Author: Dan

Ontario: some pedantry in response to the Court of Appeal decision in Rumsam

The Court of Appeal’s decision in Rumsam v. Pakes overturned the motion judge’s order granting the plaintiff leave to add a doctor as a defendant to the proceeding.  The doctor had opposed the motion on the basis of an expired limitation period.  The motion judge found the proceeding timely.

The Court’s conclusion seems right to me, but it contains some statements of law that are problematic and require comment.

First, there is this description of s. 5(1)(b):

[30]      As of August 29, 2013, Ms. Rumsam was obliged to exercise reasonable diligence to secure the name of the second doctor to satisfy the requirement in s. 5(b) [sic] of the Limitations Act that a “cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence” (emphasis added): Lawless, at para. 22.

This is not an accurate description of s. 5(1)(b).  That section provides that discovery occurs “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)”.

What paragraph 30 describes is common law discovery.  Discovery as codified in s. 5(1)(b) differs from common law discovery in two material ways.  First, the knowledge required by s. 5(1)(b) isn’t the material facts of a cause of action, but the four discovery matters in s. 5(1)(a); while these may accord generally with some causes of action, they don’t accord with many others (like breach of contract, which doesn’t have “injury, loss or damage” as a material fact.  Second, the knowledge is modified-objective, not purely objective; it’s the knowledge of a reasonable person with the abilities and in the circumstances of the plaintiff.

It’s unfortunate that the Court of Appeal continues to treat common law discovery as the same as statutory discovery.  Relatively recent Court of Appeal jurisprudence distinguishing the “claim” form the “cause of action” has been promising (see Apotex and Gillham Bay), but apparently without the impact one might have hoped for.

Then there is this summary of conclusions:

[33] In conclusion:

1. A claim must be brought within two years of a claim being “discovered”.

2. A claim is discovered when the claimant first knew the injury occurred, that it was caused by an act or omission, that the act or omission was caused by the person against whom the claim is made, and that there was loss.

3. The injury was sustained on July 11, 2007, so normally the limitation period would have expired on July 11, 2009.

4. Given that Ms. Rumsam did not turn 18 until June 4, 2010, the presumptive limitation period did not begin to run until that date.

5. The limitation period would have expired on June 4, 2012, but for the discoverability principle.

6. By August 29, 2013 at the latest, Ms. Rumsam knew all of the material facts except the name of the “second clinic physician” in question.

7. By August 29, 2013 at the latest, she was required to exercise reasonable diligence to get the name within the two-year period as she knew she likely had a claim against this person for her injuries, and August 29, 2013 was “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” as set out in s. 5(1)(b) of the Limitations Act.

8. The onus to prove reasonable diligence is on Ms. Rumsam.

9. She failed to exercise reasonable diligence as no steps were taken for at least a year.

10. As such, as the court held in Safai, there is no basis to extend the limitation period for more than two years as, from August 29, 2013, Ms. Rumsam knew of the likely claims and was in a position to ascertain the name by reasonable diligence.

Let’s go through the issues.

  1. A claim must be brought before the expiry of the limitation period, not within two years of discovery. Discovery causes the limitation period to commence, but it’s not determinative of its expiry.  There are multiple circumstances in which the limitation period will stop running—for a example a tolling agreement—so that it will expire more than two years from its commencement.
  2. Discovery does not require knowledge that an injury has occurred and that there was a loss, because for limitations purposes in injury and loss are effectively the same thing. There Limitations Act always refers to “injury, loss or damage”; “injury” never has a separate function from “loss” (which prompts the question why the act uses this language–I suspect it was intended by the drafters to signal that the act applies to all causes of action regardless of whether they require damage to be actionable).  In any event, all that discovery requires with respect to damage is knowledge that “injury, loss or damage” has occurred, so knowledge of injury or loss alone will suffice.
  3. There is no presumptive limitation period. There is basic limitation period in s. 4 that commences presumptively on the date of the act or omission that gives rise to the claim pursuant to s. 5(2). This is because of the “discoverability principle”, not despite it.  Section 5(2) creates a presumption that discovery occurs on the date of the act or omission, which the plaintiff can rebut.  The s. 5 discovery provisions always determine the commencement of the basic limitation period.

 

Ontario: make coverage denials clear and unambiguous

Clarke v. Sunlife is a reminder that for a denial of coverage to commence a limitation period, it needs to be clear and unambiguous:

[23]           It is not clear that the words used by the Sun Life letter of February 24, 2014 was a denial of disability benefits that amounted to “injury, loss or damage.” It used milder language than denial or refusal, and suggested that Ms. Clarke might “feel Totally Disabled from Any Occupation.” It invited more information to support her feeling.  However, it also said that her file was closed. This leads to an ambiguity, which leaves it unclear whether or not Ms. Clarke’s loss had “ripened” at this stage. However, assuming that Ms. Clarke’s loss was sufficiently identifiable at this point, a second issue must be addressed, that is whether Ms. Clarke was aware at the time of the February 2014 letter that a proceeding would be the appropriate means to seek a remedy for that loss.

Update! The Court of Appeal overturned this decision.

Ontario: the principles of s. 13 acknowledgment

University Plumbing v. Solstice Two Limited contains a reasonably uncommon discussion of s. 13 acknowledgment principles:

[15]           The last payment made by Solstice to the Plaintiff was on September 5, 2012. There is written acknowledgment of the debt in the form of email correspondence by Mr. Chalmers to representatives of the Plaintiff on June 20, 2013, October 9, 2013, April 25, 2014, and August 8, 2014. Mr. Chalmers admits that he sent these communications and that they contained his electronic signature.

 [16]           According to ss. 13(1), (10), and (11) of the Limitations Act, 2002, SO 2002, c. 24, Sched. B, these part payments and written acknowledgements bring the debt within two years of the commencement of the action. Under s. 13(8) these acknowledgments apply even though they may not contain specific promises to pay (although some of these communications do, in fact, contain such promises to pay the liquidated amount). The Court of Appeal has also confirmed that the acknowledgments do not have to specifically state the amount of the debt owing: Middleton v Aboutown Enterprises Inc., 2009, ONCA 466, at para 1; see also Back v Gilroy, 1977 CanLII 1548, at para 10 (Sask Dist Ct).
 [17]           This is especially the case where, like here, the actual amount is not a contentious issue: Phillips v Rogers, 1945 CanLII 500 (AB QB), [1945] 2 WWR 53, at para 26, citing Spencer v Hemmerde, [1922] 2 AC 507, 518. As stated by the Saskatchewan Court of Queen’s Bench in I.D.H. Diamonds NV v Embee Diamond Technologies Inc., 2017 SKQB 79, at para 21, “the court will look at the circumstances in which it was written, and will construe it in the way in which the writer intended it to be construed by the person to whom it is addressed.”
 [18]           The Defendants make an issue of the fact that the written acknowledgements were digitally transmitted and were not signed by hand. Counsel for the Defendants points out that s. 13(10) of the Limitations Act states that signed written acknowledgments are what is required. However, the case law establishes that the issue in every case will be one of fact: Lev v Serebrennikov, 2016 ONSC 2093, at para 24.
 [19]           The communications here are virtually identical to those described in Fleisher Ridout Partnership Inc. v Tai Foong International Ltd., 2012] OJ No 4229, at para 16:
 I am of the view that the Emails are something more than a mere acknowledgment of the debt. Firstly, the defendant expresses regret and surprise that the invoices have not been already paid. In fact, not only does he not object or deny payment but he clearly and reservedly indicates that the invoices should have been paid already. Secondly, he agrees to take ‘action’ to pay them.

