The Dispute Resolution Review - 9th Edition


Canada's system of government is divided into three distinct branches: the judiciary, the legislature and the executive. The legislature (Parliament) has the power to make, alter and repeal laws. The executive branch is responsible for administering and enforcing the laws. The judiciary resolves disputes by applying and interpreting the law.

Canada has a bi-jural legal system, meaning that two legal traditions co-exist - civil law in Quebec, and common law in the other nine provinces and all three territories. The main difference between these systems is that in Quebec the private law has been codified and can be found in the Civil Code of Quebec2 (the Civil Code). The Civil Code contains a statement of rules that are designed to deal with any dispute that may arise. In Quebec, unlike in the common law provinces and territories, judges first look to the Civil Code, and then refer to previous court decisions to help properly interpret the Civil Code's provisions.

There are different levels and types of court in Canada - provincial and territorial courts, superior courts, courts of appeal and federal courts. The federal courts have limited jurisdiction to hear claims in certain federally regulated areas such as immigration and refugee law, navigation and shipping, intellectual property and tax. They can also deal with matters of national defence, security and international relations.

The provincial and territorial courts are comprised of a first-level trial court, which handles civil matters up to a certain threshold, a superior court, which is a court of general or inherent jurisdiction and is referred to as either the Superior Court, the Supreme Court or the Court of Queen's Bench, depending on the province or territory, and an appellate court. These courts are arranged in a hierarchy, with the trial courts being subordinate to the appellate courts.

The Supreme Court of Canada is the final court of appeal from all other Canadian courts. It has nine judges and sits in Ottawa, Canada's capital. Both the Supreme Court of Canada and the Federal Court deal with matters in both civil and common law.

Administrative tribunals run parallel to the provincial or territorial and federal court systems. These specialised bodies are created by statute and focus on particular matters of law, including employment insurance, labour relations, human rights and workers' compensation. These tribunals are not part of the court system; however, it is possible to appeal a tribunal's decision to the courts through a process called 'judicial review'.

Private arbitration and mediation as a form of dispute resolution are also available and becoming increasingly popular in Canada. There are many organisations specialised in alternative dispute resolution, and qualified arbitrators and mediators can easily be found throughout the country. Most provinces now require certain alternative dispute resolution procedures (such as mandatory settlement conferences) as a part of the judicial process.


This past year has brought exciting new legal developments in Canada. The following provides a brief overview of some of the most significant legal disputes recently adjudicated throughout the country.

i Canada (Attorney General) v. Fairmont Hotels Inc

In Canada (Attorney General) v. Fairmont Hotels Inc,3 the Supreme Court ruled that rectification is not available where the basis for seeking it is that one or both of the parties wish to amend not the instrument recording their agreement but the agreement itself. Rather, rectification is limited to situations where a written instrument has incorrectly recorded the parties' antecedent agreement. In the context of tax planning, general intent to achieve tax neutrality is not enough to support a grant of rectification.

ii Mennillo v. Intramodal Inc

In Mennillo v. Intramodal Inc,4 the Supreme Court held that the fact that a corporation fails to comply with the requirements of the Canada Business Corporations Act (CBCA) does not, on its own, constitute oppression. Oppression can only be found when reasonable expectations are frustrated, and not simply when conduct is contrary to the CBCA.

iii Wilson v. Atomic Energy of Canada Ltd

In Wilson v. Atomic Energy of Canada Ltd,5 the Supreme Court held that employees under collective agreements can only be dismissed for just cause. This remains the case regardless ofmissal package is offered to the employee by the employer.

iii. Lizotte v. Aviva Insurance Company of Canada

In Lizotte v. Aviva Insurance Company of Canada,6 the Supreme Court confirmed that litigation privilege is a distinct class of privilege and that no balancing of interests is required to determine whether or not litigation privilege applies, provided the party claiming privilege can show the dominant purpose of the protected material was to prepare for litigation. The court also held that litigation privilege can be asserted against third parties as well as parties to the litigation.

iv. Nortel Networks Corporation (Re)

In Nortel Networks Corporation (Re),7 the Ontario Court of Appeal upheld the decision of the Ontario Superior Court of Justice (which was reached as a result of a joint trial held with the Delaware Bankruptcy Court) to allocate the assets of the insolvent Nortel debtor estates on a pro rata basis based upon each estate's accepted quantum of creditor claims. The court held that such a pro rata allocation did not ignore the separateness of Nortel's component companies and that it was a fair and non-arbitrary method of allocating the Nortel debtor estates' assets.

v Smoothwater Capital Corporation v. Marquee Energy Ltd

In Smoothwater Capital Corporation v. Marquee Energy Ltd,8 the Alberta Court of Appeal examined whether an arrangement of a company under the Business Corporations Act (Alberta) was fair and reasonable without a shareholder vote despite effectively amalgamating it with another company. The Court held that the test for fairness and reasonableness ought to be applied from the perspective of the company being arranged and that it is not bad faith to structure a transaction to avoid a shareholder vote. As the appellant held shares primarily in the company not being arranged, the Court found that there was no unfairness and the complainants were not entitled to vote.

vi Bank of Montreal v. Javed

In Bank of Montreal v. Javed,9 the Ontario Court of Appeal held that the doctrine of unconscionability in contract begins and ends with the agreement itself. The Court will not assess a party's performance of their obligations when analysing whether or not a contract is unconscionable.

vii Shewchuk v. Blackmont Capital Inc

In Shewchuk v. Blackmont Capital Inc,10 the Ontario Court of Appeal clarified that evidence of parties' conduct after a contract's formation is not generally part of the factual matrix used for interpreting a contract. The factual matrix of a contract is limited to those facts existing at or before the date of contracting, and post-formation conduct should only be considered contract is ambiguous.

viii Novatrax International Inc v. Hagele Landtechnik GmbH

In Novatrax International Inc v. Hagele Landtechnik GmbH,11 the Ontario Court of Appeal addressed the circumstances in which forum selection clauses should be enforced. The Court affirmed the motion judge's conclusion that the law favours the enforcement of forum selection clauses in both commercial contracts and tort claims arising from the contractual relationship. A party wishing to bring a claim contrary to a forum selection clause bears the onus of showing 'strong cause' that the case is exceptional and that the clause should not be enforced. Thus, the starting point for a forum non conveniens analysis is that the parties should be held to their bargain and the forum selection clause given full weight.


i Overview of court procedure

Each province and territory has enacted a distinct set of procedural rules governing practice within its courts.12 In addition, federal courts have their own rules of procedure. Practice directions are published by adjudicative bodies on an ongoing basis.

The Ontario Rules of Civil Procedure were recently revised with regard to automatic dismissal. As of 1 January 2017, matters commenced on or after 1 January 2012 will be automatically dismissed five years after they were commenced.13

Quebec introduced a new Code of Civil Procedure in December 2015.14 The new code has a strong focus on the principle of proportionality, requiring parties to ensure that each step in the proceedings is proportionate, in terms of the cost and time involved, to the nature and complexity of the matter.

In Canada, civil actions and proceedings are adversarial in nature. As such, the lawyer takes on the role of the advocate and the judge determines the case based on the evidence presented by the parties.

ii. Procedures and time frames

The time within which a party must bring a claim is prescribed by each province. Several of the common law provinces, including Ontario, have adopted a basic limitation period of two years for claims in contract and tort, subject to discoverability.15 In addition to these prescribed limitation...

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