Author: Dan

Ontario: Amendments to the Limitations Act

Bill 132, which abolishes the limitation period for sexual assault, received royal assent on March 8.  These are the amendments it made to the Limitations Act:

SCHEDULE 2
LIMITATIONS ACT, 2002

  1. Subsection 7 (4) [incapable persons] of the Limitations Act, 2002 is repealed.
  2. Section 10 [assaults and sexual assaults] of the Act is repealed.
  3. Subsection 15 (5) [ultimate limitation period] of the Act is amended by striking out “Subject to section 10” at the beginning.
  4. (1)  Clause 16 (1) (h) [no limitation period for proceedings arising from sexual assault in certain circumstances] of the Act is repealed and the following substituted:

(h)  a proceeding based on a sexual assault;

(h.1) a proceeding based on any other misconduct of a sexual nature if, at the time of the misconduct, the person with the claim was a minor or any of the following applied with respect to the relationship between the person with the claim and the person who committed the misconduct:

(i)  the other person had charge of the person with the claim,

(ii)  the other person was in a position of trust or authority in relation to the person with the claim,

(iii)  the person with the claim was financially, emotionally, physically or otherwise dependent on the other person;

(h.2) a proceeding based on an assault if, at the time of the assault, the person with the claim was a minor or any of the following applied with respect to the relationship between the person with the claim and the person who committed the assault:

(i)  they had an intimate relationship,

(ii)  the person with the claim was financially, emotionally, physically or otherwise dependent on the other person;

   (2)  Section 16 of the Act is amended by adding the following subsections:

Same

(1.1)  Clauses (1) (h), (h.1) and (h.2) apply to a proceeding whenever the act on which the claim is based occurred and regardless of the expiry of any previously applicable limitation period, subject to subsection (1.2).

Same

(1.2)  Subsection (1.1) applies to a proceeding that was commenced before the day subsection 4 (2) of Schedule 2 to theSexual Violence and Harassment Action Plan Act (Supporting Survivors and Challenging Sexual Violence and Harassment), 2016 came into force, unless the proceeding,

(a)  was dismissed by a court and no further appeal is available; or

(b)  was settled by the parties and the settlement is legally binding.

Same

(1.3)  For greater certainty, clauses (1) (h), (h.1) and (h.2) are not limited in any way with respect to the claims that may be made in the proceeding in relation to the applicable act, which may include claims for negligence, for breach of fiduciary or any other duty or for vicarious liability.

  1. (1)  Subsection 24 (2) [transition provisions] of the Act is amended by adding “Subject to subsection (2.1)” at the beginning.

   (2)  Section 24 of the Act is amended by adding the following subsection:

Exception

(2.1)  This section does not apply to a claim in respect of which clause 16 (1) (h), (h.1) or (h.2) applies.

   (3)  Subsection 24 (7) of the Act is repealed.

Commencement

  1. This Schedule comes into force on the day the Sexual Violence and Harassment Action Plan Act (Supporting Survivors and Challenging Sexual Violence and Harassment), 2016 receives Royal Assent.

 

We previously wrote about some of the potential issues arising from these amendments.

Ontario: don’t skip the argument

Hawthorne v. Markham Stouffville Hospital is a reminder from the Court of Appeal that a successful discovery argument requires both evidence and an explanation of the evidence’s connection to discovery of the claim.  It seems that filing documents and saying nothing about them won’t carry the day.

Hawthorne was a medical malpractice action.  The respondents moved to dismiss the appellant’s claim as barred by the expiry of the limitation period.  Their position was that the appellant ought to have discovered her claim when she obtained medical records from the respondent.

The motion judge granted summary judgment on the basis that the appellant did not rebut the Limitations Act‘s section 5(2) presumption that she discovered her claim on the date of the act or omission giving rise to it.  The appellant adduced no evidence relating to discoverability to rebut the statutory presumption.

On appeal, the appellant argued that the motion judge erred by failing to give effect to evidence that was available in the motion record, but not referred to in argument.

The Court of Appeal said no:

[8]         We do not give effect to this argument. The failure of the appellants to respond to the summary judgment motion with evidence to rebut the presumption in s. 5(2) of the Limitations Act, 2002 is fatal. Pleadings are not evidence. The appellants could not rest on the pleading of a timely discovery date in their third action, when confronted by a motion for summary dismissal based on the limitations argument.

[9]         The two receipts that were in the record (as part of the respondents’ materials), even if drawn to the attention of the motion judge, without any further evidence or explanation, could not have affected the result. Even if it might be reasonable to conclude that the appellants received medical records on the dates shown in the receipts for payment, this was not sufficient to overcome the statutory presumption. The receipts alone do not advance the appellants’ discoverability argument, in the absence of any explanation by Ms. Hawthorne linking what was in the records to the discovery of her claim.

