Dan – Under the Limit

Ontario: Remember, knowing of a possible claim doesn’t start the limitation period

February 2, 2015 Leave a Comment

AIG Insurance Co. v. Canjam Trading Ltd is of interest because it relies on the practically ancient (at least in terms of limitations jurisprudence) decision in Consumers Glass Co. v. Foundation Co. of Canada Ltd (1985) for the principle that “mere knowledge of a possible claim is not sufficient to trigger the commencement of time for limitation purposes.”

This principle has been codified in section 5(1)(a) of the Limitations Act, 2002 since January 2004. Nevertheless, it’s good that the Court is emphasising the point, even if by relying on dusty, albeit still frequently-cited authority. It remains frustratingly difficult for many who practiced under the old Act to accept that the limitation period doesn’t necessarily commence on the date of the loss.

Ontario: Delay may bar summary judgment motions on limitations defences

February 1, 2015 Leave a Comment

During a recent talk, I observed that ten years after the Limitations Act, 2002 came into force, the many and various former limitation periods are now just half-remembered curiosities. Maybe so, but Farmers Oil v. Her Majesty the Queen et al. reminds us that they’re not yet entirely irrelevant. At issue in this case was the six-month limitation period applicable to acts done pursuant to statutory or other public duty or authority that existed, until January 1, 2004, in section 7(1) of the Public Authorities Protection Act, R.S.O. 1990, c. P.38 (“PAPA”).

The defendant pleaded this limitation period when it delivered its defence in January 2002. In October 2014, it brought a motion for summary judgment to dismiss the plaintiff’s claim on the basis of this limitations defence.

The defendant’s delay caused Justice Mew to question the propriety of the motion:

[40] Given that the defendant’s position that this motion can be determined based only on the statement of claim, it is extraordinary that it let this action continue for 12 years before bringing its motion. The record does not disclose the merest whisper that a motion on the limitation issue was being contemplated until February 2014. If the defendant genuinely believed that the court does not need to make any findings of fact in order to dispose of the motion, why was the motion not brought sooner, before significant costs and utilisation of the court’s resources had occurred?

Justice Mew noted that post-Hryniak, conventional wisdom is that the Court must grant summary judgment whenever there is no genuine issue requiring trial. However, he suggested that there may be cases where it’s appropriate to dismiss a summary judgment motion on the basis of its timing:

[43]         I considered long and hard whether to deny the defendant’s motion for summary judgment solely on the basis that it has been brought too late in the action for the objectives of a just, expeditious and least expensive resolution of the case to be achieved.

[44]         As I have alluded to earlier, much of the discussion in Hryniak and the cases that have followed it focuses on the need for timely, cost-effective resolution of disputes. Part of that calculation would have entailed consideration of how the court’s resources could be most effectively deployed.

[45]         In the present case, if I were to grant summary judgment, justice would hardly have been timely or cost effective. That ship sailed some time ago. This action has already consumed days of the court’s resources, not to mention the time and money spent on discovery (documentary and oral), the failed mediation and the de bene esse examination of Dr. Palonen.

[46]         Ultimately, I talked myself out of simply dismissing the defendant’s motion based solely on the basis that it has been brought too late in the life of the action. But I would suggest that there may be cases, for example where a case is close to, if not ready for trial, and there are no, or weak, excuses for the moving party not to have brought its motion sooner, where the court goes further than I have chosen to be on this occasion and simply declines to entertain a motion for summary judgment.

This suggestion is certainly reasonable, and I expect that we’ll soon see plaintiffs citing it in response to summary judgment motions brought in the late stages of litigation.

In this case, the plaintiff’s position was that the limitation period did not apply because the dealings in issue were commercial and predominantly private in character, and therefore outside the scope of the PAPA. Justice Mew concluded that the evidentiary record did not allow him to find whether this was so, and he declined summary judgment on the basis that there was a triable issue . If the action proceeds to trial, it will almost certainly be the last judicial consideration of section 7(1) of the PAPA.

Ontario: the limitations jurisprudence of 2014 in review

February 1, 2015 Leave a Comment

This post is a paper I wrote for LawPro on the year’s limitations jurisprudence. It may be of interest to Under the Limit readers; if you’d like a PDF version , just ask.

The limitations jurisprudence of 2014 in review

Dan Zacks[1]

January 1, 2014 marked ten years since the Limitations Act, 2002 came into force. Now many aspects of the old limitations regime are forgotten, or will be soon. Consider for instance the classification of actions. Once a key step in the limitations analysis, it is barely remembered, and rarely fondly.[2]

Meanwhile, the courts have developed an extensive body of jurisprudence interpreting and applying the new Act. To be sure, this jurisprudence remains in development. Many of 2014’s leading decisions consider fundamental limitations issues arising from the Limitations Act for the first time. For example, in 2014 we learned from the Court of Appeal how a plaintiff should plead a discoverability argument (by reply), and that there is no legislative gap that would prevent the Limitations Act from applying to claims for unjust enrichment (Collins v. Cortez and McConnell v. Huxtable respectively, both discussed below). The Superior Court also delivered decisions of consequence, in particular by confirming that the Limitations Act applies to will challenges (Leibel v. Leibel, also discussed below).