[20]           As in Lev, at para 24, the “email[s] can satisfy the requirements of s. 13 of the [Litmitations] Act concerning acknowledgment.” Context is everything in these situations. Counsel for the Defendants submits that if a limitation period is to be waived, formality is important to ensure that it was intended by the sender of the communication. Here, however, that is not a particularly contentious issue since the communications are repeated and fully acknowledged. The emails sent by Mr. Chalmers and Mr. Smith all contain digital signatures. Under different circumstances those might not amount to conscious acknowledgment of the debt, but here the two individuals who sent them specifically concede that they were intended to be unequivocal acknowledgments of the debt.

 [21]           Mr. Chalmers and Mr. Smith have admitted in discovery that Solstice repeatedly confirmed liability for the full balance owing. In an email dated September 18, 2015, Mr. Smith specifically stated that the debts remained owing and again reiterated an intent to pay. As already indicated, it is the Defendants’ position that Chalmers and Smith were speaking strictly in their capacities as directors and officers of Solstice, and not of DSD or personally. However, under s. 13(6) of the Limitations Act, an acknowledgment by one trustee (i.e. Solstice) is an acknowledgment by any other person who is a trustee or later becomes a trustee (i.e. DSD, Chalmers, and Smith). “[D]irectors [who] had knowingly participated in a fraudulent and dishonest breach of trust…were therefore personally liable as constructive trustees”: St Mary’s, at 620.

Ontario: the criteria for an enforceable tolling agreement

The decision in Markplan Inc. et al. v. Osman et al. provides a helpful discussion of what is necessary to make a tolling agreement enforceable:

[10]           It is asserted that there was a tolling agreement between the parties. Between December 2014 and February 2015, there were communications between counsel arising from the motion to dismiss the Alberta action. This included a forbearance by the plaintiffs in requiring a defence to this action, and an agreement “freezing any further steps” in all the actions “to facilitate discussions regarding potential for resolution.” Those discussions foundered not long after, in early 2015. There was no discussion of tolling of limitation periods, or of forbearance respecting any counterclaim. Indeed, to the extent that limitation periods were addressed at all in the correspondence, it was by the defendants, whose counsel noted that if the Alberta action was dismissed then an action would be commenced in Texas where “the relevant limitation period…is four years.”

 [11]           The law is clear that an enforceable tolling agreement under s. 22 of the Limitations Act must be “an express and bilateral agreement between the parties that contains a clear and unambiguous request by one party to toll a limitation period and an equally clear and unambiguous affirmative response by the other”: see PQ Licensing S.A. v. LPQ Central Canada Inc., 2018 ONCA 331 at para. 40.  The Court of Appeal has also held that “a mere promise to forbear does not suspend a limitation period”: Hamilton (City) v. Metcalfe & Mansfield Capital Corp., 2012 ONCA 156 at para. 80.
 [12]           The correspondence between counsel in this case does not meet the threshold of certainty required for a tolling agreement.  It never mentions tolling the Ontario limitation period, or the possibility of a counterclaim, and the “freezing” point is about all the actions pending settlement discussions which did not last.  Further, the defendants were alive to the concerns about limitations by referring to the Texas limitation period, but did not address the Ontario limitation period.
 [13]           If there was any doubt about a lack of agreement, it was later reflected in a submission made by the plaintiffs in the Alberta proceeding in which plaintiffs’ counsel, in addressing the loss of juridical advantage issue, noted that “Mr Osman was advised in August of 2013 of the Defendants’ [plaintiffs in this proceeding] intention to challenge the appropriateness of the forum of Alberta, yet he took no steps to either commence an action in an alternative jurisdiction in order to protect  his rights or seek to negotiate a tolling agreement.” This submission was made in a brief served on June 30, 2016. If Mr. Osman and the defendants thought before then that they had a tolling agreement, they ought to have raised it at that time. They did not, and instead waited an additional two years and three months before serving the impugned defence and counterclaim in this action.
 [14]           In sum, there was no agreement to toll the Ontario proceeding and any possible counterclaim.

 

Ontario: the principles of notice under the PACA

The decision in McCarthy v. 2065943 Ontario Ltd. provides a good summary of the principles applicable to the notice requirement in s. 7 of the Proceedings Against the Crown Act:

18.           The legislation in s. 7(1) offers a much more forgiving limitation period with respect to tort claims, employment claims, and statutory claims, but s. 7(3) imposes the 10-day deadline for notice “in respect of any breach of the duties attaching to the ownership, occupation, possession or control of property”. This 10-day notice provision is considered an essential step in a proceeding against the Crown when occupiers’ liability is concerned, and for the most part it must be strictly observed.  Failure to comply with the notice provision renders the proceeding a nullity:  Zuliani Ltd. v. Windsor (City) (1973), 1973 CanLII 671 (ON SC), 2 O.R. (2d) 598 (H.C.), at para. 6.

 19.           The purpose of this notice requirement is to “target occupiers’ liability” with a special and strict notice requirement”: Latta v. Ontario (2002), 2002 CanLII 45117 (ON CA), 62 O.R. (3d) 7 (C.A.), at para. 18.  Such notice has been held to be driven by a policy that permits the Crown to gather sufficient information either to seek to resolve a claim or prepare a defence to an anticipated action: West v. West, 2013 ONSC 247, at para. 14; cf. Mattick Estate v. Ontario (Ministry of Health), 2001 CanLII 24086 (ON CA), [2001] O.J. No. 21 (C.A.), at para. 15.

 20.           Strict compliance with the notice provision has been relaxed in certain circumstances.  Thus, imperfect notice that takes into account the frailties or limitations of an injured plaintiff may nevertheless be deemed sufficient to put the Crown on notice that a claim could reasonably be anticipated: Latta, at paras. 30-35; Leone v. University of Toronto Outing Club, [2006] O.J. No. 4131 (Sup. Ct.), at paras. 75-76. Moreover, there is no indication in the PACA that the notice must be in writing, written by the hand of the plaintiff, or be in any particular prescribed form, so long as it provides the requisite elements of proper notice: Coulter v. Ontario (Ministry of Natural Resources), 2014 ONSC 1573, at paras. 61-67.

The court also explains why attempting to circumvent the notice requirement by framing an occupier’s liability claim as negligence is fraught:

21.           No notice to the MNR was given by anyone within the ten days following the date of the incident in this proceeding, August 10, 2014.  Even on a generous interpretation of the PACA, reading a “discoverability” requirement into the determination of the date that constitutes “after the claim arose” for the purposes of a third party claim under  7(3) of the PACA, no notice was provided within 10 days of the date the defendant points to for discovery of the claim, July 11, 2018.  Notice to the MNR was not provided until September 14, 2018, more than 60 days after the “discoverability” date.

