Author: Dan

Ontario: Court of Appeal sort of confirms Limitations Act applies to will challenges

The Court of Appeal decision in Shannon v. Hrabovsky is an unfortunate addition to limitations jurisprudence. Arguably, it stands for the principle that the basic limitation period applies to will challenge proceedings. An appellate court has never before considered the issue, and there is much to criticize about the few lower court decisions that Shannon cites in accepting, without consideration, that will challenge are subject to statutory limitation.

The applicant in Shannon successfully challenged the validity of a will. On appeal, the respondents argued that the application judge ought to have found the application statute-barred by the Limitations Act’s basic two-year limitation period. They sought leave to adduce fresh evidence to support their limitations defence. The appeal is really about the entitlement to adduce fresh evidence, not the limitation of will challenges, and so it’s arguable that the limitations analysis is obiter.

I wrote about the application decision here. I criticised its limitations and analysis and later Matthew Furrow and I published a paper arguing that applying statutory limitation periods to will challenges is ahistorical (it was uncontroversial that statutory limitation periods didn’t apply to will challenges from the date of reception until 2004), and requires taking an indefensibly flexible approach to the application of the s. 5 discovery provisions: see Will Challenges and the Limitations Act, 2002: A Reconsideration, 40 Est. Tr. & Pensions J. 190 (2020-2021). I also made the point more succintly in the fourth edition of the Law of Limitations:

The Act applies only to causes of action. A will challenge is not a cause of action; it is a contested proceeding to prove a will in solemn form. Section 2 of the Act limits its application to “claims” pursued in court proceedings.

 

Reformed limitations statutes apply to “claims” instead of causes of action. The “claim” converts every cause of action, for limitations purposes, into a single remedial unit comprised of two elements: actionable conduct and resulting loss. In doing so, it allows for a universal basic and ultimate limitation period with one set of accrual rules. However, as the Supreme Court of Canada observed in Grant Thornton LLP v. New Brunswick, the distinction between the “claim” and the cause of action it derives from can be one without a difference. Simply, reformed limitations statutes continue to apply only to causes of action pursued in court proceedings. As a will challenge is not a cause of action, the current Act — and any other provincial act that applies to “claims” pursued in court proceedings—does not apply to it.

 

A will challenge is the square peg to the Act’s round hole. There are procedural issues. The expiry of a limitation period is an affirmative defence that a defendant/respondent must plead and prove. Yet the party challenging a will may be a plaintiff/applicant or a defendant/respondent depending on which method is used to bring the proceeding to court. There is no procedural mechanism for a plaintiff/applicant to plead a limitations defence.

 

There are discovery issues. Codified discovery is premised on a defendant committing actionable conduct — an “act or omission” — that causes damage to the plaintiff. A will challenge does not arise from actionable conduct. The absence of actionable conduct makes it impossible to identify the presumptive commencement of the basic limitation period and the ultimate limitation period because both run from the date of the actionable conduct. It also makes it impossible to obtain knowledge of three discovery matters: commission of actionable conduct by the person against whom the claim is made causing the plaintiff loss. As the Supreme Court of Canada formulated it in Grant Thornton, discovery requires knowledge of “the material facts upon which a plausible inference of liability on the defendant’s part can be drawn”. A will challenge does not result in a finding of anyone’s liability.

 

Shannon doesn’t address any of these issues. Because the parties agreed that the basic limitation period applies to will challenge (why the applicant conceded that point is mysterious), the Court of Appeal didn’t consider the correctness of this premise. Instead, its reasoning treats the application of the Limitations Act to will challenges as noncontroversial. This is disappointing. You can’t blame the court for not considering arguments the parties didn’t make, but you might hope that in engaging with the application of s. 5 to a will challenge there might have been some consideration given to whether the principles that originate in Leibel make sense, because they don’t.

Let’s take a look at the application judge’s analysis:

[20]      The application judge concluded:

In the present circumstances, Gayle had all the facts necessary to commence her application, on the grounds of both a lack of testamentary capacity and undue influence, before the Testator’s death, with the exception of knowledge of the existence and contents of the 2007 Will. While she had suspicions that a will had been executed in 2007, she was never able to confirm its existence nor was she made aware of its contents until January 2015, after the date of death. Accordingly, Gayle has established that, on the date of the Testator’s death, when the act on which the claim is based occurred, being the effectiveness of the 2007 Will, she did not have knowledge of the existence and contents of the 2007 Will which are essential elements of her application. Gayle has therefore rebutted the presumption in section 5(2) that she had knowledge of the matters referred to in section 5(1)(a) on the day on which the act or omission on which her claim is based occurred. Gayle did not discover the claim in this application until sometime in January 2015, with the result that the two-year limitation period under the Act did not begin to run until that time. [Emphasis added.]

Just like in Leibel, this reasoning only works at the most superficial level. If the testator’s death is the act on which the applicant’s claim is based, it means that to discover the claim, the applicant required knowledge “that the act or omission was that of the person against whom the claim is made”–in other words that the respondents committed the act of the testator’s death. That’s absurd. At risk of belabouring the point, this a symptom of the fundamental problem: a will challenge isn’t based on any actionable conduct and it doesn’t seek an in personem remedy against an individual. It has never been subject to statutory limitation (and, I’d argue, equitable limitation) because it is not a creature of the common law or equity, but canon law.

In sum, please hire me to argue this point.

Ontario: Court of Appeal on the knowledge required to plausibly infer liability

The Court of Appeal decision in Di Filippo v. Bank of Nova Scotia explains the degree of knowledge required to know the s. 5(1)(a) discovery matters. This includes a clarification that the knowledge necessary to plausibly infer liability is not actual knowledge of the discovery matters. Actual knowledge requires knowledge of the material facts upon which to plausibly infer liability.

