Author: Dan

Ontario: the limitation of claims for unidentified motorist coverage

The decision in Sukhu v. Bascombe holds that the limitation period for a claim for the unidentified motorist coverage in OPCF 44R does not run until the responding insurer refuses to satisfy a demand to indemnify.

[17]      In Schmitz v. Lombard General Insurance Company of Canada, 2014 ONCA 88 (CanLII); leave to appeal refused, [2014] SCCA No. 143, the Court of Appeal was dealing with the question of when the limitation period began to run for an indemnity claim under the underinsured motorist coverage provided by OPCF 44R optional endorsement to the standard form automobile insurance policy in Ontario. The Court of Appeal applied the reasoning in Markel and concluded that the limitation period does not begin to run until a demand to indemnify has been made and the responding insurer has failed to satisfy the claim. See Schmitz at paragraphs 22 to 26.

[18]      The reasoning behind Markel and Schmitz was applied in the decision of Justice Lofchik in Chahine v. Grybas, 2014 ONSC 4698 (CanLII). Justice Lofchik was faced with a motion involving facts very similar to the facts before the court on this motion. The plaintiff was involved in an accident and sued the other driver. After the claim was issued, the defendant’s lawyer advised the plaintiff’s lawyer that there was an unidentified motorist involved who may have been responsible for the accident. The plaintiff later confirmed this by obtaining a complete copy of the police report.

[19]      The plaintiff then brought a motion to add his own insurer pursuant to the unidentified motorist coverage in OPCF 44R of his policy. Justice Lofchik considered the provisions of the Limitations Act and the decisions of the Court of Appeal in Markel and Schmitz. He concluded that the same reasoning applied to unidentified motorist coverage. The limitation period for unidentified motorist coverage does not begin to run until a demand to indemnify has been made and the responding insurer has failed to satisfy the claim. See Chahine at paragraphs 36 to 39.

[20]      The plaintiffs also rely on the decision of Justice Leitch in Platero v. Pollock, 2015 ONSC 2922 (CanLII) which followed the decision in Chahine and also relied on the analysis of the Court of Appeal in Markel and Schmitz. See Platero at paragraphs 33 to 35.

[21]      TTC Insurance relies primarily on four decisions of the Court of Appeal. Those decisions are July v. Neal, 1986 CanLII 149 (ON CA), [1986] OJ No. 1101 (CA); Johnson v. Wunderlich, 1986 CanLII 2618 (ON CA), [1986] OJ No. 1251 (CA); Hier v. Allstate Insurance Co. of Canada, 1988 CanLII 4741 (ON CA), [1988] OJ No. 657 (CA) and Chambo v. Musseau, 1993 CanLII 8680 (ON CA), [1993] OJ No. 2140 (CA). Those decisions stand for the proposition that the limitation period for a claim under the unidentified motorist coverage of a policy of insurance begins to run when a plaintiff knew or ought to have discovered the accident involved the negligence of an unidentified motorist. TTC Insurance argues that these cases are binding authority and have represented the law of Ontario for decades.

[22]      The difficulty I have with the argument of TTC Insurance is that all of the Court of Appeal cases it relies upon were decided prior to the enactment of the current Limitations Act. They were also obviously decided before the decisions of the Court of Appeal in Markel and Schmitz.

[23]      The decisions in Chahine and Platero considered specific provisions and language of the current Limitations Act within the context of the Markel and Schmitz decisions. Both judges came to the conclusion that the limitation period for unidentified motorist coverage indemnity claims does not begin to run until a demand to indemnify has been made and the responding insurer has failed to satisfy the claim. I am unable to distinguish those decisions from the case before the court on this motion. They appear to be binding on this court.

[24]      TTC Insurance cited the contrary decision of Justice Sosna in Wilkinson v. Braithwaite, 2011 ONSC 2356 (CanLII) which held that the limitation period began to run when the plaintiff knew or ought to have discovered that the accident involved the negligence of an unidentified motorist. Although that decision involved the application of the current Limitations Act, it was decided before the Court of Appeal made its decisions in Markel and Schmitz. For this reason, the decisions in Chahine and Platero are to be preferred.

[25]      TTC Insurance also relies on the decision of Master McAfee in Bhatt v. Doe, 2018 ONSC 950 (CanLII), 2018 ONSC 950 (Master) in which she applied the July decision. The decisions in Chahine and Platero are not mentioned by Master McAfee and nor are the Markel and Schmitz Court of Appeal rulings. I do not know whether those cases were considered by her. In any event, the decision of another master is of persuasive value only. I am not bound to follow it, especially in the face of contrary decisions of a judge.

[26]      Counsel for TTC Insurance also suggested that the Chahine and Platero decisions were simply incorrect. TTC Insurance submits that the judges hearing those motions did not have the benefit of the earlier Court of Appeal decisions cited by TTC Insurance on this motion. If they had those decisions, those cases might have been decided differently. That may or may not be the case. I do not know. However, it is not the role of this court to question those decisions or the basis on which they were decided. Justices Lofchik and Leitch decided precisely the same issue as the one before me, having regard to specific provisions of the current Limitations Act and within the context of Markel and Schmitz. Decisions of a judge are binding on a master. In my view, I am bound to follow the decisions of Justices Lofchik and Leitch.

The decision also underscores the futility of relying on s. 16(1)(a) to avoid a limitations defence.  This is not an especially clever argument, has been made many times, and I’m pretty sure never succesfully:

 [12]           I do not accept the plaintiffs’ first argument involving section 16 of the Limitations Act. Section 16(1)(a) states that there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought. This is not the situation on this motion. The proposed pleading states that TTC Insurance must pay Ms. Sukhu’s damages in the event they are found to have been caused by the negligence of the unidentified motorist. This is obviously consequential relief, namely the payment of damages. See Tapak v. Non-Marine Underwriters, Lloyd’s of London, 2018 ONCA 168 (CanLII) at paragraph 14. The Court of Appeal has also emphasized that declaratory relief must be read narrowly so that section 16(1)(a) is not used as a means to circumvent a limitation period. See Alguire v. Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202 (CanLII) at paragraph 28.

