Two recent decisions from the Nova Scotia Supreme Court may re-shape practice in the Nova Scotia Small Claims Court – and parties who appear as agents in the Small Claims Court should adjust their approach as a result:

• Informal and Inexpensive Adjudication – Within Limits. In both decisions, the Supreme Court reminds us of the purpose of the Small Claims Court: the informal and inexpensive adjudication of claims in accordance with established principles of law and natural justice.
• Hearsay Evidence & Written Reports.  Relevance and reliability – and not necessity – are the only threshold tests applicable to the admissibility of hearsay evidence, which is then subject only to a determination of its weight.
• Limited Appeals. The Supreme Court hearing an appeal of a Small Claims Court decision will pay deference to the Small Claims Court’s findings of fact.  It only reviews fact-finding in Small Claims Court when it appears from the summary report and the documentary evidence that there was no evidence to support the conclusion at issue; it does not review Small Claims Court findings of fact for palpable and overriding error.

HEARSAY EVIDENCE: THE “INVISIBLE WITNESS”

In Towle v. Samad, the Supreme Court dealt with how the Small Claims Court should consider the evidence of “invisible” witnesses: “witnesses” who submit evidence in writing, but whom the party does not call to testify, and the opposing party cannot cross-examine – in other words, “hearsay” evidence.

Before Towle, the Supreme Court was divided on how the Small Claims Court should treat such evidence: the Small Claims Court routinely admitted it, and considered only how much weight to give it, but at least one Supreme Court decision was highly critical of that approach.

In Towle, a contractor sued a house owner in Small Claims Court for payments related to house renovations. The owner denied the claims, and counter-claimed alleging deficiencies in the renovations. The contractor’s claim failed, but the owner’s claim succeeded; the Small Claims Court assessed most of the damages based on the estimates of witnesses who were not called to testify (“hearsay estimates”). The contractor appealed the Small Claims Court decision to the NS Supreme Court. The Supreme Court focused on the Small Claims Court’s reliance on the “hearsay estimates” to calculate the counterclaim damages:

• Necessity & Reliability Rejected. The Supreme Court noted that the Small Claims Court Act  permits hearsay evidence in small claims matters, limited only by relevance and efficiency. The Supreme Court expressly disagreed with the more restrictive approach the Supreme Court took in a 2006 decision that would admit hearsay – but consider necessity and reliability when weighing it.
• Relevance and Reliability Accepted. The Supreme Court decided that the only tests applicable to the admissibility of written estimates in Small Claims Court are their relevance and their reliability.  The threshold test for relevance will normally be low; the threshold test for reliability will generally be higher.  Thus the Small Claims Court can consider how reliable a written hearsay estimate is – without requiring the author’s testimony.

Click here to read the NS Supreme Court’s decision in Towle v. Samad.

LIMITED APPEAL ROOM

In Hoyeck v. Maloney, the Supreme Court focussed on the approach it should take to appeals of Small Claims Court decisions.

In Hoyeck, the claimant bought a used car and later sued the seller in the Small Claims Court.  In the Claim Form, the buyer alleged that the seller was Mr. Hoyeck.  No Defence was filed, but Mr. Hoyeck appeared at the Small Claims Court hearing and argued against the claim. The Small Claims Court made a decision on the issue and gave judgment against Mr. Hoyeck.  Mr. Hoyeck did not challenge the seller’s identity at the hearing and the Small Claims Court’s decision did not expressly address the issue; its determination that Mr. Hoyeck was the seller was implicit in its judgment against him. Mr. Hoyeck appealed – and challenged the factual decision that he was the seller.

The Supreme Court rejected his argument on two grounds – including that the seller’s identity was a factual decision requiring significant deference to the original decision-maker (here, the Small Claims Court). The Supreme Court took the opportunity to clarify the appeal court’s role and the basis on which it will – and will not – review Small Claims Court decisions:

• Deference. The Supreme Court emphasized that, generally, a court hearing an appeal defers to the trial judge’s factual decisions and intervenes only when a factual finding resulted in a “palpable and overriding error”. This deference is based on a number of strong policy reasons, and limits the scope of judicial review –in a principled way – necessary given the scarcity of judicial resources.
• No Evidence. The Supreme Court further noted that this need for deference to fact-finding is “acute” in Small Claims Court appeals: in keeping with its purpose of “economical dispute resolution”, the Small Claims Court Act  limits appeals of Small Claims Court decisions to an error about jurisdiction, an error of law, and a failure in the duty of fairness – and does not mention “palpable and overriding error of fact”.    The Supreme Court confirmed it does not review Small Claims Court findings of fact for palpable and overriding error; it only reviews Small Claims Court fact-finding when it appears from the summary report and the documentary evidence that there was no evidence to support the conclusion at issue.
• Fairness & The Adjudicator’s Summary.  The Supreme Court further emphasized that it must rely on the Small Claims Court adjudicator’s summary.  The summary may offend the duty of fairness – and thus attract the Supreme Court’s review – when it gives no information on the evidence upon which an important finding of fact was based.

Click here to read the NS Supreme Court’s decision in Hoyeck v. Maloney.

LESSONS FOR SMALL CLAIMS COURT PARTIES

Many parties – and in particular, parties like insurers that are regularly involved in litigation – represent themselves in Small Claims Court matters.  In Towle and Hoyeck, the Supreme Court delivered some important lessons to all counsel – and self-represented litigants – who appear in Small Claims Court:

• Informal and Inexpensive Adjudication – Within Limits.  In both decisions, the Supreme Court harkens back to the purpose of the Small Claims Court set out in the Small Claims Court Act: “… a court wherein claims up to but not exceeding the monetary jurisdiction of the court are adjudicated informally and inexpensively but in accordance with established principles of law and natural justice.”
• Hearsay Evidence & Written Reports.  The concept of informal adjudication now clearly includes hearsay evidence going only to weight.  The question of the persuasiveness of hearsay evidence remains, but its acceptance or rejection is no longer couched in formalistic terms. Based on Towle, the reliability of written reports as evidence in Small Claims Court is inherent in the strength of the author’s knowledge and experience, and in the comprehension of the author’s opinions: these are the only threshold tests applicable to admissibility.  A proper adjudication in the Small Claims Court relates to the weight – if any – to be given to such evidence, and is not ordinarily subject to appeal except where its assessment amounted to a denial of natural justice.
• Limited Appeals. Often, it seems the Supreme Court relegates appeals of Small Claims Court decisions to a different Small Claims Court for re-hearing – with little analysis.  The Hoyeck decision underscores the absolute necessity that when hearing an appeal of a Small Claims Court decision, the Supreme Court pay deference to the Small Claims Court’s findings of fact – except where doing so would amount to the denial of justice.  In-and-of-itself, “palpable and overriding error” will not be enough to attract Supreme Court review; there must be no evidence to justify the Small Claims Court’s finding.

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Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Insurance Defence Team to discuss this topic or any other legal issue.

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