Ontario

Ontario: Court of Appeal continues to disagree about limitations analyses (and clarifies that fraudulent concealment doesn’t apply to s. 5)

 

It’s not often that the Court of Appeal disagrees on a limitations issues (or at least until recently when there have been a number of dissents in limitations decisions), and it’s especially rare that the Court disagrees about whether there have been errors of fact.  That’s what make Zeppa v. Woodbridge Heating & Air-Conditioning Ltd. interesting.  Justice Brown, with Justice Strathy concurring, disagreed with Justice Feldman about what facts were necessary for the plaintiff to know that the defendant HVAC installer had caused or contributed to a faulty HVAC system.   

The motion judge found that problems with the HVAC system were necessarily the result of the defendants’ act or omissions because the defendant installed it:

It is crystal clear from these reports, as well as Christopher’s Examination, that the Plaintiffs knew long before February 2010 that the HVAC system was not functioning properly. Woodbridge was clearly responsible since they had installed the system…

Justice Brown did not find any error with this reasoning:

[46]      Unlike my colleague, I see no error in the factual findings that would justify appellate intervention. The motion judge did not misapprehend the evidence. His findings were solidly grounded in the record before him. Accordingly, I would not give effect to this ground of appeal.

However, Justice Feldman didn’t agree that it necessarily followed from the fact of the HVAC problems that the defendant had caused or contributed to them:

[92]      The motion judge found, at para. 33, that “it was not necessary for Christopher to have knowledge of the fact that the Quietside boilers were installed improperly in order for the limitation period to commence running. What was needed was knowledge, actual or imputed, that he had a “claim” against Woodbridge.” This was a legal error.

[93]      In the circumstances of this case, knowledge of the improper installation was an essential element of discoverability of the appellants’ claims for negligence and breach of contract.

[95]      Until Woodbridge’s improper installation was revealed, the Zeppas knew that the system had many problems, but they did not know that the problems were caused by the act of improper installation by the respondent. They did not know of any act or omission by Woodbridge or the day it occurred.

[96]      In fact, when the Zeppas first came to Woodbridge with complaints, Woodbridge informed them that the problems with the system were due to lack of maintenance. There were no problems with the HVAC system itself and no suggestion that the problem was caused by improper installation. On the basis of Woodbridge’s assurances, the Zeppas entered into a two-year maintenance agreement. This cost them approximately $4600.

[97]      However, Woodbridge knew that maintenance would never fix the HVAC system. Woodbridge concealed the fact that its faulty installation of the boilers was the central cause of the Zeppas’ problems. Until Quietside revealed that fact to the Zeppas, Woodbridge’s fraudulent concealment prevented the Zeppas from knowing whom to hold responsible for the damage to their family home and why.

[99]      If the action had been pleaded as a breach of an implied warranty, or if Woodbridge had provided an explicit warranty, the Zeppas’ knowledge that the HVAC system was not working properly may have been sufficient to trigger the running of the limitation period. But that is not the claim here.

[100]   Problems that can be resolved through maintenance are not necessarily caused by the acts or omissions of the installer. The motion judge’s finding that the Zeppas’ problems were clearly caused by Woodbridge’s acts or omissions was not based on any evidence other than the fact that there were ongoing problems with the HVAC system. He treated the cause of action as if it were for breach of warranty and not for negligence or breach of contract in the installation of the system.

[101]   Mr. Zeppa first contacted Quietside because he had heard that its boilers were terrible and that was why Quietside was no longer operating in Canada, i.e. the boilers had a possible manufacturing defect or were inherently faulty. When he asked the manufacturer for assistance, Quietside responded to his inquiries with the letter that revealed Woodbridge’s faulty installation of the boilers and Woodbridge’s knowledge that its faulty installation was the cause of the problems.

[103]   Mr. Zeppa’s evidence demonstrates why knowledge that the HVAC system was not working properly was not enough to trigger the basic limitation period. In the face of Woodbridge’s assurances, Mr. Zeppa reasonably suspected that the boiler manufacturer may have been responsible for the HVAC problems. Woodbridge’s false assurances continued until late 2010.

I find Justice Feldman’s reasoning significantly more persuasive.  It’s not evident to me why the court considered it “crystal clear” that if the HVAC wasn’t working it was the installer’s fault.  Knowledge that the installation was faulty is not “the how it happened” that Justice Brown refers to (at para. 43) of his reasons, but prima facie knowledge of actionable conduct.  In the absence of prima facie knowledge that defendant at contributed to the loss, I don’t see how the plaintiff could have discovered the claim.  Perhaps there’s something in the record that explains this, but not on the face of the decision.

Two other aspects of the decision are noteworthy.

First, it reiterates that the principle of fraudulent concealment is not a consideration in a s. 5 analysis, a point on which the majority and the dissent agree.  This is because s. 5 achieves the same result:

[71]      The decisions in Dhaliwal and Kim, together with the plain language of ss. 4 and 5 of the Act, support the conclusion that there is no independent work for the principle of fraudulent concealment to perform in assessing whether a plaintiff has commenced a proceeding within the basic two-year limitation period. That is because the elements of the discoverability test set out in ss. 5(1)(a) and (b) address the situation where a defendant has concealed its wrong-doing. If a defendant conceals that an injury has occurred, or was caused by or contributed to by its act or omission, or that a proceeding would be an appropriate means to seek to remedy it, then it will be difficult for the defendant to argue that the plaintiff had actual knowledge of those facts until the concealed facts are revealed. Whether the plaintiff ought to have known of those matters, given their concealment, is a matter for inquiry under s. 5(1)(b).

