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Ontario: lawyers should investigate claims with “real world” reasonableness

The Superior Court decision in Musslam v. Hamilton General Hospital contains a refreshing statement on the reasonableness of a lawyer’s actions when investigating a potential claim.  The standard is not perfection, but “contextual reasonableness in the ‘real world’”:

[41]   As I address the various issues, including the submissions not unreasonably advanced that the Oakley firm was arguably tardy or perhaps negligent in certain aspects of how it handled this matter (Mr. Mogil submitted that, while I may feel sympathy for the plaintiff, even if I dismiss this aspect of the motion, plaintiff may yet have a different remedy), I do so from the perspective that this is not now, nor has it ever been, “ a perfect world”. Not to wax too philosophically, but most people struggle daily—including lawyers to do right for their clients, and jurists who strive to come to the legally just result for all parties involved in a case. Indeed, I find all counsel in this complex matter did their best, including in their thorough, at times minute, dissection of what chronologically happened in this case.

[42]   Yet, in my view, a “standard of perfection” is not required. While limitation periods were certainly not enacted to be ignored, as Ms. Wood well submitted for Dr. Mistry, my assessment of the steps taken or perhaps not taken in a timely fashion by some of the parties in this case is based on a standard of contextual reasonableness in the “real world” in which these parties existed, not perfection based on 20/20 hindsight using a microscope or magnifying glass to minutely examine each and every step taken or not taken, or not taken in as timely a manner as ideally should perhaps have been done in some instances.

[43]   The plaintiff in this case, as was found by Master Abrams, has English as his second language and is hampered by various other significant challenges as described in her decision. The evidence before me is that before his surgery he drove a taxi. There is no evidence before me that he is an educated layman, let alone knowledgeable about medical issues or able to easily “connect the dots” so to draw inferences pertaining to causation or contribution. In my view, it is fair to conclude that the plaintiff is unsophisticated, including that he is an unsophisticated litigant. Accordingly, I so conclude, based on all the evidence.

[63]   Why May 17, 2017? Why not when the records were actually received: February 6, 2017 for the family doctor and September 2016 for the chiropractor? In response, I reference my above discussion about the imperfect “real-world” in which we all function. I again consider a small and very busy law firm, with many demands on their time. It was only this firm, after all the many lawyers whom the plaintiff saw, which was willing to take him on—and at no cost. Yet these lawyers also had other, prior commitments, including to trials and to existing clients. In my view, it was, in the context and all the circumstances, reasonable that they did not immediately drop everything when the records were received. After all, they did not expect the “bombshell” information contained therein. Moreover, the medical records were complex to read and decipher, as the step-by-step cross-examination transcript of the family doctor makes clear. If even Dr. Karmali had some challenges reading her own chart notes, these would surely not be an easy or quick read for anyone else, even a lawyer experienced in the field.  I thus find a period of about three months from when the chart of the family doctor was received until it was reviewed to be reasonable in all the circumstances.

 

Ontario: Court of Appeal on the factual nature of discovery

The Court of Appeal decision in Albert Bloom Limited v. London Transit Commission contains a great statement on the factual nature of the s. 5(1)(a) analysis.  When a claimant knows the s. 5(1)(a) discovery matters is fact-specific and there’s little value in comparing the unique facts of one case to another:

 

[31]      To be clear, the determination of when a claimant obtains actual knowledge of a claim is case-specific. Little is to be gained from comparing the unique circumstances of one case to another. There is no bright-line test that establishes when a party has actual knowledge of a claim. Instead, the totality of factual circumstances will dictate how and when a claimant obtains actual knowledge. In the present case, the motion judge undertook a detailed analysis of the factual circumstances. The evidence she relied on was uncontested, and I do not understand LTC to be arguing that the motion judge committed any palpable and overriding errors of fact.

