By Dana Hagg (Associate)

The Alberta small claims court limit increases from $50,000 to $100,000 effective August 1, 2023. The small claims court – formerly the Provincial Court of Alberta, recently renamed the Alberta Court of Justice – deals with 10,000 civil lawsuits annually that affect everyday Albertans and their businesses, such as claims for property damage, personal injury, breach of contract, and wrongful dismissal. There are advantages and disadvantages to filing a lawsuit in the Court of Justice instead of the Court of King’s Bench. Even though the Court of Justice is designed to be accessible to self-represented parties and small business owners, filing a lawsuit in the Court of Justice still involves many strategic considerations and legal risks. For high-stakes claims, many litigants still prefer to bring lawsuits in the Court of King’s Bench, despite its complexity. With the introduction of “large small” claims between $50,000 to $100,000 into the Court of Justice, it will be even more difficult to decide where to file a law suit and whether to hire a lawyer.

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Alberta has Canada’s highest small claims court monetary limit, and it is about to get even higher.

On August 1, 2023, the monetary jurisdiction of the Alberta Court of Justice will double from $50,000 to $100,000. This will increase the number of claims that can be litigated in small claims court instead of Alberta’s other “superior” trial court, the Alberta Court of King’s Bench, where delays have reached a state of crisis in recent years.

The change comes alongside other reforms that are advertised as strengthening the civil justice system in Alberta. The small claims court, formerly known as the Provincial Court of Alberta, has been renamed the Alberta Court of Justice, and its judges are now entitled “justices.” The Court of Justice was recently expanded to add seven new judges, but only one of these is a dedicated judge for civil matters.

ALBERTA’S CIVIL JUSTICE SYSTEM

The Court of Justice is Alberta’s busiest court, handling more than 10,000 civil cases annually, in addition to 17,000 family and child protection cases and more than 100,000 criminal cases. The Court of Justice offers simplified rules to provide faster and more affordable resolution of civil matters than Alberta’s other trial court, the Court of King’s Bench. The Court of King’s Bench is designed to be used by lawyers, whereas the Court of Justice offers flexible procedures that are designed to be accessible to self-represented litigants.

A civil claim that falls within the jurisdiction of the Court of Justice can generally be brought in the Court of King’s Bench, but not the other way around. Anyone who wants to initiate a lawsuit needs to decide which court is more appropriate on a case-by-case basis. Unlike the Court of Justice, whose Civil Division is colloquially referred to as Alberta’s “small claims court,” the Alberta Court of King’s Bench has no monetary limit on civil claims. There are specific types of claims that must be brought in the Court of King’s Bench regardless of monetary value because the Court of Justice never has jurisdiction over them, such as land title disputes, builders’ liens, and defamation claims. In general, however, most civil claims seeking less than $50,000 (soon to be $100,000) can be brought in either court, so litigants must carefully weigh which court is more advantageous given their circumstances and resources.

COURT OF JUSTICE MONETARY JURISDICTION TO DOUBLE

The Alberta Court of Justice is Alberta’s “small claims court,” so it cannot hear or make decisions regarding claims seeking money that exceed its monetary limit, which is formally referred to as the Court’s “monetary jurisdiction.”

The Court of Justice’s monetary jurisdiction has ballooned since the millennium. In 2002, the limit was raised from $7,500 to $25,000, and it was raised again in 2014 to the current limit of $50,000 – the highest in Canada. Ontario and British Columbia are the next highest at $35,000.

Effective August 1, 2023, the monetary jurisdiction of the Alberta Court of Justice will increase further to $100,000. Even taking inflation into account, an increase from $7,500 pre-2002 to $100,000 in 2023 represents a dramatic augmentation in the volume and complexity of civil matters in Alberta’s so-called small claims court.

The monetary jurisdiction is fixed by the Lieutenant Governor in Council, subject to a ceiling that is set by the Alberta Legislature. For twenty years, the Lieutenant Governor in Council has been unable to raise the monetary jurisdiction any further due to a $50,000 ceiling set by Legislature in 2002. This meant that the monetary jurisdiction of the Provincial Court (Court of Justice) could not be raised further without amending section 9(1)(i) of the Provincial Court Act (now the Court of Justice Act), but legislative amendments require a slow and complicated political process.

In 2015, Legislature passed a bill implementing procedural changes for Provincial Court civil claims that would have raised the ceiling to $100,000. However, a provincial election was called a week after the bill received Royal Assent, so the bill sat for several years without being proclaimed as law. In October 2018, most of the bill was proclaimed in force effective January 1, 2019, but the provision that would have increased the ceiling to $100,000 was explicitly excluded from the proclamation, so the ceiling remained unchanged at $50,000.

Legislature finally amended the Act in December 2022 and raised the ceiling to $200,000. This means that the Lieutenant Governor in Council can increase the limit up to $200,000 relatively quickly and easily, without the need for another legislative amendment.

