Specific Areas

CHAPTER 17


17.1 Small Claims Court
17.2 Landlord and Tenant Matters
17.3 Construction Liens
17.4 Bankruptcy


17.1 SMALL CLAIMS COURT

Introduction

"Small claims" in Ontario refers to claims involving less than $6,000. They are dealt with in a branch of the Ontario Court of Justice (General Division) called the Small Claims Court [123] .

Approximately 135,000 small claims are issued in Ontario yearly, as compared to approximately 178,000 civil proceedings begun in the other areas of the General Division [124] . Clearly, the disposition of small claims forms a very important part of the civil justice system. Along with family law and landlord and tenant matters, it is an area where people are touched most by the systems.

We have heard a great deal about Small Claims Court during the course of our consultation phase. Almost uniformly, members of the public and the Bar have suggested that the monetary limit be raised from the current limit of $6,000 to something in the range of $10,000 or more. At the same time, though, many were concerned by the prospect of such an increase leading to more people requiring lawyers or paralegal agents to assist them, thereby affecting the "people's court" character of the institution.

Concerns were also expressed about the cost and complexity of appeals from decisions in Small Claims Court, and about inconsistencies in decisions arising from the use of deputy judges instead of full-time judges for most Small Claims Court matters. The issue about whether small claims matters should be presided over by part-time deputy judges or by full-time judges is a difficult one because of the funding implications it contains.

We have concluded that we are not in a position, at this stage, to make definitive recommendations regarding the question of small claims. A study is being conducted by the fundamental issues group of the Review, and we are awaiting the results of that study before making our ultimate recommendations. In addition, the Simplified Rules proposal, which we have referred to earlier in this Report, may have an impact on how the disposition of small claims should be addressed in the province. We have recommended that the Simplified Rules initiative be adopted. We hope that by the time of our Final Report we will know whether it has been.

We do have some interim suggestions to make, however. In view of the importance of the subject and the considerable number of comments that we received, we propose to deal briefly with small claims at this time.

History and Background

A court with jurisdiction for small claims can be traced back two centuries in Ontario. Frequently referred to as the "people's court", today's Small Claims Court in Ontario is seen as the one place where a private citizen can have ready and inexpensive access to civil justice. The popular Ministry of the Attorney General booklet provides useful guidance and parties often represent themselves in proceedings.

Recently, the jurisdiction of the Small Claims Court was raised to $6,000.00 across the province. While the increase has been favourably received, we have heard reports, as noted above, that the increase has resulted in increased legal representation of litigants. It has also resulted in a greater formalization of the process and an increasing presence of business-related plaintiffs. Some centres report that trials take longer and delay -- the plague which envelops the rest of the civil justice system as well -- is now being spotted in this forum.

Ontario's Small Claims Court had its origins in the late 18th century. Shortly after Upper Canada was created in 1791, a court with jurisdiction for amounts less than 40 shillings was created [125] . It was called the Court of Requests, and was created to appease the emerging mercantile class who were crying out for a place to go to have debts quickly and cheaply enforced. Courts of Request were known popularly as "six-penny chanceries", and their adjudicators rendered a crude justice. However, the six-penny chanceries were quick, cheap, and a practical alternative to waiting for the infrequent visits of the Superior Court Judges or paying for the more expensive procedures of the higher courts [126] .

A more judicial arrangement than the "six-penny chanceries" was put in place for small claims following Confederation in 1867. Ontario, like Manitoba and Prince Edward Island, patterned its Small Claims Court procedure after its county and district courts. However, while Manitoba and Prince Edward Island used provincially-appointed magistrates to adjudicate, Ontario's Small Claims Courts were uniquely presided over primarily by County or District Court Judges and occasionally by a lawyers. These courts were known as Division Courts.

The Division Courts' jurisdiction steadily increased so that by 1967 it was $400 in the counties and $800 in the districts.

Changes to the Small Claims Courts from 1970-1987

In the 1970's a growing consumer rights movement drew attention to the necessity of having a forum for the resolution of "small disputes". In Ontario, the Division Courts' name was changed to the Small Claims Court, with the enactment of the Small Claims Court Act, R.S.O. 1970, c.439. This Act empowered the province to appoint full-time judges to hear disputes, but by 1973 only three had been appointed. The federally-appointed County and District Court Judges continued to adjudicate nominal small claims. However, the Small Claims Court Act provided that County and District Court Judges could appoint part-time deputy judges who had to be lawyers. Deputy judges began to do the "lion's share" of small claims adjudication in the province [127] .

