Canada: The New Code Of Civil Procedure: An Approach Promoting Negotiations Between The Parties, Mediation And Arbitration

Bill 28: An Act to Establish the New Code of Civil Procedure (the "New Code") was recently passed and should come into force in 2015. It will be the first major reform of the Code of Civil Procedure since its adoption in 1966 which will greatly affect relations between parties to a dispute.

Upon first reading, this substantial piece of legislation is surprising to the reader. Indeed, while we would expect it to describe the judicial process, the New Code begins with a series of seven (7) articles discussing the duty of the parties to consider private dispute prevention and resolution processes before going to court.

In this article, we will discuss the impact expected to result from this new approach put forth by the legislator which, in our opinion, will require a radical change in mentalities towards a more cooperative form of justice.

1. Out-of-Court Negotiation: A Compulsory Step to Consider Before Initiating Proceedings

It is striking to note that, in its Book 1, the New Code sets out the principles governing the private dispute prevention and resolution process (articles 1–7), which, of course, differ from those applicable before judicial courts. It is an important step by the legislator that aims to recognize the existence of private and voluntary dispute prevention and resolution methods.

Intensity of the New Duty

The last paragraph of article 1 states that:

"Parties must consider private prevention and resolution processes before referring their dispute to the courts." (Our emphasis)

Considering an alternative means of dispute resolution appears to be a compulsory step before commencing legal proceedings. We asked ourselves about the intensity of this new duty. From our point of view, this article is similar to the duty of the lawyer set out in section 9 of the Divorce Act "to discuss with the spouse the advisability of negotiating the matters that may be the subject of a support order or a custody order and to inform the spouse of the mediation facilities known to him or her that might be able to assist the spouses in negotiating those matters" and to confirm in the originating document that it has complied with such duty.

However, we find that, in the New Code, the intensity of this duty is more demanding. While the Divorce Act uses the wording "to discuss with the spouse", the Québec legislator uses the words "consider".

Duty Incumbent upon the Party Itself

By contrast to the federal legislator, the Québec legislator chose to place this duty to consider alternative means of dispute resolution on the parties themselves rather than on lawyers. We find that this is a good solution.

We would like to observe that, in our opinion, in the majority of cases, this legislative shift will take place smoothly, because the parties often seek a common ground to avoid lengthy and costly litigation. In the most contentious issues, such as flagrant abuse of rights or infringement of the rights guaranteed by the Charter, it is conceivable that the parties may be closed on the idea of seeking negotiated solutions. They will, however, be required to undertake the exercise.

Parties who enter into a dispute prevention and resolution procedure do so voluntarily. They are required to participate in the process in good faith, to be transparent with each other, including as regards the information in their possession, and to co-operate actively in searching for a solution.1

If the process fails, it would be advisable for the applicant to indicate in its motion to institute proceedings under the New Code that it considered resorting to such means of resolution, but that it failed, in order to demonstrate to the Court that it met this new requirement under the New Code.

Resolution Processes

The parties agree by common consent upon a private dispute prevention and resolution process. They may, for example, proceed directly between themselves, or through their lawyers.2 They may also opt for mediation or arbitration or a similar process that involves the participation of a third party.3

No Specific Penalty provided in the event of non-compliance with this pre-trial duty

The Québec legislator did not provide for specific penalties in the event of a party failing to "consider" trying to settle its dispute before referring the matter to the court. It appears that such was not the objective sought to be achieved by the legislator upon creating a pre-trial protocol and prescribing the manner in which the parties should act.

However, the extended powers of management of judges will enable them to promote conciliation at any stage of the proceedings. Indeed, paragraph 2 of article 9 provides specifically that "it further includes, both in first instance and in appeal, facilitating conciliation whenever the law so requires, the parties request it or consent to it or circumstances permit, or if a settlement conference is held." Thus, we believe that the judge in charge of the matter might intervene to encourage the parties to initiate settlement discussions.

However, it is possible that certain litigants may be tempted to argue that failure by a party to consider resorting to private prevention and resolution processes should entail negative consequences in order to give meaning to the duty created by the new provisions.

Hence, they might argue that this duty must be read in light of the guiding principles, that is, in keeping with the principle of proportionality, with the proper administration of justice.4 They might also invoke that the guiding principles require the parties to be careful to confine the case to what is necessary to resolve the dispute, and to refrain from acting with the intent to cause harm to another person or behaving in an excessive or unreasonable manner, contrary to the requirements of good faith.5

How to Prepare for this Amendment...

Since the Québec legislator has set as a fundamental principle that the parties must consider the possibility of trying to settle their disputes prior to commencing legal proceedings, parties, from now on, might benefit from including in all their contracts well-crafted mediation and/or arbitration clauses so that they know exactly how to formally trigger these processes as well as their operation in order to be able to give a real chance of success to the settlement of their disputes without resorting to legal proceedings. Once these mechanisms are implemented, the parties must carefully follow the procedural requirements of these clauses to avoid a motion to stay proceedings for failure to comply therewith.


1 See article 2 of the New Code.

2 See article 8 of the New Code.

3 See Title VII of the New Code on mediation and arbitration rules.

4 See article 18 of the New Code.

5 See article 19 of the New Code.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2014

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