Ontario: the limitation of assessing solicitor bills

Gardiner Roberts v. Canada International Distributing Inc. provides a useful overview of the operation of the time limit (which is not strictly a limitation period) in s. 3 of the Solicitors Act. In particular, it underscores the importance that an account be final in order to trigger the running of time:

[28]           Section 3 of the Solicitors Act provides that where the retainer is not disputed and there are no special circumstances, a client may obtain an order for:  a) the delivery and assessment of the solicitor’s bill; or b) for the assessment of a bill already delivered, within one month from its delivery.

[29]           Gardiner Roberts argues that it provided its “‘final’ account, i.e. the last account” on November 30, 2016.  This, it is argued, is more than one month before Cana sought an assessment.  Thus, Cana is not able to obtain an assessment under s. 3.

[30]           Cana counters that the “last” account is not a “final” account; Gardiner Roberts has refused to render a final account in order to deprive Cana of its ability to assess the accounts.  Cana is entitled to have a final bill delivered and an assessment of the bill, which would include all interim accounts rendered.

[31]           When assessing the submissions of counsel, I keep in mind that the purpose of the Solicitors Act and the assessment process is “to regulate the legal profession and protect the public in their dealings with solicitors”: Laushway Law Office v. Simpson, 2011 ONSC 4155 (CanLII), at para. 143.

[32]           As explained by Sharpe J.A. in Price v. Sonsini, 2002 CanLII 41996 (ON CA), [2002] O.J. No. 2607 (C.A.), at para. 19:

Public confidence in the administration of justice requires the court to intervene where necessary to protect the client’s right to a fair procedure for the assessment of a solicitor’s bill.  As a general matter, if a client objects to a solicitor’s account, the solicitor should facilitate the assessment process, rather than frustrating the process.

[33]           With this legal framework in mind, I have concluded that Cana is entitled to an assessment. Gardiner Roberts has failed to render a final bill: the November 30 account sent by Gardiner Roberts is an interim account, as were all previous accounts rendered by the law firm.  Given Gardiner Roberts’ failure to render a final account, it was open to Cana to obtain an order pursuant to s. 3(a) for the delivery of a final bill and an assessment.   All of the interim accounts were related to the same matter, and therefore the limitation period flows from the date of delivery of the final account.  Thus, Cana is entitled to an assessment of all of the accounts, even though many of them were paid.

Gardiner Roberts has Failed to Render a Final Bill

[34]           Following the November 30 account, Gardiner Roberts prepared written submission on costs.  Gardiner Roberts seemed (at least initially) to view the costs submissions as simply a continuation of the ongoing work being done on the Standard Innovation matter.  This seems clear from the email of Mr. Wolch on November 21, where he said “… I must also prepare submissions with respect to costs…”  Indeed, it is difficult to see the costs submissions following a lengthy trial as being anything other than part and parcel of the same matter.

[35]           Despite repeated requests by Cana, Gardiner Roberts has refused to provide a bill for the work done on the costs submissions.  Cana argues that Gardiner Roberts cannot simply refuse to render a bill for this final work done, in order to circumvent Cana’s right to an assessment under s.3 of the Solicitors Act.  I agree.  Cana properly moved pursuant to s. 3(a) of the Solicitors Act for the delivery of the final account.

            The Limitation Period Flows From the Final Account

[36]           Upon delivery of such final account, Cana is entitled to an assessment of all previous interim accounts.  As noted in Price v. Sonsini, at para. 15, where interim accounts are rendered in connection with the same matter, the limitation period for assessment under the Solicitors Act begins to run from the date of the final account, even if some of the interim accounts have been paid.

The Accounts Rendered Thus Far Have Been Interim Accounts

[37]           In Shapiro, Cohen, Andrews, Finlayson v. Enterprise Rent-a-Car Co., 1998 CanLII 1043 (ON CA), [1998] O.J. No. 727 (C.A.), at para. 14, the Court of Appeal referred to a number of factors that supported the motions judge’s conclusion in that case that all accounts rendered prior to the final account were interim accounts.  Most of those factors apply to the present case.  For example:

•        All accounts relate to once piece of litigation.  The accounts all involve the action against Standard Innovation.  It was the same matter; they are part of a continuum.  This is illustrated by the fact that all accounts said “Re: Standard Innovation” and had the same file number.

•        None of the account were marked as final accounts.  Moreover, the retainer agreement specifically said that the firm would render interim accounts and reserved the right to take into account the result achieved in the final account.

•        Considerable adjustments were at times made to the accounts.  According to Gardiner Roberts, it wrote off more than $70,000 because of request for discounts by Cana.  An example of such a discount occurred on December 9, 2011.  On that date, Mr. Wolch agreed to reduce the amount owed by Cana by $20,000.  But in reducing the account, Mr. Wolch noted that if the firm was successful in the matter, and recovered a reasonable amount, that this money would be repaid.  This supports that the accounts were interim, not final.

•        Cana was led to believe that the work on the interlocutory injunctions would not be lost.

•        Given the nature of the services, Cana could only appreciate the services performed at the end of the retainer.  This is highlighted in the retainer agreement, where Gardiner Roberts reserved the right to take into account the results obtained in determining its final account.

[38]           Looking at these factors, I find that the accounts rendered thus far have been interim. No final bill has been delivered.  Gardiner Roberts cannot avoid s. 3 of the Solicitors Act by refusing to render a final account.  I find that pursuant to s. 3(a) Gardiner Roberts is required to deliver a bill.  The limitation period for the interim accounts rendered flows from the final bill.  Thus, Cana is not time barred from an assessment of the interim accounts in this matter, even where those accounts have been paid.

[39]           I turn now to the alternative submission raised, which is that there are special circumstances which justify an assessment of the accounts.

The decision also describes the test for special circumstances:

[40]           Where there are special circumstances, pursuant to s. 4(1) of the Solicitors Act a client may obtain an assessment of an account more than 12 months after it was delivered.  This applies whether the bills are paid or unpaid.  Further, pursuant to s. 11 of the Solicitors Act, a client may obtain an assessment of bills already paid within 12 months of delivery of an account, if the special circumstances of the case appear to require the assessment.  For bills rendered within 12 months, but that remain unpaid, the court has inherent jurisdiction to order an assessment: Enterprise Rent-a-Car, at para. 8.