While it is difficult to identify definite trends in the year’s limitations jurisprudence, several lower court decisions point toward an increasing receptiveness to boundary-pushing discovery analyses. In one case, the “no, I won’t pay my 407 toll” decision, the Court found that proportionality can be a factor when determining whether a plaintiff has discovered that a proceeding is an appropriate means to seek a remedy.[3] In another somewhat eccentric case, the Court found that, pursuant to “cultural dimension theory”, being Slovenian can determine when a plaintiff discovers her claim.[4] It will be interesting to see whether courts follow either of these decisions, and more generally, whether they remain open to creative discovery arguments.

What follows is a summary of the more consequential Ontario limitations decisions from 2014. For mostly up-to-date reporting on this year’s limitations jurisprudence, you are welcome to visit limitations.ca.

McConnell v. Huxtable: In which the Court of Appeal says yes, a claim for unjust enrichment is subject to the Limitations Act[5]

McConnell is a family law decision involving an unmarried couple. The applicant made a constructive trust claim for an ownership interest in the respondent’s house and, in the alternative, for compensation in money. The respondent sought the dismissal of the claim on the basis that it was barred by the expiry of the limitation period.

The motion judge’s 2013 decision[6] was sensational, at least in the rather staid world of limitations. In thorough and persuasive reasons, Justice Perkins held that the discovery provisions of the Limitations Act cannot apply to a remedial constructive trust based on a claim of unjust enrichment. Taken to its logical conclusion, this meant that in a great many circumstances, only the equitable doctrine of laches and acquiescence would limit a claim for unjust enrichment.

A limitation period commences when the injured party discovers the claim within the meaning of section 5 of the Limitations Act. Justice Perkins concluded that a claim for constructive trust is not in all circumstances discoverable as contemplated by this section. If a claim is not discoverable, the limitation period will never commence. If the limitation period never commences, there is no limitation period. This is how he described the problem:

I think that section 5(1)(a) makes it impossible to know when if ever the limitation [period] would start running because the claimant may never (reasonably) know of a “loss, damage or injury” and because there is no act or omission of the respondent that the claimant is required to or is even able to point to in order to “discover” a claim for a constructive trust. Claims to recover land aside, the Limitations Act, 2002 may have been meant to but does not manage to encompass constructive trust claims. I am unable to give effect to the precise and detailed wording of sections 4 and 5 so as to make them apply to constructive trusts in family law cases.[7]

Not surprisingly, Justice Rosenberg, writing for the Court of Appeal, disagreed, and held that there is no legislative gap:

I do not agree with the motion judge that a remedial constructive trust claim does not require any act or omission by the person against whom the claim is brought. Generally speaking, a claim of unjust enrichment requires that the defendant retain a benefit without juristic reason in circumstances where the claimant suffers a corresponding deprivation. In other words, the relevant act of the defendant is simply the act of keeping the enrichment (or the omission to pay it back) once the elements of the unjust enrichment claim have crystallized. In the family law context, this may typically occur on the date of separation, when shared assets, including real property, are divided and the possibility therefore arises of one party holding onto more than a fair share.[8]

Justice Rosenberg acknowledged that in some cases it may be difficult to apply section 5 to a claim for unjust enrichment, but it applies nonetheless. Even if the difficulty means the claim is never discovered, the ultimate limitation period will still limit it. This is sound reasoning, but terribly disappointing to the plaintiffs’ bar, who had begun to think very hard about how to make every old claim one for unjust enrichment.

McConnell also brings clarity to the application of the Real Property Limitations Act. The fact that the respondent sought a monetary award in the alternative to an interest in land did not mean that the claim wasn’t for a share of property, and subject to section 4 of the Real Property Limitations Act with its plaintiff-friendly ten year limitation period.[9]

Longo v. McLaren Art Centre: The Plaintiff must not delay, not even for Rodin[10]

This Court of Appeal decision written by Justice Hourigan quickly became a leading authority on the duty imposed by the Limitations Act on plaintiffs to investigate potential claims. It is already much-cited by defendants when arguing that a plaintiff was dilatory in discovering their claim and, more specifically, when envoking section 5(1)(b) of the Act.

Justice Hourigan’s reasoning is not especially novel; rather, he adopts a line of discoverability jurisprudence developed under the previous Act exemplified by Soper v. Southcott (1998)[11]. In essence, a plaintiff must take reasonable action to investigate the matters described in section 5(1)(a) of the Act. What is reasonable depends on the plaintiff’s circumstances and the nature of the potential claim. However, it is never necessary for the plaintiff to investigate to the point where she knows with certainty that a potential defendant is responsible for the impugned acts or omissions. It is enough that she has prima facie grounds to infer that the potential defendant caused the acts or omissions. Establishing these grounds may require an expert report.[12]

Longo has almost glamorous facts. At issue was the appellants’ discovery of damage to their sculpture Walking Man, possibly the work of Rodin. The sculpture was harmed while in the respondents’ care and the appellants claimed for damages. The court dismissed the claim on motion for summary judgment on the basis that it was commenced out of time.

Justice Hourigan set aside the decision of the motion judge and held that there was a genuine issue requiring a trial. Determining whether a reasonable person with the abilities and in the circumstances of the appellants ought to have discovered the claim required a full trial record. Justice Hourigan nevertheless shared his view on what was appropriate in the circumstances. On learning of concerns about the condition of Walking Man, a reasonable person would arrange for an inspection of the sculpture.

Collins v. Cortez: Respond with a reply[13]

This decision is a primer on how pleadings should address a limitations defence, which is often a point of confusion for counsel.

