Author: Dan

Ontario: the misapplication of common law limitations principles

In Bailey v. Milo-Food & Agricultural Infrastructure & Services Inc., the Court of Appeal held that in a wrongful dismissal action, the cause of action for wrongful dismissal arises on the date of the termination notice:

[5]         The appellant submits that the motion judge erred in concluding that his cause of action for wrongful dismissal arose on the date he was provided notice and not on the last day he worked for Milo-FAIS. He argues that the motion judge’s reliance on Jones v. Friedman, 2006 CanLII 580 (ON CA), 2006 CarswellOnt 120 (C.A.) in this regard was misplaced. His submission is that the motion judge erred by conflating actual dismissal with notice of future dismissal, since in Jones the date of dismissal, as pleaded, coincided with the date of notice. According to the appellant, subsequent trial decisions relying on Jones have continued to conflate these dates.

[6]         We do not give effect to this submission and decline to adopt the restrictive interpretation of Jones urged upon us by the appellant. In Jones the notice of termination was given on December 12, 1994 and the employment ended on January 31, 1995. The breach the appellant relied on occurred on December 12, 1994 when his employment was terminated without reasonable notice. This court fully appreciated the context, and decided the date of notice of termination was when the limitation period began. Jones stands for the principle that a cause of action for wrongful dismissal arises on the date of notice of termination. The motion judge made no error in his reliance on that case or in striking the wrongful dismissal claim.

This is an example of the misapplication of common law principles to a Limitations Act analysis.  Limitation periods under the Act commence on discovery of a claim, not the accrual of a cause of action.

The words “cause of action” do not appear in the Limitations Act.  It is the discovery of a “claim”, not a cause of action, that commences time.  This is by design.  Cause of action accrual was a leading grievance in the movement to reform the former limitations scheme; it required a confounding, even esoteric analysis that resulted in ambiguity and confusion.  Here are the essential differences between a “claim” and a cause of action:

  1. A “claim” as defined by the Limitations Act is materially different than a cause of action. A “claim” is purely a limitations concept, whereas a cause of action is what entitles a plaintiff to relief from the court.  A claim has only two factual components (wrongful conduct and resulting damage), whereas a cause of action may have multiple factual components (like negligent misrepresentation, which has five).  Damage is always a component of a “claim”, whereas it is not always a component of a cause of action (such as breach of contract).
  2. Discovery of a “claim” is materially different from discovery of a cause of action. Discovery of a “claim” requires knowledge that a proceeding is an appropriate remedy, whereas at common law, discovery of a cause of action requires knowledge of its material facts.  The appropriateness of a proceeding as a remedy is not a material fact of any cause of action.
  3. “Claims” and causes of action are connected. The cause of action informs the content of the “claim”.  The wrongful conduct in the cause of action is the wrongful conduct in the Claim.  The damage that is relevant to the wrongful conduct, whether it forms part of the cause of action or not, is the damage in the Claim.

Ontario: the Court of Appeal on the limitation of unpaid invoice claims

In Collins Barrow Toronto LLP v. August Industries Inc., the Court of Appeal has held that the limitation period for a claim arising from an unpaid invoice does not run until a reasonable period of time has expired for payment of the invoice:

[5]         The other two invoices in dispute are dated April 9, 2014 and April 11, 2014.  The application judge pointed out that the engagement letters expressly provided that invoices only became delinquent once 45 days had expired from their delivery.  The application judge concluded that the limitation period for these two invoices did not commence until 45 days after they were delivered.  We agree with her conclusion in that regard.  It is consistent with the express wording of the engagement letters and also with existing case law that provides that the limitation period on an invoice does not begin to run until a reasonable period of time has expired for payment of the invoice:  see, for example, G.J. White Construction Ltd. v. Palermo, [1999] O.J. No. 5563 (S.C.J.).

The decision cited by the Court was decided under the former Limitations Act, in which the accrual of the cause of action determined the commencement of time.  In contrast, time commences under the Limitations Act on discovery of the claim.  It would have been more helpful had the Court explained what impact the passage of a reasonable amount of time has on the plaintiff’s discovery of the claim, and framed the analysis in the language of Limitations Act.  In the absence of such a s. 5 analysis, I assume the principle is that a plaintiff cannot really know that she has suffered a loss until a period of time expires after payment became due.

