Our former partner, the Honourable Mr. Justice Kurz strikes again
Suing in Superior Court when you should be in Small Claims Court is an abuse of process
Our former and greatly missed partner, the Honourable Mr. Justice Marvin Kurz of the Ontario Superior Court of Justice continues to make important decisions, which have ramifications for the entire Province of Ontario.
In his July 8, 2021 decision, Canaceede Credit LP v. Schulz, he stopped a common strategy used by collection firms.
Large institutions such as banks rather than dealing with the collection of small debts would simply sell them for pennies on the dollar to another company. In this case, Canaceede bought debts owed to various banks. The amounts involved were all far below the $35,000.00 limit of Small Claims Court. Canaccede, even though it was located in London, Ontario, had a strategy whereby it would commence an action in Milton in the Superior Court of Justice. Superior Court as one can imagine has far more complicated rules, amongst them, generally not permitting a party to be represented by a paralegal in contrast to Small Claims Court. Small Claims Court is also strongly tilted in favour of parties litigating on their own behalf in an effort to make justice more accessible.
Canaceede, taking advantage of the fact that what they were doing was not prohibited would ignore the Small Claims Court alternative and simply sue everyone in Superior Court out of Milton. One can assume that they chose Milton as they felt it was a jurisdiction in which the backlogs were less than others. It mattered not to Canaceede where the defendant lived (an option not granted in Small Claims Court) all of their defendants were sued in Milton.
Canaceede applied for the court’s permission for substituted service. A plaintiff may ask the court for permission to serve a defendant by an alternate means when they cannot easily be found or served. Unfortunately for Canaceede, three of such requests all found their way to Justice Kurz’s desk simultaneously.
Justice Kurz in a lengthy decision decided that this process of suing in Superior Court for matters clearly within the jurisdiction of Small Claims Court was an abuse of process. The strong supposition was that this course of action was being undertaken to make it difficult for a defendant to fight the claim.
Canaceede indicated that what they did was extremely common throughout the credit collection industry.
Justice Kurz in a detailed and lengthy fashion wagged his finger no no no. Justice Kurz reiterated that the Superior Court has inherent jurisdiction to manage its own process unless there was a statutory reason for them not to do so.
Justice Kurz ordered that all three lawsuits be transferred to the appropriate Small Claims Court jurisdiction where the defendants lived.
From Canaceede’s perspective, they are faced with an interesting dilemma and one will have to see how this develops. If they live with this decision, it is simply made at a trial judge level. It is persuasive but not binding. If they appeal and win, then they will have clearly re-established the existing strategy that they have been using successfully. However, if they appeal and lose, then there will an appellant decision which indeed will be binding upon trial judges and no doubt will come to the wide spread attention of court clerks and judges across the Province and will put an end to this practice.
As is often the case, judges lead the way in making decisions that really should have been made by the legislature. This decision alone may very well cause a change in the rules that will bring an end to this collection strategy. Canaceede admitted that it had presently before the court in Milton 109 similar cases.
An important decision for defendants of modest means across the Province and the collection industry as a whole.