Cortez moved to dismiss Collins’s personal injury claim on the basis that it was commenced two years after her accident and statute-barred by the expiry of the limitations period. Justice Gordon granted the motion. He gave effect to the presumption in section 5(2) of the Limitation Act that the limitation period commenced on the date of the accident. He held that because Collins did not plead discoverability facts in her Statement of Claim, she could not make out a section 5(1) discoverability argument.

Not so, held the Court of Appeal. In the normal course, if a limitations defence is raised in a Statement of Defence, and the plaintiff relies on the discoverability principle, the plaintiff should plead the material facts relevant to discoverability in reply, not the Statement of Claim. The expiry of a limitation period is a defence to an action that must be pleaded in a Statement of Defence. As such, a plaintiff needn’t anticipate discoverability and address it in her Statement of Claim.

Leibel v. Leibel: Two year to challenge a will[14]

Since the Limitations Act came into force, the estates bar has speculated as to whether a limitation period applies to will challenges. Many thought that it would not, based in part on an influential article by Anne Werker on limitation periods in estate actions:

It has been suggested that the 15-year absolute limitation period applies to will challenges. I do not agree. Section 16(1)(a) of the new Act expressly states that there is no limitation period in respect of “a proceeding for a declaration if no consequential relief is sought”. [15]

The courts have tended increasingly toward asserting the application of the Limitations Act, and it came to seem likely a court would apply the Act to a will challenge. This is what Justice Greer did in Leibel.

The case involved two wills. The testatrix’s son Blake applied for a declaration that the wills were invalid, and another son and other respondents moved for an order dismissing the application on the basis that it was statute-barred by the expiry of the limitation period.

Justice Greer held that the limitation period began running in June 2011, the date of the testatrix’s death, because a will speaks from death. However, Blake discovered his claim within the meaning of the Limitation Act about a month later in July 2011 (for reasons that don’t bear mentioning here, but are at paragraph 39 of the decision). This meant that he commenced his application out of time.

In particular, Justice Greer rejected Blake’s argument that no limitation period applied to his will challenge pursuant to section 16(1)(a). She held that the legislature did not intend for section 16(1)(a) to exclude will challenges from the two-year limitation period:

To say that every next-of-kin has an innate right to bring on a will challenge at any time as long as there are assets still undistributed or those that can be traced, would put all Estate Trustees in peril of being sued at any time. There is a reason why the Legislature replaced the six-year limitation in favour of a two-year limitation.[16]

Kassburg v. Sun Life Assurance Company of Canada: In business agreements, the party isn’t literal[17]

Kassburg demonstrates the Court’s commitment to protecting individuals from contracts that impose shortened limitation periods. It deals with section 22(5) of the Limitations Act, which permits contracting out of the statutory limitation period through “business agreements” unless one of the parties to the contract is an individual. Rather than limiting the word “parties” in this section to its literal meaning, the Court of Appeal instructs us to adopt a meaning consistent with the objective of protecting individuals from unexpectedly or unfairly abridged limitation periods.

Kassburg was an insured under a group policy issued by the appellant Sun Life to the North Bay Police Association. The respondent submitted a claim for long-term disability benefits that Sun Life denied.

She commenced an action claiming entitlement to the benefits. Sun Life moved for summary judgment on the basis that her claim was out of time. Among other things, Sun Life relied on a one-year limitation period contained in the insurance contract. It argued that this was a limitation period subject to section 22(5).

The motion judge held that the insurance policy fit within the business agreement exception. Because the parties to the insurance contract were the Police Association and the appellant, the contract was not entered into by an individual.

Justice van Rensburg rejected this reasoning. The word “parties” in section 22(5) must be given a broad, purposive reading. The literal reading of “parties” is inconsistent with the objective of section 22, which is to restrict the circumstances in which a contract can alter the statutory limitation periods in the Limitations Act. Although the group insurance contract under which Kassburg made her claim was between the Police Association and Sun Life, Justice van Rensburg deemed Kassburg to be a party for the purpose of asserting her claim, and for Sun Life’s limitations defence.[18]

Green v. Canadian Imperial Bank of Commerce: Plaintiffs must fully control whether they commence an action in time[19]

In Green, the Court of Appeal overturned its decision in Sharma v. Timminco (2012)[20], thus restoring peace and order to the limitation scheme under the Securities Act. [21]

Timminco created a distinctively perverse phenomenon in limitations jurisprudence: a limitation period that did not allow plaintiffs to control whether they commenced an action in time. As Justice Feldman noted in her decision for the Court of Appeal, this was unprecedented and entirely foreign to the concept of limitations.

At issue in both cases was the statutory cause of action in section 138.3 of the Securities Act. This section creates a cause of action for misrepresentations regarding shares trading in the secondary market. A plaintiff, most often a representative plaintiff in a class proceeding, can only commence a section 138.3 claim with leave. Pursuant to section 138, a plaintiff has three years from the date of the misrepresentation to obtain leave and commence the action. [22]

The Timminco Court held that a claim for damages under section 138.3 is statute-barred if the plaintiff does not obtain leave to commence it within the three-year limitation period, and that section 28 of the Class Proceedings Act[23], which suspends limitation periods in favour of class members once a claim is asserted in a class proceeding, will not operate in respect of a 138.3 claim until leave is obtained.

The Timminco Court reasoned that a section 138.3 claim is “asserted” within the meaning of section 28 of the Class Proceedings Act only when leave is granted because leave is a component of the cause of action. Given the dictionary definitions before the Court of “assert”, this conclusion was sound, at least in theory.