 

Ontario: damage occurs when there is a change in position

 

In Sirois v. Weston, the Court of Appeal cites its decision in Hamilton for the principle that damage occurs when the plaintiff suffers a change in a position, not when the change of position monetises into a specific amount:

[11]      … the plaintiff suffers damage sufficient to complete the cause of action when he enters into the transaction, not when the loss is monetized into a specific amount.

This is an essential principle in any limitations analyses.  The Limitations Act applies to “claims” (as defined by s. 1) pursued in court proceedings, and damage is an element of a “claim”.

What is not an essential principle in any Limitations Act analysis is the accrual of the cause of action.  Cause of action accrual determined the commencement of time under the former act.  If you look it up, you’ll see that limitation periods commenced when the cause of action arose.  Now look at the Limitations Act, and you’ll see that the words “cause of action” do not appear at all.  This is because MAG recommended removing the cause of action as determinative of the commencement of time in 1991 because three centuries or so of cause of action accrual had demonstrated that it was a pretty lousy animating principle of a limitations scheme.

Ontario: remember the amendment principles

Master Muir provides a helpful summary of amendment principles in Concord Adex Inc. v. 20/20 Management Limited:

[20]           The law in relation to motions seeking leave to amend a pleading is well settled and was not seriously in dispute on this motion. The applicable principles are summarized in my decision in Greenwald v. Ridgevale Inc., 2016 ONSC 3031 (CanLII), 2016 ONSC 3031 (Master). At paragraph 21 of Greenwald I set out those factors as follows:

• the amendments must not result in prejudice;

• the amendments must be legally tenable;

• the amendments must comply with the rules of pleading;

• a motion to add a party must meet all of the requirements of a motion under Rule 26.01;

• the addition of the party should relate to the same transaction or occurrence;

• the addition of the party should not unduly delay or complicate the hearing;

• the addition of a party will not be permitted if it is shown to be an abuse of process.

It is useful to keep these in mind when considering whether a motion to add a party of the presumptive expiry of the limitation period.

There is also a reminder that standard of discovery applicable when determining whether to add a proposed defendant after the presumptive expiry of the limitation period is reasonable discovery, not possible discovery:

[47]           With respect to all of these arguments it is important to emphasize that it is reasonable discoverability and not the mere possibility of discovery that triggers a limitation period. See Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16 (CanLII) at paragraph 35; leave to appeal refused, 2017 SCCA No. 85. The proposed defendants appear to be holding the plaintiffs to a standard of perfection. That is simply not the test.

Ontario: challenging discovery analyses on appeal

In Frederick v. Van Dusen, the Divisional Court reminds us that the court (in this case, a deputy judge of the Small Claims Court) need not make explicit findings with respect to the discovery matters:

[12]           Subsection 5(1) provides that a claim is discovered on the earlier of the day on which the plaintiff first knew of the matters set out in subsection 5(1)(a) and the day on which a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known of the matters referred to in subsection 5(1)(a).  The Deputy Judge found that the date on which the reasonable person with the abilities and in the circumstances of Mr. Frederick ought to have known of the matters set out in subsection 5(1)(a) was the spring of 2013.  Having made this determination under subsection 5(1)(b) of the Act, there was no requirement for the Deputy Judge to make an explicit finding as to what Mr. Frederick and Ms. Presley actually knew in relation to subsection 5(1)(a)(iv).

Ontario: Claims arising from disposition orders are not claims to enforce an order

In Thomson v. Durham (Police Services Board), the Court of Appeal held that a claim arising from damage to property specified in an order of disposition under s. 490(9) of the Criminal Code is not a claim to enforce a court order.    This is because it is a claim for damages, and not an enforcement proceeding.  Now you know.

Ontario: the great s. 18 debate

One of the few remaining unresolved limitation issues of real consequence is whether s. 18 is a deeming provision (it’s not) or merely alters the s. 5(2) presumption (it does).

