Responding to a Small Claim (20:VI)

A. Possible Strategies

1. Notify Insurance Company

Many insurance policies cover more liabilities than their description would suggest. For example, many homeowner and tenant policies cover claims for damages or injuries arising from acts or omissions by the insured anywhere in the world. An example would be accidentally tripping a person who falls and breaks their hip. These policies also tend to include most people in the household including young children and foster children.

There are many exclusions and limitations but it is always best to let the insurer know about a claim against you. If the insurer will defend you, the insurer will bear the costs of your defence and possibly pay any damages that are awarded.

Note: It is important to contact the insurer as soon as possible and to not make any admissions that might jeopardise a defence. Failing to promptly notify the insurer, admitting liability, or taking steps in the claim may permit the insurer to deny coverage.

2. Apologising

Many lawsuits arise or continue because a wrongdoer has not apologised to the party who was wronged. The Apology Act, SBC 2006, c 19 allows a person to apologise for a wrongful act or failure to act without the apology becoming an admission of liability. A sincere apology can often avert litigation or form an important foundation for a settlement.

3. Option to Pay all or Part

If a defendant pays the entire amount of the claim directly to the claimant (Rule 3(1)(a)), the defendant need not file a Reply. The defendant should retain a receipt as proof of payment and request that the claimant withdraw the claim. Only the claimant may withdraw a claim and, if a withdrawal is filed, all parties who were served with the Notice of Claim must be served with a copy of the withdrawal.

When considering this option, a defendant should be aware of other possible problems aside from the lawsuit. For example, if the claimant has placed derogatory information on the defendant’s credit file, the defendant should ask the claimant to remove this negative information as part of the settlement. If the claimant is unwilling to remove the information, the defendant may still settle the claim but may find it difficult or impossible to remove the information from the credit file. The process for removing incorrect information from a person’s credit file is outside the scope of this guide.

If the entire claim is admitted but the defendant requires time to pay or only part of a claim is admitted (Rule 3(1)(b) or (c)), the defendant must file a reply form but may also propose a payment schedule for what is admitted. The payment schedule must detail how the amount will be paid back. The Registrar can order the proposed payment schedule if the claimant consents to it (Rule 11(10)(b)). If the claimant does not consent to the proposal or no payment schedule is proposed, the claimant may summon the defendant to a payment hearing (See Section XVI: Enforcing a Judgment).

4. Option to Oppose all or Part

A defendant who opposes all or part of the claim (Rule 3(1)(d)) must file a Reply form detailing what is admitted, what is opposed, or what is outside the defendant’s knowledge. The reply should list reasons for any parts that are opposed. A defendant should avoid a general denial of the entire claim; a detailed examination of each element of the claim and why the defendant thinks it is wrong is much more persuasive.

Before deciding to oppose a claim, a defendant should ensure that there is a legal defence to the claim. A penalty can apply if a defendant proceeds through trial with a Reply that is bound to fail (Rule 20(5)).

5. Counterclaim

Whether or not a defendant agrees or disagrees with all or a part of the claim, the defendant can counterclaim (Rule 4(1)). A defendant who wishes to counterclaim should review the “Do You Have a Claim” and “Choosing the Proper Forum” sections of this guide. A counterclaim is essentially a notice of claim but on a different form. A counterclaim must have a legal basis; there are penalties for proceeding to trial if there is no reasonable basis for success (Rule 20(5)).

Although a defendant can start a separate claim either in Small Claims Court or another forum instead of counterclaiming, if the parties and witnesses are the same and the claim falls within the Small Claims Court jurisdiction, it is preferable that the defendant file a counterclaim so that both matters are heard together. If the defendant has commenced an action in a different forum, this should be mentioned in the Reply.

A counterclaim is made on the Reply form by following the instructions and paying the required fee. The fee for a counterclaim is the same as the fee for a notice of claim and is eligible for a fee waiver.