[41]           There is a presumption that payment of a bill constitutes implied acceptance of its reasonableness.  This presumption, however, is rebuttable.  As noted in Enterprise Rent-a-Car, at para. 19, the presumption is refuted to some extent by the fact that clients cannot be expected to bring an assessment while the lawyer is representing them, as they would not wish to alienate the lawyer.

[42]           In Enterprise Rent-a-Car, at para. 21,  the Court outlined a number of factors showing that the special circumstances test had been met in that case.  Similar factors can be found in the present case, including the following:

•        Cana was not familiar with commercial litigation nor with injunctions;

•        Cana understood that if the interlocutory injunction were granted, it would effectively resolve the dispute and end the litigation, and the work done would contribute significantly to trial preparation;

•        Cana did not give instructions to proceed at all costs; to the contrary, Cana communicated to Gardiner Roberts that it expected that the firm would keep legal costs within reason;

•        It is unrealistic to expect that Cana should have sought to have the bill assessed during the course of an ongoing matter such as this case;

•        Cana could only have appreciated the nature of the services at the conclusion of the retainer.   This is supported by the retainer agreement, which specified that Gardiner Roberts may take into account the result obtained in the final bill;

•        Cana was not aware that it could seek to have its accounts reviewed until it retained new lawyers.  As noted in Enterprise Rent-a-Car, at para 20, lawyers “should take the opportunity to inform their clients of their right to an assessment at appropriate times during the solicitor-client relationship.”  Gardiner Roberts, however, failed to advise Cana of its right to have its accounts assessed, even when Cana had raised objection to certain accounts;

•        Gardiner Roberts billed Cana more than $1 million, without achieving any success.

[43]           In light of the above factors, I find that the test for special circumstances has been met.   Cana is entitled to an assessment of the accounts rendered by Gardiner Roberts pursuant to ss. 4(1) and 11 of the Solicitors Act.

 

 

Ontario: the discovery provisions apply to contribution and indemnity claims

In Mega International Commercial Bank (Canada) v. Yung, the Court of Appeal held that the discovery provisions of the Limitations Act determine the commencement of the limitation period for contribution and indemnity claims.  This is an excellent, sensible decision that resolves one of the last significant (and somewhat inexplicable) uncertainties about the Ontario limitations scheme.

A refresher: Section 4 provides the basic two-year limitation period that commences on when the plaintiff discovers the claim.  Section 5(1) defines when discovery occurs.  Section 5(2) provides a rebuttable presumption that it occurs on the date of the act or omission that gives rise to the claim.  Section 15 provides that the ultimate 15-year limitation period commences on the date of that act or omission.   Section 18 provides that for the purposes of s. 5(2) and s. 15, the date when a plaintiff serves a statement of claim on a defendant is the date of the act omission that gives rise to the defendant’s contribution and indemnity claim against another alleged wrongdoer.

There were two competing constructions of s. 18.  One line of jurisprudence originating from Miaskowski (Litigation Guardian of) v. Persaud held that s. 18 prescribes an absolute two-year limitation period that commences always on the date of service of the statement of claim.  Another line of jurisprudence originating from Demide v. Attorney General of Canada et al.  held that s. 18 merely identifies the presumptive trigger date for the limitation period for contribution and indemnity claims, subject to the s. 5 discovery provisions.

I’ve long argued that Miakowski was plainly wrong, and its continued application was hard to understand.  I noted with some satisfaction the trend toward preferring the Demide construction.

The Court in Mega International essentially adopted the reasoning in Demide.  It applied the principles of statutory interpretation: the words in s .18 interpreted in their grammatical and ordinary sense do not establish an absolute limitation period.  Rather, s. 18 works “hand in glove” with the provisions of s. 5(2) and s. 15 to identify the presumptive limitation period that applies in contribution and indemnity claims.  It is not an exception to the basic limitation period in s. 4, but part of the integrated scheme established by s. 4 and s. 5.

The Court acknowledged the injustice in constructing s. 18 as imposing an absolute limitation period.  It would allow for the possibility of claims becoming statute-barred before they are discoverable.  The Court also noted the absence of any basis for recalibrating the balance between plaintiff and defendant rights the Act strikes for this particular category of claims only.

Ontario: the limitation of claims arising from assault and battery

 

The Court of Appeal granted the plaintiff’s appeal in Brown v. Woodstock.  The motion judge had found his claims statute-barred based on jurisprudence holding that a cause of action for damages for false arrest, false imprisonment, and breach of Charter rights crystallizes on the date of arrest, and that the limitation period for an assault or battery runs from the date assault or battery occurred.  I though it want’t a very good limitations decision, because cause of action accrual has nothing to do with the commencement of time.

The court followed its decision in Winmill as the basis for overturning the summary judgment:

[5]         In our view, Winmill cannot be distinguished from this case on the basis that the charges in this case are different, or that the prosecution of the appellant ended with his entering into a peace bond rather than an acquittal. Nor is it relevant that Winmill was also concerned with a claim for negligent investigation. The key point is that, as in Winmill, the battery action is essentially a mirror image of the criminal charge the appellant was facing. As a result, it was open to the appellant to await the outcome of the criminal proceedings against him before finally deciding whether to bring his action, regardless of when he first formed the intention to sue.

[6]         Specifically, the discovery date for the appellant’s action was October 22, 2015 – the date the criminal charges him were brought to a conclusion with a peace bond. The appellant had two years from that date in which to bring his action. Therefore, the appellant’s action, which was commenced May 13, 2016, is not time barred. The respondent fairly concedes that, if the claim in battery is to proceed, then it is appropriate to reinstate the entire action, with the exception of the appellant’s claim for malicious prosecution, which the appellant has abandoned.

Ontario: The Court of Appeal reminds that limitations defences are affirmative

 

Two aspects of the Court of Appeal decision in Abrahamovitz v. Berens are noteworthy.

