In nine provinces and the three territories of Canada, the English common law system prevails, while the province of Quebec adopted the French civil law system. Canada’s legal landscape is also influenced by Aboriginal and treaty rights.

Canada is a parliamentary democracy based upon the British Westminster style of government. Canada has two constitutional documents: the Constitution Act, 1867 and the Constitution Act, 1982. The Constitution Act, 1867 is the foundational document of Canada and contains the division of legislative powers between the levels of government. The Constitution Act, 1982 contains the Charter of Rights and Freedoms.

Canada has two levels of government: the federal government and provincial (or territorial) governments. Each level may pass statutes and regulations within their jurisdictional limits. The provincial government has also delegated authority to municipal governments to make their own laws of a local nature.

Since the common law system is the most prevalent legal system in Canada, the discussion regarding litigation practices and procedures will focus on the common law jurisdictions.

The Canadian common law system follows the adversarial model of adjudication. At first instance, both sides present their evidence and arguments to an impartial judge who decides the issues. Appeals are heard before a panel of judges and are typically limited to the record of the lower court.

The Canadian court system consists of two divisions:

• the federal courts, which have jurisdiction over certain limited subject matters such as immigration, tax, military matters, and intellectual property; and
• the provincial courts, which may have several trial levels, including superior courts and provincial courts. The superior courts have inherent jurisdiction and hear the vast majority of disputes in Canada including commercial, criminal, and family matters. Provincial courts have limits on the types of commercial matters heard or relief given.

Both systems also have appellate courts.

The Supreme Court of Canada is the highest court in Canada and the court of last resort in both systems. Appeals of commercial matters are generally only permitted with leave and usually involve an issue of national importance.

The superior and appellate courts also have jurisdiction over administrative boards and tribunals either by way of statutory appeal or judicial review.

The discussion in this guide will focus on superior court practice and, where requested, provincial appellate courts, as most commercial matters in Canada are litigated in these courts.

Access to justice is a real concern in Canada. Commercial litigation may take anywhere from a few years to over a decade to resolve.

The open court principle is a central feature of Canadian liberal democracy and is protected by the constitutionally entrenched right of freedom of expression. Generally, the public can attend hearings and review court files. The press is also free to inquire and comment on the workings of the courts. The Supreme Court of Canada has confirmed that this makes the justice system fair and accountable.

Statutory protections exist for evidence or witnesses in certain criminal or family matters. The courts also have discretion to impose court access restrictions, including sealing documents, where openness presents a serious risk to a competing interest of public importance. For commercial matters, the parties will most likely have to resort to the common law and not statute.

Individuals may be self-represented before every level of court. A corporation, however, cannot be self-represented in court.

The legal profession is regulated at the provincial level. In the superior and appellate courts, only lawyers called within that provincial jurisdiction may appear before the courts. The law societies of numerous provinces have entered into mobility agreements that allow lawyers called in one province to appear on a limited basis in another if they comply with the rules of that jurisdiction and the terms of their practice restrictions.

All lawyers called in any provincial or territorial jurisdiction may appear in the federal courts and before the Supreme Court of Canada.

Foreign-called lawyers cannot appear in any Canadian court as counsel of record.

Outside of class actions and insolvency, litigation funding is largely unregulated and a matter of contract between the party and the third-party funder.

To avoid the common law concerns with champerty and maintenance, the funder cannot “instigate” the litigation or through contractual terms become overly involved in the litigation.

The class action legislation in some provinces requires court approval of third-party funding agreements with representative plaintiffs. The court will consider a variety of factors such as whether the agreement is necessary to provide access to justice; whether the agreement is fair and reasonable; whether the agreement will diminish the rights of the representative plaintiff to instruct counsel or control the litigation; whether the funder is able to satisfy an adverse cost award to the extent that indemnity is provided; and the funder’s compensation and risk.

The court may cap the amounts realised by the funder so that any combined compensation received by the funder and class counsel under a contingency agreement does not exceed the caps imposed by law for contingency fee arrangements.

In the insolvency context, court approval of third-party funding that provides interim financing may be required. The factors that a court will consider are similar to those factors in the class action context. The terms of indemnification for adverse costs awards have been an important feature in court decisions.

Obligations of confidentiality may also be imposed on the funders in these two circumstances.

Third-party funding is available for all types of commercial litigation and arbitration.

Third-party funding is largely a matter of contract law in Canada. Currently, there is no legal rule preventing a defendant from obtaining third-party funding. However, plaintiffs may have more options as to funding arrangements as the third-party funder’s return is typically driven by a successful damages award.

