A microscopic bug changed the mighty legal system, but not entirely for the worse

By Joanne Paulson

When COVID-19 slammed into society in early 2020, the reaction by Canadian governments was swift and wide-ranging.

Policy directed a national pivot to managing almost everything remotely, including hearing cases in courts of law.

Citizens hoped this was short-term pain necessary to beating back the havoc caused by a bug measuring 100 nanometers — smaller than the pores in a standard mask.

Yet the after-effects of COVID restrictions have lingered, including at commercial court, and not all of them are negative. Indeed, some adjustments — notably video conferencing — may continue indefinitely.

Court appearance rules vary by province

Specific rules regarding in-person and virtual hearings vary widely by province. The Honorable Justice Karen Horner of the Alberta Court of King’s Bench says in-person hearings can be requested but the majority continue to be held online in her province.

“I think it works extremely well in the commercial area,” she said, adding that some colleagues do not agree, citing technical glitches.

“We have a system in Alberta where it’s virtual unless you ask otherwise. It’s multiple party, so we don’t have 15 people fighting for parking space in downtown Calgary.”

The ability for so many parties to meet online, particularly those who cannot travel to appear in person, is a benefit in her view. The only con is that counsel often files vast documents online that could number many thousands of pages.

When counsel refers to a particular item, “It’s going to take me five minutes to get there whereas if I had it on paper, I could just turn the pages.” Therefore, Horner asks for paper copies of big filings but is moving toward fully electronic work.

“We’re also not talking about people who need to be in a courtroom to experience the authority of the court,” she said. Furthermore, video meetings mean she can “conduct a hearing in the morning and have a decision in their hands by the afternoon.”

In Ontario, matters are divided into in-person or online proceedings by the expected length of time a matter will take, said the Honourable Thomas J. McEwen, Retired Justice of the Superior Court of Ontario.

McEwen was on the Commercial List bench for seven years and its head for two before retiring in June to become a private mediator and arbitrator. The Commercial List is a group of judges with experience in complex commercial litigation.

“When COVID hit, obviously the court started to work remotely and the Commercial List was the first court in Canada that started using Zoom,” he said.

By spring 2021, when the courts returned to in-person hearings, a protocol was created where matters of one hour or less would be done on Zoom and matters of 90 minutes or more in person, subject to the discretion of the trial judge.

“If it’s a very significant matter but it’s scheduled for an hour, the judges may want the lawyers in person; or conversely, if it’s 90 minutes or more but there are out-of-town lawyers, for example, you don’t want to put them through the expense and time of travel, which is not economically friendly,” McEwen said.

This way of proceeding is expected to go on indefinitely for the Commercial List, he said.

Still, in McEwen’s view, nothing is as efficient as in-person trials, while the ceremony of a courtroom hearing has important effects.

“I must say part of me misses the pre-COVID time when all the lawyers would come up even on 15-minute scheduling matters because it gave the lawyers a chance to talk, even about other cases, and resolve matters.”

The current situation in British Columbia, however, is notably different from in Ontario and Alberta.

“In British Columbia, we have gone decidedly back to in person,” said Madam Justice Shelley Fitzpatrick, who was appointed to the Supreme Court in 2010. “The default is in person for everything.”

There is a specific ability to request attendance by video conferencing, however, which is done by MS Teams in B.C.

“In the insolvency world, it’s fairly regularly requested on my files where I have out-of-town counsel,” Fitzpatrick said. “I tell everybody I’m very flexible in terms of allowing that, assuming it’s appropriate, of course.”

Fitzpatrick is presently presiding over a case involving a Nova Scotia company, for example, which has necessitated long-distance hearings.

“It just doesn’t make sense to put counsel on a plane and put them to that expense when we’re in an insolvency situation. Obviously, money is not in huge supply to be running up significant travel bills at the expense of the estate.”

While she vastly prefers in-person attendance, “I have yet to deny anyone the ability to attend by Teams, although that’s not to say I couldn’t.”

Legal markets remain balanced

Some members of the legal community had concerns that online hearings may bring in more out-of-province lawyers, thereby unbalancing local markets. However, none of the judges have found this to be the case.

Insolvency lawyers in B.C., who tend to practice with big national firms, “have really staked their claim here,” Fitzpatrick said. “They have nothing to worry about in terms of quality of counsel work vis-a-vis other counsel across the country.

“That said, I do see counsel from other jurisdictions regularly.”

McEwen said there is not an influx of out-of-town lawyers coming into Toronto online or otherwise.

“You see it from time to time, but it’s a pretty sophisticated bar in Toronto and they appear in the vast majority, 99 per cent, of files,” he said.