 22.           The defendant raises two main arguments against the PACA notice requirement advanced by the MNR.  It asserts that its third party claim addresses negligence, and not occupier’s liability, and is not therefore subject to the 10-day limitation.  It further submits that no such notice is necessary in the circumstances of this case, and that the MNR has suffered no prejudice from the absence of notice.

 23.           The defendant argues that its claim involves negligence of MNR servants and employees in the placement, clarity, and maintenance of necessary signage, and is not a claim “in respect of any breach of the duties attaching to the ownership, occupation, possession or control of property.”  On such an argument, the claim relates to negligence, and not to occupier’s liability, and is subject to the more lenient notice requirement in  7(1) of the PACA.

 24.           However, such an argument rings hollow in the circumstances of this case, where all of the defendant’s allegations in its third party claim actually appear to relate to issues of occupiers’ liability, and duties attaching to the ownership of property.  Indeed, a claim that is, in substance, “in respect of a breach of duties attaching to the ownership of property” does not escape into the tort claim provision under  5(1)(a) of the PACA, so as to bypass the 10-day notice required for s. 5(1)(c) property-related claims, merely by disguising its true nature under an over-arching assertion of negligence: Daoust-Crochetiere v. Ontario (Minister of Natural Resources), 2014 ONCA 776, at para. 3; Latta, at para. 18.  This argument fails.

 25.           Given the passage of time before the defendant became aware of the signage issue that was raised by the plaintiff only at her discoveries, the defendant submits that the purposes served by strict application of the notice requirement cannot be fostered in any way in relation to this third party claim, which almost necessarily arose much later than ten days after the date of loss.  By the time the defendant was served with the plaintiff’s claim, the MNR’s opportunity to investigate was already significantly attenuated.  It is submitted that strict application of  7(3) of the PACA to defendants seeking to launch third party claims will result in injustices.

 26.           The defendant also argues that in this case the MNR suffered no prejudice as a result of the failure by the defendant to provide notice, as Ms. Snarr conducted her own investigation that must have contemplated the possibility of litigation, since the MNR now seeks to wrap her report in “litigation privilege”.  The defendant argues that the policy behind the PACA notice has therefore been met, even if the notice requirement has not been.

 27.           To accede to this argument would require a court to read into the provisions of the PACA an exception that its legislators did not see fit to include.  While some areas of plaintiff incapacity have resulted or may result in a forgiving application of the PACA notice requirements in certain circumstances, such as with respect to the form of notice, a flexible approach that would bypass a notice requirement altogether, even in the absence of prejudice to the Crown, reads into the legislation an exception that does not exist.  The Ontario Court of Appeal has specifically rejected such an approach: Daoust-Crochetiere, at para. 12.

 28.           This argument also does not take into account the elements that make up proper notice under the PACA.  Adequate notice must contain both sufficient particulars to allow the Crown to identify the source of the potential problem, so that it can investigate, and a complaint in some form, to alert the Crown to the importance of investigation to avert a potential claim or prepare a defence to an impending claim: Latta, at paras. 26-27, 42; Mattick Estate, at paras. 15-18; Conners v. Ontario (Minister of Community Safety and Correctional Services), 2016 ONSC 7238, at paras. 21-22.

 29.           The Crown had a right under the legislation to be alerted to the defendant’s third party complaint relating to signage long before September 14, 2018, so that it would be encouraged to conduct what investigation it still could in as timely a way as possible.  Ms. Snarr’s report, though it may contain significant details of the incident, the names of individuals involved, and injuries sustained, has not been shown to have been directed to the plaintiff’s allegations about improper signage in the Park.  This argument must fail.

Ontario: Court of Appeal on the interaction of s. 5(1)(a)(iv) and s. 18 of the Limitations Act

Two aspects of the Court of Appeal’s decision in Ridel v. Goldberg are noteworthy.

First, the court held that a contribution and indemnity proceeding does not become an appropriate remedy for a loss only when the main action resolves.  Section 5(1)(a)(iv) will not suspend the limitation period as against a second defendant where a plaintiff has commenced a legal proceeding against another defendant for the same wrong:

[70]      The appellants rely on s. 5(1)(a)(iv) of the Limitations Act to argue that the appeal of the 2013 Judgment postponed the running of the limitation period against e3m. They say that, because the appeal may have eliminated e3m’s liability to the Ridels and hence e3m’s claim against Goldberg, they would not reasonably have known that an action was “an appropriate means” to seek to remedy e3m’s losses until the appeal was dismissed.

[72]      The appellants rely on this court’s decision in Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44, 136 O.R. (3d) 202, a case involving an action in Ontario to enforce a foreign judgment, in support of their argument that it was not legally appropriate to commence a claim against Goldberg until the appeal of the 2013 Judgment was determined. In Figliolini, this court held, at para. 77:

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

[73]      The appellants say that, just as this court held that the basic limitation period for an action to enforce a foreign judgment in Ontario runs from the date of exhaustion of all appeals (subject to discoverability principles), the same should apply to a claim that, as here, is based on a domestic judgment. In either case, the debt obligation underlying the claimant’s proceeding would disappear if the judgment were overturned.

 [74]      In my view, Figliolini does not apply by analogy or otherwise. The main issue in Figliolini was whether s. 16(1)(b) of the Limitations Act (which provides that there is no limitation period in respect of, among other things, “a proceeding to enforce an order of a court, or any other order that may be enforced in the same way as an order of a court”) would apply to an action to enforce a foreign judgment. The court rejected that argument, and then went on to determine when the basic two-year limitation period for an action to enforce a foreign judgment would begin to run.
 [75]      Figliolini dealt only with actions to enforce foreign judgments. Strathy C.J.O. noted that “a judgment creditor who brings an Ontario proceeding on a foreign judgment must show that the foreign court had jurisdiction and that the judgment is final and for the payment of money”: at para. 51. An action to enforce a domestic judgment is, by s. 16(1)(b) of the Limitations Act, not subject to any limitation period. And, importantly, actions such as the present action – which are not to enforce a judgment, but to claim indemnity – are governed by their own provisions in the Limitations Act that would be entirely undermined if the appellants’ argument were given effect. This is the fatal flaw in the appellants’ reliance on Figliolini.
 [76]      Unlike proceedings to enforce a foreign judgment, which require finality, there is no requirement that in order to effectively claim contribution and indemnity there must be a final judgment against the claimant. To the contrary, the two-year limitation period runs from the date the claim is made against the first wrongdoer, subject to the discoverability rules in s. 5(1)(a): Mega International, at para. 74. In Canaccord, this court noted that s. 18 of the Limitations Act specifically departs from the previous law for contribution claims between tortfeasors, where the limitation period ran against the party claiming indemnity from the date of judgment: at para. 20.
 [77]      While not determinative, this court’s decision in Tapak v. Non-Marine Underwriters, Lloyd’s of London, 2018 ONCA 168, 76 C.C.L.I. (5th) 197, leave to appeal refused, [2018] S.C.C.A. No. 157, is instructive. In that case, the appellants relied on s. 5(1)(a)(iv) to argue that an appeal against other parties, if successful, might have eliminated their losses and that they therefore did not know that their action for contribution and indemnity was “an appropriate means” to seek to remedy their losses until the appeal was dismissed. At para. 13, the court rejected this argument, stating:
 [Section] 5(1)(a)(iv) is not intended to be used to parse claims as between different defendants and thus permit one defendant to be pursued before turning to another defendant. Rather, it is intended to address the situation where there may be an avenue of relief outside of a court proceeding that a party can use to remedy their ‘injury, loss or damage’….

