Judge looks at papers
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Ontario’s civil court system is facing one of its most significant overhauls in decades. A proposal by the Civil Rules Review Working Group would eliminate oral examinations under oath before trial, and require plaintiffs and defendants to produce much of their evidence at the outset of a case. That includes sworn witness statements.

While intended to streamline proceedings, this front-loaded model will significantly increase the burden on financial professionals involved in litigation, particularly in cases alleging investment losses. This will, in turn, increase both the stress and expense of being sued, as well as insurance premiums for professional services.

Investor-loss claims are unique. As confirmed by a study of 73 Canadian court decisions over a decade, credibility — not documentation — is often the key determinant of the outcome of these cases. The core issue in many investor-advisor disputes is what was said, what was understood and whether suitable advice was given.

The documents produced in these cases are often standard forms that do not capture the full narrative of the discussions between advisor and client. These determinations frequently hinge on oral testimony and witness demeanor. As such, credibility assessments are important in evaluating whether settlement is advisable or if a case ought to be tried.

A serious challenge

Under the proposed system, there will be no opportunity for such evaluation until trial, the last stage of the lawsuit once most of the cost of litigating has been incurred. This poses a serious challenge in investor-loss claims, for both investors and financial professionals. These cases evolve as more information becomes available through oral discovery, which informs the decision to settle or litigate.

If the proposed rules are implemented, financial advisors and firms sued for alleged investment misconduct will face substantially higher early-stage legal costs. Insurers will likely view this as raising the risk profile of defending investor loss claims, particularly if fewer cases settle.

The reality is that the majority of investor-loss claims do not proceed to trial — they are settled. But under the proposed regime, the procedural cost of reaching that point may balloon, making settlement less accessible and shifting more cases toward trial or prolonged litigation.

This will almost certainly have a ripple effect on insurance premiums. Where settlement is less likely and litigation is more expensive, insurers will need to reassess both the costs of defence and the value of early resolution.

Financial professionals — especially those in independent or small-firm settings — may be left bearing higher premiums or facing increased deductibles in order to maintain adequate coverage.

The proposed rules also risk reinforcing procedural asymmetry. Larger institutions can absorb the cost of preparing witness statements and retaining experts early in the process. Individual advisors, however, may lack these resources, especially when named personally in claims alongside their firm.

They could be forced to invest heavily in preparing their defence from the outset, even in cases with limited merit, simply to avoid an adverse cost award or procedural disadvantage. Disputes between advisors and their firms will also be tilted in favour of the firm.

In short, the proposed reforms may disproportionately burden financial professionals involved in litigation where credibility is central and documentation alone cannot tell the whole story.

Comment by June 16

The Civil Rules Working Group has set a deadline for public comment of June 16. Investment professionals, investors, lawyers, insurers and other financial-sector stakeholders should consider how these reforms will impact their interests and bring their concerns to the attention of the working group.

The risk is clear: procedural reform aimed at efficiency may, in practice, increase costs, prolong disputes and undermine fairness in cases where witness testimony is paramount. For investor loss claims, where credibility often decides the case, these risks are particularly acute.