Perhaps like me you’ll find this distinction somewhat obtuse. What’s the difference between plausibly inferring liability per se and plausibly inferring liability based on material facts? Practically speaking, I think the point the court is making is that if you plausibly infer liability per se you have a suspicion of liability, but if you make that inference based on material facts, you have more than a suspicion. And so it’s just a different way of formulating the “more than a suspicion, less than certainty” standard that the court applied prior to Grant Thornton.

Here are the relevant paragraphs:

[54]      The court explained how to assess the plaintiff’s knowledge at para. 44:

In assessing the plaintiff’s state of knowledge, both direct and circumstantial evidence can be used. Moreover, a plaintiff will have constructive knowledge when the evidence shows that the plaintiff ought to have discovered the material facts by exercising reasonable diligence. Suspicion may trigger that exercise. (Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 42).

[55]      This court explained in Crombie that suspicion may trigger the due diligence obligation, but suspicion does not constitute actual knowledge. The full paragraph clearly explains the difference:

That the motion judge equated Crombie’s knowledge of possible contamination with knowledge of actual contamination is apparent from her statement that “[a]ll the testing that followed simply confirmed [Crombie’s] suspicions about what had already been reported on” (at para. 31). It was not sufficient that Crombie had suspicions or that there was possible contamination. The issue under s. 5(1)(a) of the Limitations Act, 2002 for when a claim is discovered, is the plaintiff’s “actual” knowledge. The suspicion of certain facts or knowledge of a potential claim may be enough to put a plaintiff on inquiry and trigger a due diligence obligation, in which case the issue is whether a reasonable person with the abilities and in the circumstances of the plaintiff ought reasonably to have discovered the claim, under s. 5(1)(b). Here, while the suspicion of contamination was sufficient to give rise to a duty of inquiry, it was not sufficient to meet the requirement for actual knowledge. The subsurface testing, while confirmatory of the appellant’s suspicions, was the mechanism by which the appellant acquired actual knowledge of the contamination.

[56]      Similarly, in Kaynes v. BP p.l.c., this court held that knowledge of allegations in pleadings does not, without more, constitute actual knowledge of one’s claim. […]

 

[59]      These examples draw out an important distinction from Grant Thornton: actual knowledge does not materialize when a party can make a “plausible inference of liability.” Rather, actual knowledge materializes when a party has “the material facts upon which a plausible inference of liability on the defendant’s part can be drawn” [emphasis added]. While class counsel may have had reason to suspect that Bank of America, Merrill Lynch and Morgan Stanley were part of the conspiracy, that suspicion was not actual knowledge. The motion judge erred in law by finding actual knowledge.

[64]      The effect of s. 5(1)(b) is to impose an obligation of due diligence on those who have reason to suspect that they may have a claim, but who do not yet have actual knowledge of the material facts giving rise to that claim: Crombie, at para. 42. Where potential plaintiffs sit idle or fail to exercise due diligence, the limitation period will commence on the date that the claim would have been discoverable had reasonable investigatory steps been taken. In other words, it is the date when the potential plaintiffs have constructive, as opposed to actual knowledge of their claim: Grant Thornton, at para. 44.

[65]      A court determining this issue will require evidence of how the material facts could reasonably have been obtained more than two years before the motion to add was brought: Mancinelli, at paras. 28, 31; Morrison v. Barzo, 2018 ONCA 979, at paras. 61-62.

 

The decision also includes an interesting if somewhat esoteric addition to s. 5(1)(a)(iv) appropriateness jurisprudence. A proceeding can be an appropriate remedy only if the circumstances give rise to a legally recognised cause of action on which to base the proceeding:

 

[37]      With respect to criterion (iv)[6], a proceeding would only be appropriate if the circumstances give rise to one or more legally recognized causes of action on which to base the proceeding. The wrong must have a legally recognized remedy. It is only in this sense – that legal recourse must be appropriate to address a loss caused by the proposed defendant’s act or omission – that the term “claim” has any legal specificity.

I expect the court assumed this to be self-evident, and perhaps it is. But it has a curious implication. Because a novel cause of action is, by definition, not legally recognised, it follows that a claim based on a novel cause of action is never discoverable. If a claim isn’t discoverable, the basic limitation period will never begin. Accordingly, only the ultimate limitation period could bar an action based on a novel claim.

Lastly, the decision contains a comprehensive statement of the law of amending a pleading to advance a new claim after the expiry of the limitation period.

 

[40]      These cases make it clear that it is the pleading of the facts that is key. If a statement of claim pleads all the necessary facts to ground a claim on more than one legal basis, and the original statement of claim only asserts one of the legal bases – that is, one cause of action based on those facts – the statement of claim can be amended more than two years after the claim was discovered to assert another legal basis for a remedy arising out of the same facts – that is, another cause of action. This is because it is only the discovery of the claim, as defined in the Limitations Act and the case law, that is time barred under s. 4, not the discovery of any particular legal basis for the proceeding.

[41]      In the textbook The Law of Civil Procedure in Ontario, Paul M. Perell & John W. Morden 4th ed. (Toronto: LexisNexis Canada, 2020), at pp. 220-21, the authors explain when an amendment will be allowed in the following passage:

A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon which the original right of action is based… Thus, where a limitation period has run its course, allowing or disallowing the amendment depends upon whether the allegations of the proposed amendment arise out of the already pleaded facts, in which case the amendment will be allowed, but if they do not the amendment will be refused. An amendment of a statement of claim to assert an alternative theory of liability or an additional remedy based on facts that have already been pleaded in the statement of claim does not assert a new claim for the purposes of s. 4 of the Limitations Act. [Citations omitted.]