[72]      If the defendant’s concealment of facts results in a lack of actual or objective knowledge by the plaintiff of the elements set out in s. 5(1)(a) of the Act, then the plaintiff does not discover his or her claim until the date the concealed facts are revealed to or known by the plaintiff, at which point time begins to run. That is to say, the analysis required by s. 5(1) of the Act captures the effect of a defendant’s concealment of facts material to the discovery of a claim.

Also note that this is now the leading description of the principle, as demonstrated by the Court’s reference to it in Endean.

Second, it contains a disappointing reference to Lawless:

[42]      As this court observed in Lawless, at para. 23, the question to be posed in determining whether a person has discovered a claim is whether the prospective plaintiff knows enough facts on which to base a legal allegation against the defendant. In support of that proposition, Lawless cited the decision of this court in McSween v. Louis (2000), 2000 CanLII 5744 (ON CA), 132 O.R. (3d) 304 (C.A.), where Feldman J.A., writing for the majority, stated, at para. 51:

The question to be posed when assessing discovery is when the plaintiff had knowledge of the discovery matters, not knowledge of the facts necessary for a legal allegation (which is the question required by common law discovery).  Nevertheless, the Court’s point regarding the amount of knowledge necessary to satisfy the discovery matters—prime facie knowledge—remains valid without reverting to common law discovery principles to describe discovery under s. 5.

Ontario: A defendant’s expertise can impact on discovery even when the defendant isn’t a professional

 

The Court of Appeal’s decision in Presley v. Van Dusen is a reminder that a s. 5 analysis requires making findings with respect to each s. 5(1) discovery matter, and reliance on a defendant’s expertise may delay the appropriateness of a proceeding even when the defendant is not a professional.

This was an appeal from an appeal from a Small Claims Court trial decision.  The trial judge found that he could determine the commencement of the limitation period without considering s. 5(1)(a)(iv):

[9]         The trial judge did not consider the s. 5(1)(a)(iv) criterion as to when the appellants did know or should have known that a proceeding would be an appropriate means to remedy their claim. He gave the following reason for not considering s. 5(1)(a)(iv): “It is not necessary for me to make any determination under that subsection and I do not do so as I only have to find the earliest date and I have no difficulty, as I have said, in finding that that date was the spring of 2013.”

This is plainly an error of law; you can’t determine discovery without considering all four discovery matters.

The Divisional Court nevertheless upheld the trial judge’s decision.  Having determined when a reasonable person ought to have known of the discovery matters pursuant to s. 5(1)(b), it found that there was no requirement for the trial judge to make an explicit finding as to when the plaintiff ought to have known the matter in s. 5(1)(a)(iv).

The Court of Appeal overturned the Divisional Court’s order.  It was an error for the trial judge not to consider s. 5(1)(a)(iv).  The law required the trial judge to consider all four discovery matters:

[14]      The analysis of both the trial judge and the Divisional Court judge of ss. 5(1)(a)(iv), 5(1)(b) and s. 5(2) of the Limitations Act is flawed. The trial judge explicitly stated that he was not considering s. 5(1)(a)(iv). A determination under s. 5(1)(b) as to the date a reasonable person would have discovered the claim requires consideration of all four “matters referred to in clause (a)”. Similarly, the finding that there was insufficient evidence to rebut the presumption under s. 5(2) that the plaintiff knew all the matters referred to in s. 5(1)(a) cannot stand as there was no consideration of s. 5(1)(a)(iv).

[15]      This court has repeatedly held that consideration of when a proceeding was an appropriate means to remedy a claim is an essential element in the discoverability analysis and that failure to consider s. 5(1)(a)(iv) is an error of law: Gillham v. Lake of Bays (Township), 2018 ONCA 667 (CanLII), 425 D.L.R. (4th) 178, at paras. 33-34; Kudwah v. Centennial Apartments, 2012 ONCA 777(CanLII), at paras. 1-2; Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469 (CanLII), 91 R.P.R. (5th) 1, at paras. 21 and 35.

It’s common for the court to making a determination under s. 5(1)(b) without making explicit findings as to the plaintiff’s knowledge of the discovery matters (though I think everyone benefits from explicit findings).  What makes this case unusual, and something of an outlier, is that the trial judge made this s. 5(1)(b) determination while finding that it was unnecessary to consider one of the discovery matters.  That’s the kind of error that seems especially prevalent in the Small Claims Court.

The Court of Appeal undertook its own s. 5(1)(a)(iv) analysis, which is noteworthy for emphasising that the superior knowledge and expertise that might engage s. 5(1)(a)(iv) is not restricted to strictly professional relationships.  Accordingly, the plaintiffs could reasonably rely on the expertise of a person licensed to install septic systems:

[21]      These principles are applicable to the facts of this case. Van Dusen is licenced to install septic systems. The appellants contracted with him because of his special training and expertise. While the respondents argue he may not qualify as “an expert professional”, there can be no question he did have expertise upon which the appellants reasonably relied.

