Category: Ontario

Ontario: Court of Appeal emphasises that discovery is contextual

The Court of Appeal’s decision in Fehr v. Sun Life Assurance Company of Canada is noteworthy for it its emphasis on the contextual nature of the discovery analysis:

[173]   However, when it came to assessing the limitation period defences applicable to the individual plaintiffs, the motions judge did not engage in a detailed examination of these idiosyncrasies. In particular, he did not consider the impact of each plaintiff’s circumstances and experiences on the critical issue of when each plaintiff discovered his or her claim or knew or ought to have known of the requisite facts grounding their claim. He failed to engage in an individualized and contextual analysis, and, instead, applied a broad presumption as to when they ought to have known of certain alleged misrepresentations.

[174]   An individualized and contextual analysis was necessary in this case for the very reason that misrepresentation claims are not generally amenable to class actions: people receive, process, and act upon written and verbal statements in different ways. Their behaviour varies depending upon a variety of factors, including their own particular circumstances, what specific representations and information they received and from whom, how they understood or processed those representations and information, the extent to which they relied upon them, and their own wishes and intentions.

[175]   An individualized and contextual analysis was particularly important in this case because, among other things: (a) there is a relationship of vulnerability between insurer and insured; (b) many of the plaintiffs are unsophisticated with respect to the insurance industry; (c) the insurance policies are complicated and not easily understood; (d) misrepresentations were made to some consumers and not others; (e) some or all of these misrepresentations were made by individuals on whom the plaintiffs might reasonably rely; (f) there is no evidence that the insurer expressly corrected the misrepresentations; and (g) the insurer may have reinforced or made further misrepresentations, to some or all of the plaintiffs, during the life of the policies.

Ontario: Court of Appeal changes (maybe?) the limitation of claims arising from coverage denials

The Court of Appeal in its decision Nasr Hospitality Services Inc. v. Intact Insurance has held that, at least in the circumstances of the case, the limitation period for a coverage action commences presumptively on the date the insured gives notice of its loss to the insurer.  This is a significant departure from the bar’s understanding, and seemingly at odds with the Court’s decision in Kassburg, and problematic enough that Justice Feldman dissented.  Both the issues and the implications of the decision are significant, so I summarise the facts in some detail.

The plaintiff purchased a commercial insurance policy from Intact. On January 31, 2013, a flood occurred on the plaintiff’s premises.  The Plaintiff notified its broker of its loss, and the broker notified Intact.

On February 13, 2014, Intact confirmed coverage, subject to policy terms and conditions, for the business interruption the plaintiff suffered, and issued a cheque to cover the losses.  Intact issued another cheque in May 2013.

The plaintiff disputed Intact’s valuation of the claim.  On May 13, 2014,  Intact wrote to advise that it would not accept the plaintiff’s valuation.  Subsequently, the plaintiff submitted a proof of loss.  On June 25, 2013, Intact rejected the proof of loss as incomplete, and advised that it was not rejecting or denying the plaintiff’s claim.

The plaintiff filed a further proof of loss on June 26, 2013.  On July 22, 2013, Intact rejected the proof of loss and advised the plaintiff that it would deny any further coverage under the policy.  Curiously, the decision suggests that Intact nevertheless provided the plaintiff with a blank proof of loss form and advised that it had two years from the date of loss to finalise its claim.

It appears from the decision that the plaintiff filed a third proof of loss on July 31, 2013, and that on August 15, 2013, Intact returned rejected that proof of loss.

The plaintiff issued its Statement of Claim on April 22, 2015 seeking damages arising from the coverage denial.  Intact moved for summary judgment on the basis of an expired limitation period.  Intact lost the motion, and appealed.

The parties agreed that the plaintiff’s cause of action arose on February 1, 2013 and the Court of Appeal accepted this agreement as “an admission of fact that February 1, 2013 was the day on which [the plaintiff] first knew the matter in ss. 5(1)(a)(i)-(iii)” of the Limitations Act.  The court found this position was consistent with its decisions in Markel and Schmitz.  Once the insured requests indemnification, the insurer is under a legal obligation to satisfy it.

