Author: Dan

Ontario: The Court of Appeal on adding new claims to a proceeding

The Court of Appeal in 1100997 Ontario Limited v. North Elgin Centre Inc. sets out the test for amending a pleading to add a new claim outside a limitation period (making our last post rather unnecessary).  The court will refuse an amendment when it seeks to advance after the expiry of the limitation period a “fundamentally different claim” based on facts not originally pleaded:

[19]      A cause of action is “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person”: Letang v. Cooper, [1965] 1 Q.B. 232 (C.A.), at pp. 242-43, as adopted by this court in July v. Neal (1986), 1986 CanLII 149 (ON CA), 57 O.R. (2d) 129 (C.A.), at para. 23.

[20]      In Morden & Perell, The Law of Civil Procedure in Ontario, 2nd ed. (Markham: LexisNexis Canada Inc., 2014), at p. 142, the authors state:

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

[21]      In Dee Ferraro Ltd. v. Pellizzari, this court noted the distinction between pleading a new cause of action and pleading a new or alternative remedy based on the same facts originally pleaded. The appellants had commenced an action against their lawyer claiming damages for breaches of contract, trust and fiduciary duty and for fraud and negligence. The appellants then sought to amend their pleading. This court, in overturning the motion judge’s dismissal of the motion to amend, concluded that the proposed amendments, such as claims for a mandatory order and a constructive trust over shares, could be made because they flowed directly from facts previously pleaded.

[22]      By contrast, a proposed amendment will not be permitted where it advances a “fundamentally different claim” after the expiry of a limitation period: Frohlick v. Pinkerton Canada Ltd. In that case, the court did not permit the plaintiff in a wrongful dismissal action to amend the statement of claim to assert a claim for damages for constructive dismissal on the basis that the limitation period had expired. This court dismissed the appeal. The amendment regarding constructive dismissal related to events that occurred prior to the events described in the original statement of claim that were unrelated to that claim. The defendant was unaware of the new allegations prior to the plaintiff seeking the amendments, and the events were not put in issue or encompassed within the original claim.

[23]      Based on the foregoing, an amendment will be refused when it seeks to advance, after the expiry of a limitation period, a “fundamentally different claim” based on facts not originally pleaded.

I think this is a sound conclusion. Allowing amendments so long as they don’t advance a fundamentally different claim based on the facts originally pleaded makes sense, though it doesn’t seem like much of a departure from the “same factual matrix” test.  Indeed, later in the decision Justice van Rensburg refers to the factual matric concept:

[38]      I therefore conclude that the proposed amendments contained in the statement of claim ought not to have been refused on the basis that they raised new claims based on new causes of action.

Perhaps this new formulation’s chief virtue is that it doesn’t necessarily require a cause of action analysis.  Comparing claims is materially different than comparing causes of action.  “Claim” is a defined term in the Limitations Act, whereas the words “cause of action” don’t appear at all in the Limitations Act, and particular causes of action and their accrual are immaterial to a limitations analysis.  Mischief results when the court forgets this.

Other aspects of the decision are noteworthy.  Justice van Rensburg concludes that when a notice of application commences a proceeding, the court should consider both the notice of application and the supporting affidavit material to determine whether a proposed amendment sets forth a new claim.

Justice van Rensburg follows the 1989 Court of Appeal decision in Energy Probe v. Canada (Attorney  General) for the principle that affidavit materials on an application form part of the pleadings.  The interesting question that arises from this principle is its interaction with the affirmative nature of a limitations defence.  In an action, the defendant must plead the Limitations Act in the statement of defence.  The plaintiff may then plead the facts supporting a discovery argument in reply.  See the Court of Appeal decision in Collins.

Does this mean that the respondent to an application should “plead” the limitations defence in  a responding affidavit? Should the applicant then plead the facts supporting a discovery argument in a reply affidavit?  Increasingly, I’m of the mind that it’s impossible to square limitations law and application procedure (with certain exceptions, especially contested applications to pass accounts), but this is an issue (and likely an article) for another day.

Lastly, Justice van Rensburg  also reminds us that an order refusing leave to amend a pleading to add a new claim outside a limitation period is a final order:

[17]      In Energy Probe v. Canada (Attorney General) (1989), 1989 CanLII 258 (ON CA), 68 O.R. (2d) 449 (C.A.), leave to appeal refused 37 O.A.C. 160 (S.C.C.), in determining whether a cause of action was disclosed, this court stated that “affidavit materials on an application are to be considered as the pleadings” (at para. 10). Further, where oppression proceedings commenced by notice of application were converted into an action in Przysuski v. City Optical Holdings Inc., 2014 ONSC 3686 (CanLII), Perell J. refused to strike paragraphs of the statement of claim as raising unanticipated claims as an abuse of process because “[t]he Notice of Application should be read with its supporting affidavits and with the evidentiary record for the Application” (at para. 11).

Ontario: the limitation of adding new claims to a proceeding

 

Justice Nordheimer’s decision in Farmers Oil and Gas Inc. v. Ontario (Natural Resources) has a useful overview of the jurisprudence of amending a pleading to add a new cause of action after the expiry of the limitation period.  It will be a good starting point if you encounter the issue:

[14]           As I have said, the central issue between the parties is whether the proposed amendments give greater clarity or particularity to the existing claim, or whether they advance new claims.  On that point, the appellant relies heavily on the decision in 1309489 Ontario Inc. v. BMO Bank of Montreal (2011), 2011 ONSC 5505 (CanLII), 107 O.R. (3d) 384 (S.C.J.)where Lauwers J. addressed this same issue.  In that decision, Lauwers J. referred to the two different approaches to determining whether a claim is a new cause of action.  On the one hand, one can see a cause of action as a factual matrix.  On the other hand, one can see a cause of action simply as the legal basis upon which the claim for relief is based.  Lauwers J. concluded that the trend of the case law was to favour the broader factually oriented approach to the meaning of a cause of action.  Under that broader approach, if the defendant has notice of the factual matrix underlying the claim being advanced, then amendments that arise out of, or do not depart from, that factual matrix do not constitute “new” causes of action that would not be allowed by way of amendment.  On that point, Lauwers J. said, at para. 27:

A plaintiff is not required to name or specify the technical cause of action as an essential part of pleading; in saying this, I do not resile from the requirement noted in Morden and Perell, supra, that ordinarily the facts as originally pleaded, or as better particularized in the proposed new pleading, must be able to sustain the technical cause of action.  [emphasis added]

[15]           A very short time later, Lauwers J. had to deal with this same issue a second time.  In Sweda Farms Ltd. (c.o.b. Best Choice Eggs) v. Ontario Egg Producers, [2011] O.J. No. 4886 (S.C.J.) the plaintiff sought to amend the statement of claim to advance a conspiracy claim, along with other amendments.  The defendant objected on the basis that any such claim was barred by the expiration of the limitations period.  In allowing the amendments to be made, Lauwers J. again addressed the meaning of a cause of action and said, at para. 25:

I find that the broader, factually-oriented approach to the meaning of “cause of action” in interpreting and applying rule 26.01 is the correct approach.  It is consistent with the trend of the cases and is also consistent with a purposive approach to the interpretation of limitations legislation.  This means that the defendant’s basic entitlement is to have notice of the factual matrix out of which the claim for relief arises.  In my view the existing set of pleadings raises the factual matrix of concern to the plaintiffs and within which the defendants’ possible liability is to be located.  The proposed Fresh Statement of Claim simply reframes those allegations of fact.

[16]           The approach taken by Lauwers J. was tacitly approved by the Court of Appeal in Rausch v. Pickering (City),[2013] O.J. No. 5584 (C.A.) where Epstein J.A. said, at para. 95:

As Lauwers J. (as he then was) emphasized in BMO Bank of Montreal, at para. 27, as long as the existing pleading “raises the factual matrix of concern to the plaintiff and within which [the defendant’s] possible liability is to be located[,] it successfully asserts a cause of action within the meaning of rule 21.01(1)(b).”  Thus, even if the plaintiff does not explicitly set out the technical cause of action on which it relies, if the facts as pleaded implicitly advance such a claim, the court ought not to strike the pleadings: BMO Bank of Montreal, at paras. 26-27.

[17]           I say that the approach was tacitly approved only because the issue that was before the Court of Appeal in Rauschhad less to do with the expired limitation period and more to do with whether the proposed amendment disclosed a cause of action.

[18]           The respondent, on the other hand, relies on a different line of cases beginning with Fuda v. Jim McIntosh Petroleum Engineering Ltd., [2013] O.J. No. 5208 (S.C.J.); aff’d. [2014] O.J. No. 2255 (C.A.) where Wilton-Siegel J. granted summary judgment dismissing certain claims, that had been added to the statement of claim by amendment, on the basis that the limitations period had expired.  In addressing the issue whether the subsequent claims could be seen to have been part of the original claim, Wilton-Siegel J. said, at para. 310:

Given the principles set out above, I conclude that each of these causes of action were asserted for the first time in the 2013 Amendment dated February 8, 2013, other than the original cause of action based on the 2003 Reserve Report Representation, which was asserted in the Statement of Claim.  The fact that both the cause of action asserted in the Statement of Claim and the four additional causes of action asserted in the 2013 Amendment lie in negligent misrepresentation is not sufficient to conclude that these remaining causes of action are contained in the Statement of Claim.

[19]           It is of some importance to this conclusion to be aware of how the Court of Appeal approached this conclusion.  In dismissing the appeal, the court said, at para. 9:

The misrepresentation claims that were asserted after the expiry of the limitation period advanced new causes of action that were unconnected to the factual matrix pleaded in the original statement of claim.  [emphasis added]

[20]           The respondent relies on two other authorities.  One is Winnipeg (City) v. Entegra Credit Union Ltd., [2013] M.J. No. 10 (C.A.).  In that case, the motion judge had permitted the plaintiff to amend its statement of claim.  The motion judge found that the proposed amendments did not constitute new causes of action.  The Court of Appeal reversed that finding.  The Court of Appeal found that the motion judge had misunderstood the nature of the claim being advanced by the proposed amendments, that is, a separate and distinct claim for breach of contract that was “independent” of the existing claim.

[21]           The other authority is American Axle & Manufacturing, Inc. v. Durable Release Coaters Ltd., [2010] O.J. No. 2515 (S.C.J.) where the issue was whether certain claims at trial were barred by the expiration of a limitations period.  The claims had been added to the statement of claim by way of amendment with the limitation period issue being expressly reserved for determination at trial.  The trial judge, Newbould J. , found that those claims were barred by the limitation period, and were not saved by any suggestion that they were not “new” causes of action, but rather were encompassed within the same factual situation previously pleaded.  In so concluding, Newbould J. said, at para. 50:

In my view the amendments do not plead alternative claims for relief arising out of the same facts previously pleaded.  The new facts pleaded are relied upon to support new causes of action and new heads of damages arising from those new causes of action.  While it is the same contract as previously pleaded that is claimed in the amendments to have been breached, the contractual provisions and breaches relied on in the amendment are different from the previous pleading and the breaches and resulting damages are different from those previously pleaded.  They constitute new causes of action.

[22]             As may be obvious from the above, the distinction between the authorities relied upon by the appellant, and those relied upon by the respondent, turns on whether the proposed amendments do, or do not, arise out of the same facts, or the factual matrix, that was pleaded in the original statement of claim.  If they do, then the amendments should be permitted.  If they do not, and the limitations period has expired, then the amendments should be refused.

[23]           In determining this issue in this case, I must begin by reading the original statement of claim generously and with due allowance for drafting deficiencies – see Operation Dismantle Inc. v. Canada, 1985 CanLII 74 (SCC), [1985] 1 S.C.R. 441.  In my view, it is clear from a generous reading of the statement of claim that the appellant’s original claim arises out of an alleged course of conduct between it and the Ministry that began in 1991, and continued through to 1995, when the new policy was adopted, and the alleged unfair dealing by the Ministry with the appellant came to light.  It is clear that the appellant was, at all relevant times, interested in obtaining the near shore rights.  The appellant claims that it did not take steps to acquire those rights only because the Ministry told it that it did not need to because, up until 1995, the Ministry was not in a position to grant those rights.  What the appellant alleges, however, is that the Ministry did not tell it that companies could file applications for those rights and, specifically, that one company had filed for the very rights that the appellant was seeking.

