Legal Blog

Court Shopping

On occasion, the choice of court (including venue) or procedure is very important to one or both of the litigants. The court used or the procedure to follow can affect the cost and efficiency of an action. Sometimes strategies to get the most advantageous court or procedure are successful and sometimes they are not. In Canaccede Credit LP v. Schulz-Hallihan (and two other separate actions) and Bank of Nova Scotia v. Carmichael, 2021 and 2022 decisions of the Ontario Superior Court of Justice, the lawyers in collection proceedings did not get what they wanted.

Court & Venue

The creditor in Canaccede purchased credit card debts from a bank, assumedly for a significant discount from the actual debt amounts. The creditor then retained its lawyers to collect the debts. The cases involved three debtors, but, later in the reasons for decision, we learned that the creditor had commenced 109 collection actions.

Collection lawyers may prefer to bring actions in the Superior Court of Justice, rather than Small Claims Court, for the following reasons:

• It is much more difficult and costly for a debtor to respond to a claim and much easier and cheaper to get default judgment in Superior Court.
• Costs are awarded at a higher level in Superior Court.
• A plaintiff can commence an action in any jurisdiction and the action will be dealt with in that jurisdiction unless the plaintiff either agrees to move it to another jurisdiction or the court orders it be moved on motion – both of which are at the insistence of the debtor.
• In Small Claims Court, the plaintiff is required to commence the action in the location where the cause of action arose or where the defendant resides or carries on business.
• It is far easier for a GTA lawyer to commence an action in the Superior Court at, say, Milton than to commence the action at, say, Peterborough or Ottawa.

Two defendants resided in Peterborough and the other, just outside Ottawa; the creditor was based in London; the lawyers brought their action in Milton (Halton Region). The amounts claimed ranged from $8,000 to  $19,000.

The Small Claims Court can deal with monetary claims up to $35,000.00. However, no legislation forbids a plaintiff with a claim less than that amount to commence its action in the Superior Court.

Accordingly, the lawyers in Canaccede, probably for the reasons set out above, decided to bypass Small Claims Court and commenced the actions in Superior Court at Milton.

Normally, this would have worked nicely. The defendants do not defend, the lawyers file the necessary affidavits of service, and the court registrar signs default judgment. However, in three cases, there was a problem – the creditor had trouble serving the defendants and needed orders for substituted service. These orders are obtained through a “basket” motion (i.e. the motion is brought in writing with affidavit evidence demonstrating the inability to serve the defendants personally). Normally, a request for substituted service (e.g. by email or mail) is granted if the request is reasonable. But these motions must be decided by a judge and the judge in Canaccede did not like what he saw.

Instead of just signing the requested order, the judge invited the creditor’s lawyers to attend before him and persuade him not to stay the actions. If so stayed, the creditor would have to commence new actions in Small Claims Court in Ottawa and Peterborough.

Hearing

The Canaccede lawyers made a number of arguments in support of the actions remaining in Superior Court. These arguments, and the judge’s responses to them, are set out below.

• It is common practice for collection lawyers to do this.
• Common practice without evidence or authority for it is not necessarily proper practice.
• Not being allowed to sue in Superior Court would render collection difficult.
• Not the court’s problem.
• No legislation forbids the practice.
• That does not mean it is right or that it is not an abuse of process.
• The court routinely issues statements of claim and grants default judgment under these circumstances and therefore implicitly agrees with the practice.
• Registrars do not have authority to do otherwise.
• Some judges have taken issue with the practice, but allowed the remedy and merely reduced costs awarded.
• Unlike the current cases, which were being decided before they progressed, the merits of the prior cases had already been decided.
• If a defendant requested a transfer to a local Small Claims Court, the lawyers would agree to the request.
• The defendants would not know that they could ask that this be done.
• The defendants did not ask for a stay.
• The defendants were not served and would not have the knowledge or monetary resources to do so. The court has to control its own processes.

The judge noted that, in the action for $8,000, the defendant would either have to retain a Peterborough lawyer and pay for travel costs or hire a Halton lawyer, in either case with legal fees that might exceed the amount being claimed from him. Further, the defendant may not have the means to hire a lawyer at all. Conversely, if the action were brought in Peterborough Small Claims Court, he could hire a paralegal or defend  himself in his home jurisdiction; the Small Claims Court procedures are more friendly to a layman than Superior Court procedures. Bringing an action in Halton disincentivized the defendant from defending at all.

The judge concluded that he had both inherent and statutory jurisdiction to stay the actions or transfer them to the Small Claims Court in the proper locations. He held that the practice of court and venue shopping was an abuse of process because it was unfair, did not do justice, was not proportionate to the amount at stake, and limited access to justice.

Decision

Instead of staying the actions and making the creditor commence new actions, the judge transferred the actions to the appropriate Small Claims Courts. Also, dealing with the creditor’s requests for subservice, the judge granted substituted service of the claims on the defendants by various means.

Judicial Sale

In Bank of Nova Scotia v. Carmichael, the judgment creditor moved for an order directing a judicial reference to conduct the sale of the debtor’s real property rather than use a sheriff’s sale under the Execution Act. The creditor argued that the sheriff’s sale process was cumbersome, expensive, and often ineffective.

The judge noted that, while these criticisms might be correct, the creditor presented no evidence to demonstrate that it had attempted to use the sheriff’s sale process and was thwarted. Further, other judges had commented that a judicial sale also was a cumbersome and expensive proposition.

The judge agreed with previous decisions that, absent special circumstances or some other injustice, the process specified by the Execution Act was to govern. Since the creditor showed no such special circumstances, its motion was dismissed.

No Opposition

In both of these cases, the lawyers tried to persuade a judge to do something that the judge thought was improper and, even with nobody appearing for the debtor to oppose the motion, the lawyers were still unsuccessful.

Image courtesy of StockSnap.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.