The decision also shows the consequences of admitting facts material to the discovery analysis in a pleading. The plaintiff argued that such an admission was ignorable “boilerplate”, but filed no evidence to support this argument (also note that the Court found that an affidavit’s double hearsay was inadmissible):

 

[32]      There is another unique circumstance in this case that supports the motion judge’s finding regarding actual knowledge. It is the plea in the statement of defence and crossclaim that the contamination was caused by a previous owner of the LTC property. That fact clearly distinguishes this case from Crombie, where there was no such plea.

[33]      On the motion and this appeal, LTC attempts to explain away that pleading: it was just a “standard pleading” and did not reflect its actual state of knowledge at the time of the filing of the statement of defence and crossclaim. However, the evidence that counsel had informed the affiant in the affidavit filed by LTC that this was a standard pleading was double hearsay. Contrary to what the affiant stated in her affidavit, on cross-examination, she testified that she had never been provided with this information by LTC’s counsel. In fact, she had received the information from her predecessor at LTC, who apparently was told the information by legal counsel. This evidence was therefore inadmissible on the motion.

[34]      LTC asserts, “[t]here was absolutely no evidence on the record before the Motions Judge to suggest that this pleading was other than a boilerplate pleading commonly set out in environmental defences without any factual knowledge attributable to LTC” : Factum, para. 27.  This submission reflects a fundamental misunderstanding of the onus on the motion. LTC’s onus was not met by asserting that there was no evidence that this was not a boilerplate pleading. LTC had an obligation to adduce compelling and admissible evidence that it was boilerplate and thus could be ignored. It failed to adduce that evidence.

Ontario: the dismissal of a certification motion and the suspension of time

In R.G. v. The Hospital for Sick Children, the court held that after the dismissal of a motion to certify an action as a class proceeding, the limitation period applicable to the plaintiff’s claim remains suspended until the occurrence of one of the circumstances set out in s. 28 of the Class Proceedings Act, 1992:

[57]           In my opinion, in circumstances where a motion to certify an action as a class proceeding is dismissed and none of the other enumerated circumstances under s. 28 applies, a motion by the defendant is required in order to deactivate the suspension of the running of limitation periods. Until such a motion is brought, not having been formally dismissed, the proposed class action is still active albeit it has not been certified. This conclusion is a consequence of the plain meaning of section 28 of the Class Proceedings Act, 1992 read in the context of the whole Act and most particularly in the context of s. 29 of the Act.

[58]           This conclusion may come as a surprise to the class action bar because up to and including the case at bar, defendants have usually not found it necessary to address whether or not the limitation period has resumed because putative class members rarely advance actions if a certification motion is dismissed. The issue of whether the unadvanced claims are statute-barred is academic. Further, the absence of a flurry of individual actions may be explained, in part, by the circumstance that putative class members may not even be aware that there was a proposed class action. There is no provision in the Act that requires publication of a dismissal of a certification motion, and so the putative class members may not know that they can no longer rely on a class action as the means to access justice.

[59]           In practical effect, however, the dismissal of the certification motion is akin to a discontinuance of a proceeding commenced under the Class Proceedings Act, but pursuant to s. 29 of the Act, a proceeding cannot be discontinued without the approval of the court on such terms as the court considers appropriate.

[60]           The case law about s. 29 reveals that before approving an abandonment or discontinuance of a proceeding commenced under the Act, a court will consider what prejudice, if any, the putative class members might suffer by a discontinuance of the action.[10] Where there is a discontinuance, the terms of the court approval may include requiring the plaintiff to give notice to the putative class members that they can no longer rely on a possible class proceeding as the means to obtain access to justice and that they may need to bring individual actions. The terms of the order may provide an operative date for the discontinuance to come into effect in order to allow the putative class members to obtain legal advice and to commence an action if so advised.

[61]           In my opinion, analyzing s.28 of the Class Proceedings Act along with s. 29 of the Act reveals that a similar approach to that used when a proposed class action is discontinued is available when a proposed class action fails to be certified. If a putative class member’s cause of action is expressly mentioned in the statement of claim of a proposed class action, then that cause of action is suspended until the suspension is lifted by certain events, including a determination that dismisses the asserted cause of action without a determination of its merits.