First, the court explains why the expiry of the limitation period is a defence that must be pleaded in enough detail to makes this a candidate for leading decision on the principle:

[30]      This court explained in Beardsley v. Ontario (2001), 2001 CanLII 8621 (ON CA), 57 O.R. (3d) 1 (C.A.), at para. 21 that “the expiry of a limitation period does not render a cause of action a nullity; rather, it is a defence and must be pleaded”. See also:Strong v. Paquet Estate (2000), 2000 CanLII 16831 (ON CA), 50 O.R. (3d) 70 (C.A.), at paras. 35-37; Tran v. University of Western Ontario, 2016 ONCA 978 (CanLII), 410 D.L.R. (4th) 527, at para. 18; and Salewski v. Lalonde, 2017 ONCA 515 (CanLII), 137 O.R. (3d) 750, at para. 43.

[31]      There are two aspects to the statement from Beardsley. One is that from a procedural fairness point of view, a plaintiff is entitled to plead in response to a limitations defence, so that if a motion is brought to dismiss the claim, the court will have all the facts relied on to assess discoverability, or whatever other factors a plaintiff may wish to raise in response: Beardsley, at para. 22;Strong Estate, at para. 38; Metropolitan Toronto Condominium Corp. No. 1352 v. Newport Beach Development Inc., 2012 ONCA 850 (CanLII), 113 O.R. (3d) 673, at paras. 115-116; and Greatrek Trust S.A./Inc. v. Aurelian Resources Inc., [2009] O.J. No. 611 (Ont. S.C.J.), at para. 18.

[32]      The requirement that an affirmative defence, including a limitations defense, be pleaded to avoid surprise to the opposite party is reflected in r. 25.07(4) of the Rules of Civil Procedure, which provides:

In a defence, a party shall plead any matter on which the party intends to rely to defeat the claim of the opposite party and which, if not specifically pleaded, might take the opposite party by surprise or raise an issue that has not been raised in the opposite party’s pleading.

[33]      The second aspect of the statement from Beardsley, however, is more germane to this case. A limitations defence is “just that, a defence”: Lacroix (Litigation Guardian of) v. Dominique, 2001 MBCA 122 (CanLII), 202 D.L.R. (4th) 121, at para. 18. A defendant chooses whether or not to rely on a limitations defence, but is not obliged to do so: Graeme Mew, Debra Rolph, & Daniel Zacks, The Law of Limitations, 3rd ed. (Toronto: LexisNexis Canada Inc., 2016) p.166. See e.g.: Strong Estate, at paras. 35-40; and Girsberger v. Kresz (2000), 2000 CanLII 22406 (ON SC), 50 O.R. (3d) 157 (C.A.), at para. 13.

[34]      The fact that the choice belongs to the defendant is codified in s. 22 of the Limitations Act, 2002, which allows a limitation period to be suspended or extended by agreement.

[35]      This is a very important and useful provision that allows parties to a potential claim to suspend the running of a limitation (toll the limitation period) to allow them to conduct investigations or settlement discussions, without pressure on the claimant to commence the action unnecessarily. It promotes judicial economy and is cost-effective for the parties.

[36]      Obviously, this provision would be ineffective if another party could assert the limitation period in spite of the defendant’s agreement to toll the limitation period, or if the action became a nullity on the expiry of the limitation period. See for example, Schreiber v. Lavoie (2002), 2002 CanLII 49430 (ON SC), 59 O.R. (3d) 130 (S.C.J.), where a third party was not entitled to rely on r. 29.05(1) (a rule which allows a third party to plead a defence not raised by the defendant) to assert a limitations defense that the defendant had expressly agreed it would not rely on.

Second, there is a reminder that special circumstances doctrine is of no application:

[24]      I would not accept this argument for two reasons. First, the Estate has not commenced any proceeding or claimed any relief. The essence of this argument amounts to invocation of the old common law doctrine of special circumstances that no longer applies under the Limitations Act, 2002. See: Joseph v. Paramount Canada’s Wonderland, 2008 ONCA 469 (CanLII), 90 O.R. (3d) 401. The Estate is essentially saying that because all of the facts have already been pleaded in the action, there is no surprise and no prejudice to the defendants (or other parties) to allow the Estate to be added as a party now, even though the limitation period has expired.

Ontario: S. 21 might include mistake as to identity

In Douglas v. Stan Fergusson Fuels Ltd., the Court of Appeal left open the possibility that s. 21 of the Limitations Act might be broad enough to include mistake as to identity rather than merely a misdescription:

[112]   In my view, while the test for misnomer may be broad enough to embrace a mistake as to the identity of the person who should have brought a suit (rather than a misdescription of the person suing),[8] it cannot do so in this case. This is because, as I have explained above, at the time State Farm chose to commence a claim, it did not have capacity to do so in its own name. As a result, it cannot be said that State Farm made a “mistake” in naming the Douglases as plaintiffs instead of itself.

Ontario: two common sense constructions of s. 18

One of the few really consequential unresolved limitations issues is whether the commencement of the limitation period for claims for contribution and indemnity commences always on the day of service of the statement of claim in the proceeding for which contribution and indemnity is sought, or on discovery of the claim for contribution and indemnity.

I’ve long argued that this was a silly debate, and notwithstanding a line of jurisprudence suggesting otherwise, there can be no serious question that s. 18 merely change the event that triggers the presumptive discovery of the limitation from the act or omission giving to the claim to the service of the statement of claim.

Two recent decisions have interpreted s. 18 this way.