[42]      In Klassen v. Beausoleil, 2019 ONCA 407 at para. 30, this court instructed that the application of this test should not be stringent or overly technical:

In the course of this exercise, it is important to bear in mind the general principle that, on this type of pleadings motion, it is necessary to read the original Statement of Claim generously and with some allowance for drafting deficiencies.

Ontario: the limitation of a solicitor-initiated assessment

The Superior Court decision in Fasken Martineau DuMoulin LLP v. Behdad Hosseini et al. sets out the principles of the limitation of a solicitor-initiated assessment under s. 3(c) of the Solicitors Act and concludes that the Limitation Act’s basic limitation period applies:

 

[83]           Both parties advised that they could not find any case law that has dealt with the issue of the applicable limitation period for solicitor-initiated assessments under s. 3(c) of the Solicitors Act, or the interplay between that section and either s. 4(1) of the Solicitors Act or s. 19 of the Limitations Act. Accordingly, this appears to be a case of first impression.

[84]           It is common ground that the requisition for the subject order for assessment was obtained under s. 3(c) of the Solicitors Act which provides:

Where the retainer of the solicitor is not disputed and there are no special circumstances, an order may be obtained on requisition from a local registrar of the Superior Court of Justice,

(b)   by the solicitor, for the assessment of a bill already delivered, at any time after the expiration of one month from its delivery, if no order for its assessment has been previously made. [Emphasis added.]

[85]           The Client’s argument is that as there is no fixed time imposed by s. 3(c) on a solicitor’s right to obtain a requisition, therefore the 12-month period reflected in s. 4(1) of the Solicitors Act must apply. The Client supports this position by noting the consumer protection nature of the Solicitors Act, and his bald assertion that it is “common knowledge” that the court “always” applies a 12-month limitation period in these types of solicitor-initiated assessments.

[86]           Section 4(1) of the Solicitors Act states:

No such reference shall be directed upon an application made by the party chargeable with such bill after a verdict or judgment has been obtained, or after twelve months from the time such bill was delivered, sent or left as aforesaid, except under special circumstances to be proved to the satisfaction of the court or judge to whom the application for the reference is made. [Emphasis added.]

[87]           The issue raises one of statutory interpretation. The essence of the Client’s position is that the 12-month time period, together with the “special circumstances” requirement for late filing, from s. 4(1) of the Solicitors Act should effectively be read into s. 3(c) of that Act in order to prevent the “absurd” result of there being no limitation period whatsoever imposed on solicitors seeking to have their accounts assessed.

[88]           The Solicitors Act was enacted in 1990 and is a consumer protection statute: Zeppieri &Associates v. Gupta, 2016 ONSC 6491. The Client urges that it would be inconsistent with the nature of consumer protection if solicitors were permitted an unlimited timeframe within which to request an assessment of accounts as against clients, whereas clients must commence their assessment proceedings within 12 months from the rendering of the final account, absent demonstrating special circumstances. The Client further submits that it is logical that the 12-month time period from s. 4(1) be read into s. 3(c) to fill this ostensible gap in the legislation. I disagree.

[89]           Section 3(c) explicitly states that a solicitor may bring a requisition to have its accounts assessed “at any time” after delivery of its account provided:

(a)   the retainer is not disputed,

(b)   there are no special circumstances,

(c)   the solicitor has waited one month after delivery of its account to file the requisition, and

(d)   no order for assessment of it has been previously made.

[90]           In this case, it is agreed by the parties that the retainer is not under dispute, no special circumstances have been advanced by either party, the requisition was filed more than a month after the subject accounts were delivered, and there was no prior order for an assessment made.

[91]           Second, s. 4(1) of the Solicitors Act explicitly refers to applications for a reference brought “by the party chargeable with such bill”. The party chargeable is the client, not the solicitor. Hence this provision has no application to the solicitor-initiated assessment under s. 3, again on a plain reading of this section.

[92]           The Solicitor submits that in the event there is a limitation period, then s. 4 of the Limitations Act is the only statute to fill that ostensible gap, as the Assessment Officer ultimately concluded based on her interpretation of Guillemette.

[93]           The Assessment Officer carefully reviewed the arguments made on this issue in the course of her September 11, 2019 reasons for decision and affirmed in the Assessment Certificate (with the benefit of written submissions from both parties). She reached the conclusion that, if there is a fixed limitation period, it is set out by s. 4 of the Limitations Act; namely two years from one month after the date of the last rendered account. As the requisition was filed approximately 17 months from the date of the last rendered account, she found that the requisition had been filed in a timely manner. The Solicitor was not required to prove special circumstances under s. 4(1) of the Solicitors Act in order to proceed with the assessment.

[94]           I do not agree with the Client’s submission that the Assessment Officer’s concurrence “with the [Client’s] representation that the Solicitors Act states that there is a twelve (12) month limitation on the right to file an Assessment” meant that she agreed with the further submission that the 12-month limitation contained in s. 4(1), together with that provision’s added requirement that special circumstances had to be proven to the satisfaction of a judge in order to extend that limitation period, therefore applied to an assessment conducted under s. 3(c). Indeed, it is clear from a review of the Assessment Officer’s decision rendered on September 11, 2019, in advance of issuing the Assessment Certificate, that she rejected the Client’s extension of that argument.

[95]           At para. 23f.iii. of her decision, in response to the Clients Objections (dated September 11, 2019), the Assessment Officer held:

23f.iii. After review of the parties’ arguments and submissions, the Assessment Officer concurred with Hosseini’s representation that the Solicitors Act states that there is a twelve (12) month limitation on the right to file an Assessment. However, the Assessment Officer also stated that precedent is clear that the Statute of Limitations Act trumps the twelve (12) month period and extends it to two (2) years for the Solicitor to bring an assessment. Based on the date that the Requisition of Assessment and Order for Assessment was filed, the Assessment Officer held that it is clear that the Application was filed well within the two (2) year limitation requirement.

