Dan – Page 23 – Under the Limit

Ontario: the limitation of oppression claims

In McFlow Capital Corp. v. James, the parties disagreed on whether the Limitations Act applies to oppression claims brought under the Condominium Act and the Ontario Business Corporations Act. The Court declined to resolve the issue.

I agree with the plaintiff, who argued, in the Court’s words, “that there is a clear jurisprudential consensus that the two year limitation period applies”. I see no viable argument otherwise. The Limitations Act applies to all claims pursued in court proceedings. Whether the claim is statutory is of no relevance.

Ontario: the limitation of claims on foreign judgments

In Independence Plaza 1 Associates, L.L.C. v. Figlioni, the Court of Appeal held that the basic two-year limitation period applies to a claim on a foreign judgment in Ontario, and begins to run, at the earliest, when the time to appeal the judgment has expired or, if there is an appeal, the date of the appeal decision. Section 5 of the Limitations Act can operate to delay discovery of the claim.

This is a terrific decision from Justice Strathy that settles one of the last unresolved limitations issues. I wrote about the issue in a now out-of-date section of the Law of Limitations. Conflicting jurisprudence held that the basic limitation period applied (correctly, I suggested), and that as a proceeding to enforce an order no limitation period applied at all (utterly wrongly, I suggested, in more measured language).

Justice Strathy’s analysis turns on a close reading of the Limitations Act. His decision begins with the following: “The correct approach to resolving the two questions raised by this appeal begins and ends with the provisions of the Limitations Act, 2002, which is a comprehensive and exhaustive scheme for dealing with limitation periods”. I would offer, gently, that the correct approach to a limitations question always begins and ends with the Limitations Act’s provisions, which courts rather often forget, but this mustn’t detract from the really excellent analyses.

The analyses begins where limitations analyses should—with section 2, which describes the application of the Limitations Act:

[31] Because the proceeding on the New Jersey judgment brought by the respondent in this appeal is a “claim pursued in a court proceeding,” it falls within the comprehensive and exhaustive scheme of the statute.

Having found that the Limitations Act applies, Justice Strathy turned to the application of s. 16(1)(b).

[33]   I turn now to the first question raised in this appeal – whether there is any limitation period applicable to a proceeding on a foreign judgment. Section 16(1) of the Limitations Act, 2002, which had no counterpart in the former statute, created a class of claims that are subject to no limitation period, rather than the “basic” two-year limitation period or the “ultimate” fifteen-year limitation period.

[42]   It falls to this court, as a matter of first impression, to interpret whether s. 16(1)(b) applies to a proceeding on a foreign judgment. The words of s. 16(1)(b) are to be read in light of the language of the provision as a whole, their context within the statutory scheme, and the purposes of the Limitations Act, 2002: see R. v. Hajivasilis, 2013 ONCA 27 (CanLII), 114 O.R. (3d) 337, at para. 23; and Ayr Farmers Mutual Insurance Co. v. Wright, 2016 ONCA 789 (CanLII), at paras. 26, 28-29, 31-32.

[43]   First, therefore, I consider the language of s. 16(1)(b) as a whole.

[44]   Phrases serving parallel functions and associated by the disjunction “or” in a statutory provision influence each other’s meaning. The parallelism “invites the reader to look for a common feature among the terms” to resolve any ambiguities: Ruth Sullivan, The Construction of Statutes, 6th ed. (Markham: LexisNexis, 2014), at p. 230. The Supreme Court has stated that “a term or an expression should not be interpreted without taking the surrounding terms into account” in order to identify a “common thread”: Opitz v. Wrzesnewskyj, 2012 SCC 55 (CanLII), [2012] 3 S.C.R. 76, at paras. 40, 43.

[45]   In my view, the term “order of a court” in s. 16(1)(b) takes its meaning, in part, from the parallel phrase immediately associated with it – namely, “any other order that may be enforced in the same way as an order of a court” (emphasis added). I observe that a similar parallel phrase is found in s. 19(1) of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, which provides that “[a] certified copy of a tribunal’s decision or order in a proceeding may be filed in the Superior Court of Justice by the tribunal or by a party and on filing shall be deemed to be an order of that court and is enforceable as such” (emphasis added).

[46]   The “common feature” or “common thread” linking these parallelisms is the concept of enforceability. Section 16(1)(b) of theLimitations Act, 2002 applies to court orders and to other orders, such as those of persons exercising a statutory power of decision, that are enforceable in the same way as a court order.

[47]   This common thread within s. 16(1)(b) does not extend to foreign judgments. The domestic judgments contemplated by the provision are directly enforceable in Ontario by means of the execution procedures in r. 60 of the Rules of Civil Procedure, including writs of seizure and sale, garnishment, or the appointment of a receiver: Lax, at para. 21. By contrast, like an order of a foreign arbitral tribunal, the debt obligation created by a foreign judgment cannot be directly enforced in Ontario in the absence of reciprocal enforcement legislation such as REJA or REJUKA. A proceeding in Ontario must be brought first: see Lax at paras. 11-13; Yugraneft at para. 45; Chevron Corp. v. Yaiguaje, 2015 SCC 42 (CanLII), [2015] 3 S.C.R. 69, at para. 43. That proceeding may result in a judgment or order of the Ontario court. The resulting order may be enforced as an order of the court, with no applicable limitation period.