[62]           In my opinion, should a defendant bring a motion to have the class proceeding dismissed without an adjudication on the merits, the motion would be akin to a discontinuance of the action, which also entails a termination of the proceeding without an adjudication on the merits. However, until the court rules on the terms of the discontinuance or dismissal without an adjudication on the merits, the suspension of the limitation period continues.

[63]           This interpretation of the operation of the Class Proceedings Act, 1992 is fair to both plaintiffs and defendants. In the normal course, the putative class members are given notice if the certification motion succeeds, and the above approach would give them notice when the certification motion fails. For the putative class members, who have been waiting to learn whether they have the option of a class proceeding rather than commencing their own action, they will be given notice of the outcome of the certification motion, and then they may act as they may be advised.

 

Ontario: don’t rely on a lawyer’s affidavit to establish discovery

The Superior Court decision in 1365 California Ltd. v. Moss Property Management Inc. is an appeal from a master’s decision granting leave to add a proposed defendant.  It provides two important reminders: a lawyer’s affidavit is a lousy way of rebutting presumptive discovery and sometimes lawyers get cross-examined on their affidavits.

The court held that the master’s determination of when the plaintiffs subjectively discovered their claim was in error.  The plaintiffs had not filed any evidence of when they discovered their claims.  They had filed only a lawyer’s affidavit that did say when discovery occurred.  On cross-examination by the proposed defendants, the lawyer admitted that he didn’t know what the plaintiffs knew, and that he hadn’t spoken with them.  Accordingly, for want of evidence the plaintiffs couldn’t rebut the presumption that subjective discovery occurred on the date of the act or omission giving rise to the claim .

These are the material paragraphs:

[19]           With respect, the Master’s finding that the Respondents did not have actual knowledge of the claims against the Proposed Defendants until they received the Second Report is not supported by the evidence.

 [20]           In support of their motion for leave to amend, the Respondents relied upon the affidavit of Mark Russell (the “Russell Affidavit”), an associate at the firm representing the Respondents in this litigation but who is not involved in the file.  The Russell Affidavit gives a chronology of the steps in the proceeding, as described above.  It does not state when the Respondents had actual knowledge of the facts underlying the New Claims against the Proposed Defendants.  Nor does the Russell Affidavit state that the Respondents did not know that they had claims against the Proposed Defendants until the Second Report was received, or at any time before December 16, 2016.  The affidavit is silent as to what the Respondents knew and when they knew it.
 [21]           On cross-examination, Mr. Russell admitted that he did not know what the Respondents knew, and that he did not know whether they knew more or less than he did.  Mr. Russell stated that he had not spoken to the Respondents and repeatedly stated that he did not have carriage of the file.
 [22]           Since the Respondents bear the burden of showing that they lacked the requisite knowledge as of two years before the motion was brought, the “critical issue” is “what the plaintiff or its agents (chiefly its lawyers) knew or ought to have known about the facts underlying the [proposed claim.]”  Sealed Air, at para. 18.

[24]           In determining whether the Respondents rebutted the statutory presumption, the issue was not, as the Master stated, whether the Respondents had actual knowledge as of the date of the First Report, but whether they had actual knowledge at any time before December 16, 2016.  At no time did the Respondents state that they did not know facts underlying the New Claims when the acts took place.  The Respondents adduced no evidence as to when they knew those facts.  The lack of any “suggestion” that the Respondents knew of the claims when they occurred was not sufficient to rebut the presumption.  In the absence of any evidence from the Respondents as to when they had actual knowledge, the Master committed a palpable and overriding error in finding that they had no knowledge until they received the Second Report.