Ontario: notice provisions are not limitation periods

Does the Limitations Act render the notice provision in section 44(10) of the Municipal Act of no force and effect? Nope.  Section 44(10) is a notice provision, notice provisions are not limitation periods, and therefore it’s not subject to the Limitations Act.

In Bourassa v Temiskaming Shores (City), the plaintiff argued that section 44(10) is not listed in section 19 of the Limitations Act (which includes the schedule of limitation periods in other acts which remain in force), and therefore is not a limitation period.  The flawed of premise of this argument is that a notice provision is a limitation period, which it’s not.  Justice Wilcox accepted the defendant’s argument that the legislature did not intend to void all the statutory notice provisions by leaving them out of the section 19 schedule.

Ontario: limitation periods and the continuous breach

When does the limitation period commence in the context of a continuing breach of contract?  Afresh each day a new cause of action accrues, so held the Court of Appeal in Pickering Square Inc. v. Trillium College Inc.

Trillium and Pickering were parties to a long-term lease of space in a shopping centre.  Trillium covenanted to operate its business continuously.  It didn’t.  Pickering claimed for damages arising from the covenant’s breach.

Trillium moved for summary judgment on the basis that Pickering’s claim was brought outside the limitation period.  Justice Mew held that Trillium’s breach of the covenant was of a continuing nature so that each day of the breach gave rise to a fresh cause of action.  This meant that only the portion of the breach which occurred more than two years before the commencement of the action was statute-barred.

Trillium appealed.  It argued that the breach of the covenant to operate its business continuously was complete on the first day it failed to resume occupation of the leased premises and operate its business, and that each subsequent day that it failed to operate its business was not a separate breach, but an instance of additional damages.  It submitted that a continuing breach requires a succession or repetition of separate acts, whereas its breach was a single act with continuing consequences.

The Court of Appeal rejected this argument.   Justice Huscroft found that Trillium’s argument that breach of its covenant to operate its business continuously established a complete cause of action the first day it failed to operate its business overlooked the consequence of its breach.

The breach entitled Pickering to cancel the lease or affirm it and require performance.  Pickering affirmed the lease, and so it remained in effect and Trillium was required to perform its obligations under it as they fell due.  Trillium could have resumed performance of its obligations at any time prior to the end of the term of the lease by carrying on its business in accordance with the covenant.  Had it done so, Pickering would have been required to accept Trillium’s performance and would have been unable to terminate the lease in the absence of a further serious breach or repudiation.  Trillium would have been liable for damages from the date of its breach until the date it resumed the performance of its obligations, but it would not have incurred liability beyond that date.

The proper approach to calculating the limitation period in the context of a continuing breach occurs on a “‘rolling’ basis”.  It commenced afresh each day a fresh cause of action accrued and ran two years from that date.

This isn’t a particularly revelatory decision from a limitations perspective.  The difficulties are in defining the breach, which is really a matter of contract.  If the breach is continuing, there are multiple causes of action, each attracting its own limitation period.  If anything, it’s misleading to describe the limitation period as rolling, because it’s the cause of action which rolls over each day, not the limitation period.

The more interesting aspect of the decision is how it highlights the tension between a “cause of action” and a “claim” in the Ontario limitations schem.  Justice Huscroft links the commencement of the limitation period to the accrual of a cause of action.  This is problematic, because the Limitations Act links the commencement of the limitation period to discovery of a “claim”.  The words “cause of action” do not appear once in the Act, and arguably, the Limitations Act rejects the concept of the cause of action entirely.

For example (one of several), under the common law, discovery is of a cause action and turns on knowledge of the material facts giving rise to it.  Under the Limitations Act, discovery is of “claims” and turns, in part, on whether a proceeding is an appropriate remedy, which is not an element of or a material fact giving rise to any cause of action.

Justice Huscroft’s statement in obiter about that when a cause of action is determinative of a limitation period is a perfect example:

[34]      But accrual of a cause of action is not determinative for limitation purposes in the context of a continuing breach of contract and an election by the innocent party to affirm the contract.

The accrual of a cause of action is not determinative of anything under the Limitations Act.  These are the questions that are determinative: whether a proceeding has been commenced in respect of a “claim”, on what day the act or omission giving rise to the claim occurred, and on what day the claimant first ought to have discovered her “claim”.

The conceptual difficulties arising from the Limitation Act’s rejection of the cause of action has become an interest of late.  Expect a terrifically illuminating paper in, oh, a year or so.