[24]           When one then looks at the proposed amendments, they allege facts that are clearly part and parcel of these dealings.  They arise out of the same factual matrix.  In that respect, they fall into the Sweda and related line of cases and are thus distinguishable from the Fuda line of cases.  They provide precisely the type of particulars regarding what was said, and between whom, that ought to have been part of the original statement of claim.  What they do not do, however, is allege some new and distinct claim unrelated to that original claim.

Ontario: the Limitations Act doesn’t apply to claims before administrative tribunals

Mea Culpa! Given my take-away from this decision below, I clearly read it too quickly.  It is actually one of the more remarkably wrong limitations decisions from the past several years, not least because it holds that any personal injury claim involving a tenant and a landlord is not subject to the Limitations Act, but the one year temporal limit in the Residential Tenenacies Act.  It’s under appeal.  (What follows may be the only thing right about the decision).  

 

The Limitations Act plainly applies only to court proceedings and not claims brought before administrative tribunals.  Should you ever need an authority for this proposition (aside from the plain meaning of s. 2), look to Justice Sloan’s decision in Letestu v. Ritlyn Investments:

[62]        Section 2 of the Limitations Act makes it clear that the Limitations Act applies to “claims pursued in court proceedings”.

[63]        Nowhere in the Limitations Act does it state that the Limitations Act applies to claims brought before administrative tribunals.

Ontario: It’s still a two-year limitation period for IRB claims

 

In Bonilla v. Preszler,  the appellant argued that the respondent’s termination notice for her Income Replacement Benefits was not clear and unequivocal and that the applicable limitation period was “rolling”.  This was a futile position and the Court of Appeal rejected it.

[10]      It is well established in this court’s case law that the limitation period is triggered by a single event, which is the refusal of an insurer to pay the IRB claimed: see e.g. Bonaccorso v. Optimum Insurance Company Inc., 2016 ONCA 34 (CanLII), 129 O.R. (3d) 544 and Sietzema v. Economical Mutual Insurance Company, 2014 ONCA 111 (CanLII), 118 O.R. (3d) 713. The appellant was informed on February 4, 2003 that she would not receive IRB after February 27, 2003. Even taking the later of these two dates, February 27, 2003, as the date of the refusal, the two-year limitation period expired February 27, 2005. The appellant’s action is several years late.

[11]      The appellant submits that this court’s prior cases are either distinguishable or are wrongly decided and offers several arguments in support. She submits that the limitation period covers only the amount of a benefit claimed, and not the nature of the benefit; that the cause of action for IRB is an “entitlement to indemnification”; that the amount claimed is limited to an amount accrued or crystallized, rather than future benefits; and that the common law discoverability rule applies.

[12]      We do not accept any of these arguments. In our view the operation of the limitation period under the legislation is clear and straightforward. It is well settled in the case law of this court, and it would be inappropriate for a three-judge panel of the court to overrule a prior decision of the court in any event. We note that the appellant requested, and was denied, a five-judge panel for this appeal.

Ontario: A limitations defence must be pleaded

In Singh v. Trump, Justice Perell dismissed a plaintiff’s claim as time-barred despite the defendants not pleading the Limitations Act, seeking leave to amend to plead it, or raising it in their written submissions.  His reasons neither refer to the fact that the defence was not pleaded nor explain why, in the absence of the plea, he should invoke the Limitations Act.

In the circumstances, the Court of Appeal found that it was not appropriate for Justice Perell to invoke the Limitations Act and dismiss the claim as statute-barred.  A limitations defence is an affirmative defence and must be pleaded.  Justice Rouleau’s decision provides a helpful overview of the relevant jurisprudence:

[132]   This court has consistently held that “[t]he expiry of a limitation period is a defence to an action that must be pleaded in a statement of defence”: Collins v. Cortez, 2014 ONCA 685 (CanLII), [2014] O.J. No. 4753, at para. 10, per van Rensburg J.A. (citing S. (W.E.) v. P. (M.M.) (2000), 2000 CanLII 16831 (ON CA), 50 O.R. (3d) 70 (C.A.), at paras. 37-38, leave to appeal to S.C.C. refused, [2001] 149 O.A.C. 397). This requirement is embodied in rule 25.07(4) of the Rules of Civil Procedure, which Ontario courts have consistently held “applies to pleadings relating to limitations that might bar an action”: S. (W.E.) v. P. (M.M.), at para. 37. Rule 25.07(4) provides as follows:

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.

[133]   Justice Cronk explained the rationale behind the requirement that a party specifically plead a limitation period defence in Hav-A-Kar Leasing Ltd. v. Vekselshtein, 2012 ONCA 826 (CanLII), 225 A.C.W.S. (3d) 237, at para. 69:

The failure to raise substantive responses to a plaintiff’s claims until trial or, worse, until the close of trial, is contrary to the spirit and requirements of theRules of Civil Procedure and the goal of fair contest that underlies those Rules. Such a failure also undermines the important principle that the parties to a civil lawsuit are entitled to have their differences resolved on the basis of the issues joined in the pleadings.

[134]   In S. (W.E.) v. P. (M.M.), MacPherson J.A. confirmed that Ontario courts “have consistently held that rule 25.07(4) applies to pleadings relating to limitations that might bar an action”: at para. 37. He went on to explain that even though in that case the trial judge had given counsel time to prepare submissions on the issue after he raised it during closing arguments, it did not remove the potential prejudice to P:

If S had raised the issue in his pleadings, P might have tried to settle, or even have abandoned, her counterclaim. Either decision might have had costs consequences. Another potential source of prejudice arises from the fact that counsel for P might have adopted different tactics at trial. In particular, counsel might have called different or additional evidence to support an argument that the discoverability principle applied (at para. 38).

[135]   MacPherson J.A. also noted that at no time during trial, including during closing arguments when the trial judge raised the limitation issue, did S seek to amend his pleadings. Nor did he seek such an amendment during the appeal hearing.

[136]   In my view, the defendants’ failure, in this case, to plead a Limitations Act defence or even to seek an amendment to their pleading to do so is, as it was in S. (W.E.) v. P. (M.M.), fatal.