For general commercial matters, there is no maximum or minimum amount. If court approval of the funding agreement is required, in assessing the fairness and reasonableness of the bargain in the class action context, the court’s decision may be informed by the caps imposed for lawyer contingency fee arrangements.

Funding may be provided to pay for disbursements and expenses, all or a portion of legal fees, adverse cost awards and security for costs.

The rules of procedure and rules of the law society in each province govern contingency arrangements between clients and their lawyers. The content of the agreements may be regulated, including the termination rights, and the lawyer may be required to provide the client with certain information regarding contingency arrangements. Some jurisdictions in Canada impose caps on the contingency percentage, restrict the claims for which contingency arrangements may be permitted, or require court approval of the agreement.

As this area is largely unregulated, there are no time limits for when the funding must be in place.

There are some optional legal steps that can be taken before an action is commenced. It is common practice to send a demand letter to the opposing side regarding a possible claim and allow time for response or negotiation. However, there is no legal obligation to do so or consequences imposed by the court for failing to do so, unless the particular cause of action requires some form of prior demand.

Most common law jurisdictions in Canada have a shorter basic limitation period that applies to most actions, which is largely dependent on when the plaintiff discovered (or ought to have discovered) certain facts regarding the claim that suggest that litigation ought to be pursued. These jurisdictions also have a longer ultimate limitation period that typically runs from the date of the act or omission giving rise to the claim.

A few common law jurisdictions in Canada have different limitation periods based on the type of cause of action. All statutory regimes have rules regarding when limitation periods will be extended or suspended.

Whether a defendant is subject to the jurisdiction of the courts is based on whether there is a “real and substantial” connection between the jurisdiction and the facts on which a claim is based. Some facts include whether the claim relates to a business operated in the jurisdiction; real property located in the jurisdiction; a contract governed by the law of the jurisdiction; a tort committed in the jurisdiction; or a trust administered in the jurisdiction.

Where a defendant does not agree that they are subject to the court’s jurisdiction, they may apply to the court to dispute jurisdiction. Additionally, even where a court has jurisdiction, a defendant may apply to the court alleging that another jurisdiction is the more appropriate forum (forum non conveniens). If the court agrees with the defendant, a stay of proceedings will be entered.

The name of the commencement document that must be filed depends on the rules of procedure in the jurisdiction. For claims that require a trial, the commencement document may be called a “statement of claim”, “notice of civil claim” or “notice of action”. For claims that may not require trial or are less procedurally complex, a different document called an “originating application”, “petition” or “notice of application” may be used to commence the proceedings.

The contents of these commencement documents are largely the same. The plaintiff or moving party must identify the parties, the material facts giving rise to the claim, a summary of the legal basis for the relief, and the relief that they are seeking.

It is possible to amend a commencement document unilaterally by the party within certain timeframes or with leave of the court upon application and satisfying the court that the test for amendment is met.

In general, a commencement document must be served personally on the defendant or responding party. Typically this is done through a process server or lawyer hired by the plaintiff or moving party. The courts do not serve commencement documents on the defendant or responding party.

The rules of procedure for the jurisdiction will have different procedures for when service on the defendant or responding party is within or outside the territorial jurisdiction of the court.

If personal service cannot be made, substitutional service orders may be obtained from the court for an alternative method of service. These applicants must be supported by evidence of attempts made at personal service.

Where service is made outside the territorial jurisdiction of the court, leave of the court may be required and the factors in 3.3 Jurisdictional Requirements for a Defendant regarding the “real and substantial connection” test will apply.

Where service is to be completed in a country that is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, service must comply with the Convention’s requirements.

If a defendant has not provided a response in accordance with the timeframes for responding as set out in the applicable rules of procedure, the plaintiff or moving party may rely upon the default judgment procedure to obtain a judgment. This is typically a written procedure that requires the filing of minimal evidence in accordance with the rules. A court officer (and not a judge) may be granted the power to enter default judgment against a party.

Not all claims, however, may result in default judgment. Where claims are not subject to default judgment procedure, the plaintiff or moving party may resort to the summary judgment procedure. This will require more detailed evidence and may require the party to appear before a judge to make legal arguments and answer questions.

The class action legislation is largely the same across the country. All class actions must be certified by a judge with common issues identified for trial. All provinces are “opt-out” jurisdictions.

The test for certification requires that:

• the pleadings disclose a cause of action;
• there is an identifiable class of two or more persons;
• the claims of the prospective class raise a common issue;
• a class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues; and
• there is a representative plaintiff.

The means of determining whether class proceedings would be preferable differs by province. In some provinces, the relevant class action statutes outline factors to consider, while in others, the court requires that a class proceeding be, at minimum, “superior to all reasonably available means of determining entitlement of the class members to relief or addressing the impugned conduct of the defendant”.