Ontario: Officers of the court, slow down

That the courts discourage officers of the courts from immediately commencing litigation is a proper factor in a limitations analysis.

In Salewski Inc. v. BDO Canada Ltd., the defendant moved for summary judgment on a limitations defence.  The defendant was retained by a creditor to assign its debtor into bankruptcy.  The court appointed the defendant trustee in bankruptcy.  Friction developed between the defendant and the bankrupt’s interim receiver, the plaintiff.  The plaintiff claimed against the defendant for breach of fiduciary duty.  The defendant pleaded the expiry of the limitation period.

In denying the defendant’s motion, Justice Garson made some helpful observations about the effect of a trustee’s behavior on the commencement of the limitation period:

[77]           In my view, it is inappropriate to start the limitations clock while good faith efforts are ongoing to achieve a remedy.

[78]           Officers of the court should be discouraged from immediately commencing litigation and encouraged to discuss and negotiate differences.

[…]

[80]           The obstacles and delays erected by BDO throughout these proceedings have impeded the exercise of reasonable diligence on the part of DSI to discover the cause of action in this matter.  These obstacles are also sufficient to impact the start of the limitations clock.

[…]

[91]           It would be both unfair and improper for DSI to have been required to commence a legal action any earlier than 2009.  Both parties are officers of the court and should be discouraged from pursuing adversarial proceedings against each other until reasonable efforts to resolve the matter have been addressed.

[92]           To determine otherwise on the facts before me would send the wrong message regarding the duties of a trustee to act fairly and impartially to all creditors, even those opposing its SRD’s.  BDO should not benefit from their prior misconduct.

[93]           This court has and will continue to expect the highest standard of conduct on the part of trustees in the discharge of their duties to the court and the Estate:  see Murphy v. Sally Creek Environs Corporation, supra, at paras. 139, 151 and 155.

[…]

[96]           BDO’s behavior in withholding or not distributing pertinent and relevant information to DSI prevented DSI from discovering the material facts upon which this claim is based.

[97]           Although DSI was suspicious in 2006 and 2007 that BDO had (i) made false statements and omitted relevant facts in an affidavit; (ii) was pursuing a commercially unreasonable course of action; (iii) had made serious allegations about the behavior of DSI, and (iv) was being influenced by Unique, these suspicions were unsupported by material facts.

Ontario: Court of Appeal redefines the s. 5(1)(a)(iv) discovery criterion

In Clarke v. Faust, the Court of Appeal has held that the section 5(1)(a)(iv) discovery criterion requires the claimant to have “good reason to believe he or she has a legal claim for damages”.

Clarke is a solicitor’s negligence action.  The plaintiffs were injured in a motor vehicle accident.  They retained the defendant lawyer to represent them on their accident benefits and tort claim.  He issued a statement of claim on their behalf nine weeks after the second anniversary of the accident.

The plaintiffs then retained a new lawyer.  He told the plaintiffs that their claim was issued after the expiry of the presumptive limitation period, but this wasn’t necessarily fatal to their claim because of discoverability.

The new lawyer passed away and another lawyer took over.  This third lawyer also was also unconcerned by the potential limitations issue.  He took the position that until the plaintiffs obtained medical documentation they couldn’t know whether their injuries met the statutory threshold.  Defence counsel apparently agreed, and the defendants didn’t plead a limitations defence.

Subsequently, the defendants changed their mind and amended their defence to plead a missed limitation period.

The plaintiffs then sued their first lawyer for negligence.  He pleaded a limitations defence and moved for summary judgment.  He argued that the plaintiffs should be presumed to have known of their claim two years after the date of the motor vehicle accident, or in the alternative on the date when their second lawyer put him on notice of the limitations issue.   The plaintiffs argued that they suffered no damage until the defendants in the underlying action pleaded a limitations defence.

The motion judge accepted the defendant’s first argument in a muddled decision that Justice Juriansz criticised fairly, but harshly.  In fairness to the motion judge, all of the theories put forward by the parties were wrong.  I expect that she didn’t have much to work with.

Justice Juriansz found that the case turned on the application of section 5(1)(a)(iv) (“that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”.  When the defendants in the underlying action delivered their defence, the plaintiffs knew that three lawyers were of the opinion that discoverability applied to their claim and that the defendants had not pleaded a missed limitation period.  Only when the defendants in the underlying action pleaded a missed limitation period did the defendants have any reason to know that commencing a legal proceeding was appropriate.  The claim was accordingly timely.

