The Court of Appeal decision in Blake v. Dominion of Canada General Insurance Company provides some useful obiter on the limitation of statutory accident benefit claims.
The submission of a new application for benefits by a claimant following a clear refusal by the insurer to pay benefits will not restart the limitation period. When an insurer denies statutory accident benefits, the remedy is to seek recourse within the limitation period, not to submit a further application.
In February, I cautioned against taking the bench’s familiarity with the Limitation Act, 2002 for granted. For I some, I suggested, it remains a novelty.
The Court of Appeal’s decision in Thompson v. Sun Life Assurance Company of Canada should encourage readers to head this advice. A motion judge ignored or misapprehended section 22 off the Act when determining whether to enforce a shortened limitation period in a group insurance policy:
[5] The primary ground of appeal advanced by Ms. Thompson is that the motion judge erred in concluding that her action was barred by reason of a contractual one-year limitation provision contained in the Policy. We agree that the motion judge erred in reaching that conclusion.
[6] The January 1, 2006, Group Benefits Handbook for the Policy described the limitation period for long-term disability benefit claims as follows: “No legal action may be brought by you more than one year after the date we must receive your claim forms or more than one year after we stop paying Long-Term Disability benefits.”
[7] In his reasons, the motion judge simply wrote in respect of this issue: “The plaintiff’s claim in this action is barred by the contractual one-year limitation provision of the policy.” The reasons of the motion judge do not explain how he reached that conclusion. Section 22 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, permits the variation of the general two-year limitation period set out in s. 4 in two circumstances. First, s. 22(2) provides that a limitation period under the Act may be varied or excluded by an agreement made before January 1, 2004. Second, s. 22(5) provides that the s. 4 limitation period may be varied or excluded by a business agreement made on or after October 19, 2006.
[8] The motion judge made no finding whether the Policy was made before January 1, 2004. Nor did the motion judge make any finding as to whether the Policy was a “business agreement” within the meaning of s. 22(5) of the Act. In the absence of such findings, the conclusion by the motion judge that Ms. Thompson’s action was barred by the contractual one-year limitation provision of the Policy is not supportable.
[9] Moreover, in light of this court’s decision in Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922, which was released after the motion judge had granted summary judgment in this case, there is strong reason to doubt that the Policy would fall within the “business agreement” exception contained in s. 22(5) of the Act.
A corporate revival will not extend a limitation period that expired while the corporation was dissolved.
In 65519 Ontario Limited v. Sacks, the plaintiff corporation commenced an action after its corporate charter was revoked. This rendered its claim a nullity. The plaintiff revived its corporate status, but after the limitation period had expired. The defendant brought a motion under rule 21.01(b) to strike the claim on the basis of a limitations defence.
The motion judge accepted the defence and struck the claim. The Court of Appeal dismissed the appeal.
Writing for the Court, Justice Cronk held that the plaintiff must be taken to have known the material facts supporting its claim when it issued its statement of claim. The limitation period began running on this date at the latest, and expired before the plaintiff’s corporate revival.
There was more. The individual plaintiffs had moved before the Superior Court for leave under section 246 of the Business Corporations Act to pursue a derivative action on the plaintiff corporation’s behalf. They argued that if leave were granted on a nunc pro tunc basis, it would regularise the action commenced by the plaintiff corporation so that, as a matter of law, the action would no longer be statute-barred.
The Court rejected this rather fraught reasoning. Even assuming that leave would be granted on a nunc pro tunc basis, the leave order could not deprive the defendant of its limitations defence. The expiry of the limitation period is a legal right that accrued to the defendant while the plaintiff corporation was dissolved, and the defendant was entitled to use it to defeat the plaintiff corporation’s claim.
Justice Stinson’s Endorsement in Brown v. Wahl is a succinct and well-reasoned example of a discovery analysis in a medical malpractice claim where the injury is obvious and the issue is when the plaintiff ought to have inferred a potential claim against the defendant practitioners.