[48]   Thus, the judgment of a foreign court is one step removed from being an order of a court for the purpose of s. 16(1)(b) of theLimitations Act, 2002. It is not on the same level as an order of an Ontario court or any other order, such as an order of an Ontario statutory decision maker, which may be enforced as an order of a domestic court. This was adverted to by Feldman J.A. in Lax, at para. 31, in explaining why she did not agree with the approach taken by Cumming J. in Girsberger:

[A]s long as only domestic judgments can be enforced by execution and the other methods discussed above, and therefore foreign judgments must be transformed into domestic judgments or registered before they are enforceable as domestic judgments, there is not parity of treatment.

[49]   There are good reasons for giving different treatment for limitations purposes to the enforcement in Ontario of a judgment of an Ontario court, on the one hand, and a judgment of a foreign court, on the other hand. The principle of territorial sovereignty means that the judgment of a court has effect only inside the territory in which the court is located and cannot be enforced outside its borders: Stephen G.A. Pitel & Nicholas S. Rafferty, Conflict of Laws, 2d ed. (Toronto: Irwin Law, 2016), at p. 162. The extraterritorial enforcement of a court’s order is not a legitimate exercise of state power: see Tolofson v. Jensen, 1994 CanLII 44 (SCC), [1994] 3 S.C.R. 1022, at p. 1052; Club Resorts Ltd. v. Van Breda, 2012 SCC 17 (CanLII), [2012] 1 S.C.R. 572, at para. 31;Chevron, at paras. 47-48; and Endean v. British Columbia, 2016 SCC 42 (CanLII), 401 D.L.R. (4th) 577, at para. 45.

[50]   Thus, while a domestic judgment can be enforced as of right in Ontario, it is necessary to bring a proceeding on a foreign judgment. If that proceeding is successful, it will give rise to an Ontario judgment which can be directly enforced in the province.

[51]   Furthermore, a judgment creditor who brings an Ontario proceeding on a foreign judgment must show that the foreign court had jurisdiction and that the judgment is final and for the payment of money (or that it would be appropriate for the Ontario court to recognize it as enforceable within the province even if it is interlocutory or non-monetary): see Pro Swing; Chevron; and Cavell Insurance Co. (Re) (2006), 2006 CanLII 16529 (ON CA), 80 O.R. (3d) 500 (C.A.), at para. 41.

[52]   The foreign judgment debtor is entitled to raise defences to the proceeding, such as fraud, denial of natural justice and public policy: see Beals. These defences “distinguish foreign judgments from local judgments, against which the sole recourse is an appeal”: Janet Walker & Jean-Gabriel Castel, Canadian Conflict of Laws, loose-leaf (Rel. 54-3/2016 Pub.5911), 6th ed. (Toronto: LexisNexis, 2005), at para. 14.3.

[53]   I conclude that the language of s. 16(1)(b) of the Limitations Act, 2002 suggests that the term “order of a court” refers to an order of a domestic court.

[54]   Second, I consider the statutory context of s. 16(1)(b) of the Limitations Act, 2002.

[55]   Section 16(1)(b) also takes its meaning from the surrounding provisions of s. 16. When statutory provisions are grouped together, the legislature is presumed to have drafted each with the others in mind: Inland Revenue Commissioners v. Hinchy,[1960] A.C. 748 (H.L.), at p. 766. They tend to illuminate each other’s meaning because they “share a single idea”: Ruth Sullivan,Statutory Interpretation, 3d ed. (Toronto, Irwin Law, 2016), at p. 175.

[56]   The other provisions grouped together in s. 16 pertain to claims such as family law support awards, sexual assault claims and government claims that are considered so important that, for one policy reason or another, they should have no limitation period at all. For example, the policy reason underlying the exemption for sexual assault claims “is grounded in the likelihood that the dynamic of the relationship will impede the autonomy of the victim”: Boyce v. Toronto (City) Police Services Board, 2011 ONSC 53(CanLII), at para. 40, aff’d, 2012 ONCA 230 (CanLII).

[57]   In this context, it is important to identify the policy reason for including claims “to enforce an order of a court” in the subset of claims that have no limitation period under s. 16. In my view, the reason is that such claims have already passed a limitations hurdle under Ontario law – a court order can only be obtained if the underlying cause of action giving rise to it was not time-barred.