Ontario: an overview of Succession Law Reform Act limits

In Weigand v. Mohammed, Justice George considered whether to extend the limitation period in s. 61(1) of the Succession Law Reform Act.  His decision sets out the statutory framework:

[2]               If permitted, the application would be brought under Part V of the SLRA.

[3]               Section 57 defines a dependent as any of the spouse, parent, or sibling of a deceased, and to whom the deceased was providing support or was under a legal obligation to provide support immediately before his or her death.

[4]               Section 58 provides that:

Where a deceased, whether testate or intestate, has not made adequate provision for the proper support of his dependants or any of them, the court, on application, may order that such provision as it considers adequate be made out of the estate of the deceased for the proper support of the dependants or any of them.

[5]               The limitation period is set out in s. 61(1):

Subject to (2), no application for an order under section 58 may be made after six months from the grant of letters probate of the will or of letters of administration.

[6]               The limitation period does not begin to run at any time during which the person with the claim is a minor.

[7]               My jurisdiction to grant an extension derives from (2):

The court, if it considers it proper, may allow an application to be made at any time as to any portion of the estate remaining undistributed at the date of the application.

The issue was whether in the circumstance of the case it would be proper to grant leave pursuant to s. 61(2).  These is Justice George’s analysis:

[26]           In B(JDD) the court provides some guidance on how to apply and interpret s. 61(2) of the Act.  I am to do so judicially and in a broad and liberal manner. I must consider the delay, the reasons for delay, and whether there would be prejudice to the estate’s ability to defend the proposed claim.

[27]           The question is does this situation bear review of whether the testator made adequate provision in his will for dependents?  Not whether he has in fact done so, but is there a sufficient basis for a review.  This requires a consideration of what is equitable, and whether or not the respondent acted “honestly, reasonably, and fairly”.

[28]           This is the applicant’s position in a nut shell.  The respondent caused the delay through her misrepresentation, and has not acted honestly.  They suggest there would be no prejudice to the estate as the respondent is the only beneficiary.  No innocent third party beneficiaries would be put at risk.

[29]           The respondent relies upon the decisions in each of Re Assaf Estate, [2007] OJ No 4579; Blatchford v. Gardiner,[1999] OJ No 3478; and Su v. Lem, [2012] OJ No 1448, all Superior Court decisions. She claims that granting an extension would bring an injustice upon her, and in any event the assets have already been distributed.

[30]           She agrees the test is whether the situation bears review of the adequacy of provisions. She, however, stresses that this is a fact-dependent exercise, and that in these circumstances, a review is not warranted.

[31]           The easy thing to do would be to simply say there is a conflict in the evidence, which I cannot resolve at this stage, and therefore the broadest and most liberal thing to do would be to grant the extension and allow the application to go forward.  This would, however, suggest an extension should be automatically granted.  It is not that simple.

[32]           While it is true the reason for delay is a factor to consider, a request for an extension is not grounded solely in “good cause” being shown for the delay.  The discretion to extend (or refuse) is a question of what is equitable between the parties, in all the circumstances. The respondent argues that the payment to the mother is the equitable outcome.  The children have been provided for, and beyond that a testator can distribute their assets as they see fit.

[33]           What are the circumstances?  First, there was a delay.  The limitation period has passed.  There is some dispute as to how long the delay was but that is of little consequence. Second, there is a conflict in the evidence as to the reason for delay, which I cannot resolve. In this respect there are essentially cross-allegations of bad faith.  It is said the respondent lied when she promised to sell the home and distribute proceeds to the children.  It has been suggested the applicant’s attempted to mislead the court by not mentioning the funds received by their mother.  Third, and further to that last point, I accept the respondent paid to the applicant’s mother, specifically for child support and in order to comply with the divorce judgment, approximately $30,702.27. It is worth nothing that the mother released the respondent from any further claims upon receipt of the funds.  Fourth, I accept the respondent’s accounting, and accept that the estate has for the most part been distributed.  Fifth, the deceased had an obligation to pay child support at the time of death.

[34]           It would be wrong to allow the respondent to rely on the fact she has distributed the estate as a basis to not grant an extension.  If the applicant’s version of events is true, and the respondent did indeed promise to sell the home and distribute the funds to them, than it would be unconscionable to allow her to defeat a claim by virtue of a passed limitation period.  If this is true, the respondent would be estopped from relying on the limitation period, as it would be open to the court to find that the applicants relied on that representation to their detriment.

[35]           As I only have untested affidavits, I am unable to resolve the conflicts in the evidence. This weighs in favour of an extension.

[…]

[42]           The part of s. 61(2) that does give me pause is the reference to “any portion of the estate remaining undistributed at the date of the application”.  This raises an interesting question.  In the normal course, and some of the case law speaks to this, if the estate has been fully distributed an extension should not be granted.  This makes sense.  It would make the discretionary extension of the limitation period a pointless exercise.  There is nothing left to distribute.  However, in our instance, a misrepresentation by the executor is being alleged, who is also the sole beneficiary, who also happens to be in current possession of the estate’s main asset, the very asset which was the subject of the misrepresentation.  It is inconceivable that the inclusion of this language was intended to shield administrators who engage in such behaviour.  I am not saying this is what happened, but a trial judge could come to this conclusion on the evidence before me.

[…]

[45]           The applicant’s say they were deceived by the respondent.  This is supported by Udo Weigand.  Even though the respondent gives a different version, I am unable to reject that explanation.  In circumstances like these, to refuse leave and not grant an extension, I would have to conclude that the prejudicial effect of an extension upon the respondent would outweigh the need to engage in a review and determine entitlement to support under s. 58.  I can’t reach that conclusion.

Ontario: bad limitations analyses are why we can’t have nice things

Two recent decisions contain limitations analyses sufficiently flawed for me to ask that you indulge my pedantry.  This lesson is titled A bad limitations analysis makes everyone lose.   

 In Lawyers’ Professional Indemnity Company v. Lloyd’s Underwriters, the analysis begins with a flawed premise resulting in more questions than the decision answers.