The defendant dentists moved for summary judgment based on a limitations defence. The limitations issue wasn’t the plaintiff’s knowledge of her injury. She encountered problems with her dentures immediately after one of the defendants constructed and inserted them. She knew, or ought to have known, that something was wrong with her dental work at that time.
The issue was when she should have known why she was experiencing the problems. Justice Stinson found that she ought to have inferred that she had a potential claim against the defendants once a third dentist, Dr. Singh, explained the source of the problems and advised her that he would have performed the procedure differently. No expert report was necessary.
[32] In my view, armed with the foregoing knowledge and information, a reasonably prudent person in the position of the plaintiff would have inferred that either or both of the defendants Casciato and Wahl had been negligent. She knew that the problem she was experiencing flowed from their treatment. She had to know that the outcome was substandard. Based on what she was told by Dr. Singh on December 13, 2011, she should have known that her problem “must have been caused through some act or failure to act by one or more of the professionals involved in the procedure and there was the likelihood of negligence of some kind, either in what was done or what was not done but should have been.” See McSween v. Louis, (2000) 2000 CanLII 5744 (ON CA), 132 O.A.C. 304, 187 D.L.R. (4th) 446 (ON C.A.) at paragraph 47.
[33] Here, based upon what she was told by Dr. Singh, the plaintiff ought to have known that the problems she was experiencing were caused by substandard treatment by one or both of the defendants. While she may have learned additional information about that substandard treatment once she received the expert reports in early 2014, in my view, those reports do not detract from the fact that she had sufficient knowledge to be aware of a breach by December 13, 2011 at the latest. Put another way, I find that the claims were discoverable by that date.
[34] This is not a case in which an expert opinion was necessary for the plaintiff to conclude that there was the likelihood of negligence of some kind. As the cases mentioned above make plain, it is enough for the plaintiff to have prima facie grounds to infer that the defendants caused harm, and certainty of the defendants’ responsibility for the act or omission that caused the loss is not a requirement for the limitation period to begin to run.
Readers may find it helpful to bookmark the Endorsement for its statement of the basic principles of a section 5 discovery analysis (paragraphs 13 – 20). The Endorsement quotes Justice Perell’s thorough discussion of discoverability in 2013’s Tender Choice Foods v. Versacold Logistics Canada Inc., a decision which I expect will remain the best summary of section 5 jurisprudence for some time.
Update: Compare Brown with another recent medical malpractice decision involving dentists, Maurice v. Alles et al.
From Justice Newbould comes Solar Harvest Company v. Dominion Citrus Limited, a decision on the commencement of the limitation period for the oppression remedy. This is not an especially developed area of limitations jurisprudence, and it’s of interest that Justice Newbould determined, for the purposes of section 5 of the Limitations Act, 2002, that damage in an oppression claim occurs when there is loss attributable to the alleged oppression.
The applicant Solar and Fortune owned preference shares of the respondent Dominion. Solar and Fortune sought oppression relief as a result of, among other things, a Plan of Arrangement involving Dominion that converted its business into an income trust in 2005.
The Arrangement affected Solar and Fortune as preference shareholders:
[10] […] Prior to [the Arrangement], Dominion had had the option on the retraction of the preference shares to pay for them in common shares of Dominion or in cash, and if Dominion chose to pay for them in cash, there was no debt in priority to the preference shares and thus no concern that cash could not be paid. After the Arrangement, because there was no ability of Dominion to pay with its common shares on a retraction of the preference shares, whether Dominion had the cash to pay for the preference shares depended on whether Dominion had available cash after paying interest on the participating notes. For this reason, the applicants say they were oppressed.
Dominion objected to the application on the basis of the expiry of the limitation period. Its position was that the Solar and Fortune knew of the material facts of the alleged oppression more than two years before bringing the application. Solar and Fortune argued that they did not suffer any damage until they received a letter from Dominion refusing to redeem the preference shares and the limitation period ran from that date.