In Murphy v. Hart, Justice Monahan reviewed the leading decisions on both sides of the debate and then explains, persuasively, why Demide‘s construction of s. 18 is correct:

[28]           The Hart Defendants rely in particular on the judgment of Perell J. in Miaskowski (Litigation Guardian of) v. Persaud.[3] In Miaskowski, Perell J. was of the view that section 18 of the Act provides that a claim for contribution and indemnity is “deemed to be discovered” on the date upon which the “first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought.” Perell J. placed particular emphasis on the use of the word “deemed” in section 18 which, he noted, was a “declarative legal concept [that is] a firmer or more certain assertion of the discovery of a claim than the rebuttable presumption of discovery contemplated by section 5 of the Limitations Act, 2002.” He further observed that section 18 did not contain the moderating language “unless the contrary is proved” that is found in section 5(2) of the Act. In his view, “by using the language of a deeming provision without any reference to the deeming of discovery of the claim being rebuttable, the Legislature intended to impose an absolute two year limitation period with respect to claims for contribution and indemnity.”

[29]           In Perell J.’s view, this approach would bring certainty and efficiency to the law of limitations, while remaining consistent with the policy purposes of the Act. He also noted that it would be a rare case where a defendant would not know whom to sue for contribution and indemnity, and the period of two years following service of the underlying claim would provide “ample time” to exercise due diligence to determine against whom to claim.

[30]           Perell J.’s reasons in Miaskowski have been followed in a number of subsequent decisions of this Court.[4] However it should also be noted that a different interpretation of the effect of section 18 was taken by Leach J. of this Court in Demide v. Canada (Attorney General).[5] In Demide, Leach J. held that section 18 of the Act merely determines the relevant presumed starting point for the basic two year limitation period for purposes of section 5(2), a presumption that was still capable of being rebutted by proof to the contrary. Although section 18 does not include language referring to “proof to the contrary”, Leach J. observed that the inclusion of such wording in section 18 was unnecessary given that this wording was already found in section 5 (2). He also noted that interpreting section 18 as establishing an absolute two-year limitation period for claims for contribution and indemnity would make the ultimate limitation period in section 15 redundant.

[31]           Leach J. accepted that an absolute two-year limitation period for contribution and indemnity claims would provide certainty and efficiency, which was one of the policies underlying the 2002 reforms to the Act. But, as he observed, the same could be said in relation to making any limitation period absolute. In Leach J.’s view, the overall goal of the legislation was to strike a balance between a defendant’s need for certainty with the plaintiff’s right to sue. The legislature generally tried to strike that balance by imposing a presumptive two-year limitation period, capable of extension by demonstrable lack of discovery, proof of which was the obligation of the claimant. While it might be a rare case that a defendant, exercising due diligence within two years of being served with the claim, would not know against whom to bring a claim for contribution and indemnity, rarity is not impossibility. In fact, the rarity of such a possibility underscored for Leach J. the somewhat modest concession to fairness of making the limitation period for contribution and indemnity claims subject to discoverability.

[32]           With due respect to the contrary view, I prefer the interpretation adopted by Leach J.

[33]           First, this interpretation is consistent with the plain meaning of the relevant provisions. As discussed earlier, section 18 is merely an interpretive provision. It specifies the date upon which the act or omission on which a claim for contribution and indemnity is deemed to have taken place. But section 18 is not a substantive provision purporting to limit the commencement of legal proceedings and, as such, it cannot operate as a “stand-alone” limitation period.

[34]           It is true that section 18 utilizes the term “deemed” rather than language referring to a rebuttable presumption or the possibility of “proof to the contrary”. But it is important to be clear about what is being “deemed” through this provision. As discussed earlier, section 18 does not deem a claim to have been “discovered” on the date of service of the underlying statement of claim; rather it deems the “date of the act or omission upon which the claim is based” to be the date of service of the underlying statement of claim. While the “date of the act or omission upon which the claim is based” is certainly a key date in the determination of the date upon which a claim is “discovered”, that determination can only be made through the application and operation of sections 5(1)(a), (1)(b) and 5(2) of the Act, which would necessarily include consideration of the qualifying language “unless the contrary is proved” as found in section 5(2).

[35]           Presumably, the legislature did not include language referring to “proof to the contrary” in section 18 because it did not want to leave any room for argument or doubt on the question of the date upon which the presumption in section 5 (2) have effect in cases of claims for contribution and indemnity. But the absence of any reference to a “rebuttable presumption” in section 18 does not in any way suggest that the presumption in section 5(2) should be ignored or read out of the Act.

[36]           As Leach J. pointed out in Demide, if section 18 is interpreted as creating an absolute two-year limitation period for claims for contribution and indemnity, section 15 of the Act is thereby rendered redundant. Yet this could not have been the intention underlying section 18 since it expressly referred to section 15. Unlike section 5(2), section 15 does not make reference to a rebuttable presumption or provide the possibility of proof to the contrary. Therefore, the effect of section 18 in relation to section 15 is to provide an absolute 15 year limitation period for claims for contribution and indemnity, commencing on the date of the service of the statement of claim against the first alleged wrongdoer.

[37]           It is a well-established principle of statutory interpretation that the legislature does not intend to produce consequences which would render a statute illogical or incoherent, or which render some aspects of it pointless or futile.[6] In my view, it would be illogical and incoherent for the legislature to provide that claims for contribution and indemnity are subject to an absolute two-year limitation period, while simultaneously providing that the same claims are subject to an absolute 15 year limitation period. The legislature cannot have intended to say “X” and “not-X” at the same time.

[38]           While there have been differing views expressed regarding the effect of section 18 in relation to section 5(2), a recent decision of the Court of Appeal suggests that the principle of discoverability does in fact apply to claims for contribution and indemnity, although the Court did not expressly deal with that issue in its reasons. In Fennell v. Deol,[7] a driver in a four vehicle accident had commenced a personal injury claim against one of the other drivers (“Shergill”) on August 16, 2012. On October 20, 2014, Shergill served a statement of defence and cross-claim, asserting a claim for contribution and indemnity against a third driver involved in the accident. Shergill’s claim for contribution and indemnity was commenced more than two years from the date he was served with the original statement of claim. The Court of Appeal noted that the two-year limitation period presumptively ran from the date Shergill was served with the statement of claim. Nevertheless, because Shergill neither knew nor ought to have known of the facts necessary for his cross-claim prior to October 20, 2012, his cross-claim was timely for purposes of the Act.