[58]   This was the policy reason suggested by the British Columbia Law Reform Commission, in its 1974 Report on Limitations, for the argument that no limitation period should apply to claims to enforce domestic court orders. As quoted by Newbury J.A. inYoung v. Verigin, at para. 7, the commission wrote:

Furthermore, the successful plaintiff cannot be said to have slept on his rights. He has taken action, and as a consequence recovered judgment. It might be argued, with considerable justification, that no limitation period whatsoever should exist with respect to the enforcement of judgments. It may seem unfair that the plaintiff who has been put to the trouble and expense of obtaining a judgment to enforce a right or obligation should face a further limitation period with respect to the exercise of his rights under the judgment. Why should he not be free to pursue his rights under the judgment at his leisure if he so chooses?

[59]   It follows that the term “order of a court” in s. 16(1)(b) should be interpreted as referring to an order of a domestic court only. A proceeding on a foreign judgment has not passed any Ontario limitations hurdle. If the action on the foreign judgment is successful, it results in an Ontario judgment, which is subject to no limitation period. But that can only be justified if the underlying cause of action based on the foreign judgment has already passed a limitations hurdle in Ontario.

[60]     I find support for this conclusion in the Report of the Ontario Law Reform Commission on the Limitation of Actions (Toronto: Department of the Attorney General, 1969), at pp.50-51. The report stated, at p. 49, that there was good reason to apply the longer twenty-year limitation period in the former Limitations Act to actions on domestic judgments because, in terms later adopted by the British Columbia report, “the successful plaintiff cannot be said to have slept on his rights. He has taken action and, as a consequence, recovered judgment.” However, the report nevertheless recommended that foreign judgments should remain subject to the six-year limitation period governing debts in the former Limitations Act, notwithstanding the artificiality of treating them as simple contract debts.

[61]   It is also noteworthy that several provinces have subjected foreign judgment proceedings to a special limitation period that is distinct from the one that applies to proceedings on domestic judgments. British Columbia’s Limitation Act subjects “local” judgment proceedings to a ten year limitation period in s. 7, but it deals with “extraprovincial judgments” separately. Section 2(1)(l) of Manitoba’s The Limitation of Actions Act, C.C.S.M., c L150, treats “Canadian judgments” differently from other judgments. Newfoundland sets a six-year limitation period on an action “to enforce a foreign judgment” and a ten-year period on actions to enforce a judgment of a court in the province: see Limitations Act, S.N.L. 1995, c. L-16.1, s. 6(1)(g). And Prince Edward Island’sStatute of Limitations, R.S.P.E.I. 1988, c. S-7, s. 2(1)(f) distinguishes between “extraprovincial judgments” and other judgments.

[62]   The statutory context therefore suggests that the language of s. 16(1)(b) of the Limitations Act, 2002 is confined to orders of domestic courts.

[63]   Third, and finally, I consider s. 16(1)(b) in light of the purposes of limitations statutes.

[64]   It would be contrary to the purposes of limitations statutes to interpret s. 16(1)(b) as exempting foreign judgments from any limitation period. If it were always possible to bring a proceeding on a foreign judgment in Ontario without time limitation, no matter when and where it was obtained, the debtor would be indefinitely exposed to the prospect of defending such proceedings in Ontario. As was pointed out in the Ontario Law Reform Commission’s report at p. 50, problems associated with the preservation and reliability of evidence are especially pronounced for foreign judgment debtors. This militates in favour of having some limitation period apply to proceedings on foreign judgments. As well, exempting such proceedings from a limitation period would not encourage diligence or reasonable dispatch on the part of the foreign judgment creditor, who, unlike domestic judgment creditors, has not already surmounted an Ontario limitations hurdle.

[66]   I conclude, therefore, that s. 16(1)(b) of the Limitations Act, 2002 does not apply to proceedings on foreign judgments, and the applicable limitation period for the respondent’s proceeding on the New Jersey judgment at issue in this appeal is the basic two-year period in s. 4. The result is that time begins to run when the claim is “discovered” within the meaning of s. 5. I turn to that question next.

Justice Strathy then considered when time begins to run on a claim on a foreign judgment in Ontario:

[70]   The test under the Limitations Act, 2002 is not whether the judgment is “final”; it is when the claim is discovered, a fact that is ascertained through the application of s. 5(1), aided by the presumption in s. 5(2).

[71]   I acknowledge the point made by Newbould J. in PT ATPK that, in the context of s. 5(1) of the Limitations Act, 2002, a proceeding on a foreign judgment does not fall particularly neatly into the definition of “claim” as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.” However, the statute was meant to be comprehensive and exhaustive.Section 2(1) provides that it applies to “claims pursued in court proceedings,” and s. 4 provides that the basic two-year limitation period applies “unless this Act provides otherwise.”

[72]   The words “injury, loss or damage” in s. 5(1) can reasonably refer to the debt obligation created by a foreign judgment and owed by the foreign judgment debtor to the creditor. The “act or omission” can reasonably refer to the debtor’s failure to discharge the obligation once it became final. Viewed in this light, s. 5(1) can reasonably be viewed as applying to a proceeding on a foreign judgment.