Justice Newbould noted that in the context of an oppression claim, the word “damage” in section 5 of the Limitations Act is the “condition of being worse off than if the oppressive activity had not occurred and at least some of the loss is attributable to that oppressive activity.” The damage was not Dominion’s refusal to redeem the preference shares, but the effect of the Arrangement on the ability of Solar and Fortune to have their preference shares redeemed, and a 2009 change to the participating notes to make them secured.
Should it be of interest, this is the discovery analysis:
[29] Prior to the meetings of the shareholders and of the preference shareholders held on December 22, 2005, the preference shareholders were sent an information circular for their special meeting that included the entire information circular for the proposed Arrangement sent to the shareholders. Mr. Fortune, a chartered accountant, received this material. He was made aware that the participating notes would be issued by Dominion to Dominion Fund and was aware from the audited financial statements that the amount of the notes issued on January 1, 2006 was $19,258,000. The interest owing on that liability each year spelled doom for Dominion ever having enough cash to redeem the preference shares without being offside the OBCA solvency requirements.
[30] As well, whereas before the Arrangement, Dominion had experienced earnings for the past four years of between $2.6 million and $1.3 million, after the Arrangement, Dominion had earnings losses each year, beginning with a loss of $2.4 million in 2006, $399,000 in 2007, $3.978 million in 2008, $2.364 million in 2009, $1.278 million in 2010, $4.152 million in 2011, $249,000 in 2012 and $357,000 in 2013. These were reported in the audited financial statements and known to Mr. Fortune. Mr. Fortune had to know that with these liabilities and losses occurring each year that the ability of Dominion to redeem the preference shares was remote.
[31] Also known to Mr. Fortune from the audited financial statements was the amount of interest paid by Dominion to Dominion Fund each year. $2.5 to $2.7 million was paid out each year to 2009 when the rate on the notes was 13% and $881,000 was paid out 1n 2011 after the rate was reduced to 5%. In December, 2011 the participating notes were again changed to provide for another interest free holiday to the end of 2013.
[32] In 2008 Dominion stopped paying interest on the preference shares. Mr. Fortune acknowledged on cross-examination that at that time he realized that there was something going on “that was not quite right”. Taken he was a chartered accountant, that is not a surprising statement.
[33] In June, 2012, more than two years before this application was commenced, Mr. Fortune said that he opened negotiations with Dominion regarding the upcoming retraction date for the preference shares. He said he was told at that time that there was an issue with the participating notes taking priority over the preference shares. It would be surprising indeed if Mr. Fortune did not realize that before in light of all of the information that he had had since the Arrangement in 2005 and the change to the terms of the participating notes in 2009 that he knew about. If he didn’t know of this issue before, he ought to have, taking all of the information he had been given, but in any event, he knew of it by June 2012. He acknowledged that by that time he felt that his interests and rights or privileges as a preference shareholder had been disregarded, and that they had been disregarded by the restructuring of the notes in 2009.
[34] Taking all of the evidence into account, I cannot help but find that Mr. Fortune well knew the material facts on which this claim is based before October 6, 2012, two years before he commenced this application. In the circumstances the application must be dismissed as being statute barred.
In Bossio v. Nutok Corporation, Justice Kershman held that a document referred to as an “undertaking” can still be a demand obligation for the purposes of section 5(3) of the Limitations Act, 2002:
[224] While the demand in the case at hand is referred to as an Undertaking, it does not set out the specific amount of debt owing, and it is not signed by the lenders or their authorized agents, the Court finds that, on this particular set of facts, sufficient demand has, nonetheless, been made (See: Dow v. Canadian Commercial Bank, 1986 CarswellOnt 4633, at paras 20 and 26). The Court is persuaded by the fact that the demand provided notice in writing, required immediate repayment via an immediate payment plan, set a deadline for repayment, as well as a reasonable period of time for repayment of 50% of the debts. Moreover, the fact that Mr. Bossio signed the demand ensured that notice was provided and received by the borrower, fulfilling the underlying purpose of the demand: to notify the borrower of the lender’s “right to immediate repayment of such loans”.