[25]           Without any evidence on the Respondents’ knowledge, it could not be inferred that the Respondents did not have actual knowledge until they received the Second Report.  A chronology of steps taken in the litigation, without more, is insufficient to draw any inference as to the state of the Respondents’ knowledge in this case.
[26]           The Respondents’ failure to rebut the statutory presumption of knowledge under s. 5(2), means that, pursuant to s. 5(1)(a), the claim was discoverable when the act or omission took place.  The two-year limitation period would run from that date.  The allegations in the Statement of Claim end in November 2011.  Other than to give the chronology leading up to the delivery of the Second Report, the Amended Statement of Claim does not allege specific acts or dates in relation to the Proposed Defendants.  Accordingly, the limitation period expired in November 2013.  Pursuant to s. 21(1) of the Limitations Act, if a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.

Ontario: the timing of amendments, and some words on laches

The Superior Court in Barker v. Barker is perhaps the most extreme example of an eleventh-hour motion to amend to plead discoverability.  The plaintiffs moved in the third week of trial to amend their Statement of Claim to plead reliance on ss. 5 and 16 of the Limitations Act in response to the defendants’ limitations defence (the decision is silent on why the plaintiffs chose to amend their Statement of Claim rather than file a Reply).  Justice Morgan didn’t find that the delay was fatal to the motion:

[8]               Whether or not the motion to amend would have been better brought before trial began rather than in its third week, what is clear is that the limitations issues, including as the Court of Appeal says, the application of section 16(1)(h.2) and the doctrine of discoverability, come as no surprise to the Defendants. They knew these issues were raised by the Plaintiffs in the 2017 motion before Perell J. Plaintiffs’ counsel has reproduced in their motion record copies of the factums from the 2017 motion, where these issues were argued for many paragraphs by both sides. As indicated above, the Defendants all knew that the 2018 judgment of the Court of Appeal had specifically reserved these issues for a later date, mentioning the trial itself as the likely time for canvassing section 16(1)(h.2) and discoverability.

[9]               Although mid-trial pleadings amendments are not encouraged as a matter of case management, Rule 26.02(c) provides that a pleading may be amended at any time, without limitation, with leave of the court. Moreover, the amendment rule is written in mandatory language. Rule 26.01 provides that, “On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.” Accordingly, a party seeking to prevent a pleading from being amended “must establish a link between the non-compensable prejudice and the amendment. It must show that the prejudice arises from the amendment”: Iroquois Falls Power Corp. v Jacobs Canada Inc., 2009 ONCA 517 (CanLII), at para 20.

The decision is also noteworthy for its consideration of the role of discoverability in a laches analysis.  It is impossible to assess the impact of delay in suing without knowing when the plaintiff first ought to have known of the claim:

[25]           Embedded in this argument is the idea that different questions would be asked in an equitable laches case than in a statutory limitation case. More specifically, it assumes that discoverability, which is an integral part of a limitation period analysis both at common law and under statute, is not at issue in a laches analysis. That sounds somewhat plausible at first blush – after all, the equitable doctrine of laches is, like all doctrines of equity, related to but different in nuance from limitation periods as its nearest relative at law. Limitation periods are hard numerical rules while laches is a principle that requires a weighing of the competing equities: Manitoba Metis Federation Inc. v Canada (Attorney General), 2013 SCC 14 (CanLII), [2013] 1 SCR 623, at paras 145-6. That difference, however, is not always as substantive as it may appear.

[26]           Almost a century ago, English legal scholar John Brunyate stated, “since delay by a plaintiff who has been ignorant of his right of action will not amount to laches, we should expect that…time will not run until the plaintiff is aware of his right of action.” Limitation of Actions in Equity (London: Stevens & Sons, 1932), c. 2, cited approvingly in M(K) v M(H), 1992 CanLII 31 (SCC), [1992] 3 SCR 6. We need not delve into legal history to see that that logic makes sense. It would be impossible to evaluate the equities of a delay in bringing an action without knowing when the Plaintiff first realized he or she had been wronged.

