Understanding the commercial litigation process

What does commercial litigation mean in Canada?

Commercial litigation is the legal court process of advancing and defending a commercial dispute between businesses. At its core, commercial litigation is a court process for adjudicating a dispute. Parties to a commercial dispute may include anyone involved in contractual or related business disputes. This may include, for example, a franchisor and a franchisee, a landlord and tenant under a commercial lease, and a buyer and seller of commercial real estate or a business. The commercial litigator that each party retains should have firm knowledge and experience in commercial litigation.

What are the major steps in the litigation process?

The major steps in the commercial litigation process are the following:

• internal investigation and evaluation by each side and their lawyer of the key facts, evidence and legal issues in the dispute;
• commencing the case in court or defending the case – pleadings (claim and defence/response);
• discovery of evidence;
• other common litigation steps, and
• pre-trial and trial.

1.  Internal Investigation and Evaluation Stage

Each side to a commercial dispute should begin by working with their lawyer to evaluate the key facts, evidence and legal issues, and review the fundamental documents that relate to the dispute (such as the contract between the parties) and key correspondence.

The commercial litigator representing each party guides their client, helping them to identify the types of information needed and may provide a list of potentially relevant documents to search for. In this stage, the lawyer for the claimant/plaintiff will also prepare and deliver demand letters, and statutory notices (in franchising – a notice of rescission), all of which is done in the initial phase before commencing a court proceeding.

For example, if the claim involves a dispute over a contract, the lawyer should review the relevant agreements, check for potential limitation periods, etc. If the claim is for alleged losses or damages, the lawyer should review key financial information.

It is to both parties’ benefit to compiling thorough and complete evidence in the very early stages of the commercial dispute to strengthen their own case and to help promote settlement discussions which may potentially avert a costly litigation process.

2.  Commencing the Court Proceeding – The Pleadings Stage

The lawyer for the party launching the court proceeding will first decide what type of court lawsuit to initiate. Depending on the nature of the dispute and whether key facts are in dispute, the lawyer may determine that either a fulsome proceeding is needed (called action or claim, depending on the province), or a summary proceeding may be available where no serious facts are in dispute (called an application or petition, depending on the province).

Once the lawyer assesses the most suitable and appropriate court proceeding for the case, they will commence the proceeding by filing a claim or application/petition (as the claimant/plaintiff, depending on the province and the type of lawsuit).

A claim can be based on many types of legal grounds, such as for example, claims for breach of contract, misrepresentation, negligence, breach of the duty of good faith, damages, rescission (in franchise disclosure dispute), or another type of a claim depending upon the nature of the commercial dispute.

A responding party/defendant then files a response/defence. The claimant then typically has an opportunity to file a reply with any additional facts not set out in the original claim. These are collectively called the “pleadings”.

3.  The Discovery Stage

Typically, after the close of the pleadings phase, the parties to a litigation process will be required to go through the discovery stage, which is made up of two steps: production of documents and examination/questioning of the parties.

– Production of Documents

Each party prepares a formal package of documents often referred to as “productions”. It contains an “affidavit of documents” or “documents list” that lists all documents that are in that party’s possession, power or control that are relevant to any issue in the case (this includes documents that are not favourable to that party). The list of documents must be professionally organized chronologically with a table of contents and these days in a format that is digitally accessible and agreed upon by both sides. The package often contains many documents, including:

• core documents (e.g., agreements and other documents exchanged by the parties before they entered an agreement);
• records of all relevant correspondences (e.g., text messages, emails, meeting notes, phone records);
• all financial records, such as invoices, receipts, bank statements, financial statements, ledgers, tax returns and other applicable financial information.

– Examination/Questioning

After each side reviews and evaluates the other party’s productions, the parties will schedule witness examination/questioning. In this second step of the discovery phase, each side’s lawyer will examine/question the other side, typically in person. In addition, each lawyer will prepare his or her client for their examination/questioning.

Each side should also start thinking about all other witnesses who have relevant information so that the lawyer can consider contacting them in advance of the trial.

4.  Other Common Litigation Steps

There are typically many other steps involved at any point through the proceeding, such as the following:

• Motions/applications for some interim relief or to deal with procedural disputes;
• Court attendance to scheduling court hearing dates and court case conferences;
• Mediation: in some Canadian jurisdictions (such as in Toronto), mediation is a prerequisite at some point in the litigation before scheduling a trial.  (Other than the litigation requirements, certain agreements, such as franchise agreements, may also require both parties to attempt settlement negotiations, and
• Obtaining expert evidence (such as accounting/damages).

5.  Pre-Trial and Trial

When all earlier phases have been completed, and if the case has not settled and is otherwise ready to proceed to trial, the lawyers will set the case down for trial. The court office will then schedule a Pre-Trial conference with a judge to review the case and ensure that all steps in the litigation process have been completed and that the case is ready for trial. If the judge is satisfied that there are no remaining procedural steps in the litigation process and that the case is ready for trial, the judge can then schedule a trial date.

Before the Pre-Trial conference, each side will file a brief summarizing their position and the evidence that they intend to present at the trial.

After the Pre-Trial hearing and before the trial, each side will be doing a great deal of work to prepare all the evidence and exhibits for the trial, line up witnesses, and prepare legal arguments and submissions.

At the trial, each side will make opening statements to summarize their positions. The parties will then call their witnesses. After all, witnesses testify, each party will make closing submissions.

After the trial judge renders a decision about the case, the parties will address the costs of the case. Typically, the successful party will be entitled to roughly half to two-thirds of their legal costs. The costs that a trial judge awards are at the trial judge’s discretion and may depend on many factors, including settlement offers, the amounts that were in dispute, the results of the trial, the significance or complexity of the issues, etc.

Conclusion

The commercial litigation process is complex and time-consuming and normally involves a large number of documents and details. It requires a great deal of cooperation between a party and their lawyer to obtain all relevant information and evidence to effectively pursue or defend the case.

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