By 1977 the jurisdiction of the Small Claims Court had increased to $1,000.00.

However the Small Claims Court was severely criticized for its informal, lackadaisical process. There was also concern that the Small Claims Court was being predominantly used by creditors and businesses to collect debts. The province's reaction was to bring the Small Claims Court slowly into the formal structure of Ontario's courts.

In 1979, the Small Claims Court in Toronto became a division of the Provincial Court. Initially established on a 3-year trial basis, it was called the Provincial Court (Civil Division), and was presided over by full-time, provincially appointed judges with the status and terms of office of Provincial Court Judges. The Court was continued on a permanent basis in 1982. It functioned only in Toronto and had the jurisdiction to try civil claims of up to $3,000.00. Elsewhere in the province the small claims jurisdiction remained at the $1,000.00 which had been prescribed in 1977.

In 1984, the Provincial Court (Civil Division) and the Small Claims Court were amalgamated under the revision of Ontario's Courts of Justice Act [128] . In 1985, all Small Claims Courts became Provincial Courts (Civil Division). The court in Toronto retained a jurisdiction of $3,000.00 while the rest of the province remained at $1,000.00. Deputy Judges could hear claims up to $1,000.00. Only full-time Provincial Court Judges could hear claims between $1,000.00 and $3,000.00. By 1997, there were 13 full time Provincial Court (Civil Division) Judges across the province -- 10 in Toronto, and one each in Ottawa, St. Catherines and Hamilton [129] . Otherwise, claims in the Provincial Court (Civil Division) could be heard by District Court Judges, Provincial Court Judges, or Deputy Judges.

The Small Claims Court Today

In 1990, major changes were made to the structure of the courts in Ontario. The former High Court of Justice and the District Court were merged to create one superior trial court for the province, and the new Court was regionalized. These changes also affected the Small Claims Court, which became a branch of the General Division.

The former Provincial Court (Civil Division) which heard small claims matters was changed to the new Small Claims Court, pursuant to the Courts of Justice Act, s. 22. Small Claims Court Rules [130] , are prescribed by regulation pursuant to this Act.

It's jurisdiction, which is prescribed by regulation, is presently $6,000.00 across the province [131] . The monetary jurisdiction may be increased with increases in the Consumer Price Index [132] .

The Small Claims Court consists of the Chief Justice of the Ontario Court of Justice, and such other General Division Judges as the Chief Justice may designate from time to time. All General Division Judges have jurisdiction to be Small Claims Court Judges.

Proceedings in the Small Claims Court are to be heard by a judge of the General Division. However, the legislation provides that a proceeding may also be heard and determined by a provincial judge assigned to the Provincial Court (Civil Division) "immediately before the 1st day of September, 1990" or by a deputy judge appointed under s.32 [133] .

Parties may represent themselves in Small Claims Court proceedings, and frequently do. Alternatively, they may be represented by counsel or by an agent. The Small Claims Court has the jurisdiction to bar an agent, who is not a barrister and solicitor, from the proceedings if the court finds that the agent is not "properly" competent to represent the party, or if the agent at the hearing does not comply with the duties and responsibilities of an advocate (s.26).

Matters falling within the jurisdiction of the Small Claims Court, albeit involving amounts of less than $6,000, are quite broad and varied. The Court has the power to hear and determine in a summary way all questions of law and fact, and may make such order as is considered "just and agreeable to good conscience". Proceedings are intended to be, and are, more informal than proceedings in the General Division. Small Claims Courts are not bound by the formal rules of evidence and (except for matters of privilege) are permitted to listen to and consider "any relevant oral testimony, documents or other thing" [134] .

Unlike the General Division, the Small Claims Court may also make orders regarding the times and proportions of payments to be made by defendants. The Court may also award costs, although these costs are not to exceed 15% of the amount claimed or value of the property, unless the court considers it necessary in the interests of justice to penalize a party, counsel or agent for unreasonable behaviour in the proceeding [135] .