[74]   Section 5(1) provides that a claim is discovered on the earlier of: (a) the day on which the claimant first knew, among other things, “that having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”; and (b) the day on which “a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a)”. The test in s. 5(1)(a) has been referred to as a “subjective test” because it looks to the claimant’s actual knowledge, and the test in s.5(1)(b) as a “modified objective” test because it looks to what a reasonable person with the abilities and in the circumstances of the claimant ought to have known: see Ferrera v. Lorenzetti Wolfe Barristers and Solicitors, 2012 ONCA 851 (CanLII), 113 O.R. (3d) 401, at para. 70; and Crombie Property Holdings Limited v. McColl-Frontenac Inc. (Texaco Canada Limited), 2017 ONCA 16 (CanLII), at para. 35.

[75]   In 407 ETR Concession Co. v. Day, 2016 ONCA 709 (CanLII), at para. 48, Laskin J.A. explained that “one reason why the legislature added ‘appropriate means’ [in s. 5(1)(a)] as an element of discoverability was to enable courts to function more efficiently by deterring needless litigation.” “Appropriate” means “legally appropriate.” For example, a tactical choice to delay commencement of a proceeding to engage in settlement discussions after a loss, injury or damage is known does not make the proceeding inappropriate: Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218 (CanLII), 109 O.R. (3d) 652, at para. 24.

[76]   Appropriateness must be assessed on the facts of each case, and case law applying s. 5(1)(a)(iv) is of limited assistance:Brown v. Baum, 2016 ONCA 325 (CanLII), 348 O.A.C. 251, at para. 41. However, it is noteworthy that courts have held that a proceeding is not legally appropriate until other mechanisms for resolving a dispute, such as a statutory remedial process, have been exhausted: see 407 ETR, at para. 40; U-Pak Disposals (1989) Ltd. v. Durham (Regional Municipality), 2014 ONSC 1103(CanLII), at paras. 22-25; Kadiri v. Southlake Regional Health Centre, 2015 ONSC 621 (CanLII), at paras. 52-57, aff’d, 2015 ONCA 847 (CanLII); and Mew, at pp. 95-96.

[77]   In the usual case, it will not be legally appropriate to commence a legal proceeding on a foreign judgment in Ontario until the time to appeal the judgment in the foreign jurisdiction has expired or all appeal remedies have been exhausted. The foreign appeal process has the potential to resolve the dispute between the parties. If the judgment is overturned, the debt obligation underlying the judgment creditor’s proceeding on the foreign judgment disappears.

[79]   To regard a claim based on the foreign judgment as discoverable and appropriate only when all appeals have been exhausted is also consistent with the observations of Rothstein J. in Yugraneft. He stated, at para. 57, that the limitation period to enforce a foreign arbitral judgment under Alberta’s Limitations Act starts to run when the time to appeal the judgment has expired or, where an appeal is taken, the date of the appeal decision.

[79]   To regard a claim based on the foreign judgment as discoverable and appropriate only when all appeals have been exhausted is also consistent with the observations of Rothstein J. in Yugraneft. He stated, at para. 57, that the limitation period to enforce a foreign arbitral judgment under Alberta’s Limitations Act starts to run when the time to appeal the judgment has expired or, where an appeal is taken, the date of the appeal decision.

[80]   Finally, as the application judge noted, this approach avoids the risk of multiplicity of proceedings by not requiring the judgment creditor to commence a proceeding on a foreign judgment in Ontario before all proceedings in the foreign jurisdiction have run their course. It furthers the purpose of s. 5(1)(a)(iv) of the Limitations Act, 2002 by deterring the unnecessary litigation that may result from commencing an Ontario proceeding on a foreign judgment that is subsequently overturned.

[82]   In a particular case, a claim based on a foreign judgment may not be discovered under s. 5 of the Limitations Act, 2002 until such time as the judgment creditor knew or ought to have known that the judgment debtor had exigible assets in Ontario and could be served with process: see Yugraneft at paras. 49. 58, 61. As s. 5(1)(b) makes clear, the discoverability assessment, including the appropriateness criterion, must take account of the factual context and the plaintiff’s actual circumstances, and I reiterate that each case must be decided on its own facts: see 407 ETR, at paras. 34, 45-46.

These are the other noteworthy aspects of the decision:

Justice Strathy uses the language of proceeding—”When does time begin to run a proceeding”. This is the correct way to engage with the commencement of time, because the Limitations Act bars proceedings, not claims or causes of action. One sees this accuracy, and the accordant conceptual clarity, quite infrequently.
Justice Strathy provides a succinct overview of the purposes of statutes of limitations, which is now the leading Ontario authority for the principles (and, forgive me for adding, cites the Law of Limitations):

[19]   Limitations statutes reflect public policy about efficiency and fairness in the justice system. There are three broad policy justifications for limitation statutes: Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14 (CanLII), [2013] 1 S.C.R. 623, at paras. 231-234.

[20]   First, they promote finality and certainty in legal affairs by ensuring that potential defendants are not exposed to indefinite liability for past acts: Hare v. Hare (2006), 2006 CanLII 41650 (ON CA), 83 O.R. (3d) 766 (C.A.), at para. 41. They reflect a policy that, after a reasonable time, people should be entitled to put their business and personal pasts behind them and should not be troubled by the possibility of “stale” claims emerging from the woodwork.

