Do You Have a Small Claim? (20:III)

In order to have a legal claim, it must be recognised by the law. A frivolous claim is one that does not disclose a legal cause of action, is incapable of proof, or is otherwise bound to fail. A vexatious claim is one that is brought in order to annoy, frustrate, or antagonise the defendant. A claim may be both frivolous and vexatious.

If a claim is frivolous or vexatious, the claimant will lose and may be penalised up to 10% of the amount of the claim1. The penalty could be up to $5,000 on a $25,000 claim; it pays to research your cause of action and limit your claim to the proper amount.

A. Types of Claims

It is helpful to research each of the following types of claims to ensure that a claim falls within at least one of them. See Appendix G for a partial list of specific causes of action. If you are unable to fit your claim into one of the listed categories, you should consult a lawyer to see if you have a cause of action.

1. Tort

Torts are offences committed by one person against another. Examples include assault, battery, and negligence. Each tort has its own test and defences. Tort law continues to evolve and a person planning to bring a claim in tort should research what must be proven to be successful and which defences may be available to the defendant. Resources include CanLII.org, the courthouse library, and a practising lawyer.

2. Contract

Contract law governs voluntary relationships between parties. It is a complicated and nuanced area of the law and a person planning to bring a claim in contract should research what must be proven to be successful and which defences may be available to the defendant. Resources include CanLII.org, the courthouse library, and a practising lawyer.

NOTE: Courts will generally not enforce illegal contracts or dishonest transactions (see Faraguna v Storoz, [1993] BCJ No. 2114). However, Transport North American Express Inc. v New Solutions Financial Corp., 2004 SCC 7 states that a court may enforce legal portions of a contract, thus effectively severing the illegal portion. A common example involves contracts purporting to charge interest rates prohibited under s 347 of the Criminal Code. The court will not enforce a term in a contract purporting to charge such a rate. (However, section 347.1 exempts payday loans from criminal sanctions, if certain conditions are met; see Section V.G: Regulation of Payday Lenders and Criminal Rate of Interest in Chapter 9: Consumer Protection).

3. Equity

The usual remedy for torts and breaches of contract is monetary damages. In circumstances where monetary damages are inadequate or where a legal remedy is improper in the circumstances, the court may grant other relief such as an injunction. The Small Claims Court, pursuant to s 2 of the Small Claims Act [SCA]2, has a limited inherent jurisdiction to grant equitable remedies.A party seeking an equitable remedy such as an injunction should consult with a lawyer and will likely need to apply to the Supreme Court for relief.

4. Restitution

The law of restitution3 applies to circumstances where a party has benefited, the other party has suffered a loss as a result, and there is no legal basis for the party to have benefited. This claim is commonly referred to as “unjust enrichment” and is a complicated and evolving area of the law.A person planning to bring a claim for restitution should research what must be proved to be successful and which defences may be available to the defendant. Resources include CanLII.org, the courthouse library, and a practising lawyer.

5. Statute

Certain statutes create a right of action that does not exist in the common law. The statute will set out what must be proved, the defences that apply, the types of damages that can be awarded, and how the claim must be brought.A person planning to bring a claim under a statutory cause of action should research the statute as well as how the courts have interpreted it by noting up the applicable provisions. Resources include CanLII.org, the courthouse library, and a practising lawyer.

B. Types of Damages

Although the Small Claims Court has the jurisdiction to award $25,0004, the awards in most cases are significantly less. There must be a principled basis for an award of damages and it is helpful to separate a claim into the following types of damages. Ensuring that there is a legal basis for a claim is a critical step as there are penalties for proceeding through a trial in Small Claims Court on a claim that has no reasonable basis for success5.

1. General Damages

General damages are those that are not easy to quantify and for which a judge must assess the amount of money that, in the circumstances, will compensate for the loss. A common example of general damages is “pain and suffering”. The purpose of general damages is to compensate and not to punish; a party should not expect to profit or realise a windfall through an award of general damages. A person planning to claim general damages should provide evidence of the loss and research the case law to determine how the courts have assessed damages in cases with similar losses and circumstances. Resources include CanLII.org, the courthouse library, and a practising lawyer.

2. Special Damages

Special damages are those that are not presumed as a direct consequence of the act6. Special Damages are generally quantifiable out-of-pocket expenses. For example, if a person has been put to expense and has receipts showing the amounts spent, these expenses would be classified as special damages. In a personal injury action, this could be medical bills, or in an action involving faulty equipment, repair bills could be classified as special damages. Each and every expense must be strictly proved with documents or other satisfactory evidence.

3. Nominal Damages

Nominal damages are those where a wrong has been committed but there has been no, or insignificant, damages suffered as a result of the wrong. Certain torts, such as trespass, allow claims for nominal damages however there is little reward and much to be lost. A person who has suffered no damages yet still brings a claim may not recover the costs for bringing a claim that wastes the court’s and the parties’ time and money. Note that cost awards are limited in small claims cases7.

4. Debt

Debt is a remedy for breach of contract. See: Busnex Business Exchange Ltd. v Canadian Medical Legacy Corp.8 At paragraph 8, the court addresses the requirements for establishing a debt or liquidated demand:

“A liquidated demand in the nature of a debt, i.e., a specific sum of money due and payable under or by virtue of a contract. Its amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation, beyond mere calculation, then the sum is not a ‘ debt or liquidated demand,’ but constitutes ‘ damages.’”

5. Liquidated Damages

Some contracts provide for a genuine pre-estimate of damages in the event of a breach and allow the non-breaching party to claim for that estimate without having to prove the amount they have actually lost. This amount can be recovered as a debt. If the amount of liquidated damages is not a genuine pre-estimate of damages or is manifestly inappropriate in the circumstances, a court may decline to award them.

6. Statutory Damages

Statutory damages are those that arise from a breach by the defendant of an obligation found in a statute. The statute and relevant case law should be examined carefully to determine what damages may be claimed and the principles for assessing damages.

7. Punitive Damages

Punitive damages, also called “exemplary damages”, are reserved for conduct that is so abhorrent that the court must impose an additional penalty to punish the wrongdoer and discourage others from engaging in similar conduct. Punitive damages are rarely awarded. Punitive damages are not compensatory and the amount, if any, is in the complete discretion of the judge.

A claimant who seeks punitive damages must ask for punitive damages in the Notice of Claim. Punitive damages cannot be awarded in addition to the $25,000 monetary limit.