Pre-Trials or Settlement Conferences in Small Court Proceedings

Pre-trials or settlement conferences may be conducted in Small Claims Court proceedings at the request of the parties, or by the direction of the Small Claims Court [136] . Pioneered in the Toronto Small Claims Court as part of a general "ADR" initiative, pre-trials are now conducted in most locations throughout Ontario, in an effort to facilitate settlements and, if settlement is not achieved, to streamline the issues before trial. In some locations, the pre-trial or settlement conference may take the form of a mediation session, and this combined pre-trial/mediation procedure has led to successful results.

There are inconsistencies in the way pre-trials or settlement conferences are conducted across the province, however. Some are conducted at a level of great sophistication. Others simply lead to a quick reference to trial. This inconsistency may be due to the fact that a pre-trial may be conducted by a judge, a deputy judge, a referee, or any person designated by the court [137] ; but what it means is that the procedure does not always achieve the desired objectives of either settling the case or, if not, at least streamlining the issues for trial.

The public, and professionals like paralegal agents who advise the public with respect to small claims matters, have made it clear to us that they like the feature of pre-trials with a strong settlement element to them. Their interest in this feature is consistent with the successful results of the ADR initiatives, and with the result of similar procedures adopted recently in British Columbia in the Small Claims Court in that province [138] .

RECOMMENDATION

We recommend that Small Claims Court proceedings across the province incorporate a standardized settlement conference/pre-trial process, with mediation-like services available as a part of that process where feasible.

Deputy Judges

Lawyers may be appointed as deputy judges to preside over Small Claims Court proceedings. Section 32 of the Courts of Justice Act provides that a Regional Senior Justice of the General Division, with the approval of the Attorney General, may appoint a barrister and solicitor to act as a deputy judge of the Small Claims Court for a three-year renewable term. A deputy judge may not preside over proceedings which are in excess of the amount prescribed regarding deputy judges by regulation, or for proceedings for the recovery of possession of personal property exceeding the prescribed amount. Deputy judges can hear pre-trials and preside over trials.

There are approximately 800 deputy judges in Ontario. They are dedicated members of the Bar who virtually volunteer their time to perform these duties. They now form the principle adjudicators in Small Claims Court matters, as the number of full time judges has been reduced to five -- three in Toronto, one in Ottawa and one in St. Catherines.

One criticism of the plan which utilizes deputy judges as the principal adjudicators in the Small Claims Court across the province has been that their presence contributes to an inconsistency of judgments. This may be partly explained by the fact that they are "volunteers" in essence [139] , leaving their practices for the day when they are sitting as small claims judges, and have neither the continued experience of being a judge nor any training for their role as part time deputy judges. We believe that training is important. To ensure that there is standardization in the hearings of Small Claims Court matters, and to account for the fact that deputy judges do not share the adjudicative background of General Division Judges, we recommend that training be provided for them.

RECOMMENDATION:

We recommend that lawyers who act as Deputy Small Claims Court Judges receive mandatory training for the performance of their duties, under the direction of the committee of the General Division Judges in consultation with the National Judicial Centre. We also recommend that this training include training in mediation. We further recommend that Deputy Judges be compensated, at their per diem rate, while attending such training sessions.

Appeal Procedures in Small Claims Court Actions

At present, appeals from decisions of the Small Claims Court may be where the final order for payment of money or possession of personal property exceeds the amount or equivalent value of $500.00.

We heard numerous submissions that the appeal process is laden with unnecessary complexities. Appeals go to a branch of the Ontario Court (General Division) called the Divisional Court. The Divisional Court hears appeals from and reviews decisions of administrative tribunals, and it has appellate jurisdiction in civil matters involving amounts up to $25,000, including small claims.

The appeal procedure is complex, paper-laden and costly. Moreover, it is not easily understood by laypeople. It is not -- to use a computer language analogy -- a "user friendly" environment for small claims litigants, many of whom are not represented by lawyers (They may not be represented by paralegal agents at the appellate level).

Another factor militating against easy and quick access for small claims litigants to the appeal process is that, while the Divisional Court sits regularly on an ongoing basis in Toronto, it does not do so in the other Regions of the province.