LawPro applied for a declaration that Lloyd’s was obliged to contribute to the defence costs of a common insured.  Lloyd’s took the position that the LawPro’s claim for contribution was statute-barred.  Justice James considered the issue:

 

[18]           On the facts present here, the entitlement of the applicant to seek a contribution from the respondent has not proscribed. I base this view on my reading of section 5(1) of the Limitations Act and in particular sub-clause 5(1)(a)(iv). There is no mandated single point in time for the applicant to request a contribution from the respondent. For the LimitationsAct to apply, it would be necessary to conclude that the claim, having been “discovered” and the request for compensation having been rejected by the opposing party, “a proceeding would be the appropriate means to seek a remedy”. Put another way, when the applicant requested a contribution from the respondent and the respondent declined the request, was it appropriate for the applicant to respond by commencing an action? I would say not. Not enough was known to say that the claim had been discovered. It could equally be appropriate to await further developments in the claim against the insured and to defer bringing the matter to a head until more information is known and the facts had emerged with greater clarity.

“For the Limitations Act to apply…?”.  This is a bad start.  The Limitations Act applies to all claims pursued in court proceedings (subject to the s. 2 exceptions), not merely those that have been discovered.

The analysis ought to have begun with the the first question in any limitations analysis:  is there claim?  Limitation periods apply to proceedings commenced in respect of a claim. If a proceeding doesn’t advance a claim, it’s not subject to a limitation period.

Assuming LawPro did have a claim, the next question ought to have been determining the act or omission that the claim seeks to remedy.  The date of the act or omission is when the presumptive limitation period commences.

If LawPro brought the application within two years of that date, its application was timely.  If not, the next question ought to have been when a reasonable person with LawPro’s abilities and in its circumstances ought to have discovered the claim.  For its application to be timely, LawPro would have needed to file it within two years of this date.

When LawPro ought to have discovered its claim required asking when it ought to have known of its loss, that wrongful conduct caused the loss, and that it was Lloyd’s wrongful conduct.  It seems likely that it ought to have known all of this on the day of Lloyd’s refusal.  We can’t be sure, because the limitations analysis doesn’t determine this.

Instead, there are conclusions without explanation.  Not enough was known at the time of the refusal for the claim to have been discovered.  What did LawPro not yet know?  It was appropriate for LawPro to await further developments that would provide more information and greater factual clarity.  What information and factual clarity did LawPro require? Why was it inappropriate for LawPro within the meaning of s. 5(1)(a)(iv) to use a proceeding as remedy for its loss on the date of Lloyd’s refusal?  The analysis answers none of these questions.  Perhaps it’s correct, but it’s impossible for the reader to know.

In Leblanc v. Glass, the plaintiff Leblanc claimed that the defendants Glass and Vitiello conspired to deprive her of properties and committed breach of trust.  Vitiello moved for summary judgment on the basis that Leblanc’s claim was statute-barred.

Justice Hennessy framed the issue:

[9]               In order to determine the issue of discoverability, the following questions must be addressed. The answers will come from the pleadings, the productions or the examinations:

a.      What did Jonathan A. Glass tell Marie Leblanc?  What did Marie Leblanc discover in Feb 2014?

b.      What did Jonathan A. Glass disclose that Marie Leblanc did not already know or could have known?

c.      Did the contents of Jonathan A. Glass’ disclosure amount to evidence of fraud, conspiracy or breach of trust against Civita Vitiello?

The discovery analysis may require answering these questions, but they are not the questions that determine discovery.  Discovery, as we know, turns on knowledge of the matters in s. 5 of the Limitations Act.  Again, to determine the date of discovery you ask, in this order, what is the act or omission that is the basis of the claim, and when would a reasonable person with the abilities and in the circumstances of the plaintiff have known of her loss, that an act or omission caused the loss, that the defendant caused the act or omission, and that a proceeding was an appropriate remedy for the loss.

Importantly, the common law discovery principle does not determine discovery within the meaning of the Limitations Act:

 

[21]           The obligation is on the plaintiff is to use reasonable diligence in discovering the material facts in relation to the claim. The limitation period will run once the plaintiff knows the identity of the tortfeasor and that some damage has occurred. (Peixeiro v Haberman 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para 18) The plaintiff is then required to lead sufficient evidence before the court showing that they exercised this reasonable diligence.

A plaintiff does not discovery her claim under the Limitations Act when she knows the identity of the wrongdoer and that some damage has occurred.  She must also know that a proceeding is an appropriate remedy for her loss.

Lastly, it is long settled that the doctrine of special circumstances does not apply to the Limitations Act:

[34]           The limitation period under s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B applies. There are no special circumstances justifying an extension of the limitation.There is no reason to consider special circumstances, because the principle of special circumstances is of no application.

Muddled limitations analyses like these are not helpful to the parties or the jurisprudence.

 

Alberta: adding claims to a proceeding

This post marks the return of non-Ontario jurisprudence to Under the Limit.  Our goal of reviewing appellate jurisprudence from all common law provinces proved overly ambitious for one person. So, I enlisted the assistance of my talented colleague Tyler Wentzell, and with his help we’re going to gradually return to the national scope we intended. 

Acielo v. Condominium Plan 9022497 is the first Alberta Court of Appeal decision to consider the meaning of the language, “the time provided by law for the service of process” in s. 6(4) of Alberta’s Limitations Act.  It settles conflicting jurisprudence and means that the limitation period for a claim added to a proceeding is the two-year general limitation period, plus one year.  The added defendant must have “sufficient knowledge” of the claim within this three-year period.

This is the relevant portion of s. 6:

Claims added to a proceeding

6(1) Notwithstanding the expiration of the relevant limitation

period, when a claim is added to a proceeding previously

commenced, either through a new pleading or an amendment to

pleadings, the defendant is not entitled to immunity from liability

in respect of the added claim if the requirements of subsection (2),

(3) or (4) are satisfied.

[…]

(4) When the added claim adds or substitutes a defendant, or

changes the capacity in which a defendant is sued,

[…]

(b) the defendant must have received, within the limitation

period applicable to the added claim plus the time provided

by law for the service of process, sufficient knowledge of

the added claim that the defendant will not be prejudiced in

maintaining a defence to it on the merits.

The Court determined that “the time provided by law for the service of process” means the time period provided for in the rules to serve a statement of claim once issued.  Under Alberta’s Rule 26, this is one year.  This is a marked increase from other case law which had only added 20 days, the time period provided to serve a counterclaim.

