Doing Business Across the Ottawa River

Avoid getting caught between Ontario and Quebec law

The National Capital Region is a complex place to do business. Federal contractors must navigate a web of procurement rules. Quebec and Ontario businesses that cross the river find themselves faced with a radically different legal system.

It can make for a sticky situation should a dispute arise between parties. 

The differences between Ontario and Quebec arise from the distinct origins of their respective legal systems. Quebec law is based on the Napoleonic Civil Code. Ontario and the rest of Canada uses common law, in which a system of rules have evolved, and continues to evolve, based on precedent. In addition, courts in one province are not quick to take jurisdiction over a case or ruling made in the other. 

Hard to enforce one province’s ruling In the other

For example, let’s say an Ontario company enters into a contract with a Quebec company for services to be rendered in Ontario. That Quebec company fails to deliver on the contract and the Ontario company takes it to court – in Ontario. Even if the Ontario company obtains a favourable ruling, it may face difficulty enforcing that judgment in Quebec.

This same difficulty could arise in other legal cases, such as a defamation action.

All common law provinces have reciprocal enforcement legislation that allows for registration and quick enforcement.  But because of Quebec’s different legal system, an entirely new legal proceeding may have to be started regarding the same case.

“This means you have to essentially start again from scratch, an expensive and costly delay,” said Jonathan Collings, a Litigation Associate with Low Murchison Radnoff LLP who practices in construction litigation, defamation and income tax law.  “The same applies for the enforcement in Ontario of a Quebec judgment.”

A hit to the pocket book

“But Ontario businesses do have some procedural weapons at their disposal, should they be the target of a lawsuit from a Quebec-based company,” Collings added.

One relates to recouping legal fees. In Ontario litigation, the successful party is generally entitled to an Order for payment of part of its legal fees. But it can be difficult to collect from a Quebec company. In appropriate circumstances, the courts allow Ontario Defendants to seek an Order that a Quebec Plaintiff deposit security for costs with the Court. 

“This means that the Quebec Plaintiff may need to come up with a substantial sum of money for deposit before proceeding with the claim, which may make it think twice,” said Collings.

Tripping over Ontario law

Another procedural weapon is the requirement that out-of-province businesses register with the Ontario government before carrying on operations here, under the Business Names Act and Corporations Information Act. 

Filing the paperwork to meet this requirement is straightforward, but it’s often neglected. Those same Acts prohibit a non-compliant company from maintaining a Court proceeding until the delinquency is fixed. 

“This could have large repercussions on the Quebec company’s lawsuit, especially in construction lien claims, defamation claims and other specialized regimes that are subject to strict timelines,” said Collings.

Wood Stone & Tile Inc. v. Ezekiel

Take the recent case of World Stone & Tile Inc. v. Ezekiel. In this case, both parties were Ontario companies, but the same regulatory requirements apply.

A contractor, “Wood Stone & Tile,” completed and failed to obtain payment for a scope of work agreed upon under contract. It placed a lien on the property owner. The owner counterclaimed for deficiencies against the individual contractor.  The contractor attempted to have the claim against him personally dismissed, on the basis that it was a corporation that did all of the work.

“The Court refused to do so, because the contractor had knowingly failed to register his business name properly, and had misled the property owner,” said Collings. “As a result, the contractor was left with a personal judgment against him.”

Know what you’re getting into

The best defence is a good offense: Understand how things work differently on the other side of the river.

“Ensure you have crossed every legal ‘T’ and dotted every ‘I’ required by the law in each province,” Collings said. 

Collings has a wide-ranging litigation practice in the Ottawa Valley.  

For more information, please contact him at (613) 696-1318 or jcollings@lmrlawyers.com

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