There appears to us to be no clear reason to keep Small Claims Court appeals in the Divisional Court, especially in view of the fact that all General Division Judges are also Judges of the Divisional Court.

RECOMMENDATION:

We recommend that the Courts of Justice Act be amended to provide for appeals from decisions of the Small Claims Court to be made to a single Judge of the Ontario Court of Justice (General Division) sitting in the Region where the claim has been disposed of.

At the present time, appeals may be taken from decisions of the Small Claims Court where the final order for payment or possession of personal property exceeds the amount or equivalent value of $500 [140] . We have been advised that the number of appeals has more than doubled since the increase in jurisdiction of the Small Claims Court to $6,000.

We believe that the $500 threshold for appeals in these matters is too low, and that it should be adjusted upward to $1,200 as long as the monetary limit of the Small Claims Court jurisdiction remains at $6,000. Moreover, we suggest that the appeal threshold should be adjusted automatically whenever there is an adjustment in the monetary level of the Small Claims Court jurisdiction. Given that the Court's jurisdiction is limited by a constitutional ceiling -- undefined, but thought to be somewhere between approximately $20,000 and $25,000 -- we suggest the adjustment factor be fixed at 20%.

RECOMMENDATION:

We recommend that the monetary threshold for appeals from final orders in Small Claims Court be established at $1,200 for the present, and that the threshold be established automatically at 20% of the maximum monetary jurisdiction of the Small Claims Court, as it may be prescribed by regulation from time to time.

Finally, we believe that consideration should be given to providing the option for written appeals in appropriate cases. As we have noted, many litigants in Small Claims Court matters are representing themselves. It is, after all, the "peoples' court". They do not encounter the same level of assistance in launching unrepresented appeals to the Divisional Court as they receive when launching their initial claim in the Small Claims Court. Conversely, staff at the Divisional Court office are asked to provide assistance which they are not equipped to, and cannot, provide. Many people confuse their right to appeal with the right to try the case over again. These problems contribute to delay, cost, confusion, misunderstanding and frustration with the system.

Much could be avoided if certain appeals, at least, could be disposed of on the basis of the written record and argument. If this option is to be adopted, however, it is important that information materials, in plain language that can be understood by laypeople, be made available to the public to explain to them the procedures -- and the limits -- of the appeal process.

RECOMMENDATION:

We recommend that consideration be given to establishing an optional procedure for appeals to be presented only in writing from final orders of the Small Claims Court.

Written appeals could be completed by parties who are representing themselves, and filed or mailed to the court. This would eliminate complexity for appellants who are unfamiliar with the present Divisional Court procedure. A single Ontario Court (General Division) Judge could hear the appeal, and his or her judgment could be mailed to the parties. This would foster the expeditious disposal of appeals.

Towards the Final Report

There are many issues respecting the Small Claims Court that we have not been able to address in this First Report. We will be returning to these issues in our Final Report.

The British Columbia experience with a dedicated Small Claims Court presided over by full time provincially appointed judges, bears examination. The funding implications for such a court are significant for the Provincial Government, however. We expect to be in a better position to sort these issues out, and to make further recommendations, after we have received, and been able to assess, the study on Small Claims Courts which is presently being conducted under the auspices of the Review's fundamental issues group.

17.2 LANDLORD AND TENANT MATTERS

Landlord and tenant applications are placing significant pressure on the Ontario Court of Justice (General Division). In addition, the public -- both landlords and tenants -- appear to find the procedure unwieldy, too lengthy, and difficult to understand.

In 1993/94 there were 40,068 landlord and tenant applications commenced in Ontario. This represents a steady increase of 34% from the 29,818 applications filed in 1989/90 [142] .

Landlord and tenant matters are a specialized area governed by the Landlord and Tenant Act 1990. Pursuant to this Act, disputed applications are to be resolved by a judge. There is no other recourse for disputed applications. Undisputed applications and default judgments may be summarily disposed of by the registrar. The majority of all applications are brought by landlords for arrears of rent.