[39]           Further support for this approach to section 18 is provided by comments made by Simmons J.A. in Placzek v. Green,[8] where she observed that, when read in combination with section 4 and section 15, section 18 “establishes the date of service of the injured party’s statement of claim as the presumed commencement date for the basic two-year limitation period in the actual commencement date for the ultimate 15 year limitation period with respect to contribution and indemnity claims.” The use of the word “presumed” is significant, since it suggests that the combined effect of section 18 and section 5 (2) is to create a rebuttable presumption, capable of being displaced by lack of actual knowledge.

[40]           In short, I conclude that the principle of discoverability does apply to claims for contribution and indemnity under the Act.

In Marjadsingh v. Toronto Transit Commission v. Kahlon, Master Jolley took a similar approach:

[17]           While most cases have found that the limitation period for contribution claims is not extended by the discovery principle, the court requires more than a tallying up of the number of decisions for and against that proposition to make such a determination.

[18]           The two divergent lines of authority are found in Miaskowski v Persaud2015 ONSC 1654 (CanLII) on the one hand and Demide v. Canada2015 ONSC 3000 (CanLII) on the other.  In Miaskowski, the court held that the discoverability principle does not apply to section 18 of the Limitations Act, 2002.Demide took the contrary position.

[19]           The preamble to subsection 18(1) of the Limitations Act, 2002 states that the section is “for the purposes of subsection 5(2) and section 15”.  Subsection 5(2) legislates a presumption about when a party had knowledge of the events giving rise to a claim.  It provides that a party is presumed to know the elements in subsection 5(1) on the date they occurred (the “presumed discovery date”).  Subsection 18(1) then deals with the presumed discovery date for contribution claims.  It provides that the presumed discovery date for a claim for contribution is the date when the party first had knowledge or was aware it was being sued, i.e. the date it was served with the claim.  In either case, the purpose of the section is to set a presumed discovery date.

[21]           Two earlier Court of Appeal decisions that discussed subsection 18(1) spoke in terms of the limitation period being “presumed” to run from service to the statement of claim.  (Waterloo Region District School Board v. CRD Construction Ltd.2010 ONCA 838 (CanLII) at paragraphs 23-24; Placzek v. Green2009 ONCA 83 (CanLII), [2009] O.J. No. 326 at paragraph 24 (C.A.)).  They did not directly address whether the presumption was conclusive or rebuttable.

[22]           As a policy matter, the courts accept that parties should not be deprived of their right to sue before they know, or reasonably should know, they have a claim.  I would find it as problematic to deprive a third party who did not and could not have discovered its claim for contribution and indemnity within two years of the claim being served on it as it would be to deprive a plaintiff of the right to pursue a claim that it did not or could not discovered within the two year presumptive limitation period, unless the legislation clearly dictated that result.

[23]           The courts have accepted that subsection 18(1) can just as easily be read to include a discoverability period as read to mean a fixed limitation period (for instance, Hughes v. Dyck2016 ONSC 901 (CanLII) at para 37).  Absent a determination by the Court of Appeal that section 18(1) is to be read as an absolute limitation period that is not subject to the principle of discoverability, I would interpret the section, as did Mr. Justice Leach, as providing a rebuttable presumption.  I do not see this interpretation to undermine the principles of efficiency and certainty underlying the Limitations Act any more than does the recognition of the discoverability principle to a main claim. I find it to be consistent with the policy of not depriving parties of their claims before they are even aware of them.  I adopt the following language from Demide:

88.  As Justice Sharpe emphasized in Canaccord Capital Corp. v. Roscoe, [2013 ONCA 378] at paragraph 17, the overall goal of the legislation was the creation of a clear and comprehensive scheme for addressing limitation issues that would balance a defendant’s need for certainty with the plaintiff’s right to sue.  A review of the legislation suggests that, with indicated exceptions, the Legislature generally tried to strike that balance by imposition of a presumptive two year limitation period, capable of extension by demonstrable lack of discovery, (proof of which was the obligation of the claimant).  Although the legislature clearly felt that claims for contribution and indemnity warranted a measure of exceptional treatment, to encourage resolution of all claims arising from the wrong at the same time, it seems to me that the approach chosen by the legislature in that regard was the introduction of a modified presumption; i.e., one that moved the presumed starting date of the basic two year limitation period forward considerably, (from the much later starting dates permitted under the previous legislation), to the date on which the party seeking contribution and indemnity was served with the claim in respect of which contribution and indemnity is sought.  Such a party, who fails to approach the possibility of contribution and indemnity claims with due diligence during that ensuing presumptive two year limitation period, from that much earlier date, does so at that party’s considerable peril.  However, I see nothing in the legislation that suggests the legislature intended to go an extra step; i.e., by absolutely precluding any possibility whatsoever of an extension of time for a party capable of providing that a contemplated claim for contribution and indemnity was indeed incapable of being discovered, even with reasonable due diligence, within two years of the party being served with a statement of claim.  As emphasized by our Court of Appeal in Pepper v. Zellers Inc., 2006 CanLII 42355 (ON CA), [2006] O.J. No. 5042 (C.A.), the discoverability principle ensures that a person “is not unjustly precluded from litigation before he or she has the information to commence an action provided that the person can demonstrate he or she exercised reasonable or due diligence to discover the information”.  In my view, the court should be reluctant to adopt a legislative interpretation that effectively permits the possibility of such an injustice, unless that is the outcome clearly indicated by the legislation.

[24]           A number of the cases on this issue, including Miaskowski, have noted that it would be a “rare case” where a defendant would not know the parties against whom to claim contribution and indemnity within the limitation period.  Those cases rely on that rarity as a basis for finding the limitation period to be absolute.  If indeed it would be a “rare case”, then I would posit that the risk of wreaking havoc on a statutory regime by allowing the third party in those few cases to rebut the presumption is slight.

[25]           Miaskowski was influenced by the fact that subsection 18(1) does not refer to the presumption being rebuttable but uses deeming language to determine when the limitation period runs.  Absent mention of the presumption being rebuttable, Perell, J. was of the view that the limitation period was absolute.  The court in Demide also considered the fact that subsection 18(1) did not reference the limitation period being rebuttable.  I agree with Mr. Justice Leach’s analysis at paragraph 87 in Demide that there was no need to provide for the rebuttal language in subsection 18(1) as it is already present in subsection 5(2).