[22]      Moreover, reliance on superior knowledge and expertise sufficient to delay commencing proceedings is not restricted to strictly professional relationships: Presidential, at para. 26. I acknowledge that the previous cases where this court has made a finding that it was reasonable for the plaintiff to rely on the defendant’s superior knowledge and expertise have concerned defendants belonging to traditional expert professions. For instance, Brown v. Baum, 2016 ONCA 325 (CanLII), 397 D.L.R. (4th) 161, involved a physician, Chelli-Greco v. Rizk, 2016 ONCA 489 (CanLII), involved a dentist, and Presidential MSH involved an accountant. However, recent Superior Court decisions have applied the superior knowledge and expertise prong of Presidential MSH to persons who are members of non-traditional professions or who are not professionals at all. For instance, in YESCO Franchising LLC v. 2261116 Ontario Inc., 2017 ONSC 4273 (CanLII), the court found that s. 5(1)(a)(iv) applied in a franchisor-franchisee relationship where the franchisees relied on the franchisor’s superior knowledge and expertise, even though the franchisor was not a member of an expert profession. Similarly, in Barrs v. Trapeze Capital Corp., 2017 ONSC 5466 (CanLII), aff’d 2019 ONSC 67 (Div. Ct.) (CanLII), the Superior Court and the Divisional Court found that s. 5(1)(a)(iv) applied to investors who relied on the superior knowledge and expertise of their investment portfolio managers.

 

Ontario: a clever but futile attempt to avoid an expired limitation period in foreign judgment enforcement

The Superior Court decision in H.M.B. Holdings Limited v. The Attorney General of Antigua and Barbuda reads like an exam question: can you use a chain of foreign judgment enforcement proceedings to avoid a limitations issue? Nope.

The plaintiff obtained a judgment from the Privy Counsel against the defendant and then commenced an action in BC to enforce the judgment and obtained default judgment.  The plaintiff then applied Ontario to enforce the BC judgment pursuant to the Reciprocal Enforcement of Judgments Act.  This proceeding was timely.

The defendant opposed the application successfully on the basis of s. 3(g) of the Act, which provides that the court shall not grant judgment if the judgment debtor would have a good defence to an action brought on the original judgment.  If the application were brought on the original judgment—the Privy Counsel judgment—it would be statute-barred.  Thus an application brought to enforce a judgment enforcing the Privy Counsel judgment must also fail.

Ontario: the denial of summary judgment on a limitations defence isn’t necessarily determinative of the defence

 

The Divisional Court’s decision in Barrs v. Trapeze Capital Corp. is a reminder that when the court denies a summary judgment motion on a limitations defence, the order isn’t determinative of the limitations defence absent explicit language to that effect:

[36]           And in Skunk, at para. 60, the Court of Appeal stated that in the absence of an express indication by the motion judge that his or her determination is to be binding on the parties at trial, it should be presumed that in expressing a conclusion on a point of law when dismissing a summary judgment motion she is simply explaining why she concluded that there is a genuine issue requiring a trial, and did not intend her determination to be binding on the parties.

[37]           Our reading of the reasons of the motions judge leaves us uncertain about whether he intended to make final and binding findings of fact and conclusions on the legal consequences of those facts. The parties evidently see things the same way, having pursued an appeal route applicable to interlocutory rather than final orders.

[38]           Given the absence of an express determination of this issue, we are of the view that the motion judge did not intend his conclusions to be binding on the parties.

A party that wants the limitations defence determined should ask the court to do so explicitly.

Ontario: prejudice from an expired limitation period, and special circumstances

Estate of John Edward Graham v. Southlake Regional Health Centre is a medmal decision noteworthy for its consideration of prejudice arising from the expiry of a limitation period, and a rare application of the special circumstances doctrine to the Trustee Act limitation period.

The parties agreed that the two-year limitation period in s. 38(3) of the Trustee Act applied to the proceeding and had expired.  The plaintiffs relied on special circumstances to overcome its expiry.  The defendant argued that the plaintiffs had failed to rebut the presumption of prejudice arising from the expiry of a limitation period, and that there were no special circumstances.

The court found that the plaintiff had rebutted the presumption of prejudice.  The consideration that informed this finding are worth noting:

[59]           As the Court of Appeal in Mazzuca summarized:

Both the related jurisprudence and the rules themselves thus underscore a simple, common-sense proposition:  that a party to litigation is not to be taken by surprise or prejudiced in non-compensable ways by late, material amendments after the expiry of a limitation period.  If such surprise or actual prejudice is demonstrated on the record, an amendment generally will be denied.[10]

[60]           The Court of Appeal has repeatedly confirmed that the loss of a limitation defence gives rise to a presumption of prejudice.[11]

[61]           In our case, Dr. Law had no notice of the litigation prior to the expiration of the litigation period.  I find an inference of prejudice to him is warranted.

