Monday, August 19, 2019Canada's Leading Online Business Magazine

Why Refusing Mediation During a Lawsuit Can Be Costly

By Jack Zwicker

In a recently released decision, one of Ontario’s trial courts struck back at unreasonable litigants in an important decision involving a party’s refusal to mediate an action started years before. The action, cited as Canfield v Brockville Ontario Speedway, eventually went to trial and involved a personal injury suffered at a car race. The Plaintiff was the victim and the defendant was the race track’s insurer. Even though the rules governing civil actions do not require lawsuits started outside Ottawa, Toronto and Windsor to participate in ‘mandatory mediation’, the trial judge applied a seldom used procedural rule to impose substantial court costs on the losing party, the insurer, for refusing to participate in mediation before trial.

When mandatory mediation was first introduced in 1999, the assumption was that it would eventually be rolled out across the Province. However, that never happened and only Ottawa, Toronto and Windsor require parties to mediate their lawsuits before going to trial. To avoid mediation in these cities, one or the other party must obtain a court order exempting mediation. When the Superior Court of Justice in Brockville gave judgment, it applied Rule 1.04 of the Ontario Rules of Civil Procedure, a general rule of procedure that directs the courts to seek the “most just, expeditious and least expensive” path in resolving disputes. By invoking this rule, the trial court sanctioned the defendant’s insurer financially for refusing to participate in mediation even though it had no authority to order mediation in the first place.

What this means for parties who are litigating, is that they have to be very conscious of the fact that insistence on going to trial based on principle can be very costly. In this particular case, the Plaintiff won damages for his injuries. And the Defendant’s insurer which carried the defence was seen as stubborn. Not only did the insurer have to pay the damages award. It also was ordered to pay reasonable court costs to the winning Plaintiff together with the additional sum of $20,000.00 representing his wasted legal expenses in not attempting settlement through mediation. In other words, proceeding to trial is a right. But doing so in inappropriate circumstances comes with a price.

One of the critical questions that parties in litigation have to ask themselves is when should they reach out and request mediation? And while there is no single answer since the facts of each case will be different, as a general rule, the earlier parties request mediation, the more likely they reduce the risk of an adverse costs finding such as in Canfield. Some lawsuits, like this one turn more on liability and less on the dollar value of the Plaintiff’s losses. In this lawsuit, it was clear that the Plaintiff was a legitimate victim and that the claim did not involve an attempt to ‘shake down’ the insurer.

In other cases, where the legitimacy of the Plaintiff’s claim is in doubt, the refusal to mediate may be reasonable. And even if the Plaintiff has an arguable claim, if his losses are foolishly exaggerated, refusing to mediate may be the right strategy. The best approach since every case depends on its facts is for the lawyers acting on both sides to ask whether the opposite party has an arguable case regarding liability and damages. If a judge could find in favour of the opposite party, it is probably advisable to go to mediation to explore settlement.

At the end of the day, the decision to go to mediation even if the rules of civil procedure do not require it, is not geared only to the position taken by the defendant as in the Canfield case. Where the Plaintiff asserts a claim that may be legitimate but the damages are unreasonable, the defendant may protect its position on court costs where the case is tried and the Plaintiff wins judgment for an amount that is out of all proportion to the costs incurred to get there. Because the procedural rule referred to seeks proportionality between the costs of litigation and the outcome, being a stubborn Plaintiff is no better than being a stubborn defendant.

One other statistic should be considered. Despite the five to seven year backlog in civil actions reaching trial in our largest cities, fully 97% of all civil actions do settle at some point without going to trial, often at the eleventh hour. That being the case, for whatever reasons, 97% of all civil actions must have some merit to justify settlement, or they would not settle. Looking at law suits as a continuum, cases may range anywhere from weak to strong or fall somewhere in between. Where a case has some arguable merit, the use of mediation should be encouraged not just to protect each party against a negative costs award at trial but more importantly to save the parties the financial and psychological expense of being involved in years of litigation. Added to those costs are the opportunity losses that businesses experience merely because they are in litigation and often have to give up both marketing time and opportunities that may be of greater value than the lawsuits themselves.

Jack Zwicker is a practising Markham, Ontario lawyer, mediator and Chartered Arbitrator.

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