In practice, it was problematic. Its effect was to require representative plaintiffs to move for and obtain leave to commence a section 138.3 claim within three years, but the plaintiffs could not control the timeliness. Obtaining leave within three years was challenging, if not impossible.

This limitation period is not subject to the discoverability provisions of the Limitations Act because it commences on the date of the misrepresentation. The longer it takes to discover the misrepresentation, the shorter the time for obtaining leave and commencing the action. Even if a plaintiff brought the motion in good time, the defendant could initiate procedural steps resulting in delay, and court availability could affect the timing of the hearing and the rendering of the decision.

And so the Court reversed itself. Justice Feldman set aside the Timminco Court’s interpretation of the Class Proceedings Act, holding instead that when a representative plaintiff brings a section 138.3 claim within the limitation period, pleads section 138.3 together with the facts that found the claim, and pleads an intent to seek leave to commence, the claim has been “asserted” for the purposes of the Class Proceedings Act, and the limitation period is thereby suspended for all class members.

This decision is obviously of great significance to the securities bar, but beyond that, it preserves the fundamental principle of limitations that a plaintiff must have unilateral control over whether it misses a limitation period.

And for the insurance bar…

Lastly, several insurance decisions bear noting.

From Sagan v. Dominion of Canada General Insurance Company, we learned that time begins to run for a claim for denied accident benefits on the date of the denial. A party can’t stop the commencement of the limitation period by sneakily (or inadvertently) omitting certain documents from the accident benefits application.[24]

In Sietzema v. Economical Mutual Insurance Company,[25] the Court of Appeal held that the limitation period begins to run for a claim for statutory accident benefits when the insurer denies the application for those benefits.

In Schmitz v. Lombard General Insurance Company of Canada[26], the court determined when the limitation period commences for a claim for indemnity under OPCF 44R, an optional endorsement for underinsured motorist coverage to the standard form automobile insurance policy. The limitation period does not start to run when the demand for indemnity is made because default must first occur. The limitation period begins to run the day after the demand for indemnity is made.

[1] Dan is a contributor to the upcoming fourth edition of The Law of Limitations and a lawyer at Clyde & Co. His practice focuses on commercial litigation and lawyers’ professional negligence. He also publishes Under the Limit, a blog about developments in the always riveting world of limitations jurisprudence.

[2] This is subject to the occasional exception. See for example Economical Mutual Insurance Company v. Zurich Insurance Company, 2014 ONSC 4763, in which the Court undertakes a classification of actions analysis, presumably out of nostalgia.

[3] See 407 ETR Concession Company v. Ira J. Day, 2014 ONSC 6409.

[4] See Miletic v. Jaksic, 2014 ONSC 5043 and the related post on Under the Limit, <http://limitations.ca/?p=19>.

[5] 2014 ONCA 86.

[6] 2013 ONSC 948.

[7] 2013 ONSC 948 at para. 143.

[8] 2014 ONCA 86 at para. 51.

[9] Conversely, the mere fact that a claim affects real property will not exclude the application of the Limitations Act. See Zabanah v. Capital Direct Lending, 2014 ONCA 872.

[10] 2014 ONCA 526 (“Longo”).

[11] 1998 CanLII 5359 (Ont. C.A.).

[12] See Longo, supra note 1, at paras. 41-44.

[13] 2014 ONCA 685.

[14] 2014 ONSC 4516.

[15] Anne Werker, “Limitation Periods in Ontario and Claims by Beneficiaries”, (2008) 34:1 Advocates’ Q at 24-28.

[16] 2014 ONSC 4516 at para. 52.

[17] 2014 ONCA 922.

[18] 2014 ONCA 922 at paras. 58-61.

[19] 2014 ONCA 90.

[20] 2012 ONCA 107.

[21] R.S.O. 1990, C. S.5.

[22] See also section 19 of the Limitations Act, 2002.

[23] S.O. 1992, C. 6.

[24]2014 ONCA 720.

[25] 2014 ONCA 111.

[26] 2014 ONCA 88.

Ontario: just because a claim affects property doesn’t mean the limitation period is ten years

January 11, 2015 Leave a Comment

Update: The Supreme Court refused leave to appeal from the Court of Appeal’s judgment.

The Court of Appeal’s decision in Zabanah v. Capital Direct Lending brings certainty to the application of the Real Property Limitations Act (and its plaintiff-friendly limitation periods). There mere fact that a claim affects real property will not exclude the application of the Limitations Act, 2002.

The appellant purchased a second mortgage on a home from the respondent, Capital Direct. The mortgagor had fraudulently informed Capital Direct that the balance of the first mortgage on her home was $83,000 when it exceeded $200,000. The mortgagor made an assignment in bankruptcy. The first mortgagee advised the appellant that the sale of the home under power of sale had yielded insufficient proceeds to pay off the first mortgage. There was nothing left for the appellant.

The appellant claimed against Capital direct for negligence, breach of contract, and breach of fiduciary duty. Capital Direct succeeded on a motion for summary judgment on the basis that the action was started after the expiry of two-year limitation period in the Limitations Act, 2002. On appeal, the appellant argued that it was the ten-year limitation period in section 43 of the Real Property Limitations Act that applied. Section 43 provides as follows:

Mortgage covenant

(1) No action upon a covenant contained in an indenture of mortgage or any other instrument made on or after July 1, 1894 to repay the whole or part of any money secured by a mortgage shall be commenced after the later of,

(a) the expiry of 10 years after the day on which the cause of action arose; and

(b) the expiry of 10 years after the day on which the interest of the person liable on the covenant in the mortgaged lands was conveyed or transferred.