[62]           I accept Dr. Law had no knowledge of this action or that any issue had been raised concerning the case until February 15, 2017 when he was contacted by Scott Graham – approximately six years after the expiration of the limitation period (February 9, 2011).

[63]           Dr. Law submits that prejudice does arise from such a long delay and an inference of prejudice is warranted.  It is submitted the plaintiffs’ motion must fail on the basis of the plaintiffs’ failure to rebut the presumption of prejudice.

[64]           I disagree.  Notwithstanding the long passage of time and the inference raised in favour of Dr. Law, I find the plaintiffs have rebutted the presumption of prejudice.  I do not agree that the presumption of prejudice is unassailable solely due to the passage of time.  There are other factors to be weighed.  Dr. Law has not offered any evidence to show any non-compensable prejudice if the amendment is granted.  Rather, the evidentiary record on this motion establishes the following:

  •     Medical records from Southlake, including x-ray imaging are preserved by Southlake and remain in each of the parties’ legal files;
  •     Counsel for the proposed defendant, Dr. Law, has collaborated with counsel for the defendant, Dr. Gannage, in accessing pleadings and documents;
  •     The claim against Dr. Gannage (ER physician), for negligently reading the x-ray is the same as the claim against the proposed defendant radiologist, Dr. Law;
  •     This case does not have a complicated or highly contentious factual matrix.  The critical issue is whether the proposed defendant, Dr. Law, negligently missed a retained medical sponge when reviewing the x-ray.  No new cause of action or relief is being raised;
  •     The same medical evidence to be relied on by the plaintiffs to prove their claims remains in the possession of the defendants to defend the action.  The defendants are compellable witnesses to attend for trial;
  •     All defendants continue to practice health care in Ontario;
  •     The action against Dr. Law is tenable in law;
  •     Dr. Law is a proper defendant to be added, since there are multiple expert reports indicating he was responsible for negligently misreading the x-rays and not seeing the radiopaque surgical sponge;
  •     No trial date has been set;
  •     All defendants will have sufficient time to prepare their defences;
  •     Dr. Law will have the benefit of the work and investigation done by his co-defendants; and,
  •     There are no steps in the prosecution or defence of this action that will be thwarted through lack of evidence or information.

[65]           For these reasons, I find the plaintiffs have met their onus and have rebutted the presumption of prejudice.

The court also found special circumstances:

[66]           Dr. Law submits that the plaintiffs have not established special circumstances.  I disagree.  Where the presumption of prejudice has been rebutted, as in this case, the plaintiffs still bear the onus to demonstrate that there are special circumstances which justify the addition of Dr. Law as a party defendant.

[67]           Dr. Law submits that no special circumstances exist in this case to justify this court exercising its power to set aside the functioning of an applicable limitation period.

[68]           The special circumstances doctrine was considered in Wisniewski v. Wismer and Wohlgemut, a decision of Edwards J. for oral reasons given on February 1, 2018.

[69]           In Wisniewski, as in our case, the plaintiffs sought to add the proposed defendants (radiologists) after the expiration of the limitation period set out in s. 38(3) of the Trustee Act.  The parties agreed that the discoverability principle did not apply to this limitation period, as they did in our case.  Further, the parties agreed that the limitation period had expired.

[70]           As in our case, the plaintiffs submitted that the proposed defendants be added and pleadings be amended, all after the expiration of the limitation period on the basis of the Doctrine of Special Circumstances.

[71]           Dr. Law submits there are no special circumstances here to warrant the exercise of the court’s discretion.

[72]           In Wisniewski, Edwards J. was not satisfied that the plaintiffs had rebutted the presumption of prejudice.  Further, he also found there was no evidence to suggest the plaintiffs and their counsel were precluded from commencing a claim against the proposed defendants within the applicable limitation period due to a lack of information.

[73]           The key finding in Wisniewski was that almost five months prior to the expiry of the limitation period, the plaintiffs were in possession of x-ray reports and that plaintiffs’ counsel had the necessary information to conclude the proposed defendants should be added as defendants.  Edwards J. found there were no special circumstances that would justify the exercise of the extraordinary remedy to add a party after the expiry of the limitation period and he dismissed the motion to add the proposed defendants to amend the statement of claim.

[74]           I am of the view that Wisniewski is distinguishable from our case.  In Wisniewski, the plaintiffs knew the deceased had been radiographed before the limitation period expired.  In our case, the radiographs were provided to the plaintiffs, not at the outset, but approximately six and a half years later.

[75]           The plaintiffs in our case were precluded from commencing an action against Dr. Law, since they never knew any radiograph existed or that Dr. Law interpreted such a radiograph.

[76]           I find there was no knowledge Dr. Law took a radiograph or radiographs of Mr. Graham and interpreted those images until the plaintiffs were advised by counsel for Southlake, provided to Scott Graham with the CD under cover of the letter dated February 23, 2015, which Scott Graham reviewed on April 12, 2015.  This critical disclosure occurred over four years after the expiration of the limitation period being two years after the date of Mr. Graham’s death on February 8, 2009.

[77]           This disclosure by Southlake came “out of the blue”.  No explanation was provided to this court by anyone, especially by the defendants for such late production.  This disclosure was critical as it enabled Scott Graham to see the radiograph for the first time and connect what he viewed with what he was subsequently told about the Clinical Consultation Report during his conversation with Southlake’s counsel on July 20, 2015.  All of this concerned the possible involvement of Dr. Law.