Here’s what makes this decision noteworthy:

  1. The court defines the knowledge required by section 5(1)(a)(iv): “That provision requires, in my view, a person to have good reason to believe he or she has a legal claim for damages before knowing that commencing a proceeding would be an appropriate means to seek to remedy the injury, loss or damage.”   Justice Juriansz doesn’t cite any authority for this conclusion, and on first consideration it’s seems a significant departure from the Court’s previous statement in Markel that this criterion requires only knowledge that a proceeding is “legally appropriate”.  There’s a material difference between knowing that a claim is legally appropriate and having good reason to believe there is a legal claim.  How does the need for the claimant to believe she has a legal claim sit with the long-settled principle that a claimant’s failure to appreciate the legal significance of a fact will not postpone the commencement of the limitation period (see for example Holley v. The Northern Trust Company, Canada or more recently Gatti v. Avramidis at para. 123)? It will be interesting to see how courts apply this new definition.
  2. The court didn’t compromise its section 5(1)(a) analysis by applying common law discovery jurisprudence (see for example the decision in Lawless). This is rare.
  3. The court acknowledged that the plaintiffs’ action may have been premature because there can be no limitations issue until there is a “claim” as defined by the Limitations Act, and a “claim” requires damage, which almost certainly cannot arise merely be virtue of pleading. Justice Juriansz suggests, correctly I think, that discovery of the claim against the defendant lawyer may not occur until there is a judgment in the underlying action (e.g., dismissing the action on the basis of a limitations defence and causing the plaintiffs damage).The plaintiffs did plead that they suffered damage when the defendants first asserted the limitations defence in the underlying action on the theory that it changed their bargaining position.  Justice Juriansz acknowledged the doubtfulness of this position.  If the lawyer didn’t miss the limitation period in the underlying action, he would not be liable for any damages, and whether he missed the limitation period is unknown until a court determines the issue.

 

Ontario: the law requires reasonable investigation, not perfection

In Bowen v Rengro Ltd., Master Dash provides a useful, and likely to be frequently quoted, description of the due diligence plaintiffs must establish when seeking to add a party to an action after the expiry of the presumptive limitation period:

[12]              In my view, it is not to any degree “the standard of perfection” to require counsel to make reasonable, meaningful, endeavors to ascertain the proper owner of the properties involved; but rather it is the reasonable standard of investigation that ought to be expected and provided, in cases such as this.

Master Dash also criticised as unwise the plaintiff’s failure to inspect the site of an accident when ownership may be at issue:

[16]              […] I regard it as unwise to fail to make some investigation of the actual site in cases where ownership is likely to be a key element. However another approach might well be to conduct an examination of the available survey and other information preserved under the province’s Registry System[.]

Ontario: outcomes of a motion to add a presumptively out of time claim

In Howell v Jatheeskumar, Justice LeMay provides a helpful summary of the possible outcomes of an opposed motion to add a party to an action after the expiry of the presumptive limitation period:

[35]      When these cases are read together, it becomes clear that there are three possible outcomes to a motion such as this one.  First, the Court could determine that there was insufficient due diligence on the part of the Plaintiff and her counsel, and that there was no other to extend the time limits, thereby defeating any claim that the Plaintiff may have to extend the time limits as a result of the principles of discoverability.  Second, the Court could determine that there was a triable issue about the issues of discovery and whether the claim was timely as a result of the application of those principles.  This triable issue could include any question of whether there was any other Act by or under which the limitations period could be extended.  Finally, the Court could determine on the materials filed that there was clearly an issue of discoverability that made the claim timely.

In other news, expect quite a few updates in the coming days as we make up for a our lack of diligence in February and March.

Ontario: an overview of s. 13 jurisprudence

In Deloitte & Touche LLP v. Kuiper, Justice Hood provides a helpful summary of the jurisprudence considering section 13 of the Limitations Act.

Section 13 deems the date of an acknowledgement of liability in respect of certain types of claims to be the date from which the presumptive limitation period begins to run:

Acknowledgments

13. (1) If a person acknowledges liability in respect of a claim for payment of a liquidated sum, the recovery of personal property, the enforcement of a charge on personal property or relief from enforcement of a charge on personal property, the act or omission on which the claim is based shall be deemed to have taken place on the day on which the acknowledgment was made.

This is the summary:

[14]           In Middleton v. Aboutown Enterprises Inc., [2008] O.J. No. 3608 (S.C.J.) there was a promisory note that had $412,500 outstanding on it.  Prior to any claim being made, the defendants sent a letter and an unsigned release to the plaintiff purporting to offer $50,000 in exchange for an executed release. Justice Lederer stated at para. 11 of Middleton that in order to be an acknowledgment for the purposes of the Act, the acknowledgment must, at a minimum, have to demonstrate and confirm the amount of the debt that remained owing.  Justice Lederer’s decision has been followed in a number of other decisions.