[26]           Subsection 5(2) provides a presumed discovery date for non-contribution claims, the date of the occurrence.  Subsection 18(1) changes only the meaning of the presumed discovery date in subsection 5(2) to the date on which a claim was served, in the case of contribution claims.  On my reading, I see nothing that would remove from subsection 5(2), and therefore subsection 18(1), the last part of the subsection, the ability of a party to “prove to the contrary” that the presumed discovery date was a different date.  The ability to rebut the “presumed discovery date”, whether it be the date of the occurrence under subsection 5(2) or the date of service of the claim under section 18, remains intact.

[27]           As to section 15, it provides an ultimate limitation period whereby no proceeding shall be commenced in respect of a claim after the 15thanniversary of the day on which the act or omission on which the claim is based took place.  For contribution and indemnity claims, subsection 18(1) deems the date on which “the act or omission took place” to be the date of service of the claim on the third party, as opposed to the “act or omission” that set the litigation wheels in motion.  I agree with Leach, J. that there would be no reason to reference section 15 in the preamble to subsection 18(1) if claims for contribution and indemnity were invariably barred two years after the date of service of the claim.  The ultimate 15 year limitation period and the reference to section 15 would be redundant.

[28]           For these reasons, I find the limitation period in subsection 18(1) of the Limitations Act, 2002 to be rebuttable rather than conclusive.

I understand that Marjadsingh is under appeal.  I am hopeful the Court of Appeal will uphold it and bring some certainty (and common sense) to the issue.

 

Ontario: No, s. 16(1)(a) is not a secret loophole

Since the early days of the Limitations Act, plaintiffs have ventured the not especially clever argument that by seeking only a declaration they can engage the exception in s. 16(1)(a) of the Limitations Act for a proceeding for a declaration if no consequential relief is sought.

As two recent decisions remind us, this strategy is transparent and ineffective.

In Skylark Holdings Limited v. Minhas, the defendants moved to dismiss the plaintiffs’ proceeding as statute-barred.  In response, the plaintiffs moved to amend the statement of claim to limit the relief claimed to a declaratory judgment of legal and beneficial ownership of shares. In this way, the plaintiffs intended to engage s. 16(1)(a).  The motion judge agreed with the plaintiffs and found that the court could make declare ownership without consequential relief.

The Divisional Court granted the defendants’ appeal.  It followed the Court of Appeal’s recent decision in Alguire, delivered after the motion judge’s decision, and assessed the essential nature of the plaintiffs’ relief.  It concluded that the plaintiffs were attempting an “end run” around the limitation period:

 

[8]                This case was only decided after the motions judge made his decision and it is therefore not surprising that the motions judge did not conduct his analysis in accordance with the directions set out in the Court of Appeal’s decision.  This was an error of law.  To decide whether s. 16 (1)(a) is being used to circumvent an application limitation period, the motions judge was required to assess the essential nature of what the respondent is seeking.  In this case, the respondent claims to be entitled to a five per cent interest in 2012111 Ontario Inc. as a result of the fulfillment of the 2002 agreement.  Any entitlement that it has today flows from a contract – the meaning and enforceability of which is in dispute – but any cause of action that the respondent may have in respect of the 2002 contract is statute barred.

[9]               To overcome this difficulty, the respondent seeks to use the device of a declaration to do an end run around the applicable limitation period.

[10]           Moreover, were the respondent to obtain the declaration, the circumstances are akin to those found by Madam Justice Harvison Young in para. 16 of Bailey v. Canada (Attorney General), 2008 CanLII 53128 (ON SC).  It is readily apparent from the record that the declaration sought will be ineffective without further mandatory relief directed to the corporation or a shareholder to implement the shareholding interest if possible.  A determination that the respondent is entitled to a five per cent interest does not say from whom and by what means the shareholding interest is to be implemented.  Therefore, a declaration of entitlement alone is of no avail without further consequential relief which brings it outside s. 16 (1)(a) of the Limitations Act 2002.

Similarly, in Van Halteren v. De Boer Tool Inc., the Superior Court looked at the pith and substance of relief sought in regards of shares and determined that it was consequential:

[6]               Section 16.1 (1) of the Limitations Act, 2002 provides that there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought. The present claim, however, does not fall under that exception. The pith and substance of the claim is damages or a property interest in shares to compensate for $500,000 advanced to the defendant. No shares actually exist. It would be impossible for the court to make a declaration of rights with respect to shares that cannot be identified. The only meaningful remedy for the plaintiff would be in the nature of consequential relief. Accordingly the applicable prescription is the general limitation of two years after the cause of action is discovered or discoverable.

As an aside, the curious thing about s. 16(1)(a) is that it’s arguably unnecessary.  The Limitations Act applies to “claims” pursued in court proceedings, which are defined in s.1 as remedying loss resulting from wrongful conduct.  If a plaintiff doesn’t seek consequential relief, like damages, then the plaintiff isn’t pursuing a claim, and if there is no claim the Limitations Act doesn’t apply.

Ontario: Rebutting presumptive discovery is the plaintiff’s burden

The Court of Appeal decision in O’Brien-Glabb v. National Bank of Canada states the principle that the plaintiff bears the onus of establishing the inappropriateness of a proceeding as part of a discovery argument:

[13]      We agree with the appellant that it was the respondent who bore the onus of leading evidence to establish on a balance of probabilities that a proceeding was not appropriate in 2010 (see: Miaskowski (Litigation guardian of) v. Persaud, 2015 ONCA 758(CanLII) at para 27; Fennell v. Deol, 2016 ONCA 249 (CanLII) at para16; and Galota v. Festival Hall Developments Ltd., 2016 ONCA 585 (CanLII) at para 15).

Even a vague familiarity with the operation of s. 5 of the Limitations Act means this principle is self-evident, but it’s nevertheless helpful to have it stated explicitly.

Ontario: Does the limitations act apply to Notices of Objection?