The court rejected the plaintiff’s s. 5(1)(a)(iv) appropriateness argument.  Though the jurisprudence recognizes that some conduct by an insurer after receiving notification of a claim under a policy can impact on the discovery of a claim, but to apply to in this instance would result in a form of promissory-estoppel, and the plaintiff had conceded that a promissory estoppel was unavailable:

[59]      Nasr has not pointed to any cases involving ordinary claims for indemnification under a commercial policy of insurance that have treated the appropriate means element in s. 5(1)(a)(iv) as some form of watered-down promissory estoppel. To treat s. 5(1)(a)(iv) in that manner for ordinary commercial insurance indemnification claims – as the motion judge effectively did – would risk ignoring the caution voiced by Sharpe J.A. in Markel Insurance, at para. 34 – and echoed by Laskin J.A. in 407 ETR, at para. 47 – that:

To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions. [Emphasis added.]

[60]      The motion judge did not find that Intact had promised, expressly or impliedly, not to rely on the limitation period. Accordingly, it was not open to the motion judge to recast, for purposes of the appropriate means analysis, the conduct by Intact that Nasr conceded could not support a finding of promissory estoppel that the insurer would not rely on the limitation period.  With respect, the motion judge erred in doing so.

Justice Feldman dissented.

She rejected that the limitation period should commence on the date of the loss, rather than the breach of the insurance contract:

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

The insurance policy itself would determine when the obligation to pay arose, and therefore the date on which Intact failed to perform that obligation in breach of the policy.  Because neither party put the policy into evidence, the moving party couldn’t prove when the breach occurred, and therefore when the limitation period commenced:

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

Further, an agreement between the parties as to when a cause of action arose cannot bind the court:

[72]      However, on appeal, the insurer again asks the court to reject the respondent’s argument, overturn the decision of the motion judge, and grant summary judgment. To grant summary judgment this court must then decide when the cause of action against the insurer for breach of the insurance contract arose, in order to determine when the limitation period commenced to run.

[73]      That is a question of mixed fact and law. The legal part requires the court to determine when the insurer became legally obligated to pay under the policy. The factual part is the determination of when the insurer did not pay in accordance with that obligation. Parties cannot bind the court on legal issues by agreement or concession. For example, in OECTA v. Toronto Catholic District School Board (2007), 2007 CanLII 6454 (ON SCDC), 222 O.A.C. 23 (Div. Ct.), Lane J. stated at para. 13:

The fourth difficulty is that the agreement asserted is an agreement not as to the facts, but as to the law. Whether the doctrine of culminating event applies only where the alleged culminating act is culpable is a question of law. Parties cannot agree on the law so as to bind a court or tribunal to their view; the law is the law and it is always open to the tribunal to determine what it is.

Justice Feldman rejected the support the majority found in Markel and Schmitz.  In those cases, the legal obligations of the insurers arose from statute:

[78]      Markel Insurance involved a transfer claim for indemnification by a first party insurer against a second party insurer in the motor vehicle accident context. The claim was governed by the Insurance Act, R.S.O. 1990, c. I.8, its regulations, and procedures set out by the Financial Services Commission of Ontario. The court had all the information before it that it required to determine when the second insurer’s obligation to indemnify arose and was breached.

[79]      Similarly, in Schmitz, the claim for indemnity at issue was brought within and was governed by the underinsured motorist coverage provided by the OPCF 44R, an optional endorsement to Ontario’s standard form automobile insurance policy.