[21]   Second, they ensure the reliability of evidence. It is inefficient and unfair to try old claims because evidence becomes unreliable with the passage of time. Memories fade, witnesses die and evidence gets lost. After a reasonable time, people should not have to worry about the preservation of evidence: K.M. v. H.M., 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6, at p. 30.

[22]   Third, and related to this, limitation periods promote diligence because they encourage litigants to pursue claims with reasonable dispatch.

[23]   Other justifications have been given, including the interest in the efficient use of public resources through the expeditious resolution of disputes and the desirability of adjudicating disputes on the basis of contemporary values and standards: see Graeme Mew, The Law of Limitations, 3d ed. (Toronto, LexisNexis, 2016), at pp. 16-18.

Justice Strathy also provides a very succinct overview of the legislation history of the Limitations Act:

[28] The Limitations Act, 2002 was the culmination of several attempts, beginning in the late 1960s, to reform, consolidate and simplify the law of limitations in Ontario. The history of those attempts was set out by Weiler J.A. in York Condominium Corp. No. 382 v. Jay-M Holdings Ltd., 2007 ONCA 49 (CanLII), 84 O.R. (3d) 414, at paras. 27-30. See also McConnell v. Huxtable, 2013 ONSC 948 (CanLII), 113 O.R. (3d) 727, at paras. 62-73, aff’d, 2014 ONCA 86 (CanLII).

[29] The purpose of the new statute was to replace a complex, obscure and confusing regime of multiple limitation periods with a simple and comprehensive scheme. The new scheme consists of a basic two-year limitation period applicable to most claims, an “ultimate limitation period” of fifteen years and a statutorily-enshrined discoverability principle. It was intended to promote certainty and clarity in the law of limitation periods: see Dilollo Estate (Trustee of) v. I.F. Propco Holdings (Ontario) 2013 ONCA 550 (CanLII), 36 Ltd., 2013 ONCA 81, 117 O.R. (3d) 81, at para. 61.

Ontario: extending the time for net family property equalization

Freire v. Freire refuses a motion to extend the limitation period in s. 7(3) of the Family Law Act for bringing an application for equalization of net family property. It appears a well-reasoned decision, though I confess to having not read it closely. I note it here largely because I don’t see very many decisions of this kind and thought it might be helpful to family law lawyers. Let me know if I’ve missed something significant!

Ontario: the Divisional Court on the nunc pro tunc doctrine

The Divisional Court has confirmed that the entitlement to an order granting leave nunc pro tunc to commence a derivative action under s. 26 of the Business Corporations Act requires bringing the leave motion within the limitation period.

In 1186708 Ontario Inc. v. Gerstein, the appellants appealed from the order dismissing their motion as statute-barred arguing that the Supreme Court decision in Green (which set out the principles of the nunc pro tunc doctrine) applies only to leave applications under the Securities Act and not under other statutes.

The Divisional Court disagreed. There was no basis not to apply the Court’s analysis in Green regarding the Securities Act to the Business Corporations Act (and probably any other statute).

Ontario: Limitations Act applies to unpaid overtime claims

Ernewein v. Honda Canada includes the following statement on the limitation of claims for unpaid overtime pursuant to the Employment Standards Act:

Where a claim for unpaid overtime is based upon the overtime provisions of the Employment Standards Act, the courts generally consider the claim encompassed by the relevant provisions of the Limitations Act.

This might be helpful when considering a limitations defence to an unpaid overtime claim.

It does seem to imply that there’s uncertainty about the application of the Limitations Act to these claims. I don’t recall any—please forward me the citations if you do—but I can’t imagine where uncertainty would arise. The Limitations Act applies to all claims asserted in court proceedings to remedy a loss caused by wrongful conduct, including all claims for unpaid overtime.

Ontario: the Court of Appeal can’t let go of the cause of action

The Court of Appeal’s endorsement in Kolosov v. Lowe’s Companies Inc. reads as if it were delivered 15 years ago when the former Limitations Act was still in force.

The Court of Appeal states the following about the law of the limitation of the intentional torts of false arrest and false imprisonment:

[11] The law in relation to the commencement of the limitation period for the intentional torts of false arrest and false imprisonment, and associated Charter breaches, is well settled. As Chiappetta J. noted in Fournier-McGarry (Litigation Guardian of) v. Ontario, 2013 ONSC 2581 (CanLII), at para. 16:

A claim for the common law torts of false arrest, false imprisonment and breach of Charter rights arising there-from crystallizes on the date of arrest (see, Nicely v. Waterloo Regional Police Force, 1991 CanLII 7338 (ON SC), [1991] O.J. No. 460 (Ont. Div. Ct.), para. 14; Fern v. Root, 2007 ONCA 79 (CanLII),[2007] O.J. No. 397 (Ont. C.A.), para. 102).