In the Wall Estate, the court held that the Limitations Act does not apply to a claim asserted in a beneficiary’s Notice of Objection to Accounts:

[1]               The discreet issue for consideration at this motion is as follows:  Can an estate trustee move to strike a beneficiary’s Notice of Objection to Accounts in the face of the estate trustee’s Application to Pass Accounts, based on the Limitations Act, 2002, or laches or acquiescence?  For reasons that follow, I am satisfied that the beneficiary, Elizabeth Wall, is not barred from filing an objection to the accounts for the entire period under administration.

Marjorie Wall died in 2005.  The objector was Elizabeth Wall, her daughter and beneficiary of the estate.  Marjorie left the bulk of her estate to her two children in trust until they attained the age of 60 years.  Both children were under 60 at the time of Marjorie’s death.  The trustee had absolute discretion to pay funds to the children during their lifetime prior to reaching 60.  If they didn’t reach 60, the will provided that the estate’s residue was to be divided amongst nieces and nephews.  Elizabeth was 54 at the time of the application, so she had a vested interested in the discretionary trust and a contingent interest in the residue of the estate.

In response to her objection, the trustee took the position that he was not required to address it because it was time-barred, either by the Limitations Act or equity.

The court disagreed.  Relying on the decision in Armitage, the court reasoned that if a passing of accounts doesn’t fit the definition of a “claim” in the Limitations Act, neither does a Notice of Objection:

[31]           Based on the facts in Armitage, Hourigan J.A. found that the passing of accounts does not fit within the definition of a claim within the Limitations Act, 2002.  In my view, if the passing of accounts does not constitute a claim, I am not satisfied that a Notice of Objection is a claim.  In filing a Notice of Objection, the beneficiary is seeking answers to questions about steps taken by the estate trustee during the currency of an administration of an estate.  Answers to those questions may assist the beneficiary in consenting to the passing of accounts without the necessity of a formal hearing.  An absence of consent will require a formal hearing.  A formal hearing will assist the court in determining if the fees sought and investment steps taken are appropriate under all the circumstances.

[32]           The objections taken at their highest may result in a reduction or loss of compensation for the estate trustee or other remedies.  In this case, if the objections are successful to any extent, no additional funds would be payable immediately to Elizabeth as beneficiary of the discretionary trust.  The corpus of the estate would be enlarged, increasing the funds available for the discretionary trust, and ultimately, could increase the amount available to be paid to Elizabeth, but only if she survives to age 60.  On the facts here, I am not satisfied that the Notice of Objection rises to the level of a “claim” as contemplated by the Limitations Act, 2002.

This reasoning is problematic.  The threshold question is whether the Notice of Objection contains a “claim”.  If so, as the Limitations Act applies to all claims pursued in court proceedings, it would limit the claim pursued in the Notice of Objection.  Section 1 of the Limitations Act defines “claim”:  “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”.  Accordingly, answering the threshold question requires assessing whether the elements that comprise a claim—wrongful conduct and resulting damage—are present.

In Armitage, the Court of Appeal found that an attorney for property’s application to pass accounts was not a “claim”. The application did not seek a remedy for any damage, but rather court approval of the attorney’s conduct.

The decision Wall does not quote the definition of “claim” and does not explicitly consider its elements. Rather, it reasons that if the application to pass accounts in Armitage was not a “claim”, then neither was the Notice of Objection.  This is not a sound limitations analysis.

Indeed, the decision certainly gives the impression that the Notice of Objection was “claim”.  In it, Elizabeth alleged that the trustee had wrongfully carried out his duties resulting in a diminution of the funds available to her; in other words, she sought to remedy damage resulting from wrongful conduct.

It may be that the court arrived at the correct decision, but from a limitations perspective it’s a very dubious decision.

Update!

Leigh Sands kindly brought to my attention Iaboni Estate v. Iaboni in which an application judge considered a limitations defence raised in response to a notice of objection without any suggestion that this is an unsettled area of the law:

Did the limitation periods expire, such that the claims made in his Notice of Objection are out of time?

[32]           The objections of Mr. C. Iaboni that the trustee ‘excluded’ many valuable assets such as a mortgage, two businesses, a condo and life insurance policy from the estate of Lidia Iaboni and that when Lidia Iaboni became disabled, her husband’s wealth evaporated and the applicant has no interest in marshalling this wealth is, in part, a complaint about the administration of Umberto Iaboni’s affairs, between the onset of his disability in 2006 and his death in 2010 and latterly a complaint about the administration of his mother’s affairs between the onset of her disability in 2006/2007 and before her death in 2012. His allegations in the Notice of Objection filed in his mother’s estate, as outlined above were in substance the same as those made in the litigation he initiated on December 15, 2010.  All of the transactions about which he complains were disclosed to him no later than the accounting delivered on behalf of his siblings pursuant to the Minutes of Settlement, with the possible exception of the discharge of the mortgage on his sister’s home, which was a matter of public record.  His civil action was dismissed on May 15, 2013.

[33]           It appears, therefore, that Mr. C. Iaboni’s Notice of Objection raises issues as particularized above that are outside of the 2-year period within which they may have been pursued.

The Court of Appeal upheld the decision:

[10]      We are not persuaded that the motions judge made any error. The appellant consented to the passing of accounts from the time of the appointment of BNS, and has not appealed that aspect of the order. Even if the appellant were able to identify errors with respect to the abuse of process and Limitations Act claims, the motions judge’s findings of fact on the merits are fatal to the appeal. She made findings that the appellant had not substantiated his suspicions with respect to the discharge of mortgage, the share certificate, or general dissipation of funds. She also found the evidence of the respondent Norma to be credible and reliable. Those findings are entitled to deference and are dispositive of the appeal.

It is certainly arguable that this decision is determinative of the issue, even if the court determined it without analysis or acknowledgement that it is the subject of debate.

However, Matthew Furrow, who is a far greater authority on these issues than me, disagrees.  He notes that really, all the Court held was that the facts were dispositive of the appeal, and not the limitations analysis.  I think he’s right, which means uncertainty remains.