I agree with the latter observation that s. 5(1)(a)(iv) is not intended to operate in the manner proposed by the appellants.

[78]      In the present appeal, the appellants assert that it was legally appropriate for e3m to delay an action against Goldberg until the Prior Action was finally disposed of on appeal. This is precisely the sort of litigation in stages which will not delay the commencement of a limitation period for purposes of s. 5(1)(a)(iv). In the usual case, s. 5(1)(a)(iv) will not suspend the limitation period as against a second defendant where a plaintiff has commenced a legal proceeding against another defendant for the same wrong: Presley, at para. 31. This general principle is buttressed by the specific and certain rules for the commencement of claims for contribution and indemnity ushered in by s. 18 of the Limitations Act. Sharpe J.A., in Canaccord, carefully described the legislative history in concluding that s. 18 provided a “marked departure from” and “significant reforms to” the previous regime governing limitation periods for claims for contribution and indemnity: at para. 27. Under the previous law, a tort claimant seeking contribution and indemnity could wait for judgment in the main action before commencing a claim for indemnification. In contrast, “s. 18 significantly shortens the limitation period governing contribution and indemnity claims to two years from the date the first alleged wrongdoer was served with the underlying claim, thereby encouraging resolution of all claims arising from the wrong at the same time”: Canaccord, at para. 20.

This is the first time the court has confronted the tension between s. 18 and its recent appropriateness jurisprudence.  It is settled that an alternative process with the potential to eliminate the plaintiff’s loss can suspend the discovery of a claim.  In a claim for contribution and indemnity, if the main action results in the dismissal of the claim, the defendant will have no loss for which to claim contribution and indemnity.  The main action will have eliminated the plaintiff’s loss.

However, this is clearly at odds with the intent of s. 18, which the court notes.  I think the court resolved this problem as best it could: the main action is not an alternative process, but the same litigation.

Secondly, the court reiterated that s. 12 of the Limitations Act applies to claims asserted by a creditor who has taken an assignment of a claim of a bankrupt under s. 38 of the BIA. The applicable date of discovery is the earlier of the predecessor’s discovery of the claim, or the person claiming through the predecessor’s discovery of the claim.  The assignment does not restart the limitation period.

The court’s analysis is well-reasoned and instructive:

[44]      In this case, by contrast, the appellants are pursuing a claim that initially belonged to e3m and that vested in the trustee on e3m’s bankruptcy. The claim for breach of Goldberg’s fiduciary and other duties to e3m is not one that the appellants could have pursued before e3m’s bankruptcy. Indcondo did not address the question of when the limitation period under s. 12 would run in respect of a creditor who may well have known of the potential claim by the bankrupt, but had no way to enforce it until the bankruptcy.

 [45]      The appellants characterize the motions judge’s error here as a failure to consider s. 5(1)(a)(iv) of the Limitations Act in relation to the claim against Goldberg. Whether a proceeding was an appropriate means to remedy a claim is an essential element in the discoverability analysis and the failure to consider s. 5(1)(a)(iv) is an error of law: Presley, at para. 15.
 [46]      I agree with the appellants that, because they lacked capacity to bring a claim in the name of e3m against Goldberg, any personal knowledge they might have had before e3m’s bankruptcy respecting a claim did not cause the limitation period to run against them pursuant to s. 12(1). In my view, however, this result does not flow from the application of s. 5(1)(a)(iv).
 [47]      In determining when the limitation period began to run in respect of the appellants’ claim, the question is when they, as “claimants” – that is, as persons who reasonably had the claim in question – knew or ought to have known of the matters referred to in s. 5(1)(a). The application of the test in s. 5(1)(a) requires first that the claims at issue be defined or identified: Morrison, at paras. 33, 49.
 [48]      In this case, the claim advanced in the appellants’ action is not a claim by them personally, or one that they could have advanced personally (as was the case in Indcondo), but a claim they are asserting on behalf of the bankrupt, e3m, against its former principal, Goldberg. Section 5(1) applies to “the person with the claim”. When they were litigating against e3m in the Prior Action, the appellants may well have known of the various matters under s. 5(1)(a) in the general sense, but because they were not and could not have been “the persons with the claim” at that stage, any such knowledge was immaterial.
 [49]      Until e3m was bankrupt, any claim against Goldberg for breach of his duties as a director could only be pursued by e3m. The appellants had no right, title or interest in the claim. They had no ability to bring the claim while the claim continued to belong to e3m.

[51]      Similarly, in this case, the appellants could not have asserted a claim against Goldberg for wrongs done to e3m until they obtained the s. 38 order. In other words, until they obtained the s. 38 order, they had no standing to claim for e3m’s losses. Any knowledge of Goldberg’s wrongdoing in relation to e3m, whether by virtue of what they themselves had pleaded in the Prior Action, or when they received Pepall J.’s reasons in the 2013 Judgment, was not sufficient for them to be able to act.

 [52]      The motions judge’s conclusion that, because of their personal knowledge of the material facts in relation to e3m’s claim against Goldberg, the limitation period began to run against the appellants as early as July 2006 and as late as April 2013, was therefore in error. Their knowledge of those matters did not become relevant until they had or ought reasonably to have had the authority to pursue the claim, which was, at the very earliest, upon the bankruptcy of e3m in January 2015.
 [53]      Under this analysis, s. 5(1)(a)(iv) is not engaged. The question is not whether the appellants knew or ought to have known that a proceeding by the company would be an appropriate remedy for Goldberg’s alleged wrongs. Until they had control over the claim, or the means to obtain such control (by moving promptly in e3m’s bankruptcy), they were not “claimants” for the purpose of s. 5(1)(a) and therefore their knowledge was not the knowledge of claimants under the section.

Ontario: the Court of Appeal leaves determining who discovers a corporation’s claim to another day

In Service Mold + Aerospace Inc. v. Khalaf, the Court of Appeal confronted the question of whose knowledge informs the s. 5 analysis when the plaintiff is a corporation, but without answering it.  This was the second time in 2019 that a court acknowledged that this remains unresolved without resolving it.

[28]      In appealing this finding, the appellant bank focused primarily on its claim that the motion judge erred in principle by using Mr. Schuurman’s abilities and circumstances, instead of those of the corporations. It argues that since the claim belongs to the corporate plaintiffs, the s. 5(1)(b) test should have focused on their abilities and circumstances, not Mr. Schuurman’s.

 [29]      I need not resolve this issue because […].
 The Court also overturned the motion judge’s s. 5 analysis on the basis that it ignored the objective component of the modified-objective test.  It’s a very good critique, and provides a helpful list of the considerations that might inform the test’s application:

[29]      […] in my view, the motion judge clearly erred in applying the modified objective test by conducting a purely subjective inquiry. Rather than imbuing the hypothetical reasonable person with the abilities and circumstances of Mr. Schuurman, she imparted on that person the attitudes and practices of Mr. Schuurman, thereby defeating the objective reasonableness inquiry.