The disputed applications, those which must go to the courts for resolution, have become problematic. A recent study partly funded by the Ministry of Housing and prepared by Dr. Julie Macfarlane [143] examined landlord and tenant disputes in Ontario. The Macfarlane Study reported that 95% of cases are landlord initiated applications for arrears of rent. In a sample of 400 cases, only 6% went to trial. In Toronto the percentage was significantly higher, at 17% [144] . Low dispute rates are generally the result of non-attendance of tenants.

Although the numbers of 6% or 17% regarding referral to trial are not dramatically large numbers, their significance lies in the fact that General Division judges are encumbered with deciding the relatively uncomplicated issue of "arrears of rent". These numbers become more significant when coupled with the fact that the number of applications has increased 34% in the last five years. The Macfarlane Study also reports that tenants are increasingly defending their positions, implicitly increasing the number of disputed resolutions which will be before the courts. Additionally, the efforts of the Ministry of Housing -- which deals with rent increases -- are often duplicated when an increase is approved, a tenant falls into arrears, and the whole matter is re-enacted before a General Division judge.

While a judge is necessary to deal with the purely legal and more complex issues in landlord and tenant disputes, the majority of straightforward rental arrears matters could possibly be resolved in another forum. A new forum would have the added advantage of assisting tenants who, according to the Macfarlane Study, have found the process under the Landlord and Tenant Act confusing. Tenants have reported that they are not knowledgeable about their legal rights, have limited access to legal representation, and ultimately feel powerless. Furthermore, although the statute was drafted with the intention to provide clear adjudicative recourse to tenants, this recourse is being used primarily by landlords, who bring 95% of applications. Additionally, the Macfarlane Study reports that both landlords and tenants find the current statutory procedure for bringing applications to be highly legalistic and "dauntingly complex".

A new forum, then, could be ideal for providing simplified procedures to benefit tenants and landlords, while simultaneously diverting the relatively simple and non-legalistic matters away from the court.

The logical alternative to the courts is an administrative tribunal. In addition to resolution of disputes, an administrative tribunal might also offer mediation services.

The Macfarlane Study considered mediation before trial. Mediation is touted as an intrinsically clearer procedure which consequently promotes accessibility and which has already been practised with success in some parts of Ontario. Where there is an interest in maintaining a relationship between the parties -- such as is the case in many landlord and tenant matters -- mediation has been demonstrated to be a more effective method of dispute resolution.

Unfortunately, from the perspective of this analysis, there are constitutional difficulties with the administrative tribunal option. Earlier attempts in the province to establish such an option, through the rent review process, were struck down both in the Ontario Court of Appeal and in the Supreme Court of Canada [145] . Other provinces have had similar experiences. In some provinces, -- Quebec, for instance -- such tribunals have been approved as being within the constitutional powers of the province. At present the issue is once again before the Supreme Court of Canada for consideration.

The constitutional issue is essentially one of whether the province can delegate this function, which has been carried out in the past by federally appointed judges, to a provincially appointed tribunal. Matters which were within the jurisdiction of federally appointed judges at the time of Confederation cannot be delegated, pursuant to s.96 of the Constitution Act, 1867. Exceptions may be made in circumstances where the powers being exercised are "administrative" rather than "judicial", or where the power in question is one in which the "judicial" function is merely ancillary function. This preserves the integrity of the courts presided over by s.96 judges.

Ontario's previous attempts to create a landlord and tenant tribunal were held to be unconstitutional because: (1) landlord and tenant matters were within the jurisdiction of s.96 judges at the time of Confederation; (2) an administrative tribunal created to hear such disputes would have a "judicial" function; and (3) this "judicial" function would be the primary function of such a tribunal [146] .

However, two other Supreme Court of Canada decisions suggest that an administrative tribunal for landlord and tenant matters may be constitutional. First, in 1983, the Supreme Court of Canada [147] held that landlord and tenant matters were not within the exclusive jurisdiction of s.96 judges in Quebec, and found that a Quebec administrative tribunal created to deal with landlord and tenant disputes was constitutionally permissible. The decision regarding Quebec is at odds with the decision regarding Ontario. A 1989 decision offers a solution to such competing results. In 1989, the Supreme Court of Canada held [148] that in order to preserve uniformity across the country, it is necessary to consider whether the impugned power was within the exclusive jurisdiction of s.96 courts in all of the provinces which existed at the time of Confederation; i.e. Ontario, Quebec, New Brunswick and Nova Scotia. If there is a tie, then one must look to the jurisdiction of England's courts at the time of Confederation for the tie-breaker.