In other words, the Court is stating that the limitation period commences when the cause of action accrues, the cause of action in question accrued on the date of the arrest, and so this is when the limitation period commenced, and no fact (such as when full police disclosure occurred), could alter this analysis.

This is plainly wrong. Where to begin? Let’s try first principles:

The Limitations Act applies to all claims pursued in court proceedings.
The Limitations Act applies to claims, not causes of action. The language “cause of action” does not appear in the Limitations Act. The accrual of a cause of action hasn’t determined the commencement of limitation period since 2004 when the Limitations Act came into force.
Section 5 determines the commencement of the limitation period. It’s a factual analysis. A fact such as when full police disclosure occurs may well have an impact on the discovery analysis.

This kind of anachronistic analysis does the law no favours. The limitations scheme is confusing enough ; wonky outlier decisions like this aren’t helpful.

Ontario: discovery doesn’t require knowledge of culpability

Update: The Supreme Court denied leave to appeal.

In Dale v. Frank, the Court of Appeal reiterated that discovery of a claim doesn’t require knowledge that the defendant’s act or omission was culpable. To require a plaintiff to know with certainty that the defendant’s wrongful conduct caused her injuries would require her to come to a legal conclusion as to the defendant’s liability. This is too a high a bar, and not what s. 5(1) of the Limitations Act requires.

The Appellants also argued that the motion judge erred by failing to consider s. 5(1)(a)(iv) of the Limitations Act in her analysis. The Court of Appeal rejected this argument. The reasons permitted the inference that the motion judge considered this discovery matter:

[9] We are not persuaded by this submission. Although the motion judge did not undertake a distinct analysis under this provision, her conclusion that each of the appellants knew or ought to have known of the other elements in s. 5(1)(a) was sufficient to infer that she also concluded that the appellants knew or ought to have known that a proceeding would be an appropriate means to seek a remedy for their losses even before the 2011 press release about Dr. Frank.

Unfortunately, in making this point the Court quoted its decision in Lawless for the principle that discovery requires the prospective plaintiff to know the material facts necessary to make a claim. Knowledge of the material facts of the claim does not include knowledge of the matter in s. 5(1)(a)(iv)—that a claim is an appropriate remedy to the loss. It’s disappointing to see the Court of Appeal continuing to rely on Lawless, given the mischief it causes.

Ontario: due diligence and motions to add a defendant

The Court of Appeal recently held in Fennell and Galota that the plaintiff’s due diligence is only factor in the discovery analysis. This introduced some uncertainty into the test for determining whether to add a defendant after the presumptive expiry of the limitation period, which is, essentially, whether the plaintiff exercised sufficient due diligence to found a discovery argument.

Last June, in Wong v. Salivan Landscape Ltd., Master Haberman held that due diligence is no longer a consideration in determining whether to add a defendant.

[31]         The Court of Appeal has recently asked similar questions in Fennell v. Deol, 2016 ONCA 249 (CanLII). There, Stewart J. concluded that while due diligence is a factor that informs the analysis of when a claim ought to have been reasonably discovered, lack of due diligence is not a separate and independent reason for dismissing a plaintiff’s claim as statue-barred.

[32]         Though the issue arose in Fennel in the context of an appeal from a summary judgment motion dismissing the claim against Deol, in my view, a similar approach should be taken in the context of a motion to add a party after the expiry of the presumptive limitation period. A motion should not be dismissed on the basis of a lack of diligence.

[33]         Even before Fennell, the court had already sought to dilute the somewhat heavy onus that some case law had thrust on plaintiffs as a means of demonstrating their due diligence. As Baltman J. noted (in Welsch v. Peel Standard Condominium Corp. No. 755, 2013 ONSC 7611 (CanLII)),Lauwers J. (as he then was) stated in Madrid v. Ivanhoe Cambridge Inc. 2010 ONSC 2235 (CanLII), that it is not in the interests of justice to impose an overly muscular level of pre-discovery due diligence; the parties should not have to conduct a pre-discovery form of discovery.   Baltman J. confirmed that as each case is unique and will turn on its own facts, whether the steps taken in each case will be sufficient will also vary.

Arguably, this rejects about twelve years of jurisprudence beginning with Master Dash’s decision in Wong v. Adler. That’s problematic. The purpose of Master Dash’s test is to require something more of a plaintiff than a mere invocation of discoverability to obtain leave to add a defendant after the presumptive expiry of the limitation period. Master Dash required the plaintiff to establish reasonable due diligence to ensure there would be some substance to the discoverability argument. It’s not clear what test Master Haberman proposed to use, if any, instead.

I don’t think that the Court of Appeal intended to change. I agree with Justice Emery’s analysis in Fontanilla v. Thermo Cool Mechanical:

[34]      The Court of Appeal agreed. Galota does not change the law regarding the expectation that a party will exercise reasonable diligence to determine the facts that would support a claim for which a proceeding may be brought to seek a remedy. The court inGalota relied on the decision of Justice Van Rensburg in Fennell v. Deol,2016 ONCA 249 (CanLII). The court in Fennellrecognized that, although due diligence is a factor that the court must consider at the time a claim ought reasonably to have been discovered, lack of due diligence is not in and of itself a reason for dismissing a plaintiff’s claim as statute barred.