 [30]      She said:
 The reasonable person standard is to be applied taking into account the “abilities” and the “circumstances of the person with the claim”. It seems to me that when the “reasonable person” standard in the context of s. 5(1)(b) is applied in this case, the circumstances of Mr. Schuurman include the organization of his business at the time of the fraud. The organization of the business, and particularly the bookkeeping part of that business, lacked a segregation of duties. Without a segregation of duties as described by Ms. Grogan, the plaintiffs were vulnerable to bookkeeper fraud. To put the analysis another way, the “abilities and circumstances’” of Mr. Schuurman included his overly trusting, perhaps gullible nature and his resultant vulnerability.

[31]      First, an issue in the case was whether the respondent corporations failed to know what they ought to have known, because the bookkeeping part of their business was not monitored as it reasonably should have been. The motion judge begged that question by assuming that a reasonable person would have the same bookkeeping practices as the respondent corporations had. Simply put, in identifying the “circumstances of the person” that the reasonable person will share with the plaintiff, it is an error in principle to infer that the reasonable person would conduct itself in the same way that the plaintiff did. To do so is to eviscerate the objective component of the test. That is what the motion judge did here.

 [32]      Second, s. 5(1)(b) is about knowing what one ought to know. In context, the reasonable person component of s. 5(1)(b) serves to ensure that the plaintiff acted with reasonable levels of prudence and attention in attending to the risk of injury, loss or damage. Because the objective component of the test is modified, the degree of prudence and attention that can reasonably be expected will vary among persons with claims, according to their abilities and circumstances – things such as level of intelligence, education, experience, resources, health, power imbalances, dependence, and situational pressures or distractions that might bear on the ability to appreciate what is happening. It is imperative to remember, however, notwithstanding that the term “abilities” may be wide when viewed in isolation, s. 5(1)(b) requires that once material characteristics are attributed to the reasonable person, that hypothetical person will remain reasonable. If the hypothetical person is imbued with unreasonable imprudence or inattention the objective component of the test is defeated, and only one result can obtain.

Ontario: discovery analyses are fact-driven

In Steele Industrial Supplies Inc. v. Elliott, the Superior Court found that an employer who knows that it has been defrauded by an employee, and has called the police in regards of that fraud, doesn’t necessarily know that a proceeding is an appropriate remedy for the fraud loss.

The decision is noteworthy as an example of how fact-driven discovery analyses are.  I think most people would consider it safe to presume that an employer who learns that an employee has committed a fraud has discovered a claim against that employee, but, as this decision shows, it depends on the facts. These are the material paragraphs:

[35]           I agree with the submission made on behalf of the defendants that, by the time Mr. D’Agostino placed his call to the police, the first three requirements of s. 5(1)(a) had been met. As the defendants correctly submit, the law does not require absolute certainty before the limitation clock starts to tick: Kowal v. Shyiak, 2012 ONCA 512, at para 18. Nonetheless, in my view, the clock did not start to tick regarding the requirement in s. 5(1)(a)(iv) until later.

[36]           In Federation Insurance Co. of Canada v. Markel Insurance Co. of Canada, 2012 ONCA 218, the Court of Appeal considered the meaning of the fourth requirement set out in s. 5(1)(a)(iv). On behalf of the court, Sharpe J. A. wrote (para. 34):

In my view, when s. 5(1)(a)(iv) states that a claim is “discovered” only when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess [the] tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.

[37]           Section 5(1)(a)(iv) requires that the court have regard to “the nature of the injury, loss or damage”. In that regard, it must be borne in mind that what was involved here was an allegation that Mrs. Elliott, a ten-year employee who was in a position of trust, had defrauded her employer. This was not a case of failed cosmetic surgery or faulty construction. Here, the act or omission was much less obvious, and the allegation was much more odious. I accept that an employer might not be in a position to know that an action was appropriate until it had confronted the suspected employee.

[38]           In both his examination for discovery and in his statement of September 9, 2012 to the police, Mr. Wilson said he had not fired Mrs. Elliott before Mr. D’Agostino called the police because he was concerned that, if he did, Mrs. Elliott might have a claim for wrongful dismissal. While Mr. Watchorn told the police a few days after Mrs. Elliott was fired that he was reasonably sure that Mrs. Elliott was responsible for a loss by July 2012, he was much less sure before she confessed. In a statement he gave on August 31, 2012, Mr. Watchorn used the word “suspect” frequently when referring to his belief about Mrs. Elliott’s actions. Mrs. Watchorn stated at that time that he was still in the process of conducting a cash test to corroborate his findings.

[39]           It is clear from the fact that Mrs. Elliott was not fired until she was confronted on September 24, 2012 that Mr. Wilson was not certain enough of Mrs. Elliott’s guilt to risk being a defendant in a wrongful dismissal suit, let alone being a plaintiff in an action for theft and fraud. In these circumstances, I believe it was reasonable for Mr. Wilson to wait to fire Mrs. Elliott until after he had confronted her, and to commence an action within two years of that date, which he did.

[40]           For these reasons, the defendants’ motion to dismiss the action as being out of time must fail. However, I am not limited to simply dismissing the motion. Notwithstanding the fact that the plaintiff has not brought a motion seeking the opposite relief, the court may make a finding as to when the limitation period began and may make a declaration accordingly: Kassburg v. Sun Life Assurance Co. of Canada, 2014 ONCA 92, at para. 52. Based on the foregoing facts, I find that the limitation period began to run on September 24, 2012.

 

Ontario: the principles of s. 7 capacity

The Superior Court decision in Enns v. Goertzen provides a detailed consideration of the Limitation Act’s s. 7 capacity provisions.  Two points are particularly noteworthy:

  1. It summarises the authorities for the principle that s. 7 capacity is distinct from legal capacity.
  2. Although it acknowledges that the Limitations Act does not define “incapable of commencing a proceeding”, instead of considering what this means the court takes the now standard approach of applying the factors developed for determining whether a party is under disability and requires a litigation guardian.  Section 7 incapacity encompasses parties under disability, but is much broader.  For example, s. 7 arguably encompasses a circumstance where a person is physically unable to commence a proceeding, perhaps because of some incapacitating injury, but has no mental impairment.  This the analysis:

[273]      In evaluating whether evidence of the nature described above is available on this motion, it is helpful to first consider the scope of the subject matter of s. 7(1) of the Act, which focuses on an individual’s lack of capability to commence a proceeding in respect of a claim.  The phrase “incapable of commencing a proceeding” is not defined in the Act (nor is the word “incapable”).  Further, the Act does not prescribe enumerated criteria that either must or may be considered by a court in determining whether a claimant has rebutted the presumption prescribed by s. 7(2) of the Act, other than its general reference to an individual’s physical, mental or psychological condition in s. 7(1) of the Act. As I will address below, the decided cases offer some additional guidance in that regard.

[274]      First, the issue of an individual’s capability to commence a legal proceeding must not be confused with other forms of legal capacity. For example, in this instance, each of the parties has adduced evidence that they say either demonstrates that after her stroke, Ms. Enns possessed legal capacity to engage in certain activities, other than commencing a proceeding or that she did not possess legal capacity to engage in certain activities, other than commencing a proceeding, respectively.

