Tuesday, September 28, 2010

A Legal Case for a Change: Small Claims Court: Pleadings: Set Off: s.25 "Courts of Justice Act" and Ambit of Small Claims Court Judge's Discretion

Hydro One Networks Inc. v. Yakeley, 2010 ONSC 4770 (CanLII)


The question is whether the trial judge erred in allowing the defence of set off when it had not been explicitly pleaded.

This was a Small Claims Court action in which the defendant/respondent had been self represented. He had counsel for the appeal.

In part of his Defence he pleaded:

...4. A number of situations were created as a result of this last minute change in pricing and conditions. First we are already committed to the cost of preparing the house for the move, we were already committed to the cost of moving the house with the house movers since the house was already loaded for the move and sitting at the end of the driveway and we had a $25,000 deposit with the purchasers of our property to have the house removed from the property by August 31, 2001 which we were not prepared to extend without forfeit of our deposit. Since there was no time to negotiate with property owners under the high-voltage wires or to build a road the only option to us was to proceed with the move was to cut the top of the entire roof off to lower the overall height of the house for the move.

5. … We were left with extensive cost to rebuild the roof of the house to its pre-existing condition not to mention costs to repair damage to the home from the elements. [emphasis added...

And in dialogue with the trial judge, the following was said:

...[8] In the Small Claims Court trial the deputy Small Claims Court judge had a dialogue with Mr. Yakeley during his examination-in-chief. As set out at page 55 of the transcript:

THE COURT: It is perhaps a legalese question but I know that it was raised at the Settlement Conference held March 17, 2008. In essence what you’re seeking, in part of your defence, is a set off but there is no claim by you as against Hydro One which would have been referred to as the defendant’s claim? I know that it was discussed because there was a note in that memorandum about it and I just want it on the record. I mean, I do not care about the discussions per se but there is no such claim advanced by you?

THE WITNESS [MR. YAKELEY]: That’s right.

THE COURT: Just so that I am clear, to repeat the obvious, your position is, but for some caution from the plaintiff, and particularly Shane Deugo, [Hydro One witness] to you in your initial meeting that the height might have been changed because of, depending on temperature and depending on time of year, you would have done differently?

THE WITNESS: That’s right.

THE COURT: And because of the time and shortness of notice and all the commitments you had made it, ended up costing you $80,000 more?

THE WITNESS: That’s right.

THE COURT: Do you want to say anything more?

THE WITNESS: I considered making a counter-claim to Hydro to offset this argument but I decided not – that I wasn’t going to put – the resources and the effort into the –...

Set off is available as a defence under s.111(1) of the Courts of Justice Act Its s. 25 says, "The Small Claims Court shall hear and determine in a summary way al questions of law and fact and may make such order as is considered just and agreeable to good conscience."

Case law lays it down that Small Claims Court proceedings are informal with latitude for its participants especially since many are self represented. The pleadings strictures of the Superior Court are therefore unworkable in the Small Claims Court. Functionally, facts are presented by the parties and the judge determines the legal issues arising from those facts.

Here, for the reviewing judge, the issue of set off was sufficiently raised. The plaintiff, a big corporation with in house counsel, had to know the defence being put to it simply based on the pleadings and the exchange between the defendant and the trial judge. Plaintiff, represented at trial, did not cross examine or ask for an adjournment. As the reviewing judge concluded:

...[19] There is no magic in the requirement to use the words “set off” in pleadings in Small Claims Court. To require a strict adherence to the rules of pleadings would be contrary to the role of the Small Claims Court in the administration of justice. In my view there was no error in law in applying set off principles based on the evidence which the deputy judge considered and accepted...


This decision seems patently right. My concern is the citing of authority for the following reasoning in the course of the reviewing judge's own reasons:

...16] With respect to the formalities required in pleadings in Small Claims Court Heeney, J. stated in 936464 Ontario Ltd. v. Mungo Bear Ltd. reflex, (2003) 74 O.R. (3d) 45 at para. 45:...

More important though is the fact that the case at bar was litigated in the Small Claims Court. The higher standards of pleading in the Superior Court are simply unworkable in a Small Claims Court, where litigants are routinely unrepresented, and where legal concepts such as the many varieties of cause of action are completely foreign to the parties. Essentially, the litigants present a set of facts to the Deputy Judge, it is left to the deputy judge to determine the legal issues that emerge from those facts and bring his or her legal experience to bear in resolving those issues...

I think this dicta accords more discretion in the Small Claims Court judge than is warranted and is wrong in principle even given the broad language of s. 25 of the Courts of Justice Act. I have never briefed s. 25 but have an initial impression that where, for an instance, the law requires specific pleading, such as with limitation periods, the failure to do so might well be fatal, and that "good conscience" in s.25 means "good conscience according to, at least, minimum standards of law".

I imagine that in the end, at least for the sufficiency of pleadings, functionality will be the final analysis: did the other party fairly have notice of the claim or defence being presented? It is too broad to say, as seems suggested by Justice Heeney, that we give the Small Claims Court judge the facts, and then let him or her do justice, "determine the legal issues", according to his or her legal experience.

Fortunately, this case need not be read as embracing that overbroad statement, which can be read as obiter dicta. Functionally, by what was pleaded, let alone the defendant's colloquy with the trial judge, there's no way that Hydro 1 didn't know it was a facing a defence based on set off, and equitable set off at that. And, I suggest, in that, on this point, lays the ratio of this case.

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