[27]           In fact, the weighing of equities in a laches analysis specifically involves asking whether the claimant has acquiesced in the delay, which in turn involves evidence of the claimant’s state of mind and level of knowledge of the facts on which the cause of action is premised: Manitoba Metis Federation, at para 147. One can’t acquiesce in something one hasn’t discovered. It is little surprise, therefore, that the Supreme Court of Canada has indicated that the equitable doctrine of laches essentially mirrors the common law doctrine of discoverability: “It is not enough that the plaintiff knows of the facts that support a claim in equity; she must also know that the facts give rise to that claim”: M(K), supra, citing Re Howlett, [1949] Ch. 767.

[28]           The Supreme Court in M(K) has specifically confirmed with respect to discoverability and laches that “both doctrines share the common requirement of knowledge on the part of the plaintiff.” The indicia of that knowledge – what did the Plaintiff know with respect to the alleged wrongs and his legal rights and when did he know it – will be the subject of discovery under both rules. It defies logic and the nature of the two very similar legal principles to say that a Defendant knew full well he had to discover on the issue of laches, but that he is greatly disadvantaged to now learn that he also had to discover on the issue of discoverability. The information sought and the questions asked will be virtually the same.

This analysis came in the context of a rather astonishing (and unsuccessful) argument by the Crown.  It denied having notice that discoverability was in issue despite having asked questions about discoverability on examination for discovery.  The Crown explained this contradiction by throwing a junior under the bus: apparently, the junior went rogue and asked the discoverability questions without instructions:

[19]           Turning to the discoverability doctrine, Defendants’ counsel contend that they have not had an opportunity to examine the Plaintiffs for discovery on the discoverability issue. They submit that at this late date, with the trial already underway, the motion to amend must either be dismissed outright or granted together with an adjournment of the trial so that further discovery can be conducted. Otherwise, they say, they are made to essentially defend a trial by ambush.

[20]           Counsel for the Plaintiffs responds with some incredulity. Plaintiffs’ motion record contains over a thousand pages of discovery transcripts in which the discoverability issue was explored with various Plaintiffs by Defendants’ counsel. Plaintiffs’ counsel point out that Defendants’ counsel canvassed everything from the dates that the Plaintiffs first contacted their present counsel, to previous complaints and law suits brought by any number of Plaintiffs, to the Plaintiffs’ awareness of and access to duty counsel while at Oak Ridge in the 1970s, to the letter writing campaigns engaged in by several of the Plaintiffs over the decades seeking to put a stop to the kind of acts in issue in this litigation. In addition, in the affidavits sworn by each of the Plaintiffs for the 2017 motion, and which by agreement of the parties now form part of the trial record, the Plaintiffs each provide information on the dawn of this case and how and when they personally became involved or realized that they could engage in a legal action.

[21]           Counsel for the government of Ontario at discoveries asked a number of the Plaintiffs for undertakings with respect to these issues, and followed up on those requests by sending Plaintiffs’ counsel an undertakings chart listing and describing each of the outstanding answers. The chart divided the outstanding undertakings into three categories, listing each of the undertakings as going to either “Liability”, “Damages”, or “Discoverability”. The label of this third category was not a Freudian slip; a perusal of the undertakings falling under this heading reveals precisely the kind of questions one would ask in order to unearth the opposing side’s discoverability position. Various Plaintiffs responded by indicating when in the past they learned about, and with whom and when in the past they had spoken about, the prospect of a law suit relating to their Oak Ridge experiences.

[22]           It is not surprising that Defendants’ counsel asked these questions. Discoverability, as Perell J. and the Court of Appeal pointed out, has long been an issue to be addressed in the case.

[23]           Defendants’ counsel responds by conceding that all of those questions were indeed asked, but says that they were for the most part meant to address the issue of laches as it pertains to the equitable claim of breach of fiduciary duties. It is the Defendants’ position that discoverability under the Act or at common law is a response to a defense which places an onus on the Plaintiff, and so it did not have to be canvassed at discoveries (or addressed at trial) if the Plaintiff did not specifically plead it.