[276]      Yet, s. 7 of the Act is exclusively focused on an individual’s capability to commence a proceeding in respect of a claim, which is distinct from an individual’s capacity, to: consent to medical treatment; manage financial affairs; or even to “discover” a claim. Indeed, in Cook v. Joyce, 2016 ONSC 2164, 130 O.R. (3d) 114, rev’d on other grounds 2017 ONCA 49, at para. 138, Perell J. articulates the clear distinction between the mental state that is required to subjectively and objectively discover that one has a claim (discoverability) and the capacity to sue.  He also distinguishes the capacity to commence an action from other legally recognized forms of capacity, at para. 178, as follows:

This type of legal phenomenon of different mental states coexisting is not unknown to the law.  The mental capacity to sue is not the same as the mental capacity to contract, or to marry, or to execute a will, or to consent to medical treatment.  To take a simple example, a teenager involved in a car accident might have discovered her claim without a litigation guardian having been appointed, the limitation period for that discovered claim would be suspended because the teenager would be a minor without the legal capacity to sue. [Emphasis added.]

Finally, he cautions that the issues of “discoverability and legal capacity to sue should not be conflated” (see: para. 180).

[277]      To that, I would add that an individual’s legal capability (or incapability) to commence a proceeding ought not to be conflated with the individual’s capacity to:  consent to medical treatment; consent to the disclosure of health related or other personal information; or to manage their own financial affairs. A conclusory finding that an individual was, for example, capable of consenting to medical treatment at a certain point in time, is not synonymous with a finding that an individual was, at that point in time, capable of commencing a proceeding in respect of a claim.  Similarly, a finding that an individual was or is incapable of managing his or her own financial affairs or property does not unequivocally prove that the person was or is incapable of commencing a proceeding.

[278]      Second, in order to negative the presumption prescribed by s. 7(2) of the Act (and stop the running of the limitation period) a claimant is not required to prove that he or she is a mental defective, a mental incompetent, or of unsound mind.  Instead, the issue remains whether a person’s physical, mental or psychological condition renders that person incapable of commencing a proceeding in respect of a claim, at any time before the appointment of a litigation guardian. If so, the accrual of the limitation period is suspended during the period of incapacity.  That standard recognizes that it is unfair to run a limitation period against a plaintiff who is incapable of commencing an action: see Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008, at paras. 29-32.
[279]      Third, the decided cases assist in identifying relevant factors for consideration when determining whether a person is incapable of commencing a proceeding in respect of a claim.  For example, in Huang v. Braga, 2016 ONSC 6306, at para. 19, leave to appeal to Divisional Court refused, 2017 ONSC 3826, Archibald J. curates from the jurisprudence, several factors that merit consideration when determining whether a party is under a disability and requires a litigation guardian specifically:
(a)        A person’s ability to know or understand the minimum choices or decisions required and to make them;

(b)        An appreciation of the consequences and effects of his or her choices or decisions;

(c)        An appreciation of the nature of the proceedings;

(d)      A person’s inability to choose and keep counsel;

(e)        A person’s inability to represent him or herself;

(f)        A person’s inability to distinguish between relevant and irrelevant issues; and,

(g)        A person’s mistaken beliefs regarding the law or court procedures.

[280]      In Hengeveld v. Ontario (Transportation), 2017 ONSC 6300, at para. 21, Hebner J. considered the foregoing factors when determining whether a party was “incapable”.  Subsequently, in Carmichael v. Glaxosmithkline Inc., 2019 ONSC 2037, at para. 40, Lederer J. similarly found that the foregoing factors merit consideration when determining if a party is incapable of commencing an action in accordance with s. 7 of the Act. Indeed, I have considered the foregoing factors, in the context of the available evidence, when determining whether the evidence discloses a genuine issue with respect to Ms. Enns’ historical capacity to commence a proceeding.

The decision also holds that there is no general rule requiring medical evidence to establish historical capacity:

[281]      In Carmichael, the court was assisted by expert opinion evidence concerning the plaintiff’s ability (or lack thereof) to commence a proceeding in respect of a claim during a specified time period that occurred before the proceeding was commenced.  Expert evidence directly addressing that issue has not been adduced by any party in the context of this motion.

[282]      The defendants seize on the absence of evidence from a qualified expert, expressly opining that Ms. Enns was incapable of commencing a proceeding in respect of her claim against them any earlier than she did, as a basis to conclude that there is no genuine issue that requires a trial to determine whether she has proved facts contrary to the presumption prescribed by s. 7(2) of the Act. They posit that a plaintiff relying on an alleged historical “incapacity to sue” as a means to extend the running of a limitation period must adduce specific medical evidence that he or she lacked capacity to bring a claim within the two year limitation period.
[283]      Yet, the provisions of the Act do not mandate that evidence of that nature be adduced. I am not persuaded that such evidence must necessarily and unequivocally be lead, in every case, on behalf of a person with a claim, who seeks to prove facts contrary to the presumption prescribed by s. 7(2) of the Act. I will explain.
[284]      The jurisprudence generally lends support to the proposition that a party seeking to prove facts contrary to the presumption set out in s. 7(2) of the Act is well served by adducing medical evidence on the issue.  For example, in Cook v. Joyce, Perell J. states at para. 152:
It should not escape notice that but for the presumption of incapacity available to victims of sexual assault, a plaintiff relying on incapacity to sue as a means to extend the running of a limitation period would likely have to provide medical evidence indicating that he or she lacked the capacity to bring a claim within the two year limitation period (see: Deck International Inc. v. Manufacturers Life Insurance, 2012 ONCA 309 (Ont. C.A.), at paras. 4 and 6; Klimec v. Klos, [2013] O.J. No. 3740 (Ont. S.C.J.), at para. 25; Reid v. Crest Support Services (Meadowcrest) Inc., 2013 ONSC 6264 (Ont. S.C.J.), at paras. 13-17). [Emphasis added.]

[285]      Similarly, in Deck International Inc. v. Manufacturers Life Insurance, 2012 ONCA 309, the plaintiffs appealed an order of summary judgment dismissing their action for long term disability benefits.  After recounting: the motion judge’s finding that there was insufficient evidence to support a finding of incapacity, such that s. 7 of the Act would apply; and the appellants’ submission that the motion judge failed to consider all the evidence before the court, the Court of Appeal concluded, at para 6:

We do not accept this submission.  There was no medical evidence to the effect that Mr. Donaldson lacked the capacity to commence the action within the meaning of s. 7.  There was evidence from family members as to his disability, but that is not the same thing as medical evidence going to the issue of capacity to commence an action. [Emphasis added.]

[286]      Similar sentiments were expressed in Reid v. Crest Support Services (Meadowcrest) Inc., 2013 ONSC 6264, at para. 17, and Aletkina v. Hospital for Sick Children, 2014 ONSC 6263 (Div. Ct.), at paras. 11-14.