The relationship between a counterclaim and a set-off should be noted. (See Johnny Walker Bulldozing Co Ltd v Foundation Co of Canada Ltd, 1997 CanLII 3726 (BCSC); Gwil Industries Inc v Sovereign Yachts (Canada) Inc, 2002 BCSC 713 (CanLII); Lui v West Granville Manor Ltd, 1985 CanLII 155 (BC CA)). A counterclaim is a standalone claim and it is possible for a defendant to succeed on a counterclaim when the claimant has been unsuccessful. A set-off is a defence. If the claimant is successful, a set-off will reduce the amount payable to the claimant. If the claimant is unsuccessful, the set-off defence does not apply; the defendant is not awarded the amount of the set-off.

a) Filing and Service

As the counterclaim is on the reply form, it must be filed at the same time as the Reply (Rule 4(1) and (2)), within the time allowed for filing a Reply (Rule 3(4)), and at the registry where the notice of claim was filed (Rule 3(3)).

The registry will serve the claimant with the reply and counterclaim within 21 days of it being filed (Rules 3(5) and 4(2)).

b) Replying to a Counterclaim

Once served, the claimant (now a defendant by counterclaim) must follow the same rules as replying to a Notice of Claim (Rule 5(7)). The claimant should review this section of the guide in its entirety.

6. Third Party

If the defendant who has filed a Reply believes that a person or legal entity other than the claimant should pay all or part of the claim, he or she may make a claim against that other party by completing a Third Party Notice (Form 3). If a settlement conference, mediation session, or a trial conference has not been held, leave of the court is not required (Rule 5(1)(a)). If any of these have been held, the defendant must apply to the court for an order permitting the counterclaim to be filed against the third party (Rule 5(1)(b)).

A third party claim is different from a claim against the incorrect defendant. A third party claim is made when a defendant believes that a third party should reimburse them if they are found to be liable to the claimant. For example, if a defendant is sued for a credit card debt, the defendant may third party the cardholder who actually spent the money giving rise to the debt.

A defendant who wishes to issue a third party notice should review the “Do You Have a Claim” and “Choosing the Proper Forum” sections of this guide. A third party claim is essentially a notice of claim but on a different form. A third party claim must have a legal basis and there are penalties for proceeding to trial if there is no reasonable basis for success.

a) Filing and Service

To start a third party claim, the defendant must complete Form 3 and file it in the same registry where the Notice of Claim was filed (Rule 5(2)). The defendant must serve the third party with a copy of the filed Form 3, a blank Reply form, a copy of the Notice of Claim, a copy of the Reply to the Notice of Claim, and all of the documents and notices the other party would have received (Rule 5(3)); all of these documents are to be served in the same manner as serving a Notice of Claim (Rule 5(4)). A defendant has only 30 days after filing to serve the third party and file a certificate of service (Form 4; Rule 5(5)) at the registry. If the third party is not served and the certificate of service is not filed within 30 days, the third party notice expires but can be renewed (Rule 5(5.1)).

The registry will serve the claimant with the third party notice within 21 days of its being filed (Rule 5(6)).

b) Replying to a Third Party Notice

Once served, a third party must follow the same rules as replying to a Notice of Claim (Rule 5(7)). The third party should review this section of the guide in its entirety.

B. Time Limits

Unless a defendant pays the amount of the claim directly to the claimant and asks the claimant to withdraw the claim (Rule 3(1)(a)), the defendant must file a Reply within the required time limit. Failure to file a Reply may result in the claimant obtaining a Default Order.

The time limits for filing a Reply are generally the same whether the defendant is:

• a defendant served with a Notice of Claim (Rule 3(4));
• the claimant served with a counterclaim (Rule 4(3.1)(b)); or
• a third party served with a third party notice (Rule 5(7)).

If the defendant was served inside British Columbia, a Reply must be filed within 14 days after service (Rule 3(4)). If the defendant was served outside British Columbia, a Reply must be filed within 30 days after service (Rule 3(4)). The one exception is where the claimant is served with a counterclaim. The claimant is required to file a Reply within 14 days after service even if the claimant is served outside British Columbia.