At the present time, the score is 1-1 (Ontario and Quebec). An appeal is now pending before the Supreme Court of Canada from a decision of the Nova Scotia Court of Appeal, which found that an administrative tribunal with powers of mediation and arbitration over landlord and tenant matters was unconstitutional for similar reasons to that in the Ontario case. The Supreme Court, hopefully, will now decide the issue for all of Canada.

Until it does so, and unless its decision alters the current law in Ontario, administrative tribunals for landlord and tenant matters will not be an option in this province.

There is another option which could be considered.

A submission was made to the Task Force at its hearings in Ottawa that, if implemented, could create a new process for the resolution of these claims. Under this scheme, a complaint would be filed with an office of the Ministry of Housing and an Information Officer would attempt to mediate the dispute. If the mediation were unsuccessful, the matter would be referred immediately to a hearings officer who would make a determination and issue a report with recommendations. A party who did not accept the report would be entitled to file an application to the court for a hearing before the judge.

This scheme would avoid the constitutional pitfalls referred to above, because it leaves open the option of going to court if a satisfactory settlement cannot be reached. It does not empower any provincially-delegated authority to make any order customarily made by a federally appointed judge.

In our view, this option should be examined further.

The Task Force is informed that the Ministry of the Attorney General has recently met with Ministry of Housing officials to discuss what options of this nature would be viable.

RECOMMENDATION:

We therefore recommend that the Ministry of the Attorney General continue to pursue mediation options with the Ministry of Housing.

If the Supreme Court of Canada holds that it is constitutionally permissible to place landlord and tenant disputes in an administrative setting, we recommend that such an option for Ontario be re-examined.

Another possible option is to attempt to expand the utilization of the Court's power to direct references, under the Rules of Civil Procedure [149] . At present, those powers are limited, in terms of available options for landlord and tenant matters. A judge may, at any time in a proceeding, however, direct a reference to determine an issue relating to "the taking of accounts". Arguably, this is broad enough to include disputes over the quantum and arrears of rent. References may be directed to Masters of the Court or to a person agreed on by the parties. Consideration could be given to amending the statutory and regulatory framework regarding references to add a "landlord and tenant officer" as a potential referee and to provide for references to that person for simple factual landlord and tenant matters. The landlord and tenant officer would issue a "report", which could be deemed to be confirmed by the judge unless an appeal is taken from it -- which is presently the case for other reference matters -- thus preserving the "judicial element" in the process. Judges would still be required to make orders for repossession of property and to issue writs of possession.

17.3 CONSTRUCTION LIENS

Construction litigation in Ontario is based on the Construction Lien Act, RSO 1990 c.30 as amended S.O. 1994, c.27 and is extremely complex and technical in nature. This is due to the technical nature of construction contracts themselves, the technicalities of the construction process and the engineering issues that generally arise in a construction matter.

According to available statistics, the number of Construction Lien cases pending before the court has been increasing steadily over the past five years; from 317 cases pending in 1989/90 to 986 cases in 1993/94 - an over 200% increase [150] .

The Construction Lien Section of the Canadian Bar Association - Ontario [151] , has identified the construction industry as the province's second largest industry.

In that industry, contractors and subcontractors who supply services and materials to the primary contractors are concerned with the flow of funds from the owner down through the chain of contractors, subcontractors and suppliers as construction proceeds. The legislative scheme sets up a system of lien and holdback rights and trust provisions to ensure the payment for the services and materials supplied. These liens are registered against the title to the land in question. As pointed out in the CBAO submission [152] :

The Construction Lien Act is intended to provide the persons at the bottom of the "pyramid", those upon whose credit construction proceeds, with some collateral security against the ever-present risk of non-payment.

Traditionally, smaller contractors, subcontractors, and tradesmen, have not been capitalised to the extent that they are able to sustain significant losses and continue in business. Accordingly, the insolvency of a contractor, or a major subcontractor, can impact on those further down the payment "pyramid" of a project, causing multiple insolvencies. Any significant interruption in tight cash-flows can cause business failures. As well, it is accepted that the timing of the receipt of funds can mean the difference between survival and failure [153] .

