 16.02.​

Alternative to Personal Service
In situations where personal service is impractical, Rule 16.03 provides alternatives. These methods include leaving the document with someone at the individual’s residence or business, sending it by mail or courier, or, in certain circumstances, by email. However, these alternatives must meet specific criteria to be valid, ensuring a reasonable likelihood that the document will come to the person’s attention.​

Special Circumstances Requiring Personal Service
Certain legal actions necessitate strict adherence to personal service due to their serious implications. For instance, if a party is initiating a contempt motion, alleging that the opposing party has defied a court order, personal service is mandatory. This requirement underscores the gravity of potential outcomes, such as fines or imprisonment, ensuring the individual is fully aware of the proceedings against them.​

Non-Originating Documents: Regular Service
For documents that do not commence proceedings, known as non-originating documents, personal service is not typically required. Rules 16.01(3) and 16.01(4) allow these documents to be served through various means, including regular mail, courier, fax, or email, provided the chosen method aligns with the rules and is appropriate under the circumstances.​

Substituted Service and Dispensing with Service
When standard methods of service prove impractical, Rule 16.04 permits a party to seek a court order for substituted service or, in rare cases, to dispense with service altogether. The court must be convinced that all reasonable efforts to effect personal service have been exhausted and that the alternative method proposed is likely to inform the individual of the proceedings. For example, courts have permitted service via text message when traditional methods failed, recognizing the evolving nature of communication. ​

One of the first steps in initiating a new civil litigation file is determining the status of the client. This is particularly important in estate litigation, where a client’s capacity to provide instructions must be assessed.

Mental Capacity to Instruct a Lawyer
A client must have the mental capacity to instruct legal counsel. This involves considerations such as:

• Age,
• Cognitive ability,
• Capacity to understand legal proceedings and provide instructions.

Although Ontario has professional capacity assessors, the most immediate and important evaluator is the retained lawyer. It is a lawyer’s professional responsibility to assess whether their client has the requisite capacity to give instructions before proceeding with a case.

Authority to Retain Counsel in Non-Individual Cases
For clients that are not individuals, lawyers must ensure that the retainer has been authorized by the appropriate person or persons. This is especially relevant in cases involving corporations, estates, or other legal entities.

For example:

• Corporate clients require authorization from their board of directors.
• When representing a newly retained corporate client, it is advisable to obtain copies of corporate resolutions that authorize the lawyer’s engagement.
• Other corporate documents, such as Articles of Incorporation and all amendment documents, may be needed to confirm the authority of the person providing instructions (e.g., verifying that the individual is a director with decision-making power).

The term “compromise” might seem counter-intuitive in the context of litigation, after all, if a case has already reached court, wouldn’t that mean neither side is willing to back down? However, the reality is that Ontario’s court system, judicial approach, and legal profession as a whole strongly encourage negotiated resolutions wherever possible.

A lawyer’s job is to balance the legal merits of a case with practical considerations. Encouraging settlement does not mean advising a client to accept any offer presented. Instead, it involves carefully evaluating whether a proposed resolution is fair and in the client’s best interest.

While settlement is encouraged, this does not mean accepting any offer simply for the sake of resolution. A lawyer must also advise their client when a settlement offer is unreasonable or improvident. There is nothing wrong with rejecting a settlement proposal that does not fairly reflect the merits of the case. The key is to find a balance between protecting the client’s interests and avoiding unnecessary litigation.

When initiating a lawsuit, selecting the right courthouse to file the claim is crucial. The general principle is straightforward:

1. A plaintiff should commence the proceeding in the courthouse located in the county where they regularly reside. This ensures convenience for the party initiating the lawsuit and aligns with standard procedural practices.

2. Exceptions may apply when fairness and practicality dictate otherwise. For example, if the plaintiff lives in Brampton but all twelve defendants are in Toronto, it may be more appropriate to commence the action in Toronto.

Pre-Judgment and Post-Judgment Interest
When a court awards damages in a lawsuit, interest may be added to the amount awarded. Interest is divided into two types:

1. Pre-Judgment Interest:
   • This is the interest that accrues on the amount claimed from the time the claim arises until the court renders a decision. It compensates the plaintiff for the delay in receiving what they are owed.
2. Post-Judgment Interest:
   • This is the interest that accrues on the awarded judgment amount from the date the judgment is issued until the debt is fully paid.

Interest Rate Rules
The Courts of Justice Act (CJA) sets out when interest applies to a judgment and at what rate. For example, the pre-judgment interest rate for an action commenced in 2022 was 0.5% in both the first and second quarters.

The Ontario government provides an informative website explaining interest rates in detail:
https://www.ontario.ca/page/prejudgment-and-postjudgment-interest-rates

Exceptions to Interest Rate Rules
An important exception is when a contract specifies a different interest rate. In such cases, the contractual rate applies. For instance, if someone defaults on a credit card debt and is sued, the interest rate set out in the credit card agreement will govern.

Exception to the Exception
However, the court always has discretion. A judge is not bound to apply the contractual interest rate if it is deemed unreasonable. For example, if a credit card contract stipulates 26% interest, a judge may decide that such a rate is excessive and award a lower interest rate instead.