Background and Chambers Decision

Ms. Acielo lived in a condo unit.  In 2009, her landlord brought an action against her in Provincial Court for unpaid rent.  Ms. Acielo’s defence and counterclaim pleaded that she had stopped paying rent because there was mold in her condo that had given her a lung condition.

In 2010, Mc. Acielo learned that her lung condition was likely permanent.  Her physician told her that she had to move out.  She provided her notice to move out.  She applied to the Provincial Court to transfer the matter to the Court of Queen’s Bench, and to add the Condo Corporation as a defendant to her counterclaim.  The Provincial Court allowed the transfer and amendment, and the Condo Corporation applied for a summary dismissal of the claim against it on the basis that it was out of time.  The chambers judge held that the limitation period for the addition of the counterclaim was the two-year general limitation period plus 20 days, the period of time for service of a counterclaim.  The chambers judge dismissed the claim against the Condo Corporation as out of time. Ms. Acielo appealed the decision.

The Appeal

The Alberta Court of Appeal discussed the discord in the case law regarding the length of time afforded under s. 6(4).  The problem principally arises from the uses of the words “process” and “pleading” in the Limitations Act.

The Court concluded that the rule permitted two possible interpretations.  The chambers judge had adopted the “narrow” interpretation: adding the amount of time required to serve the counterclaim.  The “broad” interpretation, however, would add the length of time required to serve an originating process: one year.  The Court held that a broad reading of the language was correct and more in line with public policy considerations.

The full year of additional time meant the claim against the Condo Corporation was timely.  The Court allowed the appeal.

 

Ontario: Highways are still subject to limitation periods

The Court of Appeal allowed the 407’s appeal of Justice Edward’s decision in 407 ETR Concession Company Limited v. Day.  Apart from settling the great question of how the passage of time limits 407’s claims for unpaid tolls, Justice Laskin’s decision suggests a maturity in s. 5(1)(a)(iv) jurisprudence.

 The circumstances of the claim are rather bewildering.  The defendant Day, a person of some means, refused to pay the approximately $13,000 plus interest he owed 407 for unpaid tolls.  407 sued him.  Day pleaded a limitations defence, and  407 brought a r. 21 motion to resolve questions of limitations law.  Justice Edwards determined when 407 discovered its claims against Day and rejected the validity of an agreement between Day and 407 extending the limitation period.  407 appealed.

Facts

Some facts are necessary to understand the limitations issue.

407 can collect its unpaid tolls by civil action in the courts or by license plate denial.  The statutory authorization for these two methods is set out in the Highway 407 Act, 1998.

When a person drives a vehicle on the 407, s. 13(1) of the 407 Act provides that the person in whose name the vehicle’s license plate is registered is liable to pay the tolls and related charges.

Sections 15(1) and (2) of the 407 Act provide that tolls are due and payable on the day 407 sends a toll invoice, and that interest begins to accrue 35 days later.  Section 15(3) provides the 407 with a cause of action for nonpayment .

407 can also initiate a license plate denial.  Under s. 16(1) of the 407 Act, if a toll isn’t paid within 35 days after 407 sends an invoice, 407 may send the person responsible for payment a notice of failure to pay.  If the debt remains unpaid 90 days later, s. 22(1) of the 407 Act entitles 407 to notify the Registrar of Motor Vehicles of the failure.  This notice puts the defaulting debtor into license plate denial.  Section 22(3) requires 407 to inform the recipient of a notice sent under s. 16(1) that 407 has given notice to the Registrar.

Once 407 notifies the Registrar, s. 22(4) provides that the Registrar must refuse to validate the vehicle permit issued to the recipient of the s. 16 notice at its next opportunity, and refuse to issue a vehicle permit to that person.  The Registrar’s next opportunity is typically the date the validation for a vehicle permit expires and must be renewed.  The Vehicle Permits Regulation under the Highway Traffic Act  provides that the maximum validation period for a vehicle permit is two years.

Lastly, s. 25 of the 407 Act provides that license plate denial is a complementary rather than exclusive remedy.

The r. 21 motion

407 raised two issues on the motion.

The first issue was the discovery of 407’s claim.  Justice Edwards held that 407 discovered its claim on the earliest date under the 407 Act that it could have notified the Registrar to put Day into license plate denial.

The second issue was the enforceability of the 15-year limitation period in Day’s transponder lease agreement with 407.  Justice Edwards held that 407 could not rely on s. 22 of the Limitations Act, which permits parties to contract out of the basic limitation period, because the lease agreement was not a “business agreement” as defined by that section.

The Court of Appeal’s analysis

Discovery of 407’s claim turned on s. 5(1)(a)(iv) of the Limitations Act: when, having regard to the nature of the loss, a proceeding would be an appropriate means to seek to remedy it.

Assessing the date when a civil action became an appropriate means for 407 to recover its loss required considering the purpose of s. 5(1)(a)(iv) in the context of the statutory regime under which 407 operates.

To give effect to the legislature’s intent in the 407 Act, the limitation period must be tied to the license plate denial process: ” The legislature enacted that process for a reason: it was not content to force 407 ETR to sue in the courts for unpaid toll debts. I fully agree with the Divisional Court that licence plate denial is an effective, necessary and indeed integral feature of an open access toll highway. Tying the start date of the limitation period to the licence plate denial process acknowledges the significance the legislature attached to that process for the collection of unpaid tolls.”

A civil action becomes appropriate when 407 has reason to believe that it will not otherwise be paid.  This is when the usually effective license plate denial process runs its course.  This happens when a vehicle permit expires for failure to a pay a toll debt; thereafter, a claim becomes an appropriate remedy to recover the debt and the limitation period commences.

Justice Laskin cited four reasons in support of this conclusion.

[40]      First, under s. 5(1)(a)(iv) of the Limitations Act, 2002, the date a proceeding would be an appropriate means to recover a loss must have “regard to the nature of the … loss”. So, in fixing the appropriate date, it may not be enough that the loss exists and the claim is actionable. If the claim is the kind of claim that can be remedied by another and more effective method provided for in the statute, then a civil action will not be appropriate until that other method has been used. Here, a claim will not be appropriate until 407 ETR has used that other method, without success.

[41]      […] licence plate denial – is far more effective than a civil action. By providing for licence plate denial, the legislature must be taken to have recognized its effectiveness. People who cannot renew their vehicle permits until they deal with their toll debts have a powerful incentive to pay.