There are many things that are problematic with this decision, which is perhaps why it is one of the very few limitations decisions to have a dissent. Let’s go through the list:

  1. The foremost flaw is the majority’s ratio that the cause of the action accrued on February 1, 2013 based on the parties’ agreement. Curiously, neither the majority nor the motion judge set out what occurred on February 1, 2013.  Because the majority presumes that the limitation period commenced presumptively on the date of notice of the loss, I assume February 1, 2013 was the date the insured through its broker gave notice of the loss to the insurer.  Markel and Schmitz are only relevant to the majority’s decision if this is so.
  2. It’s hard to understand why the plaintiff would agreed on this point, or why both parties had the misapprehension that cause of action accrual was determinative of the commencement of the limitation period. My guess is that the policy (which mysteriously wasn’t part of the record) contained a provision that the insured had two years from the loss to sue, which is reasonably common.  However, this kind of term has nothing to do with cause of action accrual, it just operates to vary the basic limitation period by making it run in all circumstances from a fixed date.
  3. This decision could have wonky implications. Insurers will undoubtedly rely on it as standing for the principle that the limitation period for a coverage action, certainly when coverage is under a CGL policy but probably also under other policies as well, commences presumptively on the date the insured gives notice of its loss.  This is certainly not the bar’s current understanding as it’s seemingly entirely at odds with the decision in Kassburg. 
  4. Fortunately, it will be possible to distinguish Nasr on the grounds that the limitations analysis flowed from the parties’ agreement as to cause of action accrual, and that such an agreement can have no precedential value. I think this argument will generally prevail, given both Kassburg and the decision’s ambiguity about what happened on February 1, 2013 that resulted in accrual.  However, the right limitations argument very often doesn’t prevail, and I see the potential for a body of dubious caselaw until the CA revisits the issue and, one hopes, distinguishes Nasr into irrelevance.  It’s not helpful that the Nasr court said that Markel and Schmitz supported the parties’ accrual analysis.  It’s easy to imagine a lower court considering that conclusive of the issue.
  5. Lastly, one quibble with the dissent’s statement about cause of action accrual:

[66]      As the moving party on the motion for summary judgment, the insurer had the onus to prove all of the elements that found the basis for its limitation claim, including the date when the cause of action arose, i.e. the date when the act or omission by the insurer caused the injury to the insured: see the definition of “claim” in s. 1 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and ss. 4 and 5.

The moving party did not bear the onus of establishing when the cause of action arose, but when the Claim arose.  The Limitations Act doesn’t tie the commencement of time to cause of action accrual, and the language “cause of action” doesn’t appear in the Limitations Act.  The cause of action was breach of contract.  A breach of contract is actionable per se and the cause of action doesn’t require damage to accrue.  The Limitations Act, pursuant to s. 2, applies to claims pursued in court proceedings.  Until there is a claim, the Limitations Act won’t apply.  A claim requires both wrongful conduct and resulting damage.  Until there is damage, there is no claim, and without a claim the Limitations Act doesn’t apply.  The limitation period commences presumptively from the date of the act or omission pursuant to s. 5(2), but the precondition to the application of s. 5(2) is the application of the Limitations Act itself, and therefore the occurrence of damage.  Here the point is likely practically of little consequence, as the breach and damage occurred contemporaneously (denial of coverage resulting immediately in the plaintiff being without indemnification for its loss), but conceptually it matters very much.

All of that said, the decision does have a good summary of s. 5(1)(a)(iv) principles:

[46]      In commencing his analysis under s. 5(1)(a)(iv) of the Act, the motion judge properly noted the general proposition that the determination of when an action is an appropriate means to seek to remedy an injury, loss or damage depends upon the specific factual or statutory setting of each individual case: 407 ETR Concession Company Limited v. Day, 2016 ONCA 709 (CanLII), 133 O.R. (3d) 762, leave to appeal refused, [2016] S.C.C.A. No. 509, at para. 34; Winmill v. Woodstock (Police Services Board), 2017 ONCA 962 (CanLII), 138 O.R. (3d) 641, leave to appeal to SCC requested, at para. 23.

[47]      However, as this court has observed, that general proposition is not an unbounded one.

[48]      First, in Markel Insurance this court confined the meaning of “appropriate” to “legally appropriate”. Writing for the court, Sharpe J.A. stated, at para. 34:

This brings me to the question of when it would be “appropriate” to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5(1)(a)(iv) states that a claim is “discovered” only when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions. [Italics in original; underlining added.]

