The Courts of Justice Act in Ontario contains a provision which limits the award of legal costs in Small Claims Court to 15 per cent of the amount claimed unless “the court considers it necessary in the interests of justice to penalize a party or a party’s representative for unreasonable behavior in the proceeding.”
This provision makes it impossible for many lawyers to litigate cases in Small Claims Court in a cost effective manner. In short, the amount of fees that will be charged to the client will be disproportionate to the amount of the potential overall recovery.
In a recent decision, the Small Claims Court heard a 5 day “renovation-gone-wrong” case. At the end of the day the court awarded the plaintiff just over $2,500 in damages (the plaintiff had sought $25,000) and $5,300 in legal costs.
The legal costs award is comprised of a representation fee of $3,000, plus disbursements of $200 and $100 for the preparation of pleadings in respect of the plaintiffs claim, as well as a representation fee of $1,700, plus disbursements of $200 and $100 for preparation of pleadings in respect of the counterclaim (which was dismissed).
It is interesting that the trial judge explicitly notes that the representation fee in respect of the plaintiff’s claim works out to $667 per day for 4.5 days of trial and only $378 per day for 4.5 days of trial in respect of the counterclaim. Especially so when one considers that the plaintiff was completely successful in defeating the counterclaim and only moderately successful in proving his own claim.