The rules of procedure in each jurisdiction in Canada may also permit a representative action if there is a common interest among numerous persons in the subject matter of the claim. Representative actions are not common.

There are no legal requirements to provide a cost estimate for litigation at the outset of a matter, although a firm may provide a suggested budget and offer certain types of work on a piecemeal basis, such as legal research, for a fixed fee negotiated in advance with the client.

A firm’s retainer agreement will specify the hourly rates and other fees that may be charged for legal work and that for certain steps, a client’s consent to perform the work will be obtained in advance.

The amounts that may be charged for legal work are also governed by legal ethics for lawyers that only “fair and reasonable” amounts will be charged for their services.

The rules of procedure permit applications before trial to obtain the following relief:

• procedural relief, such as document production orders and directions to answer questions objected to during examinations;
• interim relief, such as interim or interlocutory injunctions pending trial; and
• final relief, such as summary judgment.

The rules of procedure contain procedures:

• for summary judgment or summary dismissal on one or more issues; and
• to strike all or part of a claim or defence.

There is usually no set timing for when these applications must be brought in the proceedings before trial.

For summary judgment or summary dismissal, the moving party will be required to file and serve the application as well as any supporting evidence. The responding party will then be required to file their evidence and perhaps a written response to the application, depending on the jurisdiction in Canada. For applications to strike, usually only the application materials are filed. Evidence is not typically considered.

Under both procedures, the parties may need to arrange a special hearing with the court and file and serve written legal arguments.

For applications for summary judgment, the civil burden of proof applies (balance of probabilities). For applications to strike, different legal standards may apply depending on the grounds. If there is no reasonable cause of action or defence alleged, the court will consider whether the claim or defence is hopeless or bound to fail. If the grounds are that the claim is vexatious, frivolous or an abuse of process, the court will make that specific legal determination.

Procedures for summary trials of one or more issues may also exist. Those applications might have time limits for when they must be brought before trial.

The most common forms of dispositive applications made before trial are default judgments, summary judgments or summary dismissals and striking applications.

A default judgment is obtained when the defendant does not file a statement of defence or response to the claim within the applicable timeframe. Summary judgment or summary dismissal is obtained where there is no claim or defence to a claim. An order striking all or part of a claim or defence is obtained where there is no reasonable claim or defence pleading, or the pleadings are vexatious, frivolous or an abuse of process.

If a person is a proper or necessary party to the proceeding, they may be added by the plaintiff if the timeframe for adding a new party has not expired. If the timeframe has expired, then leave of the court is required to add a new party.

A court will consider a variety of factors in determining whether a new party should be added to existing proceedings including the existence of any prejudice, whether the request seeks to add a defendant after a limitation period has expired for claims against it, and the factual nexus between the existing claims and any new claims. If a party is to be added as a plaintiff, the new party must consent.

A person called an “intervenor” may also be added to proceedings with leave of the court. They are not necessary for the adjudication of the issues, but the court may allow them to participate on terms if they may be of assistance to the court in adjudicating the issues.

The availability of security for costs depends on the jurisdiction in Canada. The test that the court will apply may vary, but it will typically include the consideration of a variety of factors such as the merits of the issues; the ability of the responding party to pay; the ability to enforce against assets in the jurisdiction; and prejudice.

The default rules for how the costs of an interim application are treated will depend on the jurisdiction in Canada. Some jurisdictions provide that the successful party is entitled to costs of the interim application unless the court orders otherwise, while in other jurisdictions, the costs of interim applications are addressed after trial or upon further direction of the court.

The court has wide discretion regarding costs, including determinations of when any amounts are payable and the amount owed. The rules of procedure may also have a schedule of amounts that apply to certain steps unless the court orders otherwise or permits the review of costs by an assessment officer in accordance with certain rules or manuals.

For commercial matters, there are no legal requirements for when a judge must issue a decision on an application, even if the application is made on an urgent basis. Some jurisdictions in Canada have specialised commercial courts to hear urgent matters, such as bankruptcy and insolvency applications, injunctions or matters under the business corporations legislation. The scheduling and administration of these courts typically allows for a judge to reach a decision in a timely matter, particularly if a decision is needed before a closing or enforcement date.

Discovery involves both the production of relevant documents and the examination of enumerated classes of witnesses either in person or through written interrogatories.

Discovery is administered by the parties, although resort to the courts may be necessary to settle disputes regarding the timing or scope of disclosure and objections to questions asked during examination or requests for undertaking to produce further documents or information.

The relevancy of documents and questions to the matters at issue is a guiding factor related to the scope of discovery. Materiality may also be another guiding factor regarding the scope. Parties are also expected to manage litigation in a manner that is proportionate to the amount involved, the importance of the issues and the complexity of the proceedings.