[49]      Second, in 407 ETR, Laskin J.A. noted, at para. 47, that the use of the phrase “legally appropriate” in Markel Insurance, “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” (emphasis added).

[50]      Finally, in Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325 (CanLII), 135 O.R. (3d) 321, Pardu J.A. observed that the jurisprudence discloses two circumstances in which the issue of appropriate means most often delays the date on which a claim was discovered. First, resorting to legal action might be inappropriate in cases where the plaintiff relied on the superior knowledge and expertise of the defendant, especially where the defendant undertook efforts to ameliorate the loss: at para. 26. Second, a legal action might not be appropriate if an alternative dispute resolution process “offers an adequate alternative remedy and that process has not fully run its course”: at para. 29. See also paras. 28-48; and Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469 (CanLII), at paras. 21 and 34-35. In this regard, in Winmillthis court held that resort to a civil proceeding for a remedy in respect of damage flowing from an incident might not be an appropriate means while criminal proceedings in respect of the incident remain outstanding: at para. 28.

[51]      Although Presidential MSH does not purport to offer an exhaustive list of circumstances in which a proceeding might not be an appropriate means, I would observe that neither circumstance identified in Presidential MSH is present in this case. Some other factor would have to displace the s. 5(2) presumption that Nasr knew a proceeding was an appropriate means on February 1, 2013.

Ontario: Court of Appeal affirms that discovery of a cause of action isn’t discovery of a claim

The Court of Appeal decision in Gillham v. Lake of Bays (Township) is noteworthy for two  reasons.

First, it uses the concept of the “claim” (which is the language of the Limitations Act) rather than the concept of the “cause of action” (which is not the language of the Limitations Act) for its limitations analysis.  See for example para. 20:

[20]      The overarching question in the discoverability analysis under s. 5 of the Act is whether the claimant knew or reasonably should have known, exercising reasonable diligence, the material facts stipulated under s. 5(1)(a) that give rise to a claim: Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851 (CanLII), 113 O.R. (3d) 401, at para. 32. Section 1 of the Act defines a claim as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. Section 2(1) provides that the Act “applies to claims pursued in court proceedings” (with certain enumerated exceptions that do not apply here).

(A slight quibble: the s. 5(1)(a) matters do not give rise to a claim.  Only two facts—an act or omission resulting in injury, loss, or damage—give rise to a claim pursuant to its definition in s. 1.  Knowledge of the s. 5(1)(a) matter results in discovery of the claim.)

It even puts “cause of action” in quotation marks–presumably to distinguish it from a claim–in the context of stating that knowledge of the material facts of a cause of action is not discovery of a claim:

[33]      The motion judge erred in failing to undertake an analysis of the criterion under s. 5(1)(a)(iv) of the Act. That the appellants might have a “cause of action” against the defendants, as the motion judge found, is not the end of the analysis under s. 5(1) of the Act. As this court said in Kudwah v. Centennial Apartments, 2012 ONCA 777 (CanLII), 223 A.C.W.S. (3d) 225, at para. 2:

It is important when considering a limitation period claim to appreciate that the terms of the 2002 Act must govern. A court considering the limitation claim must address the specific requirements of s. 5 of the Act, particularly on the facts of this case, the requirement of s. 5(1)(a)(iv).

 

Second, it acknowledges the accrual of a claim as the starting point of the limitations analysis, and that discovery of the claim requires knowledge that a proceeding is an appropriate remedy for the loss:

[34]      Therefore, the motion judge had to consider whether the appellants had a claim as defined under the Act. In considering whether the appellants knew or should have known that they had a claim, the motion judge had to go on to consider whether, having regard to the nature of the injury, loss or damage, the appellants knew or should have known that a proceeding would be an appropriate means to seek to remedy it. This omission by the motion judge is an error of law: Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469 (CanLII), at paras. 21 and 35.

