Courts, dispute resolution and litigation

Disputes are a normal part of business. Customers refuse to pay, suppliers deliver late, partners fall out and employees claim they were treated unfairly. Most disputes are settled by negotiation, and only a small fraction ever reach a trial, but every negotiation happens in the shadow of the courts: what a judge would probably decide, how long it would take and what it would cost set the bargaining range. This lesson explains how the courts are organized, how a lawsuit proceeds, how limitation periods and costs shape strategy and when alternatives such as mediation and arbitration are better choices.

How the courts are organized

Canada has a unified court hierarchy in which provincial courts apply both federal and provincial law. At the top is the Supreme Court of Canada, which hears appeals from all courts, mostly with leave (permission), and chooses cases of public importance. Each province has a court of appeal, such as the Court of Appeal for Ontario or the Court of Appeal of Alberta, which hears appeals from trial courts as of right in most civil matters. Below it are the superior trial courts, such as the Ontario Superior Court of Justice, the Supreme Court of British Columbia and the Court of King's Bench in Alberta, Manitoba, Saskatchewan and New Brunswick, which have inherent jurisdiction to hear any matter not assigned elsewhere. Provincial courts, created by provincial statute, handle most criminal cases, family matters and, in several provinces, small claims. Separately, the Federal Court and Federal Court of Appeal hear matters assigned by federal statute, such as intellectual property, maritime law, federal tax appeals from the Tax Court of Canada and judicial review of federal agencies.

Jurisdiction also has a geographic side. A court can hear a case only if it has a real and substantial connection to the dispute, for example because the defendant lives or carries on business in the province, the contract was made or breached there, or the damage was suffered there. When courts in more than one province or country could hear a case, a court may decline jurisdiction if another forum is clearly more appropriate. Contracts often include a forum selection clause choosing the courts of a particular province and a choice of law clause choosing which law applies. Courts generally enforce these clauses between businesses, but in Douez v. Facebook, Inc., 2017 SCC 33, the Supreme Court of Canada refused to enforce a clause requiring British Columbia consumers to sue in California, citing unequal bargaining power and the public interest in privacy rights.

Alternative dispute resolution

Alternative dispute resolution (ADR) covers methods of resolving disputes outside the courtroom. Negotiation is direct discussion between the parties or their representatives, and it settles most disputes. Mediation adds a neutral third party who helps the parties communicate and find a solution but cannot impose one. It is quick, relatively cheap, confidential and good at preserving relationships, and some jurisdictions require it for certain civil cases. Arbitration is a private trial: the parties choose one or more arbitrators, who hear evidence and issue a binding award that courts will enforce, with very limited rights of appeal. Arbitration is common in construction, commercial and international disputes because the parties can pick experts as decision makers, keep the process confidential and enforce awards across borders under the New York Convention.

Arbitration clauses are generally enforced in Canada, and provincial arbitration acts direct courts to stay lawsuits brought in breach of them. There are important limits. In Uber Technologies Inc. v. Heller, 2020 SCC 16, an Uber driver challenged a standard-form clause requiring arbitration in the Netherlands, with up-front fees of about US$14,500, roughly his annual income from Uber. The Supreme Court held that the clause was unconscionable because of the inequality of bargaining power and the improvident result, and let the class action proceed. Consumer protection statutes in Ontario, Quebec and Alberta also prevent businesses from forcing consumers into arbitration or blocking class actions through pre-dispute clauses, and employment standards claims generally cannot be contracted out of.

Small claims courts

Small claims courts offer a simpler, cheaper process for modest disputes. Procedures are informal, paralegals or the parties themselves often appear, and costs awards are capped. Monetary limits differ by province and change from time to time. At the time of writing (October 2026), the limit is $50,000 in Ontario, raised from $35,000 on October 1, 2025, and $100,000 in Alberta's Civil Division of the Court of Justice. In British Columbia most claims up to $5,000 go to the online Civil Resolution Tribunal and claims from $5,001 to $35,000 to Provincial Court. Quebec's Small Claims Division hears claims up to $15,000, and corporations with more than ten employees cannot sue there, although they can be sued. Check the court's website before filing, because limits are raised periodically.

Stages of a civil lawsuit

A civil action in a Canadian superior court follows the province's rules of civil procedure. The plaintiff starts the action by issuing a statement of claim, which sets out the facts and the remedy sought, and serves it on the defendant. The defendant responds with a statement of defence, and may add a counterclaim against the plaintiff or a third-party claim against someone else it blames. In the discovery stage each party must disclose all relevant documents in an affidavit of documents, including emails and electronic records, and representatives of each party may be examined under oath at an examination for discovery. Many provinces require mediation or a pre-trial conference. If the case does not settle, it proceeds to trial, usually before a judge alone; civil juries are uncommon outside Ontario and British Columbia personal injury cases. After judgment, the losing party may appeal, and the winner must enforce the judgment if it is not paid.

A litigation hold is one of the most important management duties. Once a lawsuit is reasonably anticipated, a business must preserve relevant documents, including emails, chat messages and files on personal devices used for work. Routine deletion policies must be suspended for those records. Destroying evidence, called spoliation, can lead to sanctions, adverse inferences that the missing evidence would have hurt the party and, in serious cases, judgment against the party that destroyed it.

Who pays the costs

Canadian courts follow the loser pays principle: the court usually orders the unsuccessful party to pay part of the winner's legal costs. The usual scale, partial indemnity costs, covers very roughly half to two-thirds of actual fees; substantial or full indemnity costs may be ordered for misconduct or after a party rejects a formal offer to settle that turns out to be better than the judgment. Formal offers to settle therefore carry real strategic weight. Contingency fees, under which the lawyer is paid a percentage of any recovery, are permitted in all provinces subject to law society rules and, in some provinces, caps. Each province has a class proceedings act that lets one plaintiff sue on behalf of a group once the court certifies the class.

Limitation periods

A limitation period is the deadline for starting a lawsuit. Miss it and the claim is lost, however strong it is. In Ontario, the Limitations Act, 2002 sets a basic limitation period of two years from the day the claim was discovered, meaning the day the claimant knew or ought to have known of the injury, that it was caused by the defendant and that a proceeding was appropriate. An ultimate limitation period of fifteen years from the act or omission applies regardless of discovery, with exceptions. British Columbia's Limitation Act and Alberta's Limitations Act also use a two-year basic period from discovery, with ultimate periods of fifteen and ten years respectively. Ontario allows business agreements to vary or exclude limitation periods, within limits, but consumer agreements cannot shorten them. Some statutes set their own shorter deadlines, such as notice periods for claims against municipalities.

Judgments, interest and enforcement

A judgment is the court's formal order, usually to pay money. Courts add prejudgment interest from the date the claim arose (or another date set by statute) to the judgment date and postjudgment interest until payment, both usually at statutory rates. Interest matters in long cases: on a large claim, several years of interest can add a significant percentage to the award.

Winning a judgment does not put money in the bank. If the debtor does not pay, the creditor uses enforcement tools under provincial law: a writ of seizure and sale filed with the sheriff and registered against land, garnishment of wages or bank accounts (subject to exemptions), and an examination in aid of execution, in which the debtor must answer questions under oath about income and assets. A judgment from another province can be registered and enforced through reciprocal enforcement statutes. A debtor with no assets is judgment-proof, which is why checking a defendant's ability to pay is part of deciding whether to sue.