[78]           Contrary to the findings in Wisniewski, in our case it cannot be said that the plaintiffs had been “handicapped” by their own “inaction”.  In our case, the plaintiffs not only requisitioned a care conference to identify the parties responsible for the critical choking incident, but also they quickly sought to obtain and assess all relevant medical records through submitting a timely records request at the outset and well within the limitation period.

[79]           In our case, the CD and program to access the CD, and disclosure of the x-ray or x-rays were inexplicably not produced until well after the limitation period had expired.  There is no question that the defendants failed to disclose at the care conference that radiographs of Mr. Graham were taken by Dr. Law and that Southlake, despite receiving a records request in 2008, failed to disclose the key x-ray until 2015.

[80]           While Dr. Law was unaware of this action until he was contacted by Scott Graham in February 2017, the chronology of events provides a satisfactory explanation as to what was done after February 2017, including some unnecessary and mistaken proceedings, the delivery of a draft amended statement of claim, the request for consent adding Dr. Law as a party defendant and the plaintiffs’ ultimately being compelled to bring this motion.

[81]           I find the plaintiffs have established special circumstances which are exceptional in nature.  The late, critical and unexplained disclosure by Southlake in 2015, well after the expiration of the limitation period provided the plaintiffs with the revelation of Dr. Law’s involvement in the treatment of Mr. Graham.  I find the facts establish that the plaintiffs were unaware of Dr. Law’s involvement until April and again in July 2015.

Ontario: an alternative resolution process that didn’t impact on the limitation period

Soleimani v. Rolland Levesque provides an example of an alternative resolution process that doesn’t render a proceeding an inappropriate remedy pursuant to s. 5(1)(a)(iv) of the Limitations Act.

Th action involved claims between neighbouring property owners arising out of alleged contamination of the plaintiffs’ property by hydrocarbons flowing from the defendant’s property.  Following the discovery of the contamination, the plaintiffs notified the Ministry of the Environment (MOE), which  became involved in addressing the contamination.

In response to the defendant’s limitations defence, the plaintiffs argued that the MOE’s involvement was a reasonable means to attempt to remediate the damage, and a claim wasn’t an appropriate remedy for that damage until eight years later when expert investigation directed by the MOE (and funded by the defendant) determined the source of the contamination.

The court rejected this argument.  The MOE’s involvement was not part of a dispute resolution process or mechanism: the MOE acts at its own discretion, it has no power to award damages, and the there could be no certainty as to when its involvement would come to an end:

[45]           In considering whether the MOE’s interventions in this case constitute a legally appropriate means to remedy the plaintiffs’ damages it is necessary to recognize that the provisions of the EPA do not provide a dispute resolution process or mechanism.  The steps the MOE chooses to take are in the MOE’s discretion.  The MOE has no power to award damages or compensation to the plaintiffs.  Neither the previsions of the EPA nor the facts of this case allow the court to say with any certainty when the MOE’s involvement would come to an end so as to determine when the limitation period might commence.

[46]           Moreover the MOE intervention cannot result in a declaration of responsibility for the contamination nor can it award damages for stigma nor the full recovery of legal, engineering and other costs and expenses nor damages for other economic losses, all as claimed in the plaintiffs’ statement of claim.

[47]           On the other hand, I recognize that the MOE has substantial powers in the exercise of their discretion to require the defendants to investigate the cause of and remediate contamination on both the defendants’ and the plaintiffs’ lands and to direct that this be done at the defendants’ cost.

[48]           The EPA broadly empowers the MOE to make orders to clean up contamination and prevent the discharge of contaminants into the environment.  For instance, pursuant to section 17 of the EPA, the Director has the power to issue “remedial orders” where a person has caused or permitted a contaminant to be discharged into the natural environmental.  This section empowers the Director to order that person to repair the injury or damage:

Where any person causes or permits the discharge of a contaminant into the natural environment, so that land, water, property, animal life, plant life, or human health or safety is injured, damaged or endangered, the Director may order the person to,

a)            Repair the injury or damage;

b)           Prevent the injury or damage; or

c)            Where the discharge has damaged or endangered or is likely to damage or endanger existing water supplies, provide temporary or permanent alternate water supplies.

[49]           Pursuant to section 157.1 of the EPA, a provincial officer can also order a person who owns or who has management or control or property to take “preventive measures” to:

(a)           Prevent or reduce the risk of a discharge of a contaminant into the natural environment;

(b)         Prevent, decrease or eliminate an adverse affect that may result from:

(i)            The discharge of a contaminant from the undertaking, or

(ii)           The presence or discharge of a contaminant in, on or under the property.

[50]           In determining whether a court action is an appropriate remedy pursuant to s. 5(1)(a)(iv) of the Act, Laskin J.A. in ETR Concession instructed that the court should consider (a) the nature of the plaintiffs’ loss; (b) the circumstances of the plaintiffs, and (c) efficiency of the court.