Besides obtaining court orders regarding the scope of discovery or agreement amongst the parties, there are no express mechanisms to constrain the costs of this procedural step.

The ability of a party to examine third parties will depend on the rules of procedure in the jurisdiction in Canada. In some jurisdictions in Canada, there is an enumerated list of individuals that may be examined as of right. This may include third parties to the proceedings, such as employees or auditors of a party. In others, a court order may be required.

The examination of witnesses is usually agreed to by the parties, but if there is a dispute, a further notice or court order may be required to compel a witness to attend. On application, the court will consider whether the third party has relevant and material information to the dispute. The court may also limit the number of individuals that an adverse party may examine.

Court orders are also required for the production of documents in the possession or control of third parties if that party refuses to provide any requested documents. The court will consider the relevance and materiality of the document to the proceedings as well as any prejudice to the third party. As a condition of the court, the court will likely require the requesting party to reimburse the third party for reasonable expenses for copying or producing the documents if required.

Depending on the jurisdiction in Canada, examination of an adverse party’s expert witness may also be available before trial either by consent or with leave of the court.

The general approach to discovery of documents is that, subject to claims of privilege, relevant and material documents must be disclosed to parties to the litigation. A party receives documents under an implied undertaking of confidentiality not to use or disclose them outside the litigation in which they were produced.

Parties are also expected to manage litigation in a manner that is proportionate to the amount involved, the importance of the issues and the complexity of the proceedings.

This is not applicable to the common law jurisdictions in Canada.

The courts recognise both solicitor-client privilege and litigation privilege.

Solicitor-client privilege is not only an evidential right but also a fundamental and substantive rule of law and must remain as close to absolute as possible.

In order to claim solicitor-client privilege, a party must meet the following test:

• a communication exists between an individual and a legal professional (written or oral);
• the communication is confidential; and
• the communication must be for the purpose of obtaining legal advice.

There is no official difference between in-house counsel and external counsel regarding the test for solicitor-client privilege. However, in-house counsel are often consulted to give business advice, which is not covered by solicitor-client privilege.

Litigation privilege covers communications that were created in contemplation of litigation (which must be a reasonable prospect) for the dominant purpose of use in litigation. This form of communication does not require the involvement of a legal professional.

A document or question may be covered by both solicitor-client privilege and litigation privilege.

A document may be withheld on other grounds of class privilege such as settlement privilege or parliamentary privilege. The common law also recognises a case-by-case privilege may arise in particular circumstances. The claiming party must establish the existence of this privilege.

A variety of injunctive relief is available. Injunctions may be prohibitive (ie, restrain a party from doing something) or mandatory (ie, require a party to do something).

Injunctions are grounded in the equitable jurisdiction of the courts and are highly discretionary. Even if the test for granting an injunction is met, the court may deny relief if there are equitable bars to relief (such as laches) or the moving party fails to comply with equitable maxims (such as clean hands). Injunctions are typically awarded where damages are not adequate alternative relief.

The types of injunctions include the following.

• Quia timet injunctions: these are granted before any harm is actually suffered, although the probability of irreparable harm is great.
• Interim or interlocutory injunctions: these are granted to maintain the status quo or prevent irreparable harm on a short-term basis pending a final determination of the issue on its merits.
• Permanent injunctions: these are granted after a final determination of the parties’ rights.
• Mareva injunctions: these are granted if there is a real risk that the responding party will dissipate or move assets from the jurisdiction in order to avoid enforcement of any judgment. A Mareva injunction may also be available if there is a strong case that the responding party has committed fraud.
• Anti-suit injunctions: these are granted to restrain a person within the court’s jurisdiction from commencing or continuing an action in a foreign court where the claim is justiciable in the local court.

Most non-permanent injunctions will require the moving party to establish:

• the presence of a serious question to be tried;
• irreparable harm should the injunction not be granted; and
• that the balance of convenience favours the moving party.

The process for obtaining an urgent injunction will depend on the province and court. The applicable rules of court, practice direction or notice to the profession will identify the individual to contact to make arrangements.

Most courts have duty judges assigned to hear these types of applications on an expedited basis during normal court hours. Applications must be supported with affidavit evidence and a written argument and filed on the court record.

Where exceptional circumstances exist, the court may grant an injunction without notice to the responding party. However, these injunctions may be for a limited duration or the court may insert a comeback clause or other provision in the order that allows the affected party to return to court to have the injunction set aside or reheard on a complete record.

A party may be held liable in damages for obtaining an injunction that is later discharged. As a condition of granting any non-permanent injunction, the court may require the moving party to provide an undertaking as to damages or post security with the court for any damage that may be suffered by the responding party if the injunction is later discharged.