[24]           At the same time, it is the Defendants’ position that with respect to the claim of breach of fiduciary duties the doctrine of discoverability does not apply either at common law or under the pre-Act limitations statutes in force in Ontario, but that the equitable doctrine of laches applies. Defendants’ counsel concedes that the onus is on the Defendant to establish the unfair delay on which the laches principle is premised. Accordingly, counsel for the Defendants explains that in their view, discoverability does not have to be explored in pre-trial examinations if the Plaintiff has not bothered to plead it, but laches has to be explored because it is clearly relevant and the Plaintiff need not plead it.

[29]           Interestingly, counsel for the Defendants conceded in argument that examinations on the issue of discoverability were in fact conducted with respect to 7 of the 28 Plaintiffs. Defendants’ counsel’s explanation for this is that, apparently, a very diligent young lawyer for the government of Ontario conducted the discoveries on those individual Plaintiffs, and was foresightful enough to pose questions exploring the discoverability issue. As for the rest of the individual Plaintiffs, other lawyers on the Defendants’ counsel team conducted those discoveries and the discoverability questions were not asked. Accordingly, the Defendants are not seeking to eliminate the doctrine of discoverability from the analysis of the limitation period with respect to 7 of the 28 Plaintiffs, but are seeking to eliminate it with respect to the remaining 21 Plaintiffs.

[30]            With respect, this position is not tenable. In the first place, counsel for Ontario asked for undertakings regarding discoverability from 13 of the Plaintiffs. If only 7 Plaintiffs were questioned about discoverability, how is it that undertakings were extracted from 6 more of them? Perhaps others on the Defendants’ counsel team were more foresightful and diligent than they have been given credit for.

[31]           But that is only part of the point. If the Defendants’ position is to be taken seriously, the young lawyer who supposedly on his or her own asked about facts going to the discoverability issue would have been fishing for information that, in the Defendants’ view, he or she had no right to ask about. Not surprisingly, Plaintiffs’ counsel did not object to this line of questioning and provided answers that now satisfy the Defendants such that they are not discounting the discoverability doctrine with respect to those 7 deponents. What was wrongful from the Defendants’ point of view when it was done has suddenly become rightful now that it helps explain some of the discoverability questions which the Defendants did in fact explore with the Plaintiffs.

[32]           Furthermore, if one lawyer on the Defendants’ team knew about the discoverability doctrine, they all knew about the discoverability doctrine. In order to put an opponent on notice in litigation, one conveys the notice to opposing counsel – any number of them or any one of them will do. If one member of a law firm of record has notice, or one member of the Ministry of the Attorney General is aware of an issue in the action, they all are presumed to have notice and be aware of the issue. The young lawyer who asked discoverability questions is not being presented as a rogue acting beyond his retainer; quite the opposite. He is being presented as a perhaps more thorough or diligent version of all the other Defendants’ lawyers.

Ontario: the limitation period in s. 51 of the SABS is not subject to discoverability

In Tomec v. Economical Mutual Insurance Company, the Divisional Court held that the limitation period in s. 51 of the Statutory Accident Benefits Schedule is not subject to common law discovery or the discovery provisions in s. 5 of the Limitations Act.  It is a “hard” limitation period in that it runs from a fixed event, which is the refusal to pay the benefit claimed.

Update! The Court of Appeal overturned this decision.  Discoverability doesn’t apply.

Ontario: the Court of Appeal on the evidence required for discovery

It sometimes happens that I miss notable decisions.  And so, better late than never, I draw Crombie Property Holdings Limited v. McColl-Frontenac Inc. to your attention.