[51]           This is an environmental claim.  The major dispute between the parties has been, at least until very recently, whether the pollutants are emanating from the defendants’ land onto the plaintiffs’ land or, as the defendants claim, from the plaintiffs’ land onto the defendants’ land.  On the facts of this case, there can be no doubt that the MOE’s interventions have provided a means to determine the source of the contamination and remedial orders have been made.

[52]           The plaintiffs submit that given their particular situation, the MOE interventions may substantially reduce the plaintiffs’ damages and therefore it would be inappropriate to require the plaintiffs to prematurely resort to court proceedings while the regulatory process under the EPA is ongoing.

[53]           In my view the principal difficulty with the plaintiffs’ position is that there is no reasonable basis to ascertain when the MOE’s involvement will end.  To date, it has gone on in excess of eight years with no end point in site.  I agree with the defendants’ submission that the EPA does not in any sense establish an alternative adjudication or dispute resolution process for contamination claims.  While the MOE has significant remedial powers to direct the investigation and remediation of ground water contamination, these powers are outside the land owners’ control and are discretionary in nature.  These powers do not include any right to award economic damages or to grant declaratory orders, which is a significant component of the relief sought in this action.

[54]           The plaintiffs have argued that the limitation period should not run until the causation question was resolved (within the last two years) concerning the direction of flow of the contaminants.  They suggest that prior to resolving that issue it would have been unreasonable to commence court proceedings.

[55]           The plaintiffs emphasize the benefits they have achieved by allowing the MOE to deal with the contamination.  Thanks to the MOE exercising its statutory powers to direct the investigation and remediation of the groundwater contamination, the plaintiffs have avoided the considerable engineering costs of investigating the problem, of obtaining experts’ reports and of soil removal and other remedial measures.  They have also avoided or lessened the litigation risk of a possible determination that the contamination emanated from their own property, rather than the defendants’ property.

[56]           In effect, the plaintiffs can be said, in retrospect, to have made a wise economic choice in leaving the contamination issue in the hands of the MOE.  However this was manifestly a tactical decision made by the plaintiffs to avoid the costs and litigation risks of investigating their claim and establishing their case on liability and damages.  They chose to stand back for some four years prior to commencing this action to allow the MOE to move matters forward.  The case law is clear that tactical decisions will not toll the limitation period, see Markel and Presidential MSR.  As Mew J. observed in J.C. v. Farant at para 87:

Another recent decision, Gravelle (CodePro Manufacturing) v. Denis Grigoras Law Office, 2018 ONCA 396 (CanLII), reinforced the principle that a tactical decision to delay the commencement of proceedings will not, absent other factors – such as the pursuit of alternative means to resolve the very claim that I the subject matter of the action – delay the running of time.  At para. 6, the Court of Appeal stated:

 The appellant decided for tactical reasons not to bring his action against the respondents until the arbitration proceedings were completed.  He was entitled to make this choice, but he must live with the consequences of it.

[59]           In my view this position is untenable and inconsistent with the appellate case law binding on this court.  The circumstances triggering the running of the limitation cannot be a moving target incapable of being ascertained with the level of reasonable certainty required.  This would create a situation in which the plaintiffs essentially determine when the limitation period commences.

[61]           In my opinion the approach advocated by the plaintiffs and the intervenors ignores the requirement that the appropriate means exception in sub-section 5(1)(a)(iv) of the Act be restricted to factual situations in which the alternate avenue of redress is legally appropriate in the sense that the courts must not be required to interpret the parties’ communications or negotiations or, be required to analyze the significance of the technical findings of ongoing engineering studies and importantly, there needs to be a fixed end point.

Reconsidering mistakes of law and discoverability

Samuel Beswick, a Harvard legal scholar, studies the impact a mistake of law has on the discovery of a claim.  In Under the Limit‘s first guest post, he makes a compelling argument for reconsidering how Canadian limitations law might alter its approach to mistakes of law in the discovery analysis.

Mistake of law as a basis for extending the limitation period?

Common law countries have long determined that discoverability governs limitation on actions “grounded on” mistake (as the former Alberta statute put it) or that seek “relief from the consequences of” mistake (as the English Limitation Act provides). Back when the law of unjust enrichment was thought to allow restitution only for mistakes of fact, discoverability provisions had not much to do with mistakes of law. Now that the mistake-of-law bar has been abandoned, it is apt to ask: when can a mistake of law be discovered?

In England, this problem has driven multi-billion-pound-sterling unjust enrichment litigation, spurring private law scholars and confounding courts. The answer that the English courts have given, succinctly put in FII Test Claimants v HMRC, is that:

[372] … [I]n the case of a point of law which is being actively disputed in current litigation the true position is only discoverable … when the point has been authoritatively resolved by a final court.

I have recently sought to show that England’s answer to the discoverability of mistakes of law is arbitrary, jurisprudentially strained, internally inconsistent, and effects bad policy.

What’s remarkable (albeit it hasn’t to date been remarked on) is that this doctrine is also totally contradictory to Canadian precedent on this issue. The position in Canada, summarized in Hill v Alberta, is that:

[9] … Discoverability refers to facts, not law. Error or ignorance of the law, or uncertainty of the law, does not postpone any limitation period.