Worldwide Mareva injunctions may be granted to freeze the assets of a party where the court maintains jurisdiction over that party on a pre-trial basis. Mareva injunctions may be provided for in statute or at common law. The common law test in some jurisdictions in Canada may be more flexible than in others, but generally the moving party should establish:

• a strong case for trial;
• irreparable harm should the injunction not be granted; and
• that the balance of convenience favours the moving party.

The court will also consider whether there has been full and frank disclosure by the moving party; the particulars of the claim; whether the responding party has assets within the jurisdiction; and the risk of the responding party removing or dissipating these assets in order to frustrate judgment.

A strong case of fraud will also assist the moving party in establishing the risk of removal or dissipation of assets to frustrate judgment.

The moving party will also be required to post an undertaking for damages and perhaps even security for the payment of those damages.

The rights of third parties may be impacted by Mareva injunctions. Mareva injunctions typically request the assistance of banks and other third parties who may have property of the responding party in their possession. Third parties with notice of the injunction order will be required to comply with its terms.

As a term of the order, the court will likely require the moving party to compensate these third parties for any reasonable expenses incurred in complying with the terms of the injunction order.

Injunctions are enforced through contempt of court. If a party fails to comply with an injunction, the party will be required to appear before the court to show cause for why they should not be held in contempt of court. There are specific procedures that the moving party must follow when an order for contempt is sought.

After hearing from the parties, the court may allow the offending party to purge their contempt by complying with the order within a certain period of time, or the court may impose a penalty such as a fine or imprisonment. The court has wide jurisdiction to fashion a remedy to address the seriousness of the contempt.

Unless the court orders otherwise, trials are conducted in open court with witnesses, not in writing. In order to ensure a speedy or efficient trial, the parties may agree in advance to admit certain facts or provide the judge with certain documents as agreed exhibits. If no agreements are reached, witnesses are called and their oral testimony and any documents are admitted based on the rules of evidence and procedure for that court.

At the trial, both sides may provide an oral opening statement. Depending on the complexity of the trial, the trial judge may also request a shorter written argument or bench brief before trial to assist him or her with understanding the evidence and the issues.

At the end of the trial, both sides will also typically provide oral and written submissions regarding the issues; the applicable legal principles; the weight to be given to the admitted evidence; and the relief sought.

The rules of procedure differ regarding the procedure for hearing interim applications. Some types of applications, such as orders that may be consented to by the parties, may fall within a written procedure.

Less complex applications that are opposed but require less than a prescribed period of time to argue may be heard in regular chambers before a judge on a few days’ notice. More substantive applications that are opposed, such as summary judgment or an application to strike, may have to be scheduled months in advance through a court co-ordinator for two hours or more of court time.

The parties are largely responsible for complying with the deadlines contained in the rules of procedure for the applicable steps leading up to the trial. However, the parties may consent to or obtain orders for litigation plans or other orders that deviate from those default deadlines.

Case management is where a judge is seized of the matter and this judge will hear all pre-trial applications but possibly not the trial. Not all commercial matters qualify for or need case management. If a matter is not under case management, the pre-trial applications will be assigned to an available judge.

The rules of procedure or another provincial statute will govern when a trial may be heard by a jury. For example, in some jurisdictions in Canada a statute lists the types of causes of action that upon application may be heard by a jury such as claims for defamation, malicious prosecution, and false imprisonment. In others, the rules of procedure identify what causes of action cannot be heard by a jury such as those relating to the specific performance of a contract or the dissolution of a partnership.

The default rule is that trials of commercial matters are heard by a judge alone. If a party wishes to have a matter determined by a jury, they will be required to comply with the local rules such as filing and serving a jury notice or obtaining leave of the court. Jury trials for commercial cases are rare in Canada.

The rules of evidence are governed by both statute and common law. At common law, evidence is admissible if it is logically relevant to one or more issues and is not covered by a rule of exclusion. Additionally, the court has discretion to exclude evidence if the prejudicial value outweighs its probative effect.

The statutory regimes may provide for specific rules, such as those related to business records, or override common law principles on certain issues such as competency and compellability.

Generally, a party must comply with the formal requirements as well as any service deadlines for the exchange of expert evidence prescribed by the rules of procedure. Additionally, if a party objects to the admissibility of that expert evidence, it must comply with any notice obligations.

When the expert is called at trial, the court will undertake a two-step analysis to determine whether the expert opinion is admissible. This is as follows.