[35]      Instead, due diligence must be considered a part of the analytical process to determine on an objective basis the day on which a reasonable person with abilities and in circumstances of the person affected by the claim first would have known of the matters referred to in s. 5(1)(a) to bring an action. As Justice Van Rensburg explained in Fennell at paragraph 24:

[24]      Due diligence is part of the evaluation of s. 5(1)(b). In deciding when a person in the plaintiff’s circumstances and with his abilities ought reasonably to have discovered the elements of the claim, it is relevant to consider what reasonable steps the plaintiff ought to have taken. Again, whether a party acts with due diligence is a relevant consideration, but it is not a separate basis for determining whether a limitation period has expired.

I expect the courts will prefer Justice Emery’s approach.

Ontario: r. 21 motions and limitation defences

Can you bring a r. 21 motion to strike a claim as statute-barred before delivering a statement of defence? Yes, the Divisional Court confirmed in Amrane v. York University, but only where it is plain and obvious that the plaintiff could assert no additional facts that would alter the limitations analysis:

[14] I agree with the motion judge that the expiry of a limitation period is normally a defence that must be pleaded. However, as the Court of Appeal recognized in Beardsley v. Ontario, 2001 CarswellOnt. 4137 at para. 21, in those cases where it is plain and obvious from a review of the claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired, it would be unduly technical to require the delivery of a statement of defence.

See also this summary from Justice Stinson’s decision in Clark v. Ontario (Attorney General):

[12]      By way of response the plaintiffs argue that, save in exceptional cases (of which this is not one) courts do not entertain motions to decide limitation period issues prior to service of a statement of defence. In any event, they further contend, there are live factual issues that bear on the limitation issue, which are expressly raised in the statement of claim and preclude determination of the question on a pleadings-based motion such as this.

[13]      Strong authority for the former proposition can be found in Beardsley v. Ontario Provincial Police (2001), 2001 CanLII 8621 (ON CA),57 O.R. (3d) 1 (C.A.) where the Court of Appeal stated as follows (at paras 21 and 22):

[21]      The motion to strike based on the expiry of a limitation period could only be made pursuant to Rule 21.01(1)(a), which provides that a party may move for the determination of a question of law “raised by a pleading”. The expiry of a limitation period does not render a cause of action a nullity; rather, it is a defence and must be pleaded. Although we agree that it would be unduly technical to require delivery of a statement of defence in circumstances where it is plain and obvious from a review of a statement of claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired [for example expiry of the two-year limitation period under the Highway Traffic Act … in connection with a claim for property damage only, in circumstances where it is clear the discoverability rule does not apply] , a plain reading of the rule requires that the limitation period be pleaded in all other cases. See Pollakis v. Corner (1975), 1975 CanLII 597 (ON SC), 9 O.R. (2d) 691 (H.C.J.).

[22]         Plaintiffs would be deprived of the opportunity to place a complete factual context before the court if limitation defences were determined, on a routine basis, without being pleaded. Adherence to rules that ensure procedural fairness is an integral component of an appearance of justice. The appearance of justice takes on an even greater significance where claims are made against those who administer the law. …

[14]      More recently, Brown J. observed in Portuguese Canadian Credit Union Ltd. v CUMIS General Insurance (2010), 2010 ONSC 6107 (CanLII), 104 O.R. (3d) 16 (S.C.J.) as follows (at para. 33):

… I do not accept the submission of the Credit Union that its Rule 21 motion falls within the category of cases alluded to inBeardsley “where it is plain and obvious from a review of a statement of claim that no additional facts could be asserted”. InBeardsley the possibility of bringing a Rule 21.01(1)(a) motion before the close of pleadings was discussed in the context of a determination as to whether an action was statute-barred – for example, such as in cases where the injuries suffered in a car accident occurred on a date certain and nothing more could be said about that fact. That type of case is a far cry from the complex claim asserted in this proceeding. [Footnote omitted.]

[15]      In Canadian Real Estate Assn. v. American Home Assurance Co., 2015 ONCA 389 (CanLII) (at para. 2) the Court of Appeal again reminded us that “the exception in Beardsley … must be confined to cases that involve no legal or factual complexities.”

Ontario: Limitations Act doesn’t apply to applications for attorney compensation

In April, I reported that in Armitage v. The Salvation Army, Justice Ray held wrongly that the limitation period for claiming compensation as a property attorney commences on the death of the person who granted the power of attorney. I wrote that the Limitations Act doesn’t apply to such an application. In December, the Court of Appeal agreed.

Armitage brought applications to pass her accounts as attorney for property and as estate trustee. The Salvation Army filed notices of objection in both proceeding raising a limitations defence. Justice Ray held that the death of the person who granted the power of attorney terminated the continuing power of attorney and was the commencement of the applicable limitation period. The applications were accordingly timely.