Justice Charney’s decision in Gendron v. Thompson Fuels contains one paragraph (out of 431) the tends to support the latter interpretation:

[406]      I agree with Thompson’s position that the limitation period began to run on June 15, 2010, pursuant to s. 18 of the Limitations Act. At that point Mr. Gendron knew that he had a potential claim against Thompson Fuels for contribution and indemnity for the s.100.1 order made by the City. I do not accept the plaintiff’s argument that the limitation period did not begin to run until the ETR process had run its course. Section 18 specifically provides that the limitation period begins to run “the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought”, and there is no dispute that Mr. Gendron was served with the City’s order on June 15, 2010.

By this reasoning, it’s arguable that if Gendron had learned of the potential claim for contribution and indemnity on a date after service of the City’s order, then the s. 18 limitation period would have commenced after until that date.

 

 

Ontario: no limitation period without a claim

Justice Emery’s decision in Inzola Main Street Inc. v. Brampton (City of) is a statement of a very often overlooked but fundamental principle of the Ontario limitations scheme: there is no claim, and therefore no applicable limitation period, until the claimant suffers damage:

[51]           Inzola has made the basic submission on this motion that a limitation period for damages claim does not commence running until damage actually occurs. Mr. Svonkin refers to the definition of “claim” in section 1 of the Limitations Act 2002 as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. This language is consistent with section 5(1)(a) that sets out the components of the discoverability rule, and provides that a claim is discovered on the earlier of the day on which the person with the claim first knew that the injury loss or damage “had occurred”.

[52]           From reading the definition “claim” in section 1 that a claim must relate to damage, and to the qualifier “had occurred” to injury, loss or damage in section 5(1)(a)(i), the legislature has employed definitive language to require that the damage to which the claim relates must have taken place for the injury, loss or damage to be known. Where damage is an element of a cause of action or claim, a limitation period can only commence when the person with the claim suffers some damage that has occurred, and that damage is discoverable: Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] S.C.J. No. 31, at paras. 18 and 36, andPickering Square Inc. v. Trillium College Inc., [2016] O.J. No. 1118, at para. 33.

[53]           The prospect of injury, loss or damage at some future date is not sufficient to commence a limitation running. A claim does not arise only because a person recognizes or is concerned that they may suffer that injury, loss or damage at some point in the future. Justice Belobaba explained it this way in IPEX v. Lubrizol, 2012 ONSC 2717 (CanLII), at para. 22:

22.   In my view, it is self-evident that the injury, loss or damage that “has occurred” must be injury, loss or damage that was sustained by the person with the claim. It is also, in my view, a self-evident proposition of modern limitations law that the clock begins to run with actual harm (known or discoverable) and not just the possibility of future harm. The latter proposition doesn’t make any sense either in terms of public policy or otherwise.

Ontario: Justice Perell on the horror of s. 138 of the Securities Act

Kaynes v. BP, P.L.C. considers the application of the limitation periods set out in s. 138.14 of Part XXIII.1 of the Ontario Securities Act.  As Justice Perell described it, the case is “the latest sequel or prequel in what has turned out to be the case law equivalent of a horror-movie franchise”:

[7]               The franchise began with: (I) Sharma v. Timminco Ltd., 2011 ONSC 2040, 2012 ONCA 107 (CanLII), which was followed by the equally terrifying: (II) Green v. C.I.B.C., 2012 ONSC 3637 (CanLII), 2014 ONCA 90, 2015 SCC 60; (III) Silver v.IMAX Corp., 2012 ONSC 4881 (CanLII), 2014 ONCA 90, 2015 SCC 60; (IV) Trustees of the Millwright Regional Council v. Celestica Inc.,2012 ONSC 6083 (CanLII), 2014 ONCA 90, 2015 SCC; and (V) Pennyfeather v. Timminco Ltd., 2016 ONSC 3124, 2017 ONCA 369 (CanLII).

The plaintiff ventured a novel argument to “attempt to ward off the monster by relying on s. 138.3(6) (multiple misrepresentations) of the Act.”  He argued that the constituent elements of the cause of action in s. 128.3 did not crystallize until a public correction of the misrepresentation occurred.  Justice Perell had none of it:

[33]            Unlike the general limitation periods found in the Limitations Act, 2002, S.O. 2002,       c. 24, Sched. B, s. 138.14 of the Ontario Securities Act is an event-triggered limitation period. Under s. 138.14, the statutory cause of action does not have to exist, and if it does exist, it does not have to have been discovered to trigger the running of the limitation period. The Ontario Securities Act plainly states that no action for a misrepresentation shall be commenced later than three years after the date on which the misrepresentation was made.