[96]           At paras. 28 and 29 of the Assessment Decision, the Assessment Officer concluded:

28. In my review of the Objection submissions, the evidence shows that the final bill was issued to the Client on dated June 26, 2014. As noted above, Section 3(c) of the Solicitors Act permits the Solicitor to file an assessment a month after the bills are delivered. In this instance, one month after the final bill was delivered is approximately July 26, 2014, which means that under the Act the earliest the Solicitor was permitted to initiate an assessment was on July 26, 2014.

29. Further, consistent with the court’s holdings in Echo Energy Canada Inc. and Guillemette, the two (2) year limitation in the Limitations Act trumps the twelve (12) month limitation provision in the Solicitors Act. This means that the Solicitor in this instance would have had two (2) years from July 26, 2014, which is approximately July 26, 2016, to file a requisition and get an order for assessment from the Court. The facts in this case show that the Solicitor filed the Requisition and Order for Assessment on November 25, 2015, well within the limitations period. Therefore, an order from a Judge granting extension of the limitations period is not required based on the facts in this instance.

This analysis is probably wrong because a solicitor-initiated assessment isn’t a “claim” as defined by the Limitations Act, and so the Limitations Act doesn’t apply to an assessment proceeding. Is an assessment a cause of action? I’ve never seen any authority suggesting that it is.  If it’s not a cause of action, it’s not a “claim”.

This area of limitations law is so arcane that flawed analyses are understandable.  The solution is legislative reform. It’s inexcusable that there should be any ambiguity in the timelines for assessing lawyer accounts.

 

Ontario: lawyers should investigate claims with “real world” reasonableness

The Superior Court decision in Musslam v. Hamilton General Hospital contains a refreshing statement on the reasonableness of a lawyer’s actions when investigating a potential claim.  The standard is not perfection, but “contextual reasonableness in the ‘real world’”:

[41]   As I address the various issues, including the submissions not unreasonably advanced that the Oakley firm was arguably tardy or perhaps negligent in certain aspects of how it handled this matter (Mr. Mogil submitted that, while I may feel sympathy for the plaintiff, even if I dismiss this aspect of the motion, plaintiff may yet have a different remedy), I do so from the perspective that this is not now, nor has it ever been, “ a perfect world”. Not to wax too philosophically, but most people struggle daily—including lawyers to do right for their clients, and jurists who strive to come to the legally just result for all parties involved in a case. Indeed, I find all counsel in this complex matter did their best, including in their thorough, at times minute, dissection of what chronologically happened in this case.

[42]   Yet, in my view, a “standard of perfection” is not required. While limitation periods were certainly not enacted to be ignored, as Ms. Wood well submitted for Dr. Mistry, my assessment of the steps taken or perhaps not taken in a timely fashion by some of the parties in this case is based on a standard of contextual reasonableness in the “real world” in which these parties existed, not perfection based on 20/20 hindsight using a microscope or magnifying glass to minutely examine each and every step taken or not taken, or not taken in as timely a manner as ideally should perhaps have been done in some instances.

[43]   The plaintiff in this case, as was found by Master Abrams, has English as his second language and is hampered by various other significant challenges as described in her decision. The evidence before me is that before his surgery he drove a taxi. There is no evidence before me that he is an educated layman, let alone knowledgeable about medical issues or able to easily “connect the dots” so to draw inferences pertaining to causation or contribution. In my view, it is fair to conclude that the plaintiff is unsophisticated, including that he is an unsophisticated litigant. Accordingly, I so conclude, based on all the evidence.

[63]   Why May 17, 2017? Why not when the records were actually received: February 6, 2017 for the family doctor and September 2016 for the chiropractor? In response, I reference my above discussion about the imperfect “real-world” in which we all function. I again consider a small and very busy law firm, with many demands on their time. It was only this firm, after all the many lawyers whom the plaintiff saw, which was willing to take him on—and at no cost. Yet these lawyers also had other, prior commitments, including to trials and to existing clients. In my view, it was, in the context and all the circumstances, reasonable that they did not immediately drop everything when the records were received. After all, they did not expect the “bombshell” information contained therein. Moreover, the medical records were complex to read and decipher, as the step-by-step cross-examination transcript of the family doctor makes clear. If even Dr. Karmali had some challenges reading her own chart notes, these would surely not be an easy or quick read for anyone else, even a lawyer experienced in the field.  I thus find a period of about three months from when the chart of the family doctor was received until it was reviewed to be reasonable in all the circumstances.

 

Ontario: Court of Appeal on amending to add a new cause of action

In Polla v. Croatian (Toronto) Credit Union Limited, the Court of Appeal summarised the principles of amending to add a cause of action after the presumptive expiry of the limitation period:

[31]      The trial judge’s conclusion that the proposed amendment made a new claim is a legal determination, which is subject to the “correctness” standard of review on appeal: see Blueberry River First Nation v. Laird, 2020 BCCA 76, 32 B.C.L.R. (6th) 287, at paras. 20-21; Strathan Corporation v. Khan, 2019 ONCA 418, at paras. 7-8. Her conclusion that the limitation period had expired is a determination of mixed fact and law, that was based in this case on a finding of fact as to when the appellant ought to have known about the new misrepresentation, and reviewable on a standard of “palpable and overriding error”: see Longo v. MacLaren Art Centre, 2014 ONCA 526, 323 O.A.C. 246, at para. 38. The same deferential standard of review applies to the refusal of an amendment based on an assessment of prejudice: Tuffnail v. Meekes, 2020 ONCA 340, 449 D.L.R. (4th) 478, at para. 120, leave to appeal refused, [2020] S.C.C.A. No. 269.