• At the first step, the expert evidence must meet four threshold requirements. It must:
1. be relevant;
2. be necessary to assist the trier of fact;
3. not fall under any other exclusionary rule prohibiting its admissibility; and
4. be presented by a properly qualified expert. Evidence that does not meet these threshold requirements will be excluded.
• At the second "gate-keeping step", the court conducts a cost-benefit analysis, which requires it to balance the potential risks and benefits of admitting the evidence in order to decide whether the potential benefits justify the risks. The expert evidence may be rejected at this step if its prejudicial effect on the conduct of the trial outweighs its probative value.

In some jurisdictions in Canada, the court may appoint an independent expert although this is rare.

The default rule is that court proceedings are open to the public and the public may search and obtain copies of the court record and transcripts of proceedings.

Commercial matters will largely rely on the common law to obtain court access restrictions. Under this test, a party may be able to obtain an order to seal the record or close the proceedings to the public. These are discretionary orders that require evidence of potential harm to an interest and the scope of the court access restriction must be proportional to potential harm and impact on the court openness principle. See 1.3 Court Filings and Proceedings.

The common law court system is adversarial, meaning that the parties prepare and present their case as they see fit. However, this does not mean that a judge must be a passive listener or “sphinx”. A judge may and sometimes must ask witnesses questions, interrupt them in their testimony and if necessary call them to order. In so doing, however, the judge must not usurp the role of competent counsel or “enter the fray” as that gives rise to an appearance of partiality.

Whether a judgment will be given orally or reserved and issued in writing at a later date is up to the judge, although the parties may request a transcript of the oral reasons. Decisions on interim applications may be issued orally, particularly if they are on urgent matters while trial decisions of commercial matters will likely be reserved with written reasons issued weeks or months later.

Where a matter proceeds through a less complex procedure (referred to as a petition or originating application as described in 3.4 Initial Complaint) the matter may take a few months or a few years to resolve. Where the matter proceeds as an action with a statement of claim or notice of civil claim, the action will most likely take much longer to reach trial.

The procedural timeframes and trial duration will depend on the complexity of the matter, the degree of co-operation between the parties and court availability to hear applications or book trial dates.

The rules of procedure will provide mechanisms for the dismissal of proceedings for long delay (typically several years where no material steps are taken) or delay giving rise to prejudice. These orders for dismissals are not automatic and require an application with supporting evidence.

In general, court approval is not required to settle a lawsuit of a commercial matter other than class actions. However, if a settlement involves a minor or a disabled person, court approval may be required. The rules of procedure or a provincial statute will contain the restrictions and any applicable procedure.

For commercial matters, the party receiving funds may request as a term of the settlement that the monetary amounts be incorporated into a consent judgment, which will assist that party with enforcement if the amount is not paid. While this requires a judge’s approval, since the order is entered by consent, the judge is unlikely to inquire into the terms.

The Supreme Court of Canada has recognised settlement privilege as one of the classes of privilege. Settlement privilege protects the confidentiality of information and communications exchanged in the process of settling a dispute. There are exceptions to settlement privilege and a court may order that certain information relating to settlement be disclosed. For example, in multiparty litigation where the plaintiff settles with one or more of the defendants, the court may order the disclosure of certain details of the settlement to the defendants remaining in the action.

Offers to settle may be exchanged under the common law and through the rules of procedure.

The rules of procedure may contain specific forms and requirements for a “formal” offer to settle, that if refused, may result in cost consequences if the party sending the offer beats the offer at trial. This offer to settle may not be disclosed until after a decision is made on the merits.

If a settlement agreement is reached, it is enforced just like any other contract. If there is a breach, the innocent party will commence another action against the defaulting party to obtain any remedies available for that breach.

If a formal offer to settle has been accepted in accordance with the rules of procedure and there is a default in performance, there may be a mechanism to have the formal offer to settle converted into a judgment through application within the existing action.

If the settlement amount has been incorporated by the parties into a consent judgment, then that judgment may be enforced as any other judgment of the court.

As a contract, a settlement agreement may be set aside on the basis of duress, unconscionability, mistake, fraud or breach of fiduciary duty. The bar to setting aside any contract is high.

A successful party may obtain one or more of the following remedies at trial:

• declaration of rights or interests in property;
• an order for specific performance or permanent injunction;
• common law damages;
• equitable compensation or damages;
• orders under statutory schemes such as those governing corporations or partnerships; or
• pre-judgment and post-judgment interest on monetary awards.

Legal costs are determined in line with the applicable rules of procedure or contract.

For damages, the principles are governed by the cause of action. For both contract and tort actions, the starting point for damages is the sum of money that will put the party who has suffered loss, injury or damage in the same position it would have been in if it had not sustained the loss, injury or damage.

In contract, the plaintiff may pursue an expectancy or reliance methodology for calculating damages, while in tort damages are based on the reliance methodology. For some torts, like trespass, modest damages may be awarded even if there has been no loss, harm or damage suffered.