[34]           There is a difference between event-triggered and cause-of-action or claim-based limitation provisions. When the legislature specifies that the commencement of a statutory limitation period is linked to an event and not to the accrual of a cause of action, the court cannot impose a discoverability requirement. In Ryan v. Moore, 2005 SCC 38 (CanLII) at para. 24, the Supreme Court stated:

  1. [T]he [discoverability] rule is ‘generally’ applicable where the commencement of the limitation period is related by the legislation to the arising or accrual of the cause of action. The law does not permit resort to the judge-made discoverability rule when the limitation period is explicitly linked by the governing legislation to a fixed event unrelated to the injured party’s knowledge or the basis of the cause of action.

[35]           Unlike other general and special limitation periods, the limitation period found in            s. 138.14 continues to run even after the notice of action or statement of claim is issued. This feature of s. 138.14 is the source of the horror movie franchise of cases beginning with Sharma v. Timminco Ltd., supra.

[36]           The legal narrative of those cases is that:

  1.   In Sharma v. Timminco Ltd., the Ontario Court of Appeal held that the limitation period found in s. 138.14 of the Ontario Securities Act did not stop running until the court granted leave to pursue the s. 138.3 claim.
  2.   But in Green v. C.I.B.C., Silver v. IMAX Corp. and Trustees of the Millwright Regional Council v. Celestica Inc., a five-member panel of the Court of Appeal overturned Sharma v. Timminco and held that s. 28 of the Class Proceedings Act, 1992 suspended the running of the limitation period with the issuance of the notice of action or statement of claim.
  3.   However, on further appeal, the Court of Appeal was reversed, and in Green v. C.I.B.C., the Supreme Court of Canada restored Sharma v. Timminco, but the Court held that pursuant to the nunc pro tunc doctrine, the running of the statutory limitation period could, in effect, be suspended if the notice of motion for leave under s. 138.8 was delivered before the limitation period had tolled.

[37]           It may be parenthetically noted that in 2014, s. 138.14 of the Ontario Securities Act was amended to add s. 138.14 (2), which provides that the limitation period is automatically suspended when the notice of motion for leave under s. 138.8 is filed with the court. The amendment to s. 138.14 is not retroactive, and the Supreme Court of Canada in Green v. C.I.B.C. did not rely on it in formulating its rule about how the running of the limitation period could be suspended.

[38]           Notwithstanding the line of authorities that have discussed the operation of s. 183.14 of the Ontario Securities Act, Mr. Kaynes argues that the constituent elements of the statutory cause of action found in s. 138.3 did not crystallize until there was a public correction, which is a constituent element of the claim, and that this did not occur until, at the earliest, April 21, 2010, and therefore, the three-year limitation period could not have begun to run until April 21, 2010. Based on this argument, Mr. Kaynes asserts that since he commenced his action within three years of April 21, 2010, none of the 14 misrepresentation claims were untimely.

[39]           With respect, this argument ignores the plain language of s. 138.14, transmutes to the point of mutation an event-driven limitation period into a discoverability-claim-driven limitation period, obliterates the legislative policy for introducing a limitation period into Part XXIII.1 of the Ontario Securities Act, and is contrary to how s. 138.14 has been discussed, interpreted, and applied in numerous cases including the Sharma v. Timminco line of cases. In Green v. CIBC, supra at paras. 66, 180 the Supreme Court noted that the statutory limitation period was designed to run without regard for the plaintiff’s knowledge of the facts giving rise to the cause of action.

[40]           It is plain and obvious that the action based on the 11 misrepresentations is statute-barred.

[41]           Mr. Kaynes, however, attempts to save the 11 statute-barred claims by relying on            s. 138.3(6) of the Ontario Securities Act. He submits that all the misrepresentations are a continuous misrepresentation that began on May 8, 2007 and continued until May 24, 2010, and, therefore, he argues that the limitation period for all of the misrepresentations started to to run on May 24, 2010, making his November 15, 2012 Statement of Claim timely for all claims, subject to leave being obtained under Part XXIII.1 of the Act.

[42]           Mr. Kaynes’ argument about how s. 138.3(6) operates fails for three reasons.