[42]      The statistical evidence bears out the effectiveness of licence plate denial. 407 ETR issues over one million invoices a month. Nearly 70 per cent of those invoices are paid within one month, which means just over 30 per cent are not. Significantly, about 75 per cent of permit holders in default pay their toll debts after being advised the Registrar has sent a s. 22 notice. Of those, just over one half pay before or on the date their vehicle permits have to be renewed; the remainder pay after their vehicle permits have expired.

[43]      These statistics show that the motion judge’s start date – the delivery of a s. 22 notice to the Registrar – is too early in the process. It comes at the beginning of the process instead of where I think it should come, at the end. The licence plate denial process should be allowed to run its course. As the statistics show, most people, fearing the consequences, eventually pay after receiving a s. 22 notice. Only if the process fails to prompt payment does litigation become an appropriate means to recover the debt.

[44]      Second, in determining when a claim ought to have been discovered, s. 5(1)(b) of the Limitations Act, 2002 requires the court to take account of “the circumstances of the person with the claim”. 407 ETR’s “circumstances” differ from those of many other creditors. Highway 407 itself is enormously busy: 380,000 trips on an average workday. As a consequence, 407 ETR must process an enormous number of invoices, almost all for amounts of no more than a few hundred dollars apiece. And unlike, for example a credit card company, which can cancel a customer’s credit card for non-payment of a debt, 407 ETR cannot bar a defaulting debtor’s access to the highway.

[45]      407 ETR’s “circumstances” strongly suggest that requiring it to sue before finding out whether licence plate denial has achieved its purpose would be inappropriate. An important case on the significance of a plaintiff’s “circumstances” is the majority judgment in Novak v. Bond, 1999 CanLII 685 (SCC), [1999] 1 S.C.R. 808. In that case, McLachlin J. considered s. 6(4)(b) of British Columbia’s Limitations Act, R.S.B.C. 1996, c. 266, which provided that time did not begin to run against a plaintiff until “the person whose means of knowledge is in question ought, in the person’s own interests and taking the person’s circumstances into account, to be able to bring an action” […].

[46]      […] holding that time begins to run against 407 ETR before it knows whether licence plate denial has prompted payment would be unfair, or to use the word of our statute, would not be “appropriate”.

[47]      Holding that the two-year period begins after the licence plate denial process fails to prompt payment does not raise the concern Sharpe J.A. referred to in Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218 (CanLII),109 O.R. (3d) 652, at para. 34. There, he said that “appropriate” must mean “legally appropriate”. By using that phrase he signified that a plaintiff could not claim it was appropriate to delay the start of the limitation period for tactical reasons, or in circumstances that would later require the court to decide when settlement discussions had become fruitless. In this case, however, 407 ETR seeks to delay the start of the limitation period for a legally appropriate reason: waiting until a statutorily authorized process has been completed.

[48]      A third consideration is what I take to be an important purpose of s. 5(1)(a)(iv). The overall purposes of limitation statutes are well-established and well-known: certainty, finality and the unfairness of subjecting defendants to the threat of a lawsuit beyond a reasonable period of time. But it seems to me one reason why the legislature added “appropriate means” as an element of discoverability was to enable courts to function more efficiently by deterring needless litigation. As my colleague Juriansz J.A. noted in his dissenting reasons in Hare v. Hare (2006), 2006 CanLII 41650 (ON CA), 83 O.R. (3d) 766 (C.A.), at para. 87, courts take a dim view of unnecessary litigation.

[49]      If the limitation period runs concurrently with the licence plate denial process, as would be the case under the motion judge’s start date, then there would be the real possibility of numerous Small Claims Court claims. And these claims would be needless because the vast majority of defendants would likely pay their debts to avoid having their vehicle permits expire. […]

[51]      Finally, although 407 ETR has discretion when and even whether to send a s. 22 notice to the Registrar, that discretion does not detract from the appropriateness of using the end of the licence plate denial process as the start of the two-year limitation period. In theory, I suppose, as Mr. Day contends, 407 ETR could use its discretion to manipulate the start date. But why, one may ask rhetorically, would it do so? Its commercial interests dictate otherwise.

Justice Laskin also overturned Justice Edwards’s decision on the second limitations issue: whether the lease agreement could extend the applicable limitation period.  Justice Edwards correctly found that the lease agreement was not a business agreement.  However, under s. 22(3) of the Limitations Act, parties can agree to contract out of the basic limitation period even in the absence of a business agreement:

[62]      Under s. 22(3), parties can only suspend or extend the two-year limitation period. Under s. 22(5), parties may vary or exclude altogether the two-year period. Importantly, in s. 22(6) “vary” is defined to include “extend, shorten and suspend”. Thus, parties to an agreement under s. 22(3), such as the transponder lease agreement, in which one party is a consumer, can suspend or extend the two-year limitation period. They cannot, however, shorten it. Only parties to a business agreement can also agree to shorten the two-year period. As Mr. Day’s transponder lease agreement extends the two-year limitation period to 15 years, it is enforceable under s. 22(3).

Day also argued that the 15-year limitation period was unenforceable at common law.  The common law imposes specific requirements on an agreement to vary a limitation period.  These include expressly referring to and excluding the application of the statutory limitation period.  Justice Laskin held that the Court of Appeal decision in Boyce is determinative of the issue:

[68]      The resolution of this issue and its interplay with s. 22 is governed by this court’s decision is Boyce v. The Co-operators General Insurance Co., 2013 ONCA 298 (CanLII), 116 O.R. (3d) 56, leave to appeal refused, [2013] S.C.C.A. No. 296. […]

[70]      This court allowed Co-operators’ appeal. The panel held that the agreement was a business agreement, and at para. 16 held that an agreement could be enforceable under s. 22 without any of the requirements imposed by the motion judge:

We cannot accept that an agreement purporting to vary the statutory limitation period is enforceable under s. 22 of the Limitations Act, 2002 only if it contains the specific requirements set out by the motion judge. Nothing in the language of s. 22 offers any support for imposing these requirements. The only limitation in s. 22(5) is found in the definition of “business agreement”. No other limitation appears, expressly or by implication, and certainly no content related requirements appear in s. 22(5).