[35]      Section 5(1)(a)(iv) represents a legislative addition to the other factors under the discoverability analysis. As Laskin J.A. explained in 407 ETR Concession Company Limited v. Day, 2016 ONCA 709 (CanLII), 133 O.R. (3d) 762, leave to appeal to SCC refused, [2016] S.C.C.A. No. 509, at paras. 33-34:

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.

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.

This is a very welcome statement from the Court of Appeal.  It’s a step away from the misapplication of common law discovery principles to limitations analyses that has caused a great deal of confusion and uncertainty.

Lastly, the decision finds that it was appropriate for the plaintiffs to “wait and see” in the context of a construction dispute before commencing a proceeding.  I often see it argued that Presidential stands for the principle that there are only two circumstances in which a proceeding will be an inappropriate remedy—where the defendant undertakes good faith ameliorative efforts or there is an alternative dispute resolution process. This is a misapprehension of the law, as this decision demonstrates.  Here’s the key analysis:

[37]      Here, the motion judge failed to consider “the specific factual or statutory setting” of the case before him and determine whether it was reasonable for the appellants not to immediately commence litigation but to “wait and see” if the 1 ¼ inch sinking of the deck pier observed in 2009 would worsen over time or if the issue would resolve once the stone retaining wall had settled, as had been suggested to the appellants by Mr. MacKay. Neither Royal Homes nor Mr. MacKay believed the problem was serious, or due to the manner of construction. This evidence does not support the conclusion that the appellants knew or ought to have known in 2009 that their loss was not trivial and initiating legal proceedings was the appropriate means to remedy their loss.

 

Ontario: when a tax appeal doesn’t render a claim against lawyers inappropriate

In Coveley v. Thorsteinssons LLP, the plaintiffs sued their former lawyers for negligently prosecuting tax appeals.  The defendant lawyers moved for summary judgment dismissing the claim as statute-barred. The court refused to accept the plaintiffs’ s. 5(1)(a)(iv) appropriateness argument that the defendants’ prosecution of the tax appeals operated to delay their discovery of the claim:

[45]           Thorsteinssons relies upon a decision of Mew J. in J.C. v. Farant, 2018 ONSC 2692 (CanLII). In Farant, Mew J. decided a motion for summary judgment seeking dismissal of an action for professional negligence against lawyers who represented the plaintiff in an historical sexual abuse claim on the ground that it is statute barred. The outcome of the motion turned on s. 5(1)(a)(iv) of the Limitations Act, 2002. Mew J. observed at para. 72 of his decision that the focus of s. 5(1)(a)(iv) of the Limitations Acts, 2002 is on the specific factual or statutory setting of each individual case and, as a result, appellate decisions which have considered and applied the provision are not always easy to reconcile.

[46]           In his review of the jurisprudence under s. 5(1)(a)(iv) of the Limitations Act, 2002, Mew J. cited the decision of the Court of Appeal in Gravelle (CodePro Manufacturing) v. Denis Grigoras Law Office, 2018 ONCA 396 (CanLII). In Gravelle, the appellant commenced an action alleging that the respondents provided erroneous advice in respect of an agreement of purchase and sale, specifically, as to the enforceability of a binding arbitration agreement the appellant had with the purchaser under North Carolina law. The appellant gave notice of his claim but did not commence his action until over four years later. The appellant argued on appeal that it was appropriate for him to delay bringing his action until the arbitration proceedings involving the purchaser were completed, as it would have avoided unnecessary litigation if he had been successful in those proceedings. The Court of Appeal disagreed, noting that this was not a case in which the appellant was pursuing alternative means of resolving his negligence action against his former solicitors, the respondents. The Court of Appeal held that the appellant’s tactical decision to wait until the arbitration proceedings were completed before bringing his action was his to make, but this decision did not delay the commencement of the limitation period.

[47]           Mew J. cited the Gravelle decision as one that reinforces 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 is the subject of the action – delay the running of time”: Farantat para. 87.