These are the noteworthy aspects of the Court of Appeal decision:

1.  It recaps the standard of review for limitations analyses:

[31]      The Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7 (CanLII), [2014] 1. S.C.R. 87, at para. 81, established the standard of review on appeal of a summary judgment. The court stated that, “[w]hen the motion judge exercises her new fact-finding powers under Rule 20.04(2.1) and determines whether there is a genuine issue requiring a trial, this is a question of mixed fact and law”, reviewable only for a “palpable and overriding error”, unless there is an “extricable error in principle”. Further, the question whether a limitation period expired prior to the commencement of an action is typically a question of mixed fact and law and therefore subject to review on a “palpable and overriding error” standard: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526(CanLII), 323 O.A.C. 246, at para. 38. A “palpable and overriding error” is “an obvious error that is sufficiently significant to vitiate the challenged finding of fact”: Longo, at para. 39.

2.  It succinctly summarises the evidentiary burden on a summary judgment motion to dismiss on the basis of an expired limitation period:

[33]      In order to obtain a summary dismissal of the action, the moving parties were required to establish that there was no issue requiring a trial about their limitation defence. The specific issue was whether Crombie’s claim in respect of the environmental contamination of its property was “discovered” within the meaning of s. 5 of the Limitations Act, 2002 before April 28, 2012.

3.  It cites Van Allen for the principle that it is reasonable discovery and not the mere possibility of discovery the causes the limitation period to commence: see para. 35
It inaccurately describes the knowledge necessary to cause discovery of a claim:

[35]      The limitation period runs from when the plaintiff is actually aware of the matters referred to in s. 5(1)(a)(i) to (iv) or when a reasonable person with the abilities and in the circumstances of the plaintiff first ought to have known of all of those matters: Longo, at para. 41. The knowledge sufficient to commence the limitations clock has been described as “subjective” knowledge or “objective” knowledge.

This paragraph appears to conflate the amount of knowledge required by s. 5 with the subjectivity of the knowledge.  A claimant requires prima facie knowledge.  This is knowledge that is greater than suspicion but less than certainty.  See for example Brown v. Wahl at 15.  Then there is question of whether the plaintiff subjectively or subjectively-objectively had this knowledge (not purely objectively, as the Court suggests in this decision, because the question asked in s. 5(1)(b) is a “modified objective” test as it doesn’t ask about the knowledge of a reasonable person, but a reasonable person with the abilities and in the circumstances of the claimant.

Knowledge of a possible wrong (a mere suspicion) is insufficient for discovery of a claim; prima facie knowledge of an actual wrong is necessary:

[42]      That the motion judge equated Crombie’s knowledge of possible contamination with knowledge of actual contamination is apparent from her statement that “[a]ll the testing that followed simply confirmed [Crombie’s] suspicions about what had already been reported on” (at para. 31). It was not sufficient that Crombie had suspicions or that there was possible contamination. The issue under s. 5(1)(a) of the Limitations Act, 2002 for when a claim is discovered, is the plaintiff’s “actual” knowledge. The suspicion of certain facts or knowledge of a potential claim may be enough to put a plaintiff on inquiry and trigger a due diligence obligation, in which case the issue is whether a reasonable person with the abilities and in the circumstances of the plaintiff ought reasonably to have discovered the claim, under s. 5(1)(b). Here, while the suspicion of contamination was sufficient to give rise to a duty of inquiry, it was not sufficient to meet the requirement for actual knowledge. The subsurface testing, while confirmatory of the appellant’s suspicions, was the mechanism by which the appellant acquired actual knowledge of the contamination.

 

Ontario: Highways are still subject to limitation periods

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

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

Facts

Some facts are necessary to understand the limitations issue.

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

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

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

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

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

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

The r. 21 motion

407 raised two issues on the motion.

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

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

The Court of Appeal’s analysis

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

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

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

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

Justice Laskin cited four reasons in support of this conclusion.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[…]

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

Why this decision matters

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

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

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

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

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

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

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

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

Justice Laskin’s analysis also raises some interesting questions:

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