[287]      In my view, the foregoing authorities do not establish a general legal principle that: a party that seeks to prove facts contrary to the presumption prescribed by s. 7(2) of the Act is, by necessity, required to adduce an expert medical opinion that the plaintiff lacked capacity to commence a proceeding in respect of a claim prior to the expiration of the limitation period; or that a plaintiff is always required to lead expert medical evidence that he or she is under a “legal disability”.  Although such evidence has the potential to be of great benefit in proving facts contrary to the presumption prescribed by s. 7(2) of the Act, there may be situations where evidence of the narrative circumstances alone is sufficient to negative that presumption, without the need for specified expert evidence on the point.  For example, where the evidence reveals that a “person with a claim” was unconscious while in a coma for a prolonged period of time.  In that circumstance, the type of expert medical evidence that the defendants assert must always be adduced on behalf of a person with a claim, would not be necessary in order to establish that the person was incapable of commencing a proceeding, while unconscious.
[288]      Even in the absence of a specific expert opinion of the type described by the defendants, medical evidence will often be the most compelling and expedient manner through which a party may prove the contrary to the presumption prescribed by s. 7(2) of the Act. In the absence of such evidence, a party may very well fall short of meeting its onus in that regard. Nonetheless, there have been instances where courts have concluded that a party has successfully rebutted the presumption prescribed by s. 7(2) of the Act, even in the absence of confirmatory medical opinion evidence on the issue:  for example, see Landrie, at paras. 35 and 53-56.

The Supreme Court on the application of common law discovery

In Pioneer v. Godfrey, the Supreme Court considered the application of common law discovery to statutory limitation periods.  It is now the leading case on the subject.

The Court held that the common law discovery rule applies only when a limitation period runs from the accrual of a cause of action, or “some other event that can occur only when the plaintiff has knowledge of his or her injury”.

It doesn’t apply when a statutory limitation period runs from an event unrelated to the accrual of the cause of action.  This is because legislature displaces the discovery rule when linking the limitation period to an event unrelated to the plaintiff’s cause of action.

In determining whether a limitation period runs from the accrual of a cause of action, substance prevails.  Even where a statute doesn’t explicitly state that a limitation period runs from accrual, the discovery rule applies if the limitation period in substance commences on accrual .

Thus s. 36(4) of the Competition Act, which the appeal concerned, is subject to discoverability:

[44]                          The text of s. 36(4)(a)(i) provides that no action may be brought under s. 36(1)(a) after two years from a day on which conduct contrary to Part VI occurred. From this, it is clear that the event triggering this particular limitation period is an element of the underlying cause of action. That is, the limitation period in s. 36(4)(a)(i) is triggered by the occurrence of an element of the underlying cause of action — specifically, conduct contrary to Part VI of the Competition Act. Therefore, it is subject to discoverability (Fanshawe College of Applied Arts and Technology v. AU Optronics Corp., 2016 ONCA 621 (CanLII), 132 O.R. (3d) 81, at para. 18).

Justice Côté dissented.  When a limitation period commences on the occurrence of an element of a cause of action rather than the cause of action’s accrual, it does not necessarily follow that the discovery rule applies.  This is because the occurrence of the an element may not depend on the plaintiff’s knowledge:

[151]                     Conversely, “the occurrence of an element of the underlying cause of action” (Brown J.’s reasons, at para. 44) will not always fit within either category outlined above at para. 149. It may be that the occurrence of such an event does in fact depend on the state of the plaintiff’s knowledge, but unlike the accrual of a cause of action, this does not invariably follow as a matter of logical necessity. In Peixeiro, for example, this Court held that the point at which damages are sustained — a constituent element of (among other things) the tort of negligence — depends on when the plaintiff actually has knowledge of his or her injury. Knowledge will not form part of every element of the cause of action in negligence, however. A breach of a standard of care, for example, may occur years or even decades before the plaintiff first learns about it. Although such a breach is a prerequisite to a successful claim in negligence, it is also something that takes place without any regard to the plaintiff’s state of mind.

[153]                     With this in mind, I am respectfully of the view that my colleague’s approach is undermined by the well-settled principle that the discoverability rule is fundamentally a rule of statutory interpretation. The fact that a limitation period begins running upon the occurrence of anelement (and not upon the accrual or arising) of the plaintiff’s cause of action is not, on its own, indicative of any legislative intent regarding the applicability of the discoverability rule. As I have already indicated, my colleague’s conclusion is the same as the one reached by the Court of Appeal in this case and by the Ontario Court of Appeal in Fanshawe: in such circumstances, according to him, discoverability applies automatically. This, however, creates an arbitrary distinction between triggering events that are related to the cause of action and those that are not, despite the fact that both may occur independently of the plaintiff’s state of mind. How can it fairly be said that the legislature intended the discoverability rule to apply to one and not the other? Although knowledge is necessary for a cause of action to fully accrue to the plaintiff, it does not follow that an element of the cause of action also occurs only when the plaintiff has knowledge thereof.

[154]                     A preferable approach is instead one that considers each statutory limitation clause on its own terms, recognizing that a triggering event that relates to a cause of action can, but need not, be dependent upon the plaintiff’s state of mind. This approach is faithful to this Court’s jurisprudence, and respectful of the notion of discoverability as an interpretative tool and not a general rule that allows clear statutory wording to be disregarded. For my part, I would reaffirm the approach laid out in Fehr without any modification.

Thus discoverability doesn’t apply to the s. 36(4) limitation period:

[157]                     The wording of the limitation period set out in s. 36(4)(a)(i) provides ample support for the proposition that the two-year period commences independently of when the plaintiff first learns of the wrongdoing. Rather than having the limitation period commence upon the accrual of the cause of action (as was the case in Central Trust and M. (K.)), Parliament decided that it would instead commence on “a day on which the conduct was engaged in” — which, contrary to the position taken by my colleague, is not “wording to [the same] effect” as “accrual of the cause of action” (paras. 37 and 41). There is simply no link between this triggering event and the plaintiff’s state of mind; it is, in short, an “event which clearly occurs without regard to the injured party’s knowledge”. The Certification Judge’s reading of this provision led him to the same conclusion (para. 54 (CanLII)). It was the existence of conflicting jurisprudence on this point that caused him “not [to be] satisfied that it is plain and obvious that the discoverability principle can never apply to the limitation period in s. 36(4)” (para. 58).

[158]                     I acknowledge that the “discoverability rule has been applied by this Court even to statutes of limitation in which plain construction of the language used would appear to exclude the operation of the rule” (Peixeiro, at para. 38). However, a consideration of the context surrounding s. 36(4)(a)(i) lends further support to the conclusion that the discoverability rule does not apply.

[159]                     First, the cause of action in s. 36(1)(a) is based on two essential elements: (i) the defendant engaging in conduct contrary to any provision of Part VI, and (ii) the plaintiff suffering loss or damage as a result of such conduct. It is only upon the occurrence of both events that the plaintiff can commence proceedings on the basis of this statutory cause of action. Cognizant of this, and of the fact that conspiracies of this nature take place in secret, Parliament decided that the limitation period would not begin when the plaintiff actually sustained loss or damage, but rather when the defendant engaged in the prohibited conduct. It is important to keep in mind that the point at which the conduct is engaged in necessarily precedes the point at which a claimant will suffer loss or damage as a result of such conduct. I would also note that the offence under s. 45 is complete as soon as an unlawful agreement is made, meaning that the “conduct” is “engaged in” even if the agreement is not actually implemented or prices do not actually increase. It follows as a direct consequence of this legislative choice that the limitation period can in fact expire before the plaintiff is in a position to commence proceedings under s. 36(1)(a).

