Canada: Taking Care Of Business: The Case for Commercial Courts

Last Updated: October 27 2010
Article by Bryan Haynes

Previously published in the Canadian Lawyer magazine

Commercial courts have been established in various business centres around the world and are common in developed countries. Factors leading to their establishment in other jurisdictions are very much present in Canada, namely, a judiciary lacking expertise in commercial matters, overwhelmed dockets, and complex commercial disputes requiring expeditious resolution. The results are overwhelmingly positive. Canada would benefit from instituting commercial courts in all of its major commercial centres.

Commercial courts augment the quality and predictability of judicial decisions, expedite resolution of commercial disputes, reduce costs for litigants and taxpayers, and create a judicial infrastructure that attracts business. They flourish in jurisdictions including the United Kingdom, the Republic of Ireland, France, Belgium, Germany, Australia, New Zealand, many U.S. states (including New York and Delaware), Ontario, and Quebec.

Due to the vicissitudes of history, culture, and local customs, different models of commercial courts have evolved in different countries. Some are merely divisions or programs within existing courts. The Commercial List in Toronto is an unofficial division of the Ontario Superior Court of Justice, made up of a handful of judges who have experience, expertise, and an interest in commercial matters, but who also rotate in other areas of the law within the Superior Court.

Other commercial courts, such as les tribunaux de commerce in France, are separately constituted. Some commercial courts in Europe (including in Belgium, France, and Germany) embrace lay judges with business experience. France's Supreme Court (la Cour de cassation) has six chambers, including one dedicated to commercial matters. Perhaps the bestknown commercial court is the Delaware Court of Chancery, originally established as a separate court of equity. On the occasion of its bicentennial in 1992, William H. Rehnquist, the late chief justice of the United States, praised the court's national pre-eminence in corporate law, saying: " . . . the Delaware Court of Chancery deserves our celebration, not only as a unique and vibrant Delaware institution, but as an important contributor to our national system of justice."

Regardless of their differences, the fundamental objective of commercial courts is the same — to concentrate expertise in commercial litigation in order to resolve commercial disputes more effectively and expediently. One does not need to look hard or long to unearth repugnant case law. The inappropriate and inconsistent application of the just and equitable test in piercing the corporate veil is but one glaring example. Our patchwork of (at times incoherent) commercial case law is due in part to an inexperienced judiciary, prodigious backlogs, ineffective case management, and a predilection of appeal courts to hear non-commercial cases.

Concentrating expertise in commercial litigation promotes the creation of a coherent system of rational law. As Rehnquist commented: "Because the Court of Chancery, by design, has no jurisdiction over criminal and tort cases — matters which create huge backlogs in other judicial systems — corporate litigation can proceed quickly and effectively. . . . Corporate lawyers across the United States have praised the expertise of the Court of Chancery, noting that since the turn of the century, it has handed down thousands of opinions interpreting virtually every provision of Delaware's corporate law statute." Delaware's well-developed corporate law explains in large part why most U.S. public companies incorporate there.

Where there are commercial courts, disposition rates have increased and disposition times decreased, significantly. As Frank Bennett, who literally wrote the book on the subject, remarked on the Toronto Commercial List: "Considered one of the fastest courts in Ontario, if not in Canada, applications, motions, and trials can be heard with great speed compared to the ordinary regular civil courts where the backlogs are legendary to counsel and clients." In New York, following the creation of its Commercial Division in 1995, a 35-per-cent increase in the disposition rate and a 44-per-cent decrease in average disposition time for contract disputes were reported. In Ireland's Commercial List, as a result of rigorous case management (i.e. strict deadlines for exchange of pleadings, penalties for non-compliance, and mandated case management and pre-trial conferences), cases that previously took two and three years to get to full trial are now reportedly disposed of within months.

Commercial courts have also been credited with attracting business. The New York Council on Judicial Administration stated the success of its Commercial Division "helped return the New York courts to a leadership role in adjudicating major commercial disputes and maintain New York's status as the premier state for the conduct of business." Ontario's well-respected Commercial List of judges, whose expertise in commercial matters generally gives rise to predictable and acceptable results, has been credited with attracting asset-based loan and other sophisticated workout transactions to Toronto. Its success recently spurred Quebec to establish its own Commercial Division. What are the rest of us waiting for?

Bryan Haynes is a partner and co-chairman of the commercial transactions practice group at Bennett Jones LLP.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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