Mediation or Small Claims Court?

Effective April 2, 2001, the monetary jurisdiction of the Small Claims Court of Ontario has increased to ten thousand dollars.

This is a significant change, especially for small and medium sized businesses. Ten thousand dollars may represent the largest receivable or contract that a small business has outstanding at any one time. It may also represent the largest customer that a small business has for a given fiscal year. More importantly, a contract of this size may represent the customer that your business has the best hope of doing the most business with in the future.

This now creates a dilemma. How can a small business maintain a good working relationship with a customer, supplier or a family member and still collect their outstanding account?

One thought is to use the small claims court system. Small claims court has a number of restrictions on the type and amount of claims that can be made, but assuming that your claim can be handled by the small claims court, you must still take the time and incur the expense of following the required court procedures. These established court procedures are clear reminders that the small claims court is indeed a real court of law and your claim will be viewed as a real lawsuit by your customer! Now the dilemma becomes clear, if you have just dragged me into a real lawsuit that I must defend in a real court, I doubt if our business relationship will become closer over the next few months.

Mediation and arbitration, (alternate dispute resolution or ADR), are viable alternatives to small claims court actions, especially when a business or family relationship is at stake. In a mediation, the parties agree to use a trained mediator to help them come to a mutually agreed resolution of the issues. In arbitration, the parties agree to present their evidence and allow an arbitrator to decide the issues for them. Arbitration may either be binding (no going to court afterwards) or non binding (we can still go to court if we are not satisfied).

Why might you consider ADR instead of court?

ADR is fast. The parties can schedule a date for ADR just as soon as all parties are available.

ADR is confidential. The parties meet in a private place and are not required to publish the results of the ADR or file public claims like those required by a court.

ADR is relationship friendly. There is NO lawsuit, NO statement of claim, NO motions, NO technicalities, lawyers are optional. Since the parties have agreed to meet with a view to resolving their differences, ADR becomes more of a team effort to solve the problem. A valuable business or family relationship can be preserved and built upon in the future instead of running up against the confrontational wall of litigation.

ADR is cost effective. Small claims court still has a financial cost, as well as an important cost in time and stress for the parties. Would you feel comfortable taking a ten thousand dollar claim in front of a judge yourself? Can you afford a lawyer to take the case? Would you enjoy postponements and motions that delay the hearing for over a year? Would you be satisfied with a judge imposing an order to pay the outstanding amount over a two year period with no interest? Would you be happy knowing your dispute might make it into the local newspaper or television news cast? Would you be satisfied to lose your best customer or alienate a family member forever? ADR can offer solutions to overcome these costs and more.

Many small businesses and individuals are now turning to ADR before they start court action. Basically, you have very little to lose by trying ADR first. A trained mediator or arbitrator can very often save the financial situation long before a court claim is filed and, more importantly, the relationship between the parties can be saved. Should ADR be unsuccessful, the parties can always fall back on the courts to decide the issues for them.

Please feel free to contact us if you have any questions about Alternate Dispute Resolution or you wish to discuss the possibility of ADR helping you. Just double click on our mail slot and drop us a note, we will try to get back to you by the next business day.