Interestingly, the monetary jurisdiction of the Residential Tenancy Dispute Resolution Service (RTDRS), which hears disputes relating to rental accommodations under the Residential Tenancies Act and Mobile Home Sites Tenancies Act, is defined to be equal to the Court of Justice monetary jurisdiction. As a result, come August 1, 2023, the maximum RTDRS award will increase from $50,000 to $100,000. Given the informality of the RTDRS’ rules of evidence and procedure, and the fact that parties are often self-represented and highly financially vulnerable, a $100,000 limit is shockingly high.

WHERE SHOULD I FILE, AND DO I NEED A LAWYER?

Small civil claims are not usually worth spending a lot of money litigating, so self-representing in the Court of Justice is often the most cost-effective approach. But a claim worth $50,000 to $100,000 can hardly be described as “small” – a judgment of that amount would bankrupt most individuals and small businesses.

When the monetary jurisdiction of the Court of Justice doubles on August 1, 2023, the economics of “small claims” court will shift, and so will the strategic considerations for prospective litigants. Should a party with a “large small” claim hire a lawyer to help them fully vindicate their rights? Is the Court of Justice always the most advantageous venue for such claims?

If a litigant cannot afford a lawyer, the Court of Justice is likely the better choice. Unlike the Court of King’s Bench, the Court of Justice is designed to be used by laypeople – but this does not mean it is foolproof. Before filing in the Court of Justice, self-represented litigants should take great care to ensure that their claim does not fall outside the Court’s jurisdiction. Certain claims can only ever be heard in the Court of King’s Bench regardless of monetary value, such as land title disputes, builders’ liens, defamation claims, family (matrimonial) property disputes, judicial review of administrative decisions, certain partnership and corporate law applications, and so on. When a litigant files their claim in the wrong court, they may suffer consequences that even a lawyer cannot fix after-the-fact.

Small business owners looking to save on costs may prefer to self-represent. If the business has been incorporated, then it can only self-represent in the Court of Justice. The Court of King’s Bench requires corporations to be represented by a lawyer; a non-lawyer who is connected with the corporation may speak on the corporation’s behalf in court with permission, but even if permission is granted, the non-lawyer is still subject to the general prohibition against practicing law without a licence. By contrast, corporations are expressly permitted to be represented by a non-lawyer agent in the Court of Justice.

Parties with complex claims who can afford legal counsel may prefer the built-in procedural rights in the Court of King’s Bench. Procedure in the Court of King’s Bench is governed by the Rules of Court, which are long and complicated, but they afford numerous procedural rights that are designed to facilitate early settlement. Perhaps the most important advantage is the right to oral and evidentiary discovery, that is, that parties must organize and exchange any relevant and material records by prescribed deadlines, and parties are entitled to question each other about their knowledge relating to the litigation. This process forces parties to “show their cards” early in the litigation, which encourages early settlement.

By contrast, the Court of Justice Civil Procedure Regulation does not contain any specific disclosure rules; all it requires is that parties comply with any of the Court’s directions to produce records. This normally means that parties do not have to exchange records until 14 days before the Pre-Trial Conference, and parties often go into mediation with few or no records from the other side. In practice, the exchange of documents often does not even occur until after the Pre-Trial Conference. This makes it difficult for parties to weigh the merits of each side, which ultimately inhibits settlement. Unless the parties proactively disclose their records, or unless one party makes a court application to compel production of records, settlement discussions are often hampered the by absence of disclosure until the Pre-Trial Conference. Parties may question each other by consent or by order, but again, there is no automatic right to do so. Thus, for claims that will not settle without fulsome disclosure, the Court of Justice requires an extra step to get there.

While the Court of King’s Bench affords more procedural rights by default, electing to bring a small claim in the Court of King’s Bench will likely attract a penalty in the costs award. If a claim is brought in the Court of King’s Bench when it could have been brought in the Court of Justice, the Rules of Court direct the costs award to be reduced by 25% or more. This rule incentivizes parties to use the Court of Justice when possible.

To a certain extent, that discount would be offset by the fact that Court of King’s Bench costs awards are generally higher than Court of Justice awards for judgments of the same size. For typical cases, the Court of King’s Bench will aim to award the successful party costs approximating 40-50% of actual legal fees and disbursements. By contrast, the Court of Justice is designed to be accessible without having to pay for a lawyer, and it is intended as a forum for efficient and inexpensive civil justice, so Court of Justice costs awards for parties who do hire a lawyer often fall well below 40-50% of actual legal fees and disbursements. For example, after granting a $23,875.00 judgment, Judge Corbett (as she then was) recently awarded costs of $23,970.54 to a successful party whose actual legal fees and disbursements totalled $156,797.82. This amounts to approximately 15% indemnity, which the Judge described as “meaningful and reasonable indemnity of legal expenses incurred in an action in the Civil Division of the Provincial Court of Alberta.”

