In January 2010, the jurisdictional limit in Small Claims Court is rising to $25,000 from $10,000 in Ontario.
Surprisingly, there seems to be a backlash in the legal community.

Some argue that $25,000 is no small potatoes and that a self-represented individual stands to lose a lot more than just a “small” claim.

Others complain that the increased caseload will lead to more backlog in small-claims cases and thereby result in litigants waiting longer for trials.

Despite these concerns, litigants will benefit from the rise in jurisdiction. As well, a solution to alleviate the potential increased backlog - mandatory mediation - could address lawyers’ concerns.

I agree that a $25,000 claim is not small potatoes to the average Canadian, but neither is $10,000. If a self-represented litigant stands to lose far more in a small-claims trial with the increased jurisdiction, then that suggests one thing: get legal help.

Time and again, I have seen or personally faced off against self-represented litigants who have completely botched their case and turned winning lawsuits into losers.

It never ceases to amaze me that the same individuals who will do a week’s research prior to buying a used vehicle for $5,000 will waive their right to legal advice, take five minutes to fill out a form, and start their court action with $10,000 at stake.

The fact of the matter is that even with the limit at $10,000, litigants ought to be obtaining professional advice. Therefore, those self-represented parties who do take $25,000 cases to trial without legal help only have themselves to blame for not investing in legal assistance.

In my opinion, litigants will soon realize this so that the concept of self-represented individuals on a $25,000 or even $10,000 matter will be a rarity. 

It’s important to note that the Small Claims Court is the most streamlined court in Ontario. The parties exchange pleadings, have a settlement conference, and then trial. 

In the next level of court, although the matter is under simplified procedure, there are still additional steps such as an affidavit of documents, preparation of materials for and attendance at mediation, preparation of documents for and attendance at pretrial, and various other procedures prior to trial.

Simplified procedure cases taken all the way to trial can run parties into the tens of thousands of dollars and still take an estimated average of a year to two years to complete. Accordingly, when faced with a decision on whether to litigate in higher court or fight in small claims, virtually every litigant will choose the Small Claims Court.

Take the following example. It is before the rise in the claims cap, and John needs to sue Frank for $20,000 in unpaid invoices. In order to sue in Small Claims Court, he has to waive any amounts over the cap of $10,000.

Alternatively, John can go to higher court to sue, but because of all the steps in litigating, his lawyer estimates fees of $20,000 and one to two years to get to trial.

Doing the math, John understands that even if he wins in higher court and even if he recovers some of his costs, he will still likely wind up with less than $10,000. As well, John can get a quicker decision in small claims with the average wait for a trial approximately six months to a year. The no-brainer decision for John is to go to Small Claims Court.

But now, with the limit increased, he can sue in the Small Claims Court for the full amounts owing, and even if it costs him $5,000 to litigate, he is still ahead by winning $15,000 in court.

Moreover, even with an increased backlog, John is still no more behind by going to Small Claims Court than if he had waited the average of one to two years under the simplified procedure.

Nevertheless, even with the increased backlog in cases getting to trial, I know just what to do: introduce mandatory mediation to Small Claims Court. Of course, one may argue that we already have settlement conferences for that reason.

But that’s not exactly the case. I believe deputy judges would agree that, as it is, there is hardly enough time to fully mediate a case during a settlement conference and, with the increased workload, it won’t get any easier.

So why not model a small-claims case after a simplified procedure with respect to mediation? After exchange of the pleadings, parties should be required to mediate a dispute with an agreed mediator - roster or otherwise - within three months and then report back to the court.

Given that the mediator’s fees are shared equally by the parties, they wouldn’t represent too high an increase in legal costs. In any event, given the success of mandatory mediation, almost all litigants would welcome the fee in exchange for settling on an amount they can live with rather than risking it all at trial.

If the matter is still not resolved, then have the deputy judge facilitate a settlement conference in something like a higher court pretrial or just scrap that step altogether so as to free up more trial dates.

(Personally, I favour keeping settlement conferences so that a litigant sees what it’s like to face an actual judge. That may resolve even the cases that slip out of mediation unresolved.)

Despite all the intellectual debates, the Small Claims Court is meant to be a people’s court, and anyone asking the litigants themselves would be informed that the rise in the claims cap is a welcome relief.

It’s true that this may mean that litigants must spend some money on legal advice and wait a little longer in court, but in my view such monies spent should be viewed as an investment. With respect to the backlog, that will cease to be an issue if and when mandatory mediation is introduced to the Small Claims Court.

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Jordan Farkas is founder and lead lawyer of www.MrSmallClaimsCourt.ca. He also acts as an outsourced litigation consultant to lawyers and self-represented parties on higher-court matters. He can be reached at 647-727-4686 or jfarkas@jordanfarkas.com.