Choosing the proper forum is an important decision every time a lawsuit is commenced. The proper forum will depend on the realistic outcome of the case; getting it wrong can cause you to lose out on a significant cost award if your claim is successful. That can cost the plaintiff a lot and, in some circumstances, turn a “win” into a financial loss once legal fees are accounted for.
For claims in Ontario and under $35,000, the lawsuit can be brought in the Small Claims Court. Claims above this amount are brought in the Ontario Superior Court of Justice and can be brought in the simplified procedure if the amount sought is $200,000 or less. Otherwise, the ordinary procedure will apply unless all parties agree otherwise.
There are advantages and disadvantages to each option, and the decision can be tricky when the amounts you are seeking are very close to the threshold. For instance, suppose that your claim is estimated to be valued at $30,000 to $50,000. Do you limit your claim to $35,000 and bring the lawsuit in the Small Claims Court, or do you claim $50,000 and bring it in the simplified procedure?
Costs Consequences of the Wrong Decision
One of the issues to consider when making this decision is that there can be costs consequences to choosing the “wrong” forum. For example, in a typical case in Ontario, the Court will award the successful party in a lawsuit a portion of their legal costs, to be paid by the unsuccessful party. However, when the Court believes that the lawsuit should have been brought in a different forum, the costs award can be reduced or even eliminated completely.
For instance, Rule 57.05 of the Rules of Civil Procedure states:
“If a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court, the court may order that the plaintiff shall not recover any costs.”
This means that if you commence a claim for over $35,000 in Superior Court but you obtain a Judgment for under $35,000, then the Court can choose not to award you any legal costs of the proceeding since you should have chosen to proceed in Small Claims Court.
Similarly, Rule 76.13(3) provides that a plaintiff who brought their claim in the ordinary procedure, and then obtains a Judgment valued at $200,000 or less, shall not recover any costs unless the Court finds that it was reasonable for the plaintiff to have chosen to proceed in the ordinary procedure.
It is important to note that both Rule 57.05 and Rule 76.13(3) are discretionary. The Court may choose to award costs even where the wrong forum was chosen.
Wilds v. 1959612 Ontario Inc.
I previously wrote about the decision of Wilds v. 1959612 Ontario Inc. In that case, the Court ruled in favour of the employee, Barbara Wilds, on the enforceability of the termination clause in her contract, as well as the availability of punitive damages to punish the defendant employer’s conduct.
The Court awarded Ms. Wilds damages for wrongful dismissal in the amount of just under $10,000, as well as a further award of punitive damages in the amount of $10,000 due to the employer’s reprehensible conduct in the course of termination. Therefore, the total amount of the Judgment, not including costs, was approximately $20,000 – well within the jurisdiction of the Small Claims Court.
Recently, the Court released its decision on the costs of the proceeding. Ms. Wilds’ counsel argued that although the Judgment was under the Small Claims Court threshold, she should nonetheless receive a costs award of over $30,000. The defendant’s counsel argued that the Court should exercise its discretion under Rule 57.05 and award no costs.
The Court took a different approach and found that Ms. Wilds was entitled to some costs, noting that she was successful in the lawsuit and that the defendant was found to have engaged in reprehensible conduct. However, the Court also found that Ms. Wilds should have commenced her action in the Small Claims Court, and that the costs award should be limited as a result.
In most cases brought in the Small Claims Court, the maximum costs award is 15% of the amount claimed, plus disbursements. Therefore, for a claim of $35,000, in most cases the maximum costs award would be $5,250.00.
Noting that the plaintiff incurred disbursements in the amount of $2,895.22, the Court found that the maximum award of costs and disbursements that Ms. Wilds could have obtained in the Small Claims Court would have been $8,145.22 ($5,250.00 in costs plus $2,895.22 in disbursements). The Court found that this amount should be reduced further, given that there was divided success, and that the Judgment was for an amount far less than the total amount claimed. Accordingly, the Court awarded Ms. Wilds costs of $6,000.00.
Although this was not an award of “no costs”, the result was significantly closer to the defendant’s position than what the plaintiff had sought. Based on the amounts that the plaintiff had sought for costs, it is likely that Ms. Wilds’ actual legal fees were over $40,000, which was far more than the amount of the Judgment that was awarded. Despite being successful in the lawsuit, the costs consequences of choosing the wrong forum may have turned the victory into a defeat.
Conclusion
Choosing the proper forum for your lawsuit is an important decision that must be made early in the process, sometimes before you have all the relevant information.
If you are an employee that wishes to bring a lawsuit, we can work with you to decide the best way to bring your case and move it forward.
If you are an employer that has been sued by a former employee, we can help you defend the case in a strategic and efficient manner. If you have any questions about your situation or if you would like to get legal advice, please feel free to contact us.