Justice Kershman found that the demand was delivered more than two years before the action was commenced, and was therefore barred by the expiry of the limitation period. If you’d like a reminder why the lender’s delivery of a demand causes the limitation period to commence, notwithstanding the apparent meaning of section 5(3), see the Court of Appeal decision in Hare v. Hare.
Nearly two months into 2015, there’s only a trickle of new limitations jurisprudence, and so today we offer a practice tip.
As Under The Limit Readers know, 2014 marked ten years since the Limitations Act, 2002 came into force. You’d think that over the course of the last decade, bench and bar would have become accustomed to the new limitations regime, and it would have stopped feeling quite so new.
This is the case, mostly. We still see decisions that revert to the old limitations regime or, as in the recent decision in Bartholomew v. Coco Paving and LeFarge, inform us that “A new Limitations Act was passed in 2002” as if we were out-of-province and off-grid for the last 15 years.
These decisions are a reminder that for some, the Limitations Act remains a novelty. Be wary of taking anyone’s familiarity with the Act and its operation for granted, especially when the discovery provisions are in issue.
Valentina Vasilescu Tarko et al. v. Metropolitan Toronto Condominium Corporation 626 (MTC 626) et al. holds that a special assessment levied on a condo owner is not a demand obligation within the meaning of section 5(3) of the Limitations Act, 2002. The section provides as follows:
Demand obligations
For the purposes of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made.
Because the assessment provided a date for repayment, it wasn’t a demand obligation:
The appellants suggested that the Special Assessment was subject to s. 5(3) of the Limitations Act concerning demand obligations. A debt obligation that does not specify a date for repayment is a demand obligation. See Skuy v. Greenough Harbour Corp., 2012 ONSC 6998 (CanLII), 10 B.L.R. (5th) 146, at para. 31. The 2011 Special Assessment was made payable in three instalments, the first of which was July 1, 2011. Accordingly, the Special Assessment was an obligation which did specify a date when it was payable and it is not therefore a demand obligation. Section 5(3) of the Limitations Act has no application.
In his decision, Justice Marrocco also emphasised that there is no requirement for a limitations decision to refer to the specific wording of the Limitations Act,2002:
The appellants argued that the Deputy Judge’s oral reasons did not refer to the specific wording of the Limitations Act. The Deputy Judge was not required to refer to the specific wording of the Limitations Act. A review of the oral reasons reveals that the Deputy Judge considered the relevant factors set out in s. 5(1) of the Limitations Act in deciding to stay the appellants’ claim. The Court of Appeal in Ali v. Triple 3 Holdings Inc., 2002 CanLII 45126, at para. 4,¸stated that “an appellate court should not presume that the judge of first instance was not aware of or failed to apply the appropriate legal test merely because the test is not explicitly set out in the judge’s reasons.” A judge’s reasons are adequate if they demonstrate that judge has considered the relevant factors and important issues in the case. In R. v. Sheppard, 2002 SCC 26 (CanLII), [2002] 1 S.C.R. 869, at para. 42, the Supreme Court quoted with approval the words of Major J. in R. v. R.(D.), [1996[ 2 S.C.R. 191: “where the reasons demonstrate that the trial judge has considered the important issues in a case, or where the record clearly reveals the trial judge’s reasons, or where the evidence is such that no reasons are necessary, appellate courts will not interfere.”
This is a point that bears remembering when considering whether to appeal from a limitations judgment, particularly from a judgment of the Small Claims Court.
In Lima v. Moya and Mata v. Moya, Master Haberman provides a detailed discussion of a plaintiff’s obligations under the Limitations Act, 2002 to investigate potential parties prior to the expiry of the limitation period. The relevant paragraphs are below.
Two issues bear noting. Firstly, Master Haberman refers to the discoverability doctrine and its application to the section 4 general limitation period. Technically speaking, this is incorrect. Section 5, which is the codification of the common law principle of discoverability, determines the commencement of the general limitation period.