“What I have noticed more is the Toronto bar travelling to other provinces.”

“I would have expected in COVID, when we moved online for all of our commercial matters, that I would have seen an increase in practitioners from outside Alberta, but I have not,” said Horner.

“Alberta practitioners have shared they weren’t worried about it. They thought the advantages of virtual hearings outweighed any disadvantage to marketing efforts.”

Mediation another tool in the box

Efficiency is indeed very important to judges and the commercial system in general. To that end, mediation is another tool in the court system — although its rules also vary by jurisdiction.

In Ontario, the practice direction allows the Commercial List fairly broad powers with respect to dispute resolution including the ability to order judicial mediation, McEwen said.

“Ongoing procedural issues are dealt with by case conferences,” he explained. “That is probably the raison d’etre of the Commercial List – access to judges to deal with matters through a series of case conferences. They keep the matter moving along.”

Alberta judges have less discretion, but Horner said mediation is an emerging tool in that province where the Court of King’s Bench and Court of Appeal both offer judicial, or alternative, dispute resolution (JDR/ADR).

“You can book time with a judge, you can file short briefs about the issue, and you can set aside a date to meet with a judge in a conference room and see if you can resolve the issue without court application.

“We offer that. We have no ability in Alberta to order the parties to ADR.”

Neither can judges order mediation ahead of hearings nor order parties into a different dispute resolution process outside court, she said, adding that if an order is requested and agreed upon, “I would send it to mediation in a heartbeat.”

Fitzpatrick has sent lawyers out of the courtroom to discuss cases in the middle of hearings in an attempt to have them iron out matters themselves.

“There’s that kind of an ad hoc request that they talk,” she said. “As I emphasize to them when required, ideally they should talk to opposing counsel before they even reach the courthouse steps to see if a resolution is possible.

“In terms of formal mediation, we have judicial settlement conferences, but I have never done one of those in an insolvency situation in our court. Given the shortage of judges and given our normal judicial workload, settlement conferences are very low priority for our court because we just don’t have the judicial capacity.”

Canadian insolvency law changes

Judicial discretion has changed in other ways over the last 15 to 20 years through an increasing trend for Canadian insolvency law to be captured in codified form by Parliament in federal statutes, as opposed to case law.

Horner said the Companies’ Creditors Arrangement Act (CCAA) was once a very short statute — only about 30 sections, as compared to the approximately 2,000-section Income Tax Act, for example.

“It was very simple, very broadly worded, very short, and it left a lot to judicial discretion,” she said.

“Judges interpret the statute given the broad policy framework and they are able to act and react to the specific situation before them.

“The more that you codify that, the more you write it down, the narrower the judicial discretion becomes, which may not necessarily a good thing.

“In order to be nimble and provide an advantage over the U.S. system for those companies which have cross-border filings, I think it’s important for us to maintain a broad judicial discretion,” she said.

McEwen also described the situation as business as usual in the main, but noted amendments that caught the attention of the insolvency bar.

The first was an amendment to the CCAA in 2019 where the initial stay period was reduced to 10 days from 30 days. A stay prevents creditors from taking proceedings to recover debts.

The bar was “initially not a fan” given that it compressed the time to prepare, he said.

A second amendment brought limited relief including interim financing and security, “which is reasonably necessary for the operations of the debtor company during that 10-day period,” he said.

The reason for the amendment was that government wanted to enhance protection for workers, to ensure proceedings were fair and more transparent, and that more stakeholders could become involved.

“To me that was a significant change,” McEwen said. “People adapted well to it, but it made it a more compressed and rigorous procedure to get the initial stay.”

Another change he found interesting was to the Canadian Business Corporations Act, also in 2019, in which amendments were made primarily to company directors’ duties.

“They added a section that teased out the definition of the best interests of the corporation. The usual employees, creditors and shareholders were included, but they also added the environment to that, which . . . implied that people involved in environmental concerns could complain under that act and pursue remedies.

“Certainly, it changed how we granted initial orders.”

Fitzpatrick said many amendments to the legislation over the years have simply enshrined previous judge-made law.

“There are a couple of examples where discretion has been removed. One is the requirement that there be a comeback hearing within 10 days along with a restriction on what relief may be granted in the initial order,” she said.

“I thought that this provision was a good one and had a good policy reason behind it. Also, the amendment still allows flexibility in what relief is granted, if a judge finds it is reasonably necessary until the comeback hearing.”

Codification has made a difference to judicial practice, “but I wouldn’t call it a significant difference,” she said.

“There’s a lot of thought that goes into the new amendments and I think the government is very much engaged with the professional organizations in terms of feedback on these proposed amendments.”