The appellant’s position was that her claim affected real property because her loss was the reduced value of her security interest in the property. She relied on the Court of Appeal decision in The Equitable Trust Co. v. Marsig (2012) for the proposition that the Limitations Act, 2002 does not apply to a claim affecting real property.

Justice Blair disagreed. The appellant’s claim sounded in negligence and contract. The negligence related to what Capital Direct allegedly did and said. The contract related to the transaction where the appellant acquired the second mortgage. Neither claim was within the category of claims described by section 43. Marsig involved a guarantee covenant contained in a mortgage and was distinguishable on that basis. The court’s obiter in Marsig about the application of the Limitations Act, 2002 to claims affecting real property was limited to the distinction between guarantees associated with land transactions, which are subject to the Real Property Limitations Act, and guarantees associated with contract claims, which are not.

Accordingly, section 43 does not apply to every action in which a mortgage or real estate is involved:

[18] We agree with the motion judge’s qualification regarding s. 43 of the RPLA, that “[t]o the extent that language could be read as encompassing every action in which a mortgage or piece of real estate is in any way involved, I do not believe that it accurately describes the present state of the law.” The motion judge’s statement at the end of para. 46 is unassailable, and makes all the difference: “Nothing that this court decides will affect any party’s relationship to the second mortgage or the property.” The appellant’s action, as against Capital Direct, is simply a negligence and contract claim, and is not a claim to an interest in land, as in Marsig.

Ontario: Read business agreements varying the limiation period “broadly and purposively”

January 11, 2015 Leave a Comment

Section 22(5) of the Limitations Act, 2002 permits contracting out of the statutory limitation period unless one of the parties to the contract is an individual. The word “parties” in this section does not have only its literal meaning. The Court of Appeal in Kassburg v. Sun Life Assurance Company of Canada instructs us to read it broadly and purposively so that its meaning is consistent with the objective of the section.

The respondent in Kassburg was an insured under a group policy issued by the appellant Sun Life to the North Bay Police Association. The respondent submitted a claim for long-term disability benefits that Sun Life denied.

The following exceptions apply only in respect of business agreements:

Section 22(5)

A limitation period under this Act, other than one established by section 15, may be varied or excluded by an agreement made on or after October 19, 2006.

A limitation period established by section 15 may be varied by an agreement made on or after October 19, 2006, except that it may be suspended or extended only in accordance with subsection (4).

Section 22(6)

“business agreement” means an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002 (“accord commercial”) [Section 1 of the Consumer Protection Act, 2002 defines “consumer” as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes; (“consommateur”)];

“vary” includes extend, shorten and suspend. (“modifier”)

The motion judge held that the insurance policy fit within this business agreement exception. Because the parties to the insurance contract were the Police Association and the appellant, the contract was not entered into by an individual acting for personal, family, or household purposes.

Justice van Rensburg rejected this reasoning. The word “parties” in section 22(5) must be given a broad, purposive reading consistent with the objective of the provision:

[58]      The clear wording of s. 22(5) permits contracting out of the statutory limitation period, unless the parties to the contract include an individual, and the contract was for “personal, family or household purposes”. There are therefore two requirements for a business agreement to exist: the parties must not include individuals, and the contract must not have been for personal, family or household purposes.

[59]      The literal reading of the “parties” aspect of the section that appears to have been accepted by the motion judge, in my view, is inconsistent with the objective of s. 22 of the Limitations Act, 2002, which is to restrict the circumstances in which the statutory limitation periods under the Act can be altered by contract. In my view, the word “parties” in s. 22(6) should be given a broader, purposive reading to accord with the objective of s. 22.

[60]      In this action, the respondent is asserting a personal claim for LTD benefits provided under a group policy. She is entitled to assert the claim directly against the insurer under s. 318 of the Insurance Act, R.S.O. 1990, c. I.8. Although the group insurance contract under which she is making her claim was entered into between the NBPA and the appellant, the appellant relies on a limitation period contained in that contract to exclude her claim. The respondent is in effect deemed to be a party for the purpose of asserting her claim, and for the purpose of the appellant’s limitations defence.

[61]      With respect to the “purposes” requirement, the contract is for personal purposes, and accordingly is not a “business agreement” under s. 22(5).

Alberta: Be wary of the ultimate limitation period

December 5, 2014 Leave a Comment

The Court of Appeal’s decision in W.P. v. Alberta is a reminder of the finality of Alberta’s ultimate limitation period. It runs from of date of injury even when the claimant is unaware of the injury or incapable of discovering it. It pauses only in narrow circumstances. It’s harsh.

The appellants were formerly resident students at the Alberta School for the Deaf. They alleged physical, sexual, and emotional abuse by their teachers, staff, and other students. They alleged that the abuse occurred at varying times between the early 1960s until 1991.

When the appellants applied for certification of the action as a class proceeding, Alberta cross-applied for summary judgment. Alberta submitted that the appellants commenced their action after the expiry of the ultimate limitation period in section 3(1)(b) of the Limitations Act (which I don’t quote here because it’s very long, but the link takes you right to it). The chambers judge agreed and dismissed the action.