Secondly, Master Haberman held that a plaintiff’s obligation to take reasonable steps to investigate a potential claim can include bringing a Wagg Rule 30.10 motion (see this helpful explanation of Wagg motions). She found it “inconceivable” that personal injury counsel would be unfamiliar with this procedure for gaining access to police records, and that the failure to bring such a motion in this case “amounts to a lack of due diligence, such that discoverability cannot be relied on” (at paras. 95, 117).
[59] The applicable limitation period here is two years, as per s. 4, of the Act, so it expired in July 2011, subject to the application of the discoverability doctrine. The Act states that a party is presumed to have known of all necessary matters to start its claim on the day on which the act or omission on which the claim is based occurred, so that the plaintiff bears the onus of establishing that the presumption should be ousted.
[60] Discoverability is discussed in s. 5(1)(b) of the Act, which states that:
A claim is discovered on the earlier of 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).
[61] Case law has interpreted first ought to have known to mean would have found out had they used reasonable diligence. Thus, a plaintiff is bound to start his claim within two years of becoming aware of the material facts on which it is based having been discovered, or ought to have been discovered by the plaintiff by the exercise of reasonable diligence. (see Central Trust Co. v. Rafuse 1986 CanLII 29 (SCC), [1986] 2 SCR 147).
[62] Where the plaintiff relies on their failure or inability to learn all of the facts they deem necessary to start their claim against a particular defendant, the onus is on him to lead cogent evidence to the effect that it would have been inappropriate or abnormal for him to have investigated further during the life of the limitation period (see Mercurio v. Smith [2011] OJ No. 5040).
[63] In Aguonie v. Galion Solid Waste 1998 CanLII 954 (ON CA), 1998 CANLII 954, the Ontario Court of Appeal discussed the why discoverability was a necessary addition to the law of limitations. One of the scenarios considered was a case where the seriousness of the injuries sustained by a plaintiff was not clear within the two-year limitation period. Thus, though it might appear that a plaintiff was aware of all of the elements to allow the him to know he had a claim and against whom it should be brought within the limitation period, the essential ingredient of whether his injuries were serious enough to pass threshold may not have crystalized during that time frame. In such cases, the court was of the view that the deadline for starting the action should be extended until he could know, and discoverability principles were used as a basis for doing so.
[64] The Court of Appeal has also looked at cases where identifying tortfeasors was the issue, pointing out that:
The discovery of a tortfeasor involves more than the identity of one who may be liable. It involves the discovery of his or her acts, or omissions, which constitute liability.
[65] Again, the plaintiff will be held to a standard of having used reasonable diligence to obtain this information.
[66] It is also understood that, in certain types of actions, identifying possible defendants is not always a straightforward exercise. For example, in medical malpractice cases, hospital charts may be illegible or not all medical staff in an operating room or on duty in the emergency room may be identified. In slip and fall actions, it may take time to determine all possible occupiers, or those contractually bound to maintain the upkeep of the property where the accident occurred.
[67] It is understood that there will be cases where the plaintiff is not even aware that he is missing critical information leading to the identity of a possible defendant until examinations for discovery so he cannot be found at fault for failing to pursue further information (see Madrid v. Ivanhoe Cambridge Inc. 2010 ONSC 2235 (CanLII).
[68] As the court pointed out in Western Mercantile Financial Corp. v. Ernst & Young Inc., 1999 ABQB 144 (CanLII), 11, CBR (4th) 149, not every item of evidence to support the plaintiff’s claim need be known before the limitation period commences to run.
[69] Similarly, in Lawless v. Anderson, 2011 ONCA 102 (CanLII), the court stated:
Determining whether a person has discovered a claim is a fact-based analysis. The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant. If the plaintiff does, then the claim has been “discovered” and the limitation begins to run.
…Certainty of a defendant’s responsibility for the act or omission that caused or contributed to the loss is not a requirement.
[70] Further, in The Investment Administration Solution Inc. v. Silver Gold Glatt & Grosman LLP 2011 ONCA 658 (CanLII), the Court of Appeal pointed out that discovery of new facts that might help the plaintiff’s case does not restart the limitation period.
