In a recent decision in a personal injury action, a Superior Court Judge denied a plaintiff’s motion to transfer her action to Small Claims Court despite her assertion that her damages would properly be assessed under the $25,000 limit of the Small Claims Court.

May v. Hutchinson, 2013 ONSC 7712 arose out of a December 15, 2010 car accident which the Plaintiff claimed resulted in various injuries to her.  She therefore commenced an action under Simplified Procedure seeking general and special damages of $100,000.  It is noteworthy that the Statement of Claim was issued on August 13, 2012, over two and a half years after the monetary jurisdiction of the Small Claims Court increased from $10,000.00 to $25,000.00 on January 1, 2010, so the Plaintiff was unable to argue that her claim now fell within the expanded jurisdiction of the Small Claims Court.

Before the Plaintiff moved to transfer the action to Small Claims Court, the Defendant had already invested considerable time and effort defending the case.  This included the exchange of Affidavits of Documents and productions, as well as completion of Examinations for Discovery and an independent medical examination of the Plaintiff.

In refusing to grant the Plaintiff’s motion, Justice Broad accepted the Defendant’s argument that his litigation strategy, including his choice of counsel and the steps undertaken in defence of the action, was reflective of the amount claimed by the Plaintiff and the court level which she chose, which he held was a relevant consideration on such motions.  Justice Broad was also mindful of the fact that much of the costs incurred by the Defendant in responding to the Plaintiff’s action may not have been incurred to any great extent, or at all, had the claim initially been commenced in Small Claims Court.

Justice Broad further noted that even if he granted the Plaintiff’s motion, it would have been contingent on the Plaintiff paying the Defendant an appropriate amount to compensate him for his costs thrown away in defending the action in Superior Court (on a complete indemnity basis). 

In his conclusion, Justice Broad was mindful of the fact that:

It was the Plaintiff who chose to claim the amount of damages that she did and to commence her action in the Superior Court and the Defendant was entitled, and indeed required, to marshal resources and to adopt a litigation strategy commensurate with the claim and the forum chosen by the Plaintiff.

He went on to hold that:

In the circumstances of this case, it would be unfair to the Defendant to effect a transfer to the Small Claims Court simply because the Plaintiff has now come to the realization that her true claim for damages is within the jurisdiction of the Small Claims Court and wishes to mitigate her exposure to a possible adverse award of costs in the Superior Court.

Accordingly, Justice Broad dismissed the Plaintiff’s motion, with costs.

I argued this motion on behalf of the defence and can confirm that the Defendant was able to leverage its success on the motion, and the ensuing costs award, into an outright dismissal of the action.

A critical lesson to be learned from the decision in May v. Hutchinson is the importance of looking at the bigger picture when faced with a motion to transfer an action to Small Claims Court.  When faced with a claim that is commenced in Superior Court, often for several hundreds of thousands of dollars, it is often tempting to accede to a plaintiff’s request to transfer the action to Small Claims Court on the basis that it will limit a defendant’s exposure to the $25,000 jurisdictional limits of that court.  We must remember, however, that plaintiffs are often motivated to transfer actions to Small Claims Court because they realize that the claim lacks sufficient, or any, merit justifying its continuation in Superior Court.  For this reason it is often more beneficial to continue an action in Superior Court, which has stricter Rules by which a defendant can test a plaintiff’s claim, and provides the opportunity to have the case decided by a jury.

Another factor that no plaintiff lawyer will ever admit, but which nevertheless fuels the motivation to transfer unmeritorious claims to Small Claims Court, is the fact that plaintiffs want to avail themselves of the favourable costs rules in Small Claims Court.  Under the Rules of the Small Claims Court, a successful party is generally only entitled to recover costs in the amount 15% of the amount claimed, which on a $25,000 claim translates into $3,750.  As we are all aware, this is often a fraction of the costs a defendant will typically incur in defending an action, whether it is meritorious or not.  Therefore, if for no other reason, it is often appropriate to keep actions in Superior Court where there is a greater chance of recovering the costs actually incurred in successfully disposing of a claim.

With the foregoing in mind, be sure to think twice before acceding to a plaintiff’s request to transfer an action to Small Claims Court.  What may initially look like a good way to limit your exposure may, in fact, actually serve to limit a plaintiff’s exposure to an adverse costs award.