Not so, I wrote. While there may be sound policy reasons for limiting a claim for attorney’s compensation after the death of the grantor, no limitation period applies to such an application. The application is not a “claim” within the meaning of the Limitations Act because it doesn’t seek to remedy loss resulting from an act or omission. If it’s not a “claim”, the basic and ultimate limitation periods can’t apply. In fairness to Justice Ray, we noted that neither party raised this point.

Armitage raised the point on appeal, and Justice Hourigan accepted it:

[19]      While I agree with the result reached by the application judge, I disagree with his conclusion that the Limitations Act, 2002had any application in the circumstances of this case. As I will discuss below, in my view, the Limitations Act, 2002 does not apply because compensation for an attorney for property through the passing of accounts process does not constitute a “claim” within the meaning of the Limitations Act, 2002.

[20]      It is useful to briefly consider the nature of compensation for attorneys for property and how the passing of accounts process works. An attorney for property is a fiduciary and has an obligation under s. 32(6) and 38(1) of the SDA to, among other things, keep accounts of all transactions involving the property.

[21]      The attorney for property may bring an application to the Superior Court to have his or her accounts approved. Through that process, the attorney for property may also seek court approval of compensation for his or her services. The responding parties to the application have an opportunity to file a notice of objection to the accounts, and to object to the compensation that the attorney for property proposes to take or has taken.

[22]      Where the attorney for property has not commenced an application for the passing of accounts, an interested party may bring an application under s. 42(1) of the SDA to compel the passing of accounts.

[23]      As noted by Matthew Furrow and Daniel Zacks in their very recent article “The Limitation of Applications to Pass Accounts” (2016) 46 Adv. Q. 2, historically in Ontario there was no statutory limitation period for the passing of accounts. The only bars were the equitable defences of laches and acquiescence. The question becomes whether the enactment of the Limitations Act, 2002changed the law and imposed the general two-year limitation period on claims for compensation for attorney for property.

[24]      At first blush it would appear that such claims might be captured by the general limitation period. The Limitations Act, 2002 was designed to comprehensively deal with all manner of civil claims, whether grounded in equity, law, or statute. There are specific carve outs in the legislation for claims that are not subject to the Act. It is arguable, therefore, that if compensation for attorneys for property was intended to be exempted from the general limitation period it would have been specifically exempted under the Limitations Act, 2002.

[25]      The difficulty with that argument is that the Limitations Act, 2002 applies only to the assertion of a “claim”, and a claim is defined in the Act as follows: “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.”

[26]      The appellant submits that the right under the SDA to seek compensation is a new statutory right and, as with all rights, where there is a right there must be a remedy. Further, the appellant argues that the respondent’s claim for compensation fits within the statutory definition of a claim. Counsel for the appellant submits that in seeking compensation at this time the respondent has suffered a loss because she chose not to seek self-help and take her compensation earlier. He goes on to argue that this loss is the result of the respondent’s omission in failing to claim compensation earlier.

[27]      I am unable to accede to this rather circular argument. The fact is that in seeking court approval of the passing of accounts, an attorney for property is not seeking redress for any loss, injury, or damage. Rather, he or she is seeking approval from the court of his or her actions in managing the property, including approval for compensation previously taken or now sought. A passing of accounts application is the opposite of remedial; it is a process that seeks a court order that no remedy is necessary with respect to the accounts: see Furrow and Zacks, at pp. 9-10. Thus, the passing of accounts does not fit within the first part of theLimitations Act, 2002 definition of claim.

[28]      An application for the passing of accounts also does not fit within the second part of the statutory definition of claim. Where the definition speaks of an act or omission, it must surely refer to an action taken or not taken by a third party that has the effect of causing loss, injury, or damage. It would be a strange result if a limitation period could not be triggered until the party asserting the claim took an action or omitted to do something.

[29]      The result, in my view, is that a passing of accounts under the SDA is not subject to the two-year general limitation period found in the Limitations Act, 2002.[1] The common law in that regard was not changed with the enactment of that legislation. Consequently, the only defences available are the equitable defences of laches and acquiescence, neither of which were asserted in the present case.

Obviously, I think this is sound reasoning (based as it is on a paper I wrote with my colleague Matthew Furrow).

Importantly, Justice Hourigan explicitly not does hold that the Limitations Act has no applicability to the passing of accounts process under the SDA:

[1] I do not mean to categorically provide that the Limitations Act, 2002 has no applicability to the passing of accounts process under the SDA. In particular, it may be that the filing by a beneficiary of a notice of objection after an attorney has sought a passing of accounts is a claim within the meaning of the Limitations Act, 2002. However, I leave this determination to another case where it arises directly on the facts.

In our paper, Matthew and I argue a notice of objection that asserts a claim within the meaning of the Limitations Act is subject to its limitation periods. Send me a note if you’d like a copy.