[48]           The factual circumstances disclosed by the evidence on the motion before me are unlike those in Presidential in material respects. In Presidential, Pardu J.A. relied upon the fact that the appellant looked to its professional advisors to provide accounting and tax advice, and the appellant relied on the accountant’s advice to retain a tax lawyer to object to CRA’s Notices of Assessment. The accountant who had filed the tax returns late was involved in the strategy that was recommended to the appellant and that it pursued. The accountant continued to be involved in the alternative process that had been recommended by the accountant while this process was running its course.

[49]           The evidence on the motion before me is very different. Thorsteinssons informed Michael and Stella in September and October 2010, respectively, that their tax appeals were weak. Soon after this advice was given, Thorsteinssons, although initially willing to continue to represent the plaintiffs through the trial of their tax appeals (on a pro bono basis with an associate acting as trial counsel), sought and obtained an order, that was not opposed, removing the firm as counsel of record for the plaintiffs on November 12, 2010. Thorsteinssons was not thereafter involved in the litigation strategy that the plaintiffs pursued. The plaintiffs retained new counsel for their tax appeals and they were represented by new counsel through the trial of the tax appeals and an appeal of the trial decision. Thorsteinssons does not agree that incorrect advice was given and, unlike the facts in Presidential, the firm did not provide advice to the plaintiffs about what to do to solve the problem of incorrect advice having been given. The plaintiffs’ decisions to pursue the tax appeals and to wait until after the trial of the tax appeals before starting an action were made after the professional relationship between Thorsteinssons and the plaintiffs had ended, and were not recommended by Thorsteinssons. The fact that Thorsteinssons continued to represent the plaintiffs until November 12, 2010, and that before this date the firm had expressed a willingness to continue to represent the plaintiffs at the trial of their tax appeals, does not affect the plaintiffs’ knowledge by no later than October 27, 2010 that Thorsteinssons’ advice was that both appeals were weak, and that this advice conflicted fundamentally with earlier advice, upon which the plaintiffs maintain they relied, that the appeals were strong and likely to succeed.

[50]           I regard these factual circumstances to be more like those in Gravelle. In Gravelle, the appellant knew of the claim against his former solicitors for allegedly improper advice. The solicitors were not involved in the appellant’s decision to pursue arbitration against the purchaser or the appellant’s decision to wait until the conclusion of the arbitration before starting an action against the solicitors for professional negligence. As I have noted, the Court of Appeal concluded that the appellant’s decision not to bring his action until the arbitration proceedings were completed did not delay the commencement of the limitation period. The same reasoning applies to the facts on the motion before me.

[51]           In addition, I regard as significant that Stella and Michael did not state in their affidavits that they decided to delay commencing a claim against Thorsteinssons while they were pursuing the tax appeals because, if they were successful, the losses resulting from their claims against Thorsteinssons would have been substantially or entirely eliminated. If this was the reason for delaying commencement of the action, I would expect evidence of this fact to have been provided.

[52]           I also regard as significant that the plaintiffs did not wait for the trial decision in their tax appeals before commencing an action against Thorsteinssons. The trial of the tax appeals was held in October 2012 and the Tax Court of Canada released the judgment dismissing the tax appeals more than one year later, on December 20, 2013. The action against Thorsteinssons was commenced on November 2, 2012, soon after the trial of the tax appeals and before the release of the Tax Court of Canada’s decision. This evidence is inconsistent with the position advanced by the plaintiffs that a legal proceeding against Thorsteinssons was not an appropriate means to seek to remedy the loss caused by incorrect legal advice given by Thorsteinssons until the alternative process upon which the plaintiffs rely, the tax appeals, had run its course.

[53]           The pursuit of tax appeals that, according to the plaintiffs’ evidence, they regarded as weak and unlikely to succeed, does not amount to an alternative process that had the reasonable potential to resolve the dispute between the parties and eliminate the plaintiffs’ loss. The plaintiffs’ pursuit of the tax appeals does not postpone the time when they first knew or reasonably ought to have known that, having regard to the nature of the injury, loss or damage that they claim was caused by their reliance on Thorsteinssons’ advice, an action would be an appropriate means to seek to remedy their claim.