Non-pecuniary damages for personal injury have been capped by the Supreme Court of Canada at CAD100,000 in 1978 dollars, which is approximately CAD437,000 in 2024 dollars. Caps for non-pecuniary damages arising from fatalities may also exist under provincial legislation.

The remedies for breach of fiduciary duty are not necessarily limited to damages but also include accounting of profits and disgorgement of gains.

Punitive damages are very much the exception rather than the rule in the common law jurisdictions in Canada. They are imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour.

Punitive damages are rare for breach of contract cases. They are more likely to be awarded in breach of fiduciary duty, fraud, or negligence situations.

The provinces have statutory regimes for the provision of pre-judgment and post-judgment interest on monetary judgments. It is common for plaintiffs to claim these amounts in their commencement documents or any interest amounts owing under a contract.

The statutory regimes differ across the provinces and may provide:

• different rates for pecuniary and non-pecuniary awards or heads of damages;
• different rates for the pre-judgment and post-judgment periods;
• default rules regarding when interest arises and the period over which it accrues; and
• the circumstances where the court may depart from the default statutory scheme (such as where interest is provided under contract).

The statutory rates are typically less than commercial or banking interest rates.

If a provincial scheme does not apply, the federal Interest Act may govern the claim, although it is less prescriptive than the provincial regimes.

The provinces and territories have statutory regimes for the enforcement of domestic judgments that govern:

• enforcement mechanisms including distress, writs, garnishments, orders for sale of land and seizures of other property;
• the actions of civil enforcement agencies and bailiffs;
• the type or value of property that is exempt from enforcement; and
• how money realised through enforcement mechanisms is distributed amongst competing creditors.

A foreign judgment may be enforced through statute or common law. The provinces and territories have statutory regimes for the reciprocal enforcement of judgments of the other provinces and territories as well as some other countries and US states.

Where a judgment has been obtained in a reciprocating jurisdiction, the creditor may apply within that province or territory to have the judgment recognised and enforced as a domestic judgment. The court will consider several statutory conditions.

The province or territory may also have rules regarding the enforcement of judgments under the Convention between Canada and the United Kingdom of Great Britain and Northern Ireland providing for the Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters.

Canada is not a signatory to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters.

If the judgment was obtained in a foreign jurisdiction that is not a reciprocating jurisdiction nor party to an enforcement treaty, then the party must commence new proceedings on the foreign judgment to obtain a local judgment.

Most common law jurisdictions in Canada have a superior court and appellate court. The appellate court is a statutory court but has wide jurisdiction to hear appeals of most matters from the superior courts, although leave may be required for certain matters.

The superior courts and appellate courts may hear judicial reviews or appeals of a particular administrative board or tribunal depending on the statutory regime.

The rules of procedure differ depending on what types of decisions are appealable as of right and which require leave of the appellate court. Most commercial judgments will be appealable as of right.

The rules of procedure also differ as to the procedure and test for granting leave. In some jurisdictions in Canada leave applications are part of a written process, while in other jurisdictions the parties may be required to appear in court for an oral argument. Leave applications are almost always heard by a single judge of the appellate court.

In order to commence an appeal, the appealing party must file and serve the required documents within the prescribed time for that jurisdiction in Canada. The prescribed time for filing and service may differ depending on the jurisdiction and the type of appeal. An appeal of a judgment may have different timeframes than an appeal of an administrative tribunal. The timeframes are typically short, such as 30 days.

The triggering date for an appeal may vary, but it is usually the date of the decision.

Appellate courts review decisions of lower courts when an error of law or fact is alleged to have occurred. Questions of law are reviewed on a standard of correctness, while questions of fact or questions of mixed fact and law are reviewed on a standard of palpable and overriding error. Palpable and overriding error is a high threshold based on the principle that first instance judges are best equipped to make factual findings.

Appeals are on the record and are not a re-hearing of the original case, although an appellate court may hear new evidence and arguments but exercise that discretion rarely and in limited circumstances. Leave of the court may be required.

In granting leave to appeal, the court may impose conditions on the parties such as the posting of security pending appeal.

The powers of the appellate court on appeal are prescribed by the rules of procedure or statute. Generally, an appellate court may allow the appeal; dismiss the appeal; or make any order that the lower court ought to have made.

In allowing the appeal, the court may substitute its determination of the issues or outcome for that of the lower court or it may remit the matter back to the lower court for redetermination in accordance with its reasons. In making any order that the lower court ought to have made, the appellate court may impose any terms and conditions.