[71] In summary, as long as the identity of a potential tortfeasor is known and there is some information on which a court could make a finding of liability, there is no room for discoverability to delay the starting point of the limitation period. Having enough information to form an allegation of negligence is quite different from having a winning case against a particular defendant – it is only the former that is required for the limitation clock to start running.
[72] Further, while new information may emerge down the road that strengthens the case against the proposed defendant, this will not restart the clock. A plaintiff should not wait until he has a good case against a defendant before starting a claim against him – as long as he has a case he can try to make, he must move within the limitation period.
[73] In terms of what does and does not constitute due diligence in assessing whether grounds to sue a particular individual exist, Master Dash noted in Wakelin v. Gourley et al 2005 CanLII 23123 (ON SC), 76 OR (3d) 272, that if all the plaintiff does during the two years after an accident in order to identify tortfeasors is request a copy of the police report, that will not constitute reasonable diligence.
[74] The plaintiffs rely on the case law that dictates the approach the court should take when dealing with motions such as there, where the issue of discoverability is on the table and there is a credibility issue. They maintain that the case law suggests that leave should be granted to add the proposed party, while also allowing the defendant to plead the expiry of the applicable limitation period.
[75] However, it appears clear that such an approach is only advocated when there is an issue of credibility that has to be resolved regarding who knew what and when, such that a trial is a better mechanism for resolving the issue (see Wong v. Sherman [1998] OJ No. 1534). The “let it go and flesh out the facts at trial” approach is only appropriate when the basis for the discoverability of the claim must be explored in more depth and the evidence about it needs to be tested.
[76] I should not have to point this out in 2015, the plaintiff’s only salvation in the face of an expired limitation period is the application of the discoverability doctrine. The doctrine of “special circumstances” was clearly laid to rest in Joseph v. Paramount Canada’s Wonderland, 2008 ONCA 469 (CanLII), a decision of the Ontario Court of Appeal released in February 2008. Cases that talk about lack of prejudice are generally dealing with special circumstances so the presence or absence of prejudice really is not a factor here. When dealing with discoverability, the issue is whether someone discovered, or ought to have, that they have a claim, along with the essential elements that go with it to enable them to start an action. This is a fact-based analysis [emphasis in original].
In Zhu v. Matadar, Justice Perell provides a succinct and helpful description of how sections 5(1) and (2) of the Limitations Act, 2002 operate:
[6] Not surprisingly, in bringing a summary judgment motion, a defendant advancing a limitation period defence will rely on the statutory presumption in s. 5 (2) of the Limitations Act, 2002 that unless the contrary is proven, the claimant is presumed to have known the elements for his or her claim on the day the events of the claim occurred.
[7] Not surprisingly, on the summary judgment motion, a plaintiff will attempt to rebut the statutory presumption by tendering evidence that he or she both subjectively and objectively did not discover the claim until sometime after the day the events of the claim occurred.
[8] In order to rebut the presumption, the claimant must meet both a subjective and an objective standard because s. 5 (1) of the Act defines discovery by relation to “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).”
[9] Practically speaking, applying s. 5 (2) of the Limitations Act, 2002 to any case and focussing on the commencement of the running of the limitation period means that for the claimant to prove that his or her claim is timely, the claimant must prove that he or she subjectively and objectively did not discover the claim in the period between the events giving rise to the claim and a date that is two years before an action was commenced; otherwise the two year period will begin at the date of the event and end at the second anniversary of the event.
Nothing in this description is novel, and one might assume it’s well familiar to lawyers who have practiced under the Limitations Act, 2002 for the past ten years. Nevertheless, I often encounter misunderstandings about the interaction of section of 5(1) and (2), from both bench and bar.
This is particularly so regarding Justice Perell’s reminder that the practical implication of section 5(2) is to require a plaintiff to meet the “modified objective” test in section 5(1)(b) (see Ridel v. Cassin at para. 4), rather than merely the subjective test in section 5(1)(a). There’s no gain in establishing when the plaintiff subjectively discovered the claim when the defendant will establish that the plaintiff ought to have discovered it earlier.