[32]      The general rule respecting the amendment of pleadings is that an amendment shall be granted at any stage of a proceeding on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment: Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 26.01. The expiry of a limitation period in respect of a proposed new claim is a form of non-compensable prejudice, where leave to amend to assert the new claim will be refused: Klassen v. Beausoleil, 2019 ONCA 407, 34 C.P.C. (8th) 180, at para. 26.

[33]      There is no real dispute between the parties about the applicable test. In 1100997 Ontario Limited v. North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, this court observed that an amendment to a statement of claim will be refused if it seeks to assert a “new cause of action” after the expiry of the applicable limitation period. As this court explained, at para. 19, in this context, a “cause of action” is “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person” (as opposed to the other sense in which the term “cause of action” is used – as the form of action or legal label attached to a claim: see the discussion in Ivany v. Financiere Telco Inc., 2011 ONSC 2785, at paras. 28-33).

[34]      The relevant principles are summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 4th ed. (Toronto: LexisNexis Canada, 2020), at pp. 220-21, as follows:

A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon [which] the original right of action is based.

This passage has been cited with approval by this court. See 1100997 Ontario Limited, at para. 20, Davis v. East Side Mario’s Barrie, 2018 ONCA 410, at para. 32, and Klassen, at para. 29.

[38]      In conducting this assessment, the court must read the pleadings generously in favour of the proposed amendment: Klassen, at para. 30; Rabb Construction Ltd. v. MacEwen Petroleum Inc., 2018 ONCA 170, 29 C.P.C. (8th) 146, at para. 8. The existing pleadings, together with the proposed amendment, must be considered in a functional way – that is, keeping in mind that the role of pleadings is to give notice of the lis between the parties. As such, the question in this case is whether the respondents would reasonably have understood, from the Amended Statement of Claim and the particulars provided on discovery, that the appellant was pursuing a claim in respect of the matter addressed by the proposed amendment.

Ontario: the evidentiary burden when moving for judgment on a limitations defence

The Superior Court decision in RNC Corp. v. Johnstone summarises the evidentiary burden on a motion for judgment on a limitations defence:

 

[25] In Kinectrics Inc. v. FCL Fisker Customs & Logistics Inc., [2020] O.J. No. 4761, 2020 ONSC 6748 (S.C.J.) my colleague Sanfilippo J. expressed the point this way [at paras. 37-38]:

When a limitation defence is raised, the onus rests with Kinectrics, as plaintiff, to establish that its claim is not statute-barred in that it acted on its claims when it actually discovered the claim or when a reasonable person in the same or similar circumstances using reasonable diligence would have discovered the facts upon which the claim is based: Hawthorne v. Markham Stouffville Hospital, 2016 ONCA 10, at para. 8; Soper v. Southcott (1998), 1998 CanLII 5359 (ON CA), 39 O.R. (3d) 737 (C.A.); Bolton Oak Inc. v. McColl-Frontenac Inc., 2011 ONSC 6567, 64 C.E.L.R. (3d) 239, at paras. 12-14; Clemens v. Brown (1958), 1958 CanLII 331 (ON CA), 13 D.L.R. (2d) 488 (Ont. C.A.), at p. 491; Verbeek v. Liebs-Benke, 2017 ONSC 151, at para. 23.

However, a defendant moving for summary dismissal based on a limitation defence has the burden of establishing that there is no issue requiring trial about its limitation defence: Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 33.

[26] There is no doubt that the plaintiff needs to establish at trial that it sued in time. It needs to lead that evidence on the motion to try to avoid the issue being resolved summarily against it. But the burden remains with the moving defendants to satisfy the court that the case is one that fairly and justly ought to be resolved summarily under Hryniak. It is only once the moving party has satisfied the court that the case ought to be resolved summarily that the court will put the plaintiff to its burden on the merits.

 

The court denied the motion because it would require “a trial in a box”.  The analysis is trenchant and serves a warning against asking the court to decide factually complex limitations defences summarily:             

 

[48] The defendants argue that even if one starts counting at August 2016, when the parties joined issue, and even deducting for mediation, a post mediation negotiation period, and two other short periods relied upon by the plaintiff, the plaintiff is still out of time. They argue for a number of reasons that the Tarion process is irrelevant.

[49] This argument actually brings into focus my principal concern with the motion. The defendants argued about each stage and each piece of timeline relied upon by the plaintiff. They had case law to submit why each individual scene of the play in and of itself would be insufficient to toll the limitation period. It was very mathematical A + B + C.

[50] However, human relations are not mathematically precise. Each scene was not a discrete event unto itself. Like an unfolding play, each scene is part of an act. Each scene came after something and before something else. Many of the scenes and acts overlapped temporally. Each side had their own tactics and strategies in play overlaying the parties’ actions. Each scene occupied a place in a complex web of interactions of which I have very little understanding without seeing the whole play.

[51] The contract called for dispute resolution. The parties discussed invoice numbers and trying to fix the value of deficiencies. When that failed, they mediated. When that failed, they may have kept negotiating for a time — or not. The defendants went to Tarion and put everything in issue at the outset. Tarion may have assisted with an overall resolution — or not.

[52] Even assuming that I had all the documentary and transcript evidence about all of these individual scenes, I would then be looking at the entirety of the merits of the lawsuit. I would be called upon to decide credibility questions on important issues. I would be hearing the full trial in my chambers without live witnesses explaining the context and without counsel to bring order to the evidence and lead me through it all.

[53] And that is a trial in a box.