[54]           For these reasons, I conclude that by no later than October 27, 2010, the plaintiffs first knew or reasonably ought to have known that an action against Thorsteinssons would be an appropriate means to seek to remedy their claim against Thorsteinssons for giving incorrect advice about the merits of the tax appeals. The plaintiffs’ claim was discovered by no later than October 27, 2010. The action was commenced more than two years later. There is no genuine issue requiring a trial in relation to whether the action is statute barred.

Ontario: the Land Titles Act and possessory and prescriptive rights

Aragon (Wellesley) Development (Ontario) Corp. v. Piller Investements Ltd. will be useful to the real property bar for its summary of the effect of the Land Titles Act on possessory and prescriptive rights (starting at para. 122), abandonment of easements (starting at para. 154), and prescriptive easements (starting at para. 165).

 

 

Ontario: an expired time-bar doesn’t make a jurisdiction inappropriate

The decision in Leon v. Volkswagen stands for the principle, potentially useful in jurisdictional disputes, that a foreign jurisdiction may be more appropriate than Ontario even if the proceding would be time-barred in the foeign jurisdiction:

[50]         Indeed, Canadian courts have done exactly that. Even where the proposed Ontario action was time-barred in the foreign jurisdiction, our courts have deferred to comity and to the more appropriate (foreign) forum.

Ontario: Easements by prescription

 

The Court of Appeal decision in Hunsinger v. Carter contains a statement of the principles of establishing an easement by prescription (which, as I like to point out, is a limitation issue):

(1)         Establishment of an easement by prescription

[9]         An easement by prescription can arise either under s. 31 of the Real Property Limitations Act, R.S.O. 1990, c. L.15, or pursuant to the doctrine of lost modern grant. Both have the same four requirements, which were properly recognized by the application judge: i) a dominant tenement that enjoys the benefit of the easement and a servient tenement whose owner suffers some use of its land; ii) the properties cannot be owned by the same person; iii) the benefit of the easement must be reasonably necessary for the enjoyment of the dominant tenement; and iv) there must be 20 or 40 years’ (see: Kaminskas v. Storm, 2009 ONCA 318 (CanLII), 95 O.R. (3d) 387, at paras. 31-36) continuous, uninterrupted, open, and peaceful use enjoyed without obtaining the permission of the servient tenement owner. See: Henderson et al. v. Volk et al. (1982), 1982 CanLII 1744 (ON CA), 35 O.R. (2d) 379 (C.A.).

[10]      After a property has been registered under the Land Titles system, a pre-existing prescriptive easement over the land can be established if the four criteria can be proved to have been met before the land was transferred into Land Titles: Carpenter v. Doull-MacDonald, 2017 ONSC 7560 (CanLII), at paras. 54-55.

Ontario: the interaction of representation orders and the Limitations Act

 

Can a party obtain a r. 12.08 representation order after the expiry of the limitation period? No, held the Court of Appeal in United Food and Commercial Workers Canada, Local 175, Region 6 v. Quality Meat Packers Holdings Limited.

If you’re unfamiliar with the rule, the court’s summary is helpful:

(i)           Rule 12.08

[27]      Rule 12.08 states:

Where numerous persons are members of an unincorporated association or trade union and a proceeding under the Class Proceedings Act, 1992 would be an unduly expensive or inconvenient means for determining their claims, one or more of them may be authorized by the court to bring a proceeding on behalf of or for the benefit of all.

[28]      There is little reported case law dealing with the application of Rule 12.08. Indeed, the parties did not point to any cases that directly deal with the issue here, namely, whether a representation order can be obtained under Rule 12.08 following the expiry of a limitation period.

[29]      However, there are several points worth mentioning about Rule 12.08.

[30]      First, Rule 12.08 falls under Rule 12, which is entitled “Class Proceedings and Other Representative Proceedings”.

[31]      Second, it is engaged