Section (3)(1)(b) provides that if a claimant doesn’t seek a remedial order within ten years after the claim arose, the defendant is entitled to immunity from liability in respect of the claim. Time begins to run from the date of the negligent or wrongful act. Because time runs from a fixed date, the discoverability principle doesn’t apply:

[29] […] the ultimate limitation period tolls without regard to when the alleged harm occurred, or when the fact of its occurrence was discovered or even discoverable. Rather, it begins to run merely upon the occurrence of the breach of the duty – in this case, upon the occurrence of the alleged abuse. This is not only the plain effect of the statutory language, but was its anticipated and intended effect: Limitations, Alberta Law Reform Institute Report No 2007 ABCA 347 (CanLII), 55, December 1989 at 70-71, 425 AR 123

The act does provide for the suspension of the ultimate limitation period in two circumstances. Section 4 of the act suspends time while the defendant fraudulently conceals the occurrence of the injury:

4(1) The operation of the limitation period provided by section 3(1)(b) is suspended during any period of time that the defendant fraudulently conceals the fact that the injury for which a remedial order is sought has occurred.

(2) Under this section, the claimant has the burden of proving that the operation of the limitation period provided by section 3(1)(b) was suspended

Section 5 suspends time when the claimant is a “person under disability”, which, pursuant to the definition in section 1(h) is either a represented adult as defined in the Adult Guardianship and Trusteeship Act, a person for whom a certificate of incapacity is in effect under the Public Trustee Act, or an adult who is unable to make reasonable judgments in respect of the claim:

5(1) The operation of the limitation periods provided by this Act is suspended during any period of time that the claimant is a person under disability.

(2) The claimant has the burden of proving that the operation of the limitation periods provided by this Act was suspended under this section.

The appellants relied on both sections 4 and 5. They argued that the teachers and staff of the school concealed the injuries by instructing students to tell no one about the abuse and by providing inadequate education so that the students couldn’t communicate it.

The Court of Appeal laid out the three part test for establishing fraudulent concealment:

[34] […] to demonstrate fraudulent concealment, as alleged here, which suspends the running of the ultimate limitation period, the appellants must show (1) that Alberta (or its agents or servants) perpetrated some kind of fraud; (2) that the fraud concealed the fact of their injury; and (3) that the appellants each exercised reasonable diligence to discover the fraud.

The Court of Appeal found that the appellants couldn’t satisfy the test. Though the injuries caused by abuse of children often manifest slowly and imperceptibility so that “only the passage of time and maturity allows the victim to realize the magnitude of the harms suffered, and their cause”, this has no bearing on whether the injuries have been concealed. The appellants had no evidence that they were laboring under a misapprehension of the fact of having suffered an injury:

[36] […] While they might not have known until later that they could sue, that is not the same thing as having the fact of the wrongful conduct and its effects deliberately concealed from them. Nor does being told at the time not to discuss the abuse support an allegation of fraudulent concealment of the fact of the injury. While the evidence here strongly suggests that each of the appellants were aware of the wrongfulness of the alleged acts well before the expiry of the ultimate limitation period, we need not decide that here. It suffices to conclude that the issue of fraudulent concealment is insufficiently meritorious to require a trial.

The Court of Appeal also rejected the appellants’ reliance on section 5:

The appellants do not say that they were represented adults under the Adult Guardianship and Trusteeship Act or persons subject to a certificate of incapacity under the Public Trustee Act. And, while each of them has encountered difficulties in life, they do not show how such difficulties rendered them unable to make reasonable judgments in respect of their claims. Even the facts alleged by EP with respect to her time spent in psychiatric hospital care, which might form part of an account of a disability which suspends the operation of the ultimate limitation period, is on its own insufficient to show that the issue has merit. We are not told, for example, what that care entailed, when she was in that care, or for how long.

The Court of Appeal concluded its analysis with a warning about the high bar for invoking sections 4 or 5:

It is difficult – and [the Legislature] intended that it be difficult – for plaintiffs to persuade a court that the ultimate limitation period should not run for a period of time. It will be a rare case where deliberate concealment of the fact of an injury, or a condition which disables a claimant from making reasonable judgments, can be established within the meaning of sections 4 and 5 of the Act.

I also note the Court of Appeal’s warning that a class proceeding has no special status that allows it to survive where it would otherwise be statute-barred:

[21] Simply put, a class proceeding is just one procedural mode of advancing a claim. The mere fact that a claim is advanced by way of a class proceeding does not endow it with special status allowing it to survive where the same claim would otherwise be doomed. More particularly, it remains subject to all the tools furnished by Part 7 of the Rules of Court for resolving claims without a full trial, including summary judgment […].

[22] The foregoing applies with equal force where the summary judgment application is based upon the expiry of a limitation period relative to the claim of a proposed representative plaintiff. Where a proposed representative plaintiff’s claim is shown to be time-barred, there is no good reason for permitting the issue of certification to continue consuming judicial and litigants’ resources. Indeed, there is good reason for not doing so, since the representative plaintiff must be a member of the class. Allowing a representative plaintiff’s clearly time-barred claim to proceed further would defy the Legislature’s intent that the class proceeding be brought only by someone with a personal stake in the outcome [internal citations omitted].

Ontario: Even highways are subject to limitation periods (plus a novel discovery argument)

November 17, 2014 Leave a Comment

Readers of Under the Limit rejoice! There is now an answer to the question that worried us so while driving the 407: what limitation period applies to the collection of unpaid 407 tolls?

Not only did the Court answer this question in 407 ETR Concession Company v. Ira J. Day, it emphasised the universal application of the Limitations Act, 2002 and added a novel proportionality component to the discovery analysis.