[71]      Instead, at para. 20, this court set out what was required for the enforceability of an agreement under s. 22:

A court faced with a contractual term that purports to shorten a statutory limitation period must consider whether that provision in “clear language” describes a limitation period, identifies the scope of the application of that limitation period, and excludes the operation of other limitation periods. A term in a contract which meets those requirements will be sufficient for s. 22 purposes, assuming, of course, it meets any of the other requirements specifically identified in s. 22.

[…]

[74]      Specifically in response to Mr. Day’s contention, it is unnecessary to refer expressly to the exclusion of the two-year period. There was no express reference to it in the agreement in the Boyce case, yet this court held the agreement was enforceable under s. 22. Similarly, I would hold that the transponder lease agreement signed by Mr. Day is enforceable under s. 22(3) of theLimitations Act, 2002 and is not rendered unenforceable at common law.

Why this decision matters

I think the real significance of this decision is a s. 5(1)(a)(iv) analysis that suggests s. 5(1)(a)(iv) jurisprudence is maturing into a settled, useful aspect of the discovery analysis.  I note in particular Justice Laskin’s recognition of the novelty of s. 5(1)(a)(iv):

[33]      The appropriateness of bringing an action was not an element of the former limitations statute or the common law discoverability rule. This added element can have the effect – as it does in this case – of postponing the start date of the two-year limitation period beyond the date when a plaintiff knows it has incurred a loss because of the defendant’s actions.

Given the Court of Appeal’s enthusiasm for citing the common law discoverability rule and applying it to limitations analyses under the current Act, this is noteworthy and refreshing.  I’ve written about the damage wrought by the Court of Appeal decision in Lawless, which is frequently cited for its statement of common law discoverability.  If you use the common law test (knowledge of the material facts of a cause of action) to determine the date of discovery, it becomes awkward if not impossible to apply the s. 5(1)(a)(iv), because it’s not a material fact of any cause of action.

I also think Justice Laskin’s consideration of the meaning of “appropriate” is significant:

[34]      Also, when an action is “appropriate” depends on the specific factual or statutory setting of each individual case: see Brown v. Baum, 2016 ONCA 325 (CanLII), 397 D.L.R. (4th) 161, at para. 21. Case law applying s. 5(1)(a)(iv) of the Limitations Act, 2002 is of limited assistance because each case will turn on its own facts.

In Markel, the Court of Appeal defined “appropriate” as “legally appropriate” and discouraged courts from giving it an “evaluative gloss”.  In this paragraph, Justice Laskin cites Brown rather than Markel.  Justice Feldman held in Brown that what is legally appropriate turns on the facts (it was not legally appropriate for the plaintiff in Brown to sue her doctor while he continued to treat her).  Justice Laskin later in his decision considered Markel, and found that it was legally appropriate for 407 not to sue Day until the statutorily authorised plate denial process completed.

The Court of Appeal may have defined “appropriate” as “legally appropriate”, but as a practical matter the meaning of “legally appropriate” seems to be settling as “what is appropriate in the circumstances of the case”. I think this is a reasonable approach, though it doesn’t bring any more certainty to the commencement of limitation periods.

Interestingly, Justice Laskin does not cite Justice Juriansz’s decision in Clarke, where he gave “appropriate” an especially expansive meaning (“appropriate” means having good reason to believe there is a legal claim).  Clarke‘s influence on s. 5(1)(a)(iv) jurisprudence may prove to be limited.

Justice Laskin’s analysis also raises some interesting questions:

  • A civil action became appropriate when 407 had reason to believe that it will not otherwise be paid. Does this reasoning apply to other claims arising out of non-payment of invoices? If I bill you for my services, does my claim become appropriate only when it becomes reasonable for me to believe that you won’t pay me?
  • The fact that 407 could remedy its claim against Day by “another and more effective method” was a consideration in the s. 5(1)(a)(iv) analysis. The more effective remedy was statutory, which I think will limit the relevance of this decision to other s. 5(1)(a)(iv) analyses.  Still, what if another more effective non-statutory remedy is available? For example, what if the statistics indicate that engaging a collection agency to recover my many small debts is more effective than small claims court? Will a legal claim only become appropriate when the collection agency’s efforts fail?

Ontario: The limitation of claims for trusts over real property

Justice Doyle’s decision in Campbell v. Nicol contains a helpful summary of the limitation of claims for the imposition of a constructive trust on real property:

[71]           With respect to equitable claims, the Ontario Court of Appeal dealt with this issue in McConnell v. Huxtable, 2014 ONCA 86 (CanLII), 118 O.R. (3d) 561, where the court dealt with a claim for the remedial constructive trust over real property based on an allegation of unjust enrichment. The Court held that the applicable limitation period was the 10 year period under s. 4 of the Real Property Limitations Act.

[72]           The question for the Court was whether a claim for unjust enrichment in which the claimant asks the court to impose a constructive trust upon the respondent’s real property is an action to recover any land. The Court answered in the affirmative. The Court concluded that the constructive trust remedy for unjust enrichment as well as the purposes and contextual interpretation of the Real Property Limitations Act justified a finding that the claim fell within this category.

[73]           The Court also found that the applicant’s alternative claim for monetary compensation was also governed by the 10-year limitation, not the two-year limitation period pursuant to the Limitations Act, 2002.

Analysis

[74]           The applicant issued his application six years after the date of separation. Given the decision in McConnell, the court finds that the proper limitation period for the claim in unjust enrichment is 10 years under the Real Property Limitations Act.

[75]           A claim based unjust enrichment has two remedies. The Court must first consider a monetary remedy and secondly a property remedy: see Kerr v. Baranow; Vanasse v. Seguin, 2011 SCC 10 (CanLII), [2011] 1 S.C.R. 269.

[76]           Here, the applicant did couch the remedy he was seeking as a property claim for the unjust enrichment claim. The Ontario Court of Appeal in McConnell confirmed that the limitation period for an unjust enrichment claim requesting a property remedy is 10 years. Even though a trial court will, upon finding unjust enrichment, must first determine if the unjust enrichment can first be remedied by a monetary claim as stated in Kerr and Vanasse, the McConnell case states that the claim for unjust enrichment has a limitation period of 10 years even if the alternate claim is for monetary compensation.