Litigants in the Court of Justice should keep an eye out for a new Practice Note with updated recommendations for costs awards. At the time of writing, for a $50,000 claim, the recommended costs awards in the Court of King’s Bench are approximately double the amounts recommended by the Court of Justice. Neither Court is bound by these recommendations, but they are designed to serve as guidelines for the appropriate degree of compensation for lawyer’s fees. The Alberta Court of Justice will publish a revised tariff in August 2023 with a new “Column 5” for larger small claims. The updated tariff will likely increase tariffs for smaller claims as well, as the Court of King’s Bench significantly increased its tariffs in May 2020, but the Court of Justice tariffs have not been updated since January 2019.

However, the level of indemnity awarded in costs in the Court of Justice will likely continue to be significantly lower than in the Court of King’s Bench. When the Provincial Court’s monetary jurisdiction increased from $7,500 to $25,000 in 2002, Judge Fradsham (as he then was) emphasized that, “though the jurisdiction of the Court has been greatly expanded, its purpose remains the same: to provide a relatively inexpensive means of resolving disputes involving amounts within the court’s jurisdiction. Costs awards should not thwart that purpose.”

Parties in the Court of Justice who do choose to use a lawyer should therefore prepare to be responsible for most of the resulting lawyer’s bill. Even if the lawyer’s bill is enormous, the Court will determine the costs award by reference to what was reasonable in the context of small claims proceedings, not by the party’s actual costs and disbursements. In the case of Cramer v Focus Group Holding Inc, 2013 ABPC 196, the successful party had incurred approximately $260,000 in legal fees while defending a $12,954 claim but was awarded only $5,494.13 in costs. Judge Sharek (as he then was) wrote that Provincial Court proceedings should be dealt with “inexpensively to everyone involved,” so a party is “of course free to use and pay for counsel as it sees fit, but to seek to visit this expenditure upon an unsuccessful litigant … is inappropriate.” To avoid being saddled with a large lawyer’s bill, Court of Justice litigants need to carefully consider whether the value and complexity of their claim justifies hiring a lawyer, and lawyers representing clients in the Court of Justice need to keep costs down.

A claimant who is willing to settle the dispute without going to trial may prefer the Court of Justice, where suitable claims will be automatically referred to a free, impartial, court-appointed mediator, who will assist the parties in preparing a settlement agreement. Parties who wish to mediate their dispute in the Court of King’s Bench can select their own mediator, but they have to pay the mediator’s hourly rate, which can exceed $500 for very experienced mediators. For litigants on a tight budget, the free Court of Justice mediation process is a valuable perk, particularly given the relatively high success rate of the free Court of Justice mediation process (about 30-35%).

An alternative to mediation is Binding Judicial Dispute Resolution, where parties appear in front of a judge to engage in settlement discussions. If a settlement is not reached, the judge will usually make a decision, and that decision is binding and cannot be appealed. Both the Court of King’s Bench and the Court of Justice offer access to free Binding Judicial Dispute Resolution, but as usual, the Court of King’s Bench wait time is much longer.

ONLY ONE NEW CIVIL DIVISION JUSTICE APPOINTED

Wait times could get worse before they get better.

When the Court of Justice’s monetary jurisdiction increases on August 1, 2023, the increased volume and complexity of civil matters will also increase court operational demands and judicial workload. In May 2022, the government expanded the Provincial Court (now the Court of Justice) by four seats to make the largest appointment of justices in Alberta history, and announced that it was adding a further three seats on April 3, 2023. Only one of the seven new seats is in the Civil Division, whose justices are dedicated to civil matters. The Civil Division now has eight full-time and two part-time justices, evenly split between Calgary and Edmonton. Four of the seven new seats are in Regional Divisions, where generalist justices split their time between all types of cases, and civil sittings are far less frequent than in urban centres. Two seats were added to the Edmonton Region, and one seat was added to the Calgary Division and the South Division. There were no seats added to the Central or Northern Regions.

There has been no indication that any further seats will be added to the Court of Justice before the next provincial budget in 2024. Higher-valued claims entail a higher rate of procedural applications and longer trials, creating more work for judges and increased demand for courtrooms. Hopefully the relatively modest addition to the Court of Justice judicial complement will match the influx of “large small” claims.

Court of King’s Bench wait times will likely decrease once claims under $100,000 are mostly diverted to the Court of Justice. This will be partly offset by appeals from the Court of Justice, which are heard in the Court of King’s Bench. The bigger the judgment, the more worthwhile it is to appeal, so the rate of appeals from the Court of Justice to the King’s Bench will likely increase with the introduction of “large small” claims, come August 1, 2023. Civil chambers in both courts will likely see a temporary wave of applications relating to transitional issues, as is to be expected upon significant legal reforms.

Only time will tell whether these reforms will actually make civil justice faster and more accessible for Albertans.