[15]           In Montcap Financial Corp. v. Schyven, 2011 ONSC 4030 (CanLII) at para. 27, and in Skuy v. GreennoughCorporation, 2012 ONSC 6998 (CanLII) at para. 56, Justice Perell in both instances referred to Middleton and stated that an acknowledgment for the purposes of the Act of an indebtedness for a liquidated sum “must, at a minimum, confirm and concede the amount that remains owing”.  In West York International Inc. v. Importanne Marketing Inc., 2012 ONSC 6476 (CanLII), Justice DiTomaso at paragraph 92 referenced Middleton and Montcap, and repeated Justice Perell’s wording that the acknowledgment “must, at a minimum, confirm and concede the amount that remains owing”.

[16]           Justice Lederer’s decision in Middleton was appealed.  While the appeal was dismissed in a four paragraph endorsement, see:  Middleton v. Aboutown Enterprises Inc., 2009 ONCA 466 (CanLII), the Court stated in its endorsement that it did not accept the statement that to stand as an acknowledgment, the letter and Release would, at a minimum, have to demonstrate and confirm the amount of the debt that remained owing.  It would seem that the appeal decision was not drawn to the attention of either Justices Perell or DiTomaso based upon their adoption of Justice Lederer’s wording in their decisions.

[17]           Unfortunately, the Court of Appeal does not say what part of Justice Lederer’s statement it did not accept.  However, the Court went on to say at para. 1 that with respect to the alleged acknowledgment documentation, it “did not constitute a clear and unequivocal acknowledgment of the debt claimed, with a proposal to satisfy it, as opposed to a mere offer to settle a claim, without acknowledging that $412,500, or indeed any amount, remained owing in respect of the promissory note”.

[18]           Using the wording of the Court of Appeal, I cannot find that the letter herein of October 24, 2011, was a clear and unequivocal acknowledgment of the debt claimed.  Nor does the letter contain a proposal to satisfy the debt.  There is no acknowledgment of $143,620.84, or any amount owing in respect of the invoices.  If anything, it was a letter of complaint addressed to the plaintiff complaining that the invoices were not in accordance with the initial estimate and that they lacked detail.  The defendants also raised some tax issues which they said were not drawn to their attention by the plaintiff.  Accordingly, I am unable to find that the defendants acknowledged the debt within the meaning of s. 13 of the Act, thereby extending the commencement of the limitation period.

If you’ll excuse a little pedantry, there’s one issue with the decision that bears noting.  Justice Hood states that “Section 13 of the Act overrides s. 4 of the Act“.  Not so. Section 4 provides that “a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered”.  Section 13 has no impact on section 4.  Rather, section 13 relates to section 5(2), which contains the presumption that a person discovers her claim on the day the act or omission on which the claim is based took place.  Section 13 deems this day to be day the acknowledgement of liability was made.

 

 

Ontario: s. 36 of the BIA has no impact on the limitation period

Section 38 of the Bankruptcy and Insolvency Act permits a creditor to obtain the court’s authorisation to commence a proceeding in the creditor’s own name.  The need for the court’s authorisation doesn’t operate to extend the limitation period.

In King Insurance Finance (Wines) Inc. v. Byers, the court in a bankruptcy proceeding issued an order authorising the plaintiff to commence proceedings in its own name to recover assets the bankrupt may have transferred.  The plaintiff argued that the limitation applicable to this claim didn’t commence until the date of the order.

Justice Faieta correctly rejected the argument as baseless:

[34]           In my view, the need for approval under section 38 of the BIA does not operate to extend the limitation period under the LA, 2002.

[35]           There is nothing under the LA, 2002 or the BIA which supports the Plaintiff’s submission.

[36]           The interaction of the BIA and the LA, 2002 was resolved by the Ontario Court of Appeal in in Indcondo Building Corp.v Sloan, 2010 ONCA 890 (CanLII), 103 O.R. (3d) 445 where the Court found that a creditor commencing an action under section 38 of the BIA acquired no higher right than the Trustee.  The Court ruled, at paragraph 20, that:

The application of s. 12(1) [of the LA, 2002]  to a creditor claiming through the trustee will be to make effective the earlier discoverability date of either the assignor or the assignee, so that an assignment cannot have the effect of re-starting the running of a limitation period. Ordinarily, this would operate to the benefit of the defendant. If the creditor were aware of the underlying facts under s. 5(1)(a) of the LA, 2002 and failed to bring a proceeding within the limitation period, the creditor would be statute barred from taking advantage of enhanced recovery under a s. 38 order.