In addition to lien rights , the statute creates a scheme of payments and "holdbacks" as the project proceeds. These "holdbacks" accumulate and become a fund which is then a source of recovery in the event that someone is not paid.

Any dispute between an owner and subcontractor with regard to the work to be performed could interrupt the flow of payments. The presence of liens will stop payments from the owner to the general contractor placing the entire flow of payment along the chain into jeopardy. A single lien can stop a multi million dollar project. The Act allows a lien to be set aside by posting security with the court. Accordingly, it is critical that there be quick access to the courts and to resolve lien disputes in order to keep the construction project moving.

The complex and technical nature of the legislation mirrors the highly specialized nature of construction contracts. When these disputes must be dealt with by the courts, vast amounts of documents are the norm and multiple parties are involved. Most contracts utilize standard forms prepared by the Canadian Construction Documents Committee.

In Ontario, lien matters have been dealt with by Masters in Toronto and Windsor and by General Division Judges elsewhere. The Construction Lien Act formerly provided that the Masters jurisdiction was limited to lien matters relating to land in their own counties or districts. That limitation was removed and Toronto Masters can now hear motions with respect to construction liens on land anywhere in the province. Since counsel with expertise in this area are generally based in Toronto, there has been a tremendous increase in the number of motions being heard by Toronto Masters. This has an impact on their availability for the trials of construction lien matters.

Masters derive their authority to deal with these matters from the legislation. The procedure is known as a reference or referral to the Master from a Judge. The CBAO Construction Law section has emphasized, in their submission to the Review, the effectiveness of the Lien Masters in Toronto. They have urged the retention of Masters to deal with these matters and an expansion of the " Lien Master " system across the province.

In 1994, the Ministry of the Attorney General established The Attorney General's Advisory Committee on Alternative Resolution of Construction Disputes. That group released a discussion paper in November of 1994 and will be releasing a final report in the near future.

The discussion paper recommends ADR clauses in construction contracts and also recommends that the reference powers under the Rules of Civil Procedure be expanded to allow references to someone other than a Master, i.e. to an outside technical expert.

A new form of contract was published in June of 1994 and provided for on site mediation and for arbitration of some disputes but it will take some time to find out if owners will use it.

The Construction Lien Act was amended in December of 1994 to allow references to be conducted "by a Master or a person agreed by the parties" [154] . Where matters in dispute are more of technical nature instead of legal, these could be decided, on consent, by a person with the particular technical expertise. Once again, the amendments are too recent to evaluate their effectiveness.

The prompt resolution of construction dispute is important to the provincial economy. The Review looks forward with anticipation to the release of the Advisory Group's final report.

RECOMMENDATION:

The Review recommends that a working group consisting of representatives of the Judiciary, the Masters, the Ministry of the Attorney General, the Construction Bar and the Construction Industry be established to review the final report of the Advisory Committee and report back to the Review for a recommendation in our Final Report.

17.4 Bankruptcy

Bankruptcy matters are governed by Federal legislation [155] .

There are Bankruptcy Courts in four centres only; Toronto, London, Ottawa and Sudbury. The Registrar in Bankruptcy is in Toronto, and there are Deputy Registrars in Sudbury, Ottawa and London. Masters perform these duties in Toronto and Ottawa. In Sudbury, these duties are assumed by the Regional Senior General Division Judge. The Deputy Registrar position in London was vacant but has recently been filled on a temporary basis.

In a submission to the Review, The Canadian Bar Association - Ontario Branch supported the continued assignment of Masters to deal with these matters.

At this time, the Review does not have a clear assessment of the volumes of these matters nor of their impact on the Court. Contested and unopposed applications for Discharge involving individuals are dealt with in one of these four centres. As a result, individuals must travel across the province, and sometimes from considerable distances, to deal with matters in connection with theses discharges and consequently, a disproportionate volume of work is directed to the Registrar and Deputy Registrars and the Judiciary in those courts.