[43]           First, Mr. Kaynes interpretation of s. 138.3(6) offends the principles of statutory interpretation that a statute should be interpreted coherently, harmoniously, and without internal contradictions.

[44]           To interpret a statute, the court should look at the Act as a whole and attempt to find an interpretation that is in harmony with the entire legislative scheme, including the regulations and forms: Verdun v. Toronto-Dominion Bank, 1996 CanLII 186 (SCC), [1996] 3 S.C.R. 550 at p. 559; Mavi v. Canada (Attorney General) (2009), 2009 ONCA 794 (CanLII), 98 O.R. (3d) 1 (C.A.) at paras. 92-96. In interpreting a statute, it is presumed that the constituent elements of a legislative scheme are meant to work together logically and teleologically, each contributing to the achievement of the legislator’s goal without contradictions or inconsistencies among the constituent elements: Peel (Police) v. Ontario (Special Investigations Unit), 2012 ONCA 536 (CanLII)at paras. 26, 60; R. v. Morgentaler, 1975 CanLII 8 (SCC), [1976] 1 S.C.R. 616 at p. 676.

[45]           In Green v. C.I.B.C., supra at para. 55, Justice Côté rejected interpretations of the statutory scheme of Part XXIII.1 of the Ontario Securities Actthat undermine the s. 138.14 limitation period; she stated:

Even if we were to assume that there is an ambiguity in the wording of the relevant provisions — which there is not — the legislative purpose and structure of those provisions would nonetheless support my conclusion. In other words, “the scheme of the Act, the object of the Act, and the intention of Parliament” are consistent with the ordinary and grammatical meaning of the words, which is another reason not to depart from that meaning […] To hold that s. 28 CPA operates to suspend a limitation period for a statutory claim under s. 138.3 OSA before leave is obtained would be to circumvent the carefully calibrated purposive balance struck by the limits to the statutory action provided for in Part XXIII.1 OSA. Such an interpretation would render s. 138.8 OSA ineffective, since the suspension of the limitation period, although not permanent, could nevertheless delay the decision on the merits of leave for several months or even for years, as the cases at bar demonstrate.

[46]           As demonstrated by the case at bar, Mr. Kaynes’ interpretation and argument about the application of s. 138.3(6) of the Ontario Securities Actessentially obliterates the operation of s. 138.14 and the clear policy of the Legislature that no action shall be commenced under           s. 138.3 after three years from the first release of the misrepresentation. As demonstrated by the case at bar, Mr. Kaynes’ action is brought based on misrepresentations that, at the commencement of the action in 2012, were over five years old.

[47]           Second, Mr. Kaynes’ interpretation is contrary to the scheme of Part XXIII.1 of the Ontario Securities Act, which carefully calibrates the regulation of the securities marketplace balancing a myriad of factors including the rights of plaintiffs and defendants and the reality that where damages are awarded against a corporation, it is their innocent long-term shareholders who ultimately pay the price for corporate misconduct. As Justice Côté noted in Green v. C.I.B.C., supra at para. 69:

  1. Part XXIII.1 [of the] OSA strikes a delicate balance between various market participants. The interests of potential plaintiffs and defendants and of affected long-term shareholders have been weighed conscientiously and deliberately in light of a desired precise balance between deterrence and compensation. The legislative history reveals a long, meticulous development of this balance, one that found expression in all the limits built into the scheme.

[48]           Third, Mr. Kaynes’ interpretation of s. 138.3(6) of the Ontario Securities Act is contrary to the legislative history that explains the Legislature’s purpose for including s. 138.3 as part of the legislative scheme. The legislative history reveals that s. 138.3(6) was added based on a suggestion from the Ontario Securities Commission in response to a Request for Comments. The Commission suggested that s. 138.3(6) would enable the court to deem repeated common misrepresentations to be a single misrepresentation and thus prevent multiple liability for disclosure violations that were so interconnected to be considered a single disclosure violation. In other words, s. 138.3(6) was designed to protect defendants and the provision was not intended to affect the limitation provisions of the Ontario Securities Act.

[49]           I conclude that it is plain and obvious that s. 138.3(6) does not bring back from the dead the 11 statute-barred misrepresentation claims.