Chapter 2: Litigation and Alternative Dispute Resolution
This handout was adapted from Chapter 2 in McInnes et al., Managing the Law: The
Legal Aspects of Doing Business, 3rd edition (Toronto: Pearson Canada, 2011).
The Litigation Process: Who Can Sue and Be Sued?
Who has access to the courts in Ontario? Who can be sued in an Ontario court?
All adults, regardless of their citizenship.
Corporations, even if they are incorporated outside of Ontario. (Remember that
the law treats corporations as legal persons for some purposes.
o Children: children can sue and be sued, but a parent or litigation guardian
must represent them.
o Adults suffering from a mental incapacity (e.g., dementia or Alzheimer’s):
they can sue and be sued, but they must be represented by a litigation
Unincorporated organizations, such as clubs, amateur teams, and community groups, are
generally not recognized in law as “persons”. Thus, these organizations cannot sue or be
sued as an organization. If you want to sue a club, you must sue individual members of
the club. If members of a club wish to pursue legal action against another party, they
must bring their legal action as individuals. They cannot sue in the name of the club or
organization. Trade unions, however, are an important exception to this rule.
Historically, it was not possible to sue the government. However, legislation has now
made it possible to sue the government under some circumstances.
The person who initiates a law suit is called the plaintiff. The person being sued is called
the defendant. The law suit as a whole is frequently called the action.
The Litigation Process: Class Actions
Case 1: Why do we have class actions? George v. Shark Loans
When George’s car unexpectedly broke down, he needed a loan to cover the repair costs.
Because he had bad credit, George went to Shark Loans, a company that makes relatively
small loans to people who are considered bad credit risks. Shark Loans not only charges
high interest rates, but it also imposes a major penalty for any late payments. George was
charged a $75 late penalty when he paid an installment on the loan three days late.
George wondered if charging this late penalty was legal, so he asked his friend Wendy,
who is a lawyer, for advice. Wendy did some quick calculations, reviewed the case law,
and then told George that the late penalty very likely violated the criminal interest rate
provisions in the Criminal Code. She told George that he could sue Shark Loans to get
the late penalty back, but that he would have a hard time finding a lawyer who would take a case worth $75. Even if George represented himself, the cost of the filing fees and
the time wasted on pursuing the matter would be far more than $75.
At first, George was content to let the matter go. But as he thought about it, he started to
become angry. How many other people were stuck paying this late penalty? Shark Loans
was breaking the law – and profiting from it. Shark Loans knew that hardly anyone
would bother to challenge the late penalty in court; it simply would not be worth the time
and money. At the same time, George estimated that Shark Loans could be making up to
$7 million from the collection of the late penalties. Something had to be done.
George went back to his friend Wendy for more advice. “You see, if it is just me, then
the law suit is only worth $75. But what if there were 100,000 people in my position? Or
even 250,000 people? Shark Loans is a pretty big company; it has locations all over
Ontario. Shark Loans claims that it has given over 400,000 loans. So what would Shark
Loans do if we all sued the company, all at once – and all together? Is that possible?”
Wendy thought about the matter, and replied, “You would need a class action. You
would ask the court for permission to join all the claims against Shark Bank in one
proceeding, with a representative plaintiff. You wouldn’t sue for $75. You would sue for
$7 million – the value of all the claims combined. Since the claims are all very similar, it
makes sense for the court to hear one or two cases and apply its decision from those cases
to the rest of the cases. It’s a better use of the court’s limited resources to decide these
cases altogether than to hear very similar claims separately.”
George smiled. “Shark Loans might not care about $75 claims, but a $7 million claim
will get its attention!”
What are the benefits of class actions?
In this Case, who would be the plaintiff and
who would be the defendant if George decides to sue Shark Loans?
In Case 1, George is contemplating bring a class action against Shark Loans. A class
action allows a single person (like George) or a small group of people to bring a legal
claim on behalf of a larger group of people.
from very small (even just two people) to very large (thousands of people).
In Ontario, the Class Proceedings Act governs class actions. You should read this Act,
particularly s. 1, 5, 6,and9. In order to bring a class action, a representative plaintiff must
take steps to have the class certified.
members of a proposed class to be joined together; this allows someone like George to
initiate a lawsuit on behalf of everyone else.) The Class Proceeding Act states that a
judge will certify a class if the following requirements are met:
There is a “cause of action” (a legitimate claim recognized by the law). The
representative plaintiff does not have to prove his case during the certification
phase, but he must show that there is some basis in law and in fact for the claim being mad
Members of the proposed class must have common issues. That is, the claims of
class members must involve similar (but not necessarily identical) questions of
fact or law. Here are some examples:
The class members are all suing the same defendant in relation to the same
product line or service or in relation to the defendant’s employment practices
The class members all suffered the same sort of injury.
The class members suffered different injuries, but the injuries arose from the