In Canada, time runs on mistake-of-law claims whether or not a claimant has discovered their mistake. This causes other problems, which I have endeavoured to draw out in a recent paper.

There is, however, a middle ground between England’s “authoritative judgment” understanding of limitation on mistakes of law and Canada’s “exception” to the discoverability principle, a full account of which will be appearing in the LQR. The short answer, though, is this: mistakes as to the law should be considered discoverable once a claimant is in a position to plead them in a statement of claim. Discoverability is not about finding out one’s legal position from a court. It is about having adequate time to be able to plead one’s case to a court.

 

Ontario: the limitation of breach of resulting trust claims

In Sinclair v. Harris, the plaintiff argued that no limitation period applies to claims for breach of a resulting trust relating to real property.  The court rejected this argument and found that the ten-year limitation period in s. 4 the RPLA applies. The defendant relied on a dubious interpretation of the Court of Appeal decision in Drakoulakos, in which some unlikely facts allowed me to make a successful s. 24 argument:

[18]           The first issue that needs to be resolved is what limitation period, if any, is applicable in this case.  There is a stark difference in the position of the parties.  The plaintiffs submit that no limitation is applicable to a resulting trust in equity.  The defendants submit that a 10-year limitation period applies to this trust.

[19]           The definition of a resulting trust is succinctly stated in Waters’ Law of Trusts in Canada 4th Ed.:

Broadly speaking, a resulting trust arises whenever legal or equitable title to property is in one party’s name, but that party is under an obligation to return it to the original title owner, or to the person who paid the purchase money for it.

See Pecore v. Pecore, 2007 SCC 17 (CanLII) at para. 20.

[20]           The responding parties argue that the plaintiffs’ action should be dismissed because any resulting trust established on the evidence is statute barred.  They rely upon the 10-year limitation period found in s. 4 of the Real Property Limitations Act, R.S.O. 1990, c. L.15 (“RPLA”):

No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it.

[21]           In McConnell v. Huxtable, 2014 ONCA 86 (CanLII), Rosenberg J.A. traced the history of the law of limitations in this province. With respect to s. 4, he held that it applied to constructive trusts where the claimant did not have any interest in the property until so declared by the court.  In other words, it applied to an equitable interest in land through the imposition of a constructive trust.

[22]           In Waterstone Properties Corp. v. Caledon (Town), 2017 ONCA 623 (CanLII), the court made it clear that the 10-year limitation period in s. 4 did not just apply to claims for the possession of land but would encompass claims of ownership of land advanced by way of a resulting trust (at para. 32):

The words “action to recover any land” in s. 4 of the RPLA are not limited to claims for possession of land or to regain something a plaintiff has lost. Rather, “to recover any land” means simply “to obtain any land by judgment of the Court” and thus these words also encompass claims for a declaration in respect of land and claims to the ownership of land advanced by way of resulting or constructive trust: Hartman Estate v. Hartfam Holdings Ltd., 2006 CanLII 266 (ON CA), [2006] O.J. No. 69, at para. 56; McConnell v. Huxtable, 2014 ONCA 86 (CanLII), 118 O.R. (3d) 561, at paras. 38 – 39.

[23]           The plaintiffs rely on the case of Drakoulakos v. Stirpe, 2017 ONCA 957 (CanLII).  This was an appeal of a summary judgment motion whereby the motions judge granted summary judgment on the basis that the claim was statute barred based on the basic limitation period of the Limitations Act 2002. In that case, more than 15 years had passed since the plaintiff had known or ought to have known he had an action arising from a resulting trust.  The Court of Appeal overturned the decision because there was no limitation period for a claim based upon the transitional provisions of the Limitations Act 2002, where there was no limitation period for the claim against the trustee of a resulting trust or property still in the possession of the trustee under the former Act and the claim was discovered before January 1, 2004.

[24]           These comments, which are relied upon by the plaintiffs to support their position that there are no limitations for any resulting trust, must be read with care. The Ontario Court of Appeal was dealing with the application of the transitional provisions when it came to a resulting trust.  They were not making broad statements that are applicable to the facts before me. I further see Drakoulakos as distinguishable.  In that case, the court was dealing with taxi licenses and shares in a company.  It was unconnected to any real property. Thus, the Real Property Limitations Act would have no application to it. Similarly, in McConnell v. Huxtable, (at para. 41) Rosenberg J.A. held that s. 4 did not apply where the claimant was seeking an interest in a pension or a business. See also The Equitable Trust Co. v. Marsig, 2012 ONCA 235 (CanLII) at para. 19.  I see no conflict in these authorities.

[25]           Likewise, comments made in McCracken v. Kossar, 2007 CanLII 4875 (ON SC), [2007] O.J. No. 664 (S.C.J.) at para. 36, relied upon by the plaintiff, that queries whether equitable trusts are subject to the RPLA have now been overtaken by the appellate authorities noted above, and must be viewed in that light.