[160]                     Second, s. 36(4)(a)(ii) provides a mechanism for the plaintiff to advance a claim that may be barred by s. 36(4)(a)(i): even if two years have expired from the day on which the prohibited conduct was engaged in, the limitation period will restart on the day on which criminal proceedings relating to the impugned conduct are finally disposed of. While s. 36(4)(a)(ii) applies only where the alleged conduct contrary to Part VI is the subject of criminal prosecution, it nevertheless provides an indication that Parliament was aware of the strictness of s. 36(4)(a)(i) and chose to enact this provision as the only means of relieving against it.

[161]                     Third, and unlike claims subject to the general limitation period in British Columbia’s Limitation Act, S.B.C. 2012, c. 13, s. 21, Parliament has not subjected claims under s. 36(1)(a) to any ultimate limitation period. Interpreting s. 36(4)(a)(i) as commencing only when the underlying conduct becomes discoverable will therefore have the effect of leaving defendants at risk of lawsuit indefinitely. As Paul-Erik Veel helpfully observes, the result would be that “companies could face claims decades later, well after the employees involved in the alleged conspiracy may have left and documents lost, without any ability to defend themselves” (Waiting forever for the axe to drop? Discoverability and the limitation period for Competition Act claims, Lenczner Slaght, August 12, 2016 (online)). This runs contrary to the certainty and evidentiary rationales that underlie the law of limitations.

[162]                     Fourth, the two-year limitation period was enacted by Parliament at a time when limitation periods were comparatively much longer. For example, the provincial limitations statutes that were in force at the time in Ontario and British Columbia set out a general limitation period of six years (The Limitations Act, R.S.O. 1970, c. 246, s. 45(1); Statute of Limitations, R.S.B.C. 1960, c. 370, s. 3). The relatively short limitation period at issue here, which commences even before the cause of action fully crystalizes, provides a further indication of the premium that Parliament placed on granting repose to defendants and encouraging diligence by potential plaintiffs.

I find Justice Côté’s reasoning more persuasive.  I say that with the qualification that I am not as conversant with common law discovery jurisprudence as I am with codified discovery jurisprudence.

That said, I am sufficiently conversant to recognise a curious fiction that underlies the court’s competing arguments.  For the most part, courts apply common law discovery to limitation periods that predate the rule.

Take for example the limitation period in s. 38(3) of the Trustee Act, which commences on death.  It predates the 1997 Supreme Court decision in Peixeiro which determined that discoverability was of general application.  Thus in 2000, the Court of Appeal in Waschkowski noted that “Until the later decision of the Supreme Court of Canada in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, 151 D.L.R. (4th) 429, it was not clear whether the discoverability rule applied to all limitation provisions, or whether its application depended on the actual wording of the statutory limitation”

Section 38(3) dates from 1990.  It’s possible, but doubtful, that the legislature drafted s. 38(3) as a response to, say, the early SCC discoverability decisions like 1986’s Central Trust.  However, it’s beyond doubt that the Legislature did not draft the limitation periods in the former Limitations Act mindful of the discoverability rule.  Some of those limitation periods were centuries old before discoverability was even a glimmer in the Legislature’s eye.

Similarly, it’s not clear to me how Parliament could have intended discoverability to apply to s. 36 of the Competition Act when that provision appears to have been enacted in 1985, a year before Central Trust.

So, the court really isn’t arguing about what Parliament intended subjectively, because Parliament didn’t know that discoverability was going to be a rule of general application.  Instead, the court is trying to rationalise common law discovery with limitation periods drafted before the rule existed.  I think Justice Côté’s approach is the soundest conceptually.

In that regard, I note another problem with the majority’s analysis.  If a limitation period commences on the occurrence of an event that forms part of a cause of action, and if discoverability applies, it would be possible to discover the event before the cause of action accrues.  The limitation period would commence before there is a legal basis for an action.  This wouldn’t happen with s. 36(4), but insofar as the majority is setting out a rule, it’s one with problematic implications.

There are two other noteworthy aspects of the decision:

First, the decision includes what is now the leading consideration of fraudulent concealment.  Importantly, the court clarifies that the doctrine does not require a “special relationship between the parties” as its conventional formulation suggests:

[53]                          While it is therefore clear that equitable fraud can be established in cases where a special relationship subsists between the parties, Lord Evershed, M.R. did not limit its establishment to such circumstances, nor did he purport to define exhaustively the circumstances in which it would or would not apply (see T.P. v. A.P., 1988 ABCA 352 (CanLII), 92 A.R. 122, at para. 10). Indeed, he expressly refused to do so: “[w]hat is covered by equitable fraud is a matter which Lord Hardwicke did not attempt to define two hundred years ago, and I certainly shall not attempt to do so now” (Kitchen, at p. 249, emphasis added).

[54]                          When, then, does fraudulent concealment arise so as to delay the running of a limitation period? Recalling that it is a form of equitable fraud, it becomes readily apparent that what matters is not whether there is a special relationship between the parties, but whether it would be, for any reason, unconscionable for the defendant to rely on the advantage gained by having concealed the existence of a cause of action. This was the Court’s point in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19 (CanLII), [2002] S.C.R. 678, at para. 39:

[Equitable fraud] “… refers to transactions falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained” (p. 37). Fraud in the “wider sense” of a ground for equitable relief “is so infinite in its varieties that the Courts have not attempted to define it”, but “all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken” [Emphasis added.]

It follows that the concern which drives the application of the doctrine of equitable fraud is not limited to the unconscionability of taking advantage of a special relationship with the plaintiff. Nor is the doctrine’s application limited, as my colleague suggests, to cases where there is something “tantamount to or commensurate with” a special relationship between the plaintiff and the defendant (paras. 171 and 173-74). While a special relationship is a means by which a defendant might conceal the existence of a cause of action, equitable fraud may also be established by pointing to other forms of unconscionable behaviour, such as (for example) “some abuse of a confidential position, some intentional imposition, or some deliberate concealment of facts” (M. (K.), at p. 57, citing Halsbury’s Laws of England (4th ed. 1979), vol. 28, para. 919). In short, the inquiry is not into the relationship within which the conduct occurred, but into the unconscionability of the conduct itself.

Second, the majority formulates discoverability as applying when “a limitation period runs from the accrual of cause of action or knowledge of the injury”.   The language “knowledge of the injury” comes from Peixero, which takes it from the MB CA decision in Fehr, where it appears without any explanation.  I don’t know what it means.  Is it a reference to a circumstance where a wrong isn’t actionable unless it causes an injury that rises above a threshold?  I struggle to think of other scenarios where knowledge of an injury causes time to run, but knowledge of the cause of action wouldn’t.

It’s odd to me that the majority thought this would be so self-evident that no explanation was required.  At risk of a little (inexcusable) immodesty, the majority and the dissent cite the my text book: this is good indication that if I don’t know what it means, I’m not sure the court could reasonably assume it’s common knowledge.