Mr. Day refused to pay his 407 tolls. Unfortunately, the cameras of the 407 ETR Concession Company are all-seeing, and so in June 2013 the 407 ETR commenced an action against Mr. Day for payment of $9,808, plus interest, owed for driving the 407 on 2,194 occasions. Mr. Day admitted his use of the 407, but chose to fight a portion of the 407’s claim against him on the basis that it was statute-barred. 407 brought a r. 21 motion to determine the limitation issues. The 407 ETR was represented by a team of three from Lenczners led by Tom Curry. Mr. Day was represented by a team of two captained by Ronald Manes of Torkin Manes. The 407 is, evidently, serious business.

The 407 ETA’s argument was threefold. First, they argued that the Limitations Act, 2002 does not apply to claims brought by the 407 ETA. The basis for this position was the Highway 407 Act, which provides that “a toll and any related fee or interest is a debt owing to the owner, and the owner has a cause of action enforceable in any court of competent jurisdiction for the payment of that debt”. If the legislature intended this debt to be like any other, the 407 ETA suggested, there would be no reason to specify separately that the 407 ETR has a cause of action to enforce the debt. By implication, the cause of action is a stand-alone remedy available to the 407 ETA that is not subject to the Limitations Act, 2002 (presumably, the limiting principles of equity would still apply, though the 407 ETA doesn’t appear to have addressed this).

This is a problematic argument because it’s entirely at odds with a limitation period of general application. Justice Edwards rightly had none of it, noting that it “flies in the face” of the universal limitation period in section 4 of the act:

[41] There is nothing from my review of the Limitations Act nor the Highway 407 Act which would explicitly exempt the 407 ETR from Ontario’s limitation regime, nor is there anything that prescribes a separate limitation period for the toll debt. Presumptively the toll debt owed to the 407 ETR is, in my view, subject to sections 4 and 15 of the Limitations Act.

[…]

[43] In my view it would take explicit language in the 407 Act, and or an exception provided for in the Limitations Act, to give to the 407 ETR an ability to make a claim free of any limitations defence. No such language can be found in the 407 Act, nor is there any exception in the Limitations Act.

The 407 ETA’s second argument was that the applicable limitation period was 15 years pursuant to the transponder lease agreement Mr. Day signed. It argued that the agreement was valid under section 22 of the Limitations Act, 2002, which permits parties to extend a limitation period by agreement.

This argument also failed. Section 22(5) allows for the variance and exclusion of limitation periods under the act in respect of “business agreements”. The act defines “business agreement” as “an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002”. The Consumer Protection Act, 2002 defines a consumer as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.”

The lease agreement could not be a business agreement:

[51] The application for the Transponder Lease signed by Mr. Day makes quite clear on its face that he is signing for personal use as opposed to business use. The 407 ETR must have therefore known of the distinction between a consumer applying for a transponder in his personal capacity versus someone acting in his business capacity. Mr. Day, when he leased the transponder, did so as a consumer as defined by the Consumer Protection Act. As such, the 407 ETR cannot rely upon the 15 year limitation period set forth in the Transponder Lease Agreement, as the 407 ETR does not fall within the exception set forth in section 22(5)(1) of the Limitations Act given that it only applies in respect of business agreements. The Transponder Lease Agreement as signed by Mr. Day was not a business agreement.

This serves as a reminder to carefully word agreements excluding the Limitations Act, 2002.

The 407 ETA’s last argument was that the limitation period commenced when Mr. Day’s license plate went into “denial”, and not, as Mr. Day argued, on the date the 407 ETA issued each invoice. The Highway 407 Act empowers the 407 ETR to ask the Registrar of Motor Vehicles to deny the renewal of a license plate associated with outstanding 407 invoices.

Justice Edwards undertook a discovery analysis. He focussed on the criterion in section 5(1)(a)(iv) of the Limitations Act, 2002, whereby a party must discover that, “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”:

[57] It would be difficult to argue that the 407 ETR would not have the means to discover when an invoice is unpaid. In this age of computers it would undoubtedly be possible for the 407 ETR to have available to it the necessary information to determine that with the non-payment of an invoice 30 days after its issuance, that in fact “injury, loss or damage had occurred”. To require the 407 ETR to issue a claim for every unpaid invoice would not be an effective means, nor would it be an appropriate means to seek its remedy. The invocation of section 5(1)(a)(iv) of the Limitations Act is not a question of discoverability, but rather an application of proportionality, common sense and the effective means emphasized by the Divisional Court in 407 ETR Concession Company Limited (supra).

To my knowledge, this is a novel reading of section 5(1)(a)(iv). If there’s a standard definition of “appropriate”, it’s “legally appropriate” (see Markel Insurance Company of Canada v. ING Insurance Company of Canada at para. 34). This section is mostly invoked to delay the commencement of a limitation period while the underlying damage, though discovered, is trivial and a claim for damages is legally inappropriate. Here the issue isn’t the triviality of the 407 ETR’s damage, but the burden of imposing a limitation period that would oblige it to commence thousands of claims.

If this proportionality approach to section 5(1)(a)(iv) finds traction, I look forward to seeing how the courts determine the balance. If the prospect of thousands of actions means a claim is not legally appropriate, what of the prospect of just a thousand actions, or five hundred, or fifty? How much burden must there be to prevent a claimant from discovering its claim?