The rules of procedure or provincial statutes govern costs. Most common law jurisdictions in Canada take a modified “loser pays” approach to costs, although the specifics of how the amounts are calculated vary by province. In general, the winning party is entitled to costs. However, judges are afforded broad discretion in awarding costs, and the cost rules vary significantly across the common law provinces.

Costs may be awarded on a full indemnity, partial indemnity or party and party basis. Full indemnity costs may be awarded where the contract between the parties that gave rise to the litigation provides for full indemnity costs to the party who must enforce the obligations. Costs on a party and party basis are default and typically awarded according to a schedule or tariff of costs for certain steps.

If there are disputes that cannot be settled by the court, or the court declines to address costs, costs may be assessed by a court officer who reviews invoices and detailed calculations and calculates the amounts according to the rules of procedure and other court manuals regarding disbursements and fees.

The courts may take a wide variety of circumstances into account when determining a cost award such as the complexity of the proceedings; any circumstances that shortened or lengthened the proceeding; each party’s conduct during the litigation process; any formal offers to settle that were not accepted; and the reasonableness of the amounts claimed.

Under the statutory regimes governing pre- and post-judgment interest, interest is not typically available on cost awards.

Arbitration is widely used in Canada as an alternative to court litigation. Arbitration is commonly used in the mining, oil and gas, construction, information technology, forestry and power industries as well as in shareholder disputes.

Mediation is also widely available, although it may not be used as frequently for commercial matters.

The requirements for alternative dispute resolution (ADR) vary across the provinces and levels of court. In several provincial superior courts, mediation is required for some commercial matters, although exemptions are available. In others, a judicial dispute resolution process may be available for commercial matters, but participation is not mandatory. Some courts offer a judge-led mediation with the goal of facilitating a settlement agreement amongst the parties or narrowing the issues for trial or appeal.

There are no sanctions for refusing ADR where it is not mandatory.

There are many arbitration institutions and facilities in Canada that support both domestic and international arbitration proceedings. They include the following.

• The ADR Institute of Canada Inc (ADRIC).
• The Vancouver International Arbitration Centre (VanIAC, formerly BCICAC).
• The Canadian International Internet Dispute Resolution Centre (CIIDRC, a division of VanIAC).
• The Canadian Arbitration Association (CAA).
• The International Centre for Dispute Resolution of Canada (ICDR – Canada).

Former judges and senior litigation counsel also act as mediators or arbitrators either individually or through consortiums.

The provinces and territories have statutory schemes for the conduct, recognition and enforcement of domestic and international arbitration. In 1986, Canada became the first jurisdiction to adopt the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”).

The statutory regimes largely follow or are consistent with the Model Law.

The subject matters that may be arbitrated are largely governed by the arbitration agreement between the parties with some limited exceptions for consumer issues. Arbitration legislation in Canada does not provide for class action arbitration or group arbitration.

The statutory regimes allow a party to the arbitration to apply to the courts to have the award set aside on specific grounds. However, an application to set aside an arbitral award is not the same as an “appeal” of the judgment in a commercial case. The Model Law limits the grounds on which an arbitral award may be set aside. An arbitral award may be set aside if the applying party proves:

• contractual incapacity;
• invalidity under the law to which the parties have subjected it;
• lack of notice of the arbitral appointment or proceedings, or inability to present the party’s case;
• jurisdictional grounds (ie, the award deals with or decides matters beyond the scope of the submission to arbitration);
• the composition of the arbitral tribunal or procedure was not in accordance with the parties’ agreement;
• the subject matter of the dispute is not capable of settlement by arbitration under the relevant law; or
• the arbitral award conflicts with public policy.

Parties to an arbitration cannot agree to exclude or expand the scope of the application to set aside the award.

The statutory regimes provide for the procedures for enforcing arbitration awards issued within the province, another province or territory of Canada or internationally. An application is typically made to the court providing a copy of the arbitral award.

If there are no grounds to set the arbitral award aside and the time limits for an appeal of the award or application to set aside have expired, the court will then issue a judgment enforcing the award.

The traditional trial process is resource- and time-intensive and incredibly expensive. Dispute resolution reform in Canada has focused on means to resolve claims without a full trial.

Over the last few years, many provinces have implemented rules to provide for modified or hybrid trials that embrace procedural concepts from arbitration. Case law has also worked to promote the determination of justice in ways without the need for a full trial, such as the promotion of summary judgment.

While Canadian courts are attempting to create more timely and less expensive access to justice through modified processes, private arbitration continues to increase in use for those same reasons.

The following areas appear to be future battlegrounds in commercial disputes: liability related to generative AI decision-making; data breach and corporate espionage-related claims; class actions (particularly in securities and ESG matters); and growing disputes between the interplay between private arbitration and the public courts.