Ontario: bankruptcy and appropriateness

The Superior Court decision in Caning Construction Limited v. Dhillon finds that a bankruptcy proceeding was not an alternative process that could impact on the appropriateness of a civil action.  The bankruptcy proceeding could have determined damages in the civil action, but not its merits.  Further, in the circumstances the case, there was no reasonable prospect of the bankruptcy proceeding making the plaintiff whole and so a civil action was always going to be necessary for full recovery:

 

[56]           As in both Gravelle and Lilydale, the Westport bankruptcy proceedings could not resolve the legal dispute involving Mr. Dhillon.  Here, Canning knew it had a claim in negligence against the Defendants before the bankruptcy proceedings against Westport were concluded.  Although the bankruptcy could have determined the amount of damages to be sought in the civil action, the proceedings could not determine the legal issues between the parties and were therefore not an alternative means of resolving the negligence allegations.  I conclude that the Westport bankruptcy proceedings are not an alternative process which delays the start of the limitation period in the action against the Defendants.

[57]           Even if a bankruptcy proceeding is an alternative remedy which could have the effect of delaying the start of the limitation period, it is my view that it does not do so in the circumstances of this case.  Section 5(1)(a)(iv) of the Act is subject to the modified objective test.  The determination of when a plaintiff “discovered” that the legal action against the defendant was legally appropriate takes into account what a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known.  Here, Canning had an unsecured claim in the amount of $1,638,018.89.  Based on the secured claims and assets of Westport as set out in the Statement of Affairs, there was no reasonable expectation that unsecured creditors would be fully compensated for their claims.  I conclude that a plaintiff with the abilities and in the circumstances of Canning would have known that it would not fully recover its claim in the Westport bankruptcy and therefore would have known that a tort action against the Defendants was legally appropriate before the bankruptcy proceedings were completed.

Ontario: Court of Appeal on s. 38(3) of the Trustee Act

The Court of Appeal’s decision in Beaudoin Estate v. Campbellford Memorial Hospital provides a good summary of Trustee Act limitation period:

 

[16] The respondents rely on the limitation period in s. 38 of the Trustee Act. Section 38(1) of the Trustee Act provides that, except in cases of libel and slander, the executor or administrator of any deceased person may maintain an action “for all torts or injuries to the person or to the property of the deceased”. Section 38(3) provides that no action under s. 38 shall be brought “after the expiration of two years from the death of the deceased”. [page596]

[17] There is no dispute that the following legal principles apply regarding s. 38(3) of the Trustee Act:

(1)   Claims brought by the deceased’s dependents under s. 61 of the Family Law Act are governed by the same limitation period in s. 38(3) of the Trustee Act: Camarata v. Morgan (2009), 94 O.R. (3d) 496, [2009] O.J. No. 621, 2009 ONCA 38, at para. 9; Smith Estate v. College of Physicians and Surgeons of Ontario (1998), 1998 CanLII 1523 (ON CA), 41 O.R. (3d) 481, [1998] O.J. No. 4367 (C.A.), at p. 488 O.R., leave to appeal to S.C.C. refused [1998] S.C.C.A. No. 635.

(2)   Section 38(3) of the Trustee Act prescribes a “hard” or absolute limitation period triggered by a fixed and known event — when the deceased dies — and expires two years later: Levesque v. Crampton Estate (2017), 136 O.R. (3d) 161, [2017] O.J. No. 2866, 2017 ONCA 455, at para. 51; Bikur Cholim Jewish Volunteer Services v. Penna Estate (2009), 94 O.R. (3d) 401, [2009] O.J. No. 841, 2009 ONCA 196, at para. 25.

(3)   The discoverability principles under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B do not apply to toll the limitation period under s. 38(3) of the Trustee Act: Giroux Estate v. Trillium Health Centre (2005), 2005 CanLII 1488 (ON CA), 74 O.R. (3d) 341, [2005] O.J. No. 226 (C.A.), at para. 33; Bikur Cholim, at para. 26; and Levesque, at para. 47. Although this can sometimes be harsh, since a claim under the Trustee Act can be time-barred even before it is discovered, this can be mitigated by common law rules, such as the doctrine of fraudulent concealment: Levesque, at para. 56; Bikur Cholim, at para. 25.

 

It also summarises the principles of fraudulent concealment:

 

[19] The Supreme Court of Canada recently addressed the doctrine of fraudulent concealment in Pioneer Corp. v. Godfrey, [2019] S.C.J. No. 42, 2019 SCC 42, 437 D.L.R. (4th) 383. Justice Brown for the majority described fraudulent concealment as “an equitable doctrine that prevents limitation periods from being used ‘as an instrument of injustice'”: at para. 52, citing M. (K.) v. M. (H.), 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6, [1992] S.C.J. No. 85, at pp. 58-59 S.C.R. He stated that “[w]here the defendant fraudulently conceals the existence of a cause of action, the limitation period is suspended [page597] until the plaintiff discovers the fraud or ought reasonably to have discovered the fraud”, and noted that it is “a form of ‘equitable fraud’ . . . which is not confined to the parameters of the common law action for fraud”: at para. 52. See also M. (K.), at p. 56 S.C.R.; Giroux Estate, at para. 28.

[20] Pioneer was released a few months after the motion judge’s decision here. The motion judge had cited Colin v. Tan, [2016] O.J. No. 810, 2016 ONSC 1187, 81 C.P.C. (7th) 130 (S.C.J.), at para. 45, to suggest that fraudulent concealment has three “constitutive element[s]”:

(1)   the defendant and plaintiff have a special relationship with one another; (2) given the special or confidential nature of the relationship, the defendant’s conduct is unconscionable; and (3) the defendant conceals the plaintiff’s right of action either actively or the right of action is concealed by the manner of the wrongdoing.

[21] In Pioneer, however, Brown J. explained that although fraudulent concealment can apply when there is a special relationship between the parties, a special relationship is not required: at para. 54. Instead, fraudulent concealment can apply whenever “it would be, for any reason, unconscionable for the defendant to rely on the advantage gained by having concealed the existence of a cause of action” (emphasis in original).