In 1992, the legislation was amended with respect to consumer bankruptcies. Now where a consumer bankruptcy is unopposed, the bankrupt is discharged automatically after nine months from the date of the assignment. While this has had an impact by reducing the number of applications for discharge by consumer bankrupts, the Review was advised that this decline has been more than offset by the increase in the number of commercial bankruptcies as a result of the economic difficulties of the past few years.

Should the team concept of case management as recommended by this report be adopted, the assignment of the bankruptcy matters could be made to the Judicial Support Officer associated with the commercial law team. It may also be possible to redirect the discharge functions to other areas and limit some of the impact on the four current bankruptcy centres.

RECOMMENDATION:

The Review recommends that the Registrar and Deputy Registrar in Bankruptcy functions be assigned to the Judicial Support Officers working within the case management team concept, and that a Judicial Support Officer in each Regional Centre be appointed, under the Bankruptcy and Insolvency Act, to carry out the functions of a Deputy Registrar in Bankruptcy in each of those centres.



Footnotes:

[123] See The Courts of Justice Act, supra, note 96, sections 22-33.

[124] See Court Statistics Annual Report, Fiscal Year 1993-1994, supra, note 65, pp. 9(replacement page) and 56.

[125] P.H. Russell, The Judiciary in Canada: The Third Branch of Government (McGraw-Hill Ryerson Limited, Toronto, 1987) at 237 [hereinafter "Russell"].

[126] id.

[127] Russell, supra, note 126, at p. 239.

[128] id., at p. 240.

[129] Zuber Report, supra, note 2, p. 35.

[130] R.R.O. 1990, Reg. 201, am. O. Reg. 732/92 (Dec. 7, 92).

[131] O. Reg. 92/93, which came into force on April 1, 1993, provides as follows: 1. (1) The maximum amount of a claim in the Small Claims Court is $6000. (2)The maximum amount of a claim over which a deputy judge may preside is $6000. Recall that previously the jurisdiction had been $3000.00 in Toronto, and $1000.00 in the rest of the Ontario regions.

[132] Ministry Comment, 1989 Amendments, Bill 2, in Watson and McGowan, ONTARIO CIVIL PRACTICE, Courts of Justice Act (Carswell: Toronto, 1994) at "PART 1: COURTS OF JUSTICE ACT" at p. 24.

[133] The Courts of Justice Act, supra, note 96, sections 24(1), 24(2) and 32.

[134] The Courts of Justice Act, supra, note 96, section 27.

[135] id., ss. 28 and 29.

[136] Small Claims Court Rules, Rule 14.01 (1).

[137] Rule 14.01(2) provides that a pre-trial may be held before a "judge or another person designated by the court", at the court's direction.

[138] Semmens: Adams, Evaluation of the Small Claims Program Province of British Columbia, Ministry of the Attorney General (December, 1992) at 30.

[139] Deputy Small Claims Court judges are paid a nominal rate of $235 per day, an amount which is less than the hourly rate of many at their level of experience in the profession.

[140] The Courts of Justice Act, supra, note 96, s.31

[142] Court Statistics Annual Report, published in October, 1994, supra, note 65.

[143] Julie Macfarlane, Project Coordinator, THE LANDLORD/TENANT DISPUTE RESOLUTION PROJECT: FINAL REPORT AND RECOMMENDATIONS, May, 1994, [hereinafter "Macfarlane Study"].

[144] Registrars who find, or detect, that an application is in dispute reportedly refer these applications to trial. Thus the variation among court house registrars in defining "dispute" is a significant variable in the percentages of applications referred to court.

[145] Re Residential Tenancies Act,(1980) 26 O.R. (2d) 609(C.A.); [1981] 1 S.C.R. 714 (S.C.C.).

[146] id.

[147] A.G. v. Grondin, [1983] 2 S.C.R. 62.

[148] Sobeys Stores Ltd. v. Yeomans, [1989] 1 S.C.R. 238.

[149] Rule 54.

[150] Court Statistics Annual Report Fiscal Year 1993/94, supra, note 65.

[151] Submission to The Civil Justice Review Re: Review of the Civil Justice System by the Construction Law Section as Relates to Construction Issues, Canadian Bar Association - Ontario, July 20, 1994.

[152] Id., p.4

[153] id.

[154] Bill 175, S.O. 1994, c.27, s.42(4).

[155] The Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3 .