Allocate more resources to Small Claims Court to alleviate increased burden

There have been some significant reforms to the Ontario justice system of late. Namely, the amount of damages that can be claimed has been increased both in Small Claims Court and under the Simplified Procedure rules. As of January 1, 2020, the amount that can be claimed in Small Claims Court will increase from $25,000 to $35,000, and the limit for Simplified Procedure claims will increase from $100,000 to $200,000.

Although these changes were introduced with the intention of providing increased access to justice, there are some serious concerns as to whether they will function that way in practice. Unless more guidance and resources are provided, these reforms may compound the problem that they are meant to solve.

The changes to the Simplified Procedure regime are quite expansive. Not only will the claim limit be increased, but examinations for discovery will be expanded from two hours to three hours and trials will be limited to five days with a new procedure in place. On top of that, there will be a $50,000 limit on the amount of costs that can be recovered and a $25,000 limit on disbursements (both exclusive of HST).

These amendments are aimed at making civil procedure more accessible and streamlined for claims under $200,000. And these new rules will help ensure that the regime functions as intended.

The reform to Small Claims Court, however, may have the opposite effect. Unlike the amendments to the Simplified Procedure regime, there have been no other changes announced for the Small Claims process, nor do we know whether more economic and judicial resources will be dedicated to Small Claims Court.

This is concerning for a few reasons, the most pressing of which is that Small Claims Court may not be able to accommodate an increase in the number of Small Claims actions being heard.

The government press release announcing the changes stated that the Small Claims damages cap was being increased to allow more claims to be determined in that court, making “it faster, easier and more affordable for people and businesses to resolve their disputes in front of a judge.”

This makes sense on paper. After all, the Small Claims process involves many fewer steps than the Superior Court regime, and it’s technically easier to get a claim to trial. However, anyone who has experience in Small Claims Court will tell you it is far from fast and easy.

The annual reports issued by Ontario Superior Court routinely describe the Small Claims Court as “extraordinarily busy.” Nearly half of all civil claims in the province are commenced in Small Claims Court. Since the Small Claims limit was increased from $10,000 to $25,000 in 2010, there have been about 60,000 new claims commenced each year in the 77 Small Claims Court locations across Ontario. That is nearly half a million new claims in the past eight years.

The sheer volume of claims commenced each year puts a massive strain on the system and slows things down as a result. The prospect of adding more claims to a system that’s already bursting at the seams raises real concern. If the system is going to be reformed to push more cases into the Small Claims arena, more resources should also be dedicated to accommodating that increase.

Another concern has to do with costs recovery. As the Small Claims limit is increased, the cases that will be adjudicated there will become more serious. Not only will the stakes increase, but so will the complexity of the proceedings. This will mean more motions, more documentary production and longer trials.

As this happens, parties will likely need to retain lawyers more often to adjudicate their claims. And as we all know, lawyers do not come cheap. This creates a problem given the very low limit on costs awards in Small Claims Court. Specifically, section 29 of the Courts of Justice Act limits costs awards in Small Claims Court to 15 per cent of the amount claimed. That means that, for a maximum claim of $35,000, a party cannot recover more than $5,250 in costs, which may only cover a small fraction of the actual legal fees for a trial.

And speaking of trials, there has been no indication as to whether there will be limits placed on trial length in the Small Claims forum. The new five-day limit on Simplified Procedure trials is aimed at ensuring that things get wrapped-up expeditiously. Unfortunately, there is no such limit for Small Claims trials. Practically, this means that a $200,000 claim must be tried in five days, while a $5,000 claim in Small Claims Court can be tried in twice that amount of time, or longer.

Trial lengths in Small Claims Court already create huge problems. Parties can wait many months for a Small Claims trial date and lengthy trials are often cut short and then adjourned for many more months. As a result, due to the shortage of resources, many Small Claims matters take well over a year to complete.

Finally, more Small Claims matters mean more appeals. An appeal from a Small Claims decision lies with the Ontario Divisional Court, which is already one of the busiest appellate courts in Canada. With approximately 1,500 new proceedings commenced in Divisional Court each year, it is becoming increasingly difficult to get an appeal heard in a timely fashion.

If more cases are pushed down to Small Claims Court, it seems reasonable to conclude that there will be more Divisional Court appeals. This will place additional strain on a system that is already overburdened.

Taking all this into account, it is imperative that more reforms and resources be dedicated to the Small Claims arena. Although raising the damages cap is a well-intentioned move, it may end up creating more problems than it solves.