Another implication of Justice Edwards’s analysis is to give the 407 ETR control of the commencement of the limitation period. It’s the 407 ETR that initiates a plate denial. In theory, the 407 ETR could wait years before causing the limitation period to run, subject only to the 15 year ultimate limitation period, and enjoy the benefit of accruing interest. This gives defendants no security that they “will not be held to account for ancient obligations”, a fundamental purpose of limitations legislation (see M.(K.) v. M.(H.)).

BC: When it comes to death, there is no temporal elasticity (at least for limitation periods)

November 13, 2014 Leave a Comment

Generally, the discovery rule won’t extend a limitation period tolled by a fixed event like death; for these limitation periods there is, in the words of the Ontario Court of Appeal, “no temporal elasticity” (See Waschkowski v. Hopkinson Estate at paras. 8 and 9). In Buhr v. Manulife Financial, the BC Court of Appeal affirmed this principle by finding that the discovery rule can’t extend the limitation period applicable to claims against an insurer for death benefits.

Burh claimed against her deceased husband’s insurer for death benefits. On appeal, the insurer argued that the expiry of the limitation period in section 65 of the former Insurance Act barred the claim.

Section 65 provided that “proceedings against an insurer for the recovery of insurance money must not be commenced […] more than 6 years after the happening of the event on which the insurance money becomes payable”.

The Court accepted the insurer’s argument:

[T]he limitation period in this case began to run from the date of Mr. Mattern’s death, regardless of when Ms. Buhr became aware of potential claims. The event on which the insurance money becomes payable, contemplated in s. 65 of the former Insurance Act, is death in cases involving death benefits. The statute designates a fixed event, unrelated to the plaintiff’s knowledge of a cause of action, to start the limitation period, requiring commencement of an action within six years. The discoverability rule does not operate to extend the prescribed period.

In 2012, section 76 of the current Insurance Act replaced section 65. It provides as follows:

76 (1) Subject to subsections (2) and (5), an action or proceeding against an insurer for the recovery of insurance money payable in the event of a person’s death must be commenced not later than the earlier of

(a) 2 years after the date evidence is furnished under section 73, and

(b) 6 years after the date of the death.

The explicit reference to the date of death in section 76(1)(b) means that the discovery rule cannot extend this limitation period. Although the claimant in Buhr evidently required more than six years to bring her claim, six years is three times as generous as the two year limitation period in Ontario’s Trustee Act, which also begins to run from the date of death. I acknowledge that she is unlikely to find this aspect of Canadian limitations jurisprudence consoling.

Ontario: In an accident benefit claim, a denial triggers the limitation period

November 3, 2014 Leave a Comment

Time begins to run for the mediation of a denied accident benefit claim from the date of the denial. A party can’t stop the commencement of the limitation period by sneakily (or inadvertently) omitting certain documents from the accident benefits application.

The appellant in Sagan v. Dominion of Canada General Insurance Company was in a car accident in March 2008. In the same month, he advised his insurer of his claim. The insurance company sent him a package that included the OCF 1 application for accident benefits form and the OCF 3 disability certificate. The appellant filed the OCF 1 form but not the OCF 3 certificate.

The respondent denied the claim in April 2008. In April 2011, the appellant applied for mediation of the denial. The respondent took the position that the two-year limitation period had expired. The appellant commenced an action, which the Court dismissed on a motion for summary judgment.

The appellant argued that the limitation period begins to run not from the date of just any claim, but a valid claim. The appellant’s claim was invalid because it didn’t include a disability certificate. A claim for accident benefits requires a disability certificate pursuant to section 35(2) of the Regulations under the Insurance Act governing claims for accident benefits.

The Court rejected this position:

1. A plain reading of section 35(2) provides that the disability certificate is to be filed with the application for benefits. It is not the application. In addition, section 35(6) provides for claims to be considered in cases where there is no disability certificate filed at all.

2. The statutory regime is designed to ensure timely submission and resolution of accident benefits. It is not in keeping with this overall purpose to suggest that a claimant can delay the start of the limitation period – perhaps indefinitely – by not submitting a disability certificate.

And so sound judicial resoning triumphed over a cute, but improbable argument.

Ontario: The Court of Appeal reminds us to respond to limitations defences by delivering a reply

October 10, 2014 Leave a Comment

The Court of Appeal decision in Collins v. Cortez is a reminder that plaintiffs may respond to a limitations defence by delivering a reply. Plaintiffs needn’t plead facts supporting a discovery argument in the Statement of Claim in anticipation of a limitations defence.

In Collins, Cortez moved to dismiss Collins’s personal injury claim on the basis that it was commenced two years after her accident and statute-barred by the expiry of the limitations period. Justice Gordon granted the motion. He gave effect to the presumption in section 5(2) of the Limitations Act, 2002 that the limitation period commenced on the date of accident. He held that because Collins did not plead discoverability facts in her Statement of Claim, she couldn’t make out a section 5(1) discoverability argument.

The Court of Appeal allowed Collins’s appeal:

In the normal course, if a limitations defence is raised, as here, in a statement of defence, and the plaintiff relies on the discoverability principle, the material facts relevant to discoverability should be pleaded in reply. I disagree with the conclusion of the motion judge that the appellant was required to plead the facts relevant to discoverability in her statement of claim. The expiry of a limitation period is a defence to an action that must be pleaded in a statement of defence. As such, discoverability, which is relevant to the limitations defence, need not be anticipated by a plaintiff and addressed in her statement of claim [citations omitted].

Update: Failing to deliver a Reply won’t necessarily bar a plaintiff from arguing discoverability.