 

Given the factual nature of fraudulent concealment, the Court held that it can’t be considered under r. 21.01(1)(a):

 

[29] As I will explain, the motion judge erred in deciding the question of fraudulent concealment as a question of law under rule 21.01(1)(a).

[30] This court has underscored that a motion under rule 21.01(1)(a) is not the proper procedural vehicle for weighing evidence or making findings of fact: see, e.g., McIlvenna v. 1887401 Ontario Ltd., [page599] [2015] O.J. No. 6312, 2015 ONCA 830, 344 O.A.C. 5, at paras. 19-20; Andersen Consulting v. Canada (Attorney General), 2001 CanLII 8587 (ON CA), [2001] O.J. No. 3576, 150 O.A.C. 177 (C.A.), at para. 35.

[31] This court has applied this general principle in a long line of cases in which it has discouraged using rule 21.01(1) (a) to determine limitation period issues except in very narrow circumstances where pleadings are closed and the facts relevant to the limitation period are undisputed: Kaynes v. BP, P.L.C., [2012] O.J. No. 266, 2021 ONCA 36, at para. 74; Beardsley v. Ontario (2001), 2001 CanLII 8621 (ON CA), 57 O.R. (3d) 1, [2001] O.J. No. 4574 (C.A.), at para. 21; Tran v. University of Western Ontario, [2016] O.J. No. 6645, 2016 ONCA 978, 410 D.L.R. (4th) 527, at paras. 18-21; and Golden Oaks Enterprises Inc. (Trustee of) v. Lalonde (2017), 137 O.R. (3d) 750, [2017] O.J. No. 3188, 2017 ONCA 515, at paras. 42-45.

[32] The rationale for this position was recently explained by Feldman J.A. in Kaynes, at para. 81. She noted that discoverability issues are factual and it is unfair to the plaintiff for a motion judge to make such factual findings on a motion to determine a question of law under rule 21.01(1)(a), because that rule prohibits evidence on the motion except with leave of the court or on consent:

In establishing the main rule that a claim should not normally be struck out as statute-barred using r. 21.01(1) (a), the courts have noted that discoverability issues are factual and that the rule is intended for legal issues only where the facts are undisputed. It would therefore be unfair to a plaintiff where the facts are not admitted, to use this rule, which does not allow evidence to be filed except with leave or on consent. But where a plaintiff’s pleadings establish when the plaintiff discovered the claim, so that the issue is undisputed, then the courts have allowed r. 21.01(1)(a) to be used as an efficient method of striking out claims that have no chance of success, in accordance with the principle approved in Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 19.

[33] Thus, a factual dispute about the discovery date of a cause of action precludes the use of rule 21.01(1)(a) to determine whether a limitation period subject to discoverability has expired, because this rule is limited to determining questions of law raised by a pleading. If the parties have joined issue on disputed facts on the limitations issue, the preferable procedure might be a motion for summary judgment under Rule 20, which provides the court with certain fact-finding powers: Kaynes, at para. 80; Brozmanova v. Tarshis, [2018] O.J. No. 3097, 2018 ONCA 523, 81 C.C.L.I. (5th) 1, at paras. 21, 23 and 35; and rule 20.04(2.1).

[34] These principles about the limited scope for using rule 21.01(1)(a) to address discoverability under the Limitations Act, 2002 also apply to fraudulent concealment. Just as factual issues should not be decided in relation [page600] to discoverability on a motion under rule 21.01(1)(a), they should also not be decided in relation to fraudulent concealment. To do so would be unfair to a plaintiff when no evidence is admissible on such a motion except with leave of the court or on consent.

[39] However, the respondent doctors assert in their factum that the April 2017 claim “provides definitive evidence that the [page601] [a]ppellants had knowledge of their cause of action as of April 27, 2017”. They note that courts have considered prior pleadings in motions under rule 21.01(1)(a), citing Metropolitan Toronto Condominium Corp. No. 1352 v. Newport Beach Development Inc. (2012), 113 O.R. (3d) 673, [2012] O.J. No. 5682, 2012 ONCA 850, at paras. 111-113 and Torgerson v. Nijem, [2019] O.J. No. 2930, 2019 ONSC 3320 (S.C.J.). But neither of those cases purports to authorize a court to make a factual finding on a disputed point on a motion under rule 21.01(1)(a). The appellants assert that issuing a statement of claim is not necessarily determinative of their “knowledge” of a cause of action, and that the April 2017 claim simply reflected their “suspicion” that a cause of action may have existed. The case law requires knowledge of the cause of action, not mere suspicion. For example, in Pioneer, at para. 53, Brown J. cited approvingly P. (T.) v. P. (A.), [1988] A.J. No. 1055, 1988 ABCA 352, 92 A.R. 122, though on a different point, in which the Alberta Court of Appeal discussed fraudulent concealment and stated that “[s]uspicion is not knowledge”: at para. 15. See also Zeppa v. Woodbridge Heating & Air-Conditioning Ltd. (2019), 144 O.R. (3d) 385, [2019] O.J. No. 610, 2019 ONCA 47, at para. 41, leave to appeal to S.C.C. refused [2019] S.C.C.A. No. 91; Lawless v. Anderson, [2011] O.J. No. 519, 2011 ONCA 102, 276 O.A.C. 75, at paras. 21-28; and Kaynes, at para. 56. Because this is a fact-based analysis and both parties’ positions depend on evidence, this factual dispute cannot be decided on a motion under rule 21.01(1)(a).