[26]           The plaintiffs submit that the limitation period does not apply since the claim is not about land but it is about the monies that Ms. Rock gave the defendants.  I cannot agree.  First of all, it is clear from the statement of claim and the evidence that this claim is about a resulting trust in a piece of real property.  The monies were expressly given to the defendants so that they could purchase the home and land.  This is not a case where Ms. Rock gave a sum of money which was unrelated to any real property to the defendants.  Here the connection is clear and direct.  Further, to try and distinguish the defendants’ authorities on this basis is futile.  In most real property transactions, money is involved.  The RPLA cannot simply be avoided by an attempt to characterize the transaction as being about money and not land. The fact that the plaintiffs are not actually seeking the return of the Beeton property or any other piece of real property, does not avoid the application of s. 4 given what they are seeking is “money to be laid out in the purchase of land” which fits within the definition of “land” under the RPLA: Harvey v. Talon International Inc., 2017 ONCA 267 (CanLII) at paras. 50 to 54 (dealing with a return of a deposit on the purchase of land); Scicluna v. Solstice Two Ltd., 2018 ONCA 176 (CanLII) at para. 25 (dealing with relief from forfeiture of a deposit for the purchase of land); Goldhar Estate v. Mann, [2016] O.J. No. 6872 (S.C.J.) (holding that the Act applied to equitable mortgage).

[27]           In short, the plaintiffs’ claim is an action to recover land and as such falls within s. 4 of the RPLA.

Ontario: the codification of the discovery rule is not semantics (blog pedantry)

The decision in Loy-English v. Fournier requires some gentle criticism for its description of the limitations scheme:

[40]           Before turning to the evidence, I will just mention that counsel for the intervenor provided me with a useful review and critique of much recent jurisprudence. I have not found it necessary to address the argument that there is a difference between the time when a cause of action accrues at common law and the day when a claim is discovered under the Act.  I need not seek to resolve what counsel identifies as inconsistency in the jurisprudence and failure of courts to recognize the extent to which the Act has changed the common law.

[41]           I will just observe that in the seminal decision of Peixiero v. Haberman, the Supreme Court of Canada endorsing the principle of discoverability in connection with Ontario’s motor vehicle regime uses language suggesting a cause of action under Ontario law only “accrues” when it is possible to determine that the injuries exceed the threshold.[18]  In Lawless v. Anderson our Court of Appeal declared that “the principle of discoverability provides 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.” The court went on to define “cause of action” as “the fact or facts which give a person a right to judicial redress or relief against another.”[19]  Arguably, the effect of the Act is to identify discoverability as a constituent component of a cause of action in Ontario but this is largely a question of semantics.

[42]           The important point is the rationale underlying the discoverability principle. A limitation statute should not be construed to run before the plaintiff could reasonably know that she had a viable cause of action.  It is this rationale that is codified in s. 5 of the Act.  Whether the cause of action can be said to have arisen at an earlier date, knowledge that there is a cause of action and a legal proceeding is an appropriate avenue for relief is a component of discoverability.  All four statutory components are necessary to trigger the running of the limitation period.

  1. It’s not arguable that the Limitations Act makes discoverability a constituent element of a cause of action, nor is the argument one of semantics.  At common law, the discoverability rule relates to the accrual of a cause of action, not the elements of a cause of action.  The rule provides that a cause of action accrues when the plaintiff discovers its material elements.  Section 5 of Limitations Act contains a codified discoverability rule that applies to “claims”, a defined term, not causes of action.  It also doesn’t make discoverability an element of a cause of action or “claim”, but determinative of when discovery occurs.  This isn’t at all an issue of semantics.  “Claims” and causes of action are not interchangeable, a point made recently by the Court of Appeal.
  2. It is not so that the Limitations Act prevents time from running before a plaintiff can reasonably know that she has a viable cause of action.  Knowledge of the elements of a cause of action will not result in discovery of a “claim” under the Limitations Act.  This is because the s. 5(1)(a)(iv) discovery matter—the appropriateness of a proceeding as a remedy—is not an element of any cause of action, and also because discovery requires knowledge of damage, and damage is not an element of any cause of action based on conduct that is actionable per se (like breach of contract).

Ontario: another good “abilities and circumstances” analysis

 

The decision in Service Mold + Aerospace Inc. v. Khalaf is another good example of the court’s assessment of a plaintiff’s abilities and circumstances for a limitations analysis.  The fact that the plaintiff had no background or education in bookkeeping, accounting, or finances informed the court’s analysis of when the plaintiff could reasonably discover a fraud committed by his bookkeeper.

It’s also a noteworthy decision for the dubious (and unsuccessful) position taken by the defendant:

[21]           TD Bank acknowledges that the plaintiffs did not actually discover the fraud until early 2015 and relies on s. 5(1)(b).  The position of TD Bank is as follows:

1.         The plaintiffs ought to have discovered the claim at least by 2009 or 2010.  TD Bank takes the position that bookkeeper fraud is a well-known risk and a prudent businessman would have measures in place to control it.  Mr. Schuurman, in effect, turned a blind eye to the risk. TD Bank therefore invites me to dismiss the action.

To discover a claim, the plaintiff must know that the defendant has caused or contributed to his loss (and there is no “claim” as defined by the Limitations Act until loss occurs).  Whether the plaintiff was blind or not to a risk that ultimately resulted in his loss, until the loss occurred, the claim was not discoverable.  This position might support a contributory negligence argument, but it’s immaterial to a limitations defence.