C. Defences

For every cause of action, there is usually at least one possible defence. Some of the more common defences are listed here however a defendant should research the claimant’s cause of action or obtain legal advice to determine which defences might be applicable.

1. Common Defences

a) Contributory Negligence

Where a claimant was careless and this carelessness contributed to the damages suffered, a defendant might plead the defence of contributory negligence. An example is where a claimant tripped over a bag that was carelessly left in a walkway. The defendant may be liable but the claimant may have been contributorily negligent for failing to keep watch for obstacles.

A defendant who believes that the claimant was partially at fault should state in the reply: “The defendant pleads and relies upon the Negligence Act”. (See Negligence Act, RSBC 1996, c 333). Each party is liable to the degree that they are at fault; where degrees of fault cannot be determined, liability is apportioned equally. (See Negligence Act, supra, s 1(2))

b) Consent

Where, by express or implied agreement, a claimant knew of and understood the risk he was incurring and voluntarily assumed that risk, the defendant will not be liable. Because voluntary assumption of risk is a complete defence, it is very difficult to prove.

c) Criminality or Immorality

Where a claimant stands to profit from criminal behaviour or compensation would amount to an avoidance of a criminal sanction, the claimant cannot recover damages. (See Hall v Hebert, [1993] 2 SCR 159). This is narrowly construed and a claimant should read Hall before relying upon it.

d) Inevitable Accident

If the defendant can show that the accident could not have been prevented even if the defendant had exercised reasonable care, the defendant cannot be liable. (See Rintoul v X-Ray and Radium Industries Ltd, [1956] SCR 674). For this defence to apply, the defendant must have had no control over whatever occurred and its effect could not have been avoided even with the best effort and skill.

e) Illegality

If the claimant is suing on a contract that is illegal (e.g., it calls for a criminal interest rate), the defendant may ask the court to decline to enforce the illegal provision or possibly the entire contract. Depending on the circumstances, the court may consider modifying the contract to remove the illegality.

f) Self Defence

If the defendant honestly and reasonably believed that an assault or battery was imminent and used reasonable force to repel or prevent the assault or battery, the defendant may not be liable for any injuries or damage suffered by the claimant as a result. (See R. v Lavallee, [1990] 1 SCR 852; Wackett v Calder, [1965] BCJ No 129; Brown v Wilson, [1975] BCJ No. 1177; and R v Beckford, [1987] All ER 425).

g) Defence of Third Parties

The same general rules apply as for self-defence provided that the use of force is reasonable. (See Gambriell v Caparelli, [1974] OJ No. 2243).

2. Statutory Defences

Certain statutes such as the Business Practices and Consumer Protection Act, SBC 2004, c 2 provide a party with a cause of action that would not otherwise exist. A defendant should carefully read the statutes that the claimant is relying upon to see if the statute creates or prescribes certain defences.

Where the claim is for remuneration in relation to real estate or property management services, the claimant must have either been licensed when the services were rendered or have been exempt from the requirement to be licensed. (See Real Estate Services Act, SBC 2004, c 42, s.4). If the claimant was required to be licensed but was not licensed, the claimant cannot legally charge a fee.

The first step in replying to a claim by an entity such as a real estate management company is to establish whether the claimant was licensed with the Real Estate Board.

D. Filing a Reply

The Reply must be filed in the same registry where the Notice of Claim was filed (Rule 3(3)). There is a filing fee except where the defendant admits and agrees to pay the entire claim or obtains a fee waiver.

Generally, a Reply cannot be filed late however, in practice, the registry may allow a Reply to be filed late as long as the registrar has not made a default order or set a date for a hearing (Rule 3(4)(b)).

E. Serving a Reply

The registry will serve the Reply and Counterclaim, if any, on each of the other parties (Rules 3(5) and 5(6)).

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