Ontario: Court of Appeal on the factual nature of discovery

The Court of Appeal decision in Albert Bloom Limited v. London Transit Commission contains a great statement on the factual nature of the s. 5(1)(a) analysis.  When a claimant knows the s. 5(1)(a) discovery matters is fact-specific and there’s little value in comparing the unique facts of one case to another:

 

[31]      To be clear, the determination of when a claimant obtains actual knowledge of a claim is case-specific. Little is to be gained from comparing the unique circumstances of one case to another. There is no bright-line test that establishes when a party has actual knowledge of a claim. Instead, the totality of factual circumstances will dictate how and when a claimant obtains actual knowledge. In the present case, the motion judge undertook a detailed analysis of the factual circumstances. The evidence she relied on was uncontested, and I do not understand LTC to be arguing that the motion judge committed any palpable and overriding errors of fact.

The decision also shows the consequences of admitting facts material to the discovery analysis in a pleading. The plaintiff argued that such an admission was ignorable “boilerplate”, but filed no evidence to support this argument (also note that the Court found that an affidavit’s double hearsay was inadmissible):

 

[32]      There is another unique circumstance in this case that supports the motion judge’s finding regarding actual knowledge. It is the plea in the statement of defence and crossclaim that the contamination was caused by a previous owner of the LTC property. That fact clearly distinguishes this case from Crombie, where there was no such plea.

[33]      On the motion and this appeal, LTC attempts to explain away that pleading: it was just a “standard pleading” and did not reflect its actual state of knowledge at the time of the filing of the statement of defence and crossclaim. However, the evidence that counsel had informed the affiant in the affidavit filed by LTC that this was a standard pleading was double hearsay. Contrary to what the affiant stated in her affidavit, on cross-examination, she testified that she had never been provided with this information by LTC’s counsel. In fact, she had received the information from her predecessor at LTC, who apparently was told the information by legal counsel. This evidence was therefore inadmissible on the motion.

[34]      LTC asserts, “[t]here was absolutely no evidence on the record before the Motions Judge to suggest that this pleading was other than a boilerplate pleading commonly set out in environmental defences without any factual knowledge attributable to LTC” : Factum, para. 27.  This submission reflects a fundamental misunderstanding of the onus on the motion. LTC’s onus was not met by asserting that there was no evidence that this was not a boilerplate pleading. LTC had an obligation to adduce compelling and admissible evidence that it was boilerplate and thus could be ignored. It failed to adduce that evidence.

Ontario: Court of Appeal on the limitation of FLA actions

The Court of Appeal decision in Malik v. Nikbakht summarises the limitation of FLA actions.  Because they are derivative, the limitation period that applies to the injured person’s action also applies to the dependant’s action:

[9]         In my view, the appeal judge was correct in holding that a s. 61 FLA claim is a cause of action that, in Mr. Malik’s case, is statute barred.

[10]       As the appeal judge correctly acknowledged, the common law does not permit family members to sue for compensation for injuries to their relatives. He explained, at para. 26, that s. 61(1) FLA therefore “created” a statutory cause of action that did not previously exist at common law: Camarata v. Morgan, 2009 ONCA 38, 246 O.A.C. 235, at para. 10.

[11]      Section 61(1) FLA provides:

If a person is injured or killed by the fault or neglect of another under circumstances where the person is entitled to recover damages, or would have been entitled if not killed, the spouse, … children, grandchildren, parents, grandparents, brothers and sisters of the person are entitled to recover their pecuniary loss resulting from the injury or death from the person from whom the person injured or killed is entitled to recover or would have been entitled if not killed, and to maintain an action for the purpose in a court of competent jurisdiction.

[12]      As put by Laskin J.A. (concurring), this provision “dramatically expanded recovery”: Macartney v. Warner (2000), 2000 CanLII 5629 (ON CA), 46 O.R. (3d) 641 (Ont. C.A.), at para. 51.

[13]      Significantly, the new cause of action created by s. 61 of the FLA is “derivative”: Camarata, at para. 9. In other words, Mr. Malik’s s. 61 FLA claim would be for his damages arising out of injuries caused to his children as the result of allegedly negligent breaches by the defendants of duties of care they owed to his children. As the appeal judge pointed out, at paras. 28-29, this is a fundamentally different claim than Mr. Malik’s negligence action, which claimed damages arising out of his own injuries caused as the result of allegedly negligent breaches by the defendants of duties of care they owed to him. Indeed, as the appeal judge recognized, at para. 17, had Mr. Malik brought his s. 61 FLA claims in a timely way, he could have done so even without instituting a negligence action of his own.

[14]      I do not read this court’s decision in Ridel v. Cassin, 2014 ONCA 763, which cites Bazkur, at para. 10, as holding that Bazkur was correctly decided. In Ridel, this court cited Bazkur, along with other authorities, only for the uncontroversial proposition that claims for additional damages arising from an existing cause of action in a timely claim are not barred by the Limitations Act, 2002. The error in Bazkur occurred in the application of that principle.

[15]      It follows that the appeal judge was correct in finding that Mr. Malik was not entitled to amend his statement of claim to bring a new statutory cause of action outside of the applicable limitation period.

 

This is settled law, but it’s never made sense to me. A person injured through fault or neglect has a cause of action in tort as against the wrongdoer.  The elements of that tort include the wrongdoer’s actionable conduct and the resulting damage to the injured person.  An FLA cause of action derives from the tort committed to the injured person in that it arises from the same actionable conduct, but the damage is to the FLA claimant, not the injured person.  Even if the FLA cause of action is conditional on the tort, they are independent causes of action based on discrete losses.

Why should the same limitation period apply to the tort and the FLA cause of action?  The FLA claimant may not discover her pecuniary loss when the injured person discovers her injury.  The injury that founds the tort and the pecuniary loss that founds the FLA claim don’t necessarily occur contemporaneously.  I’d like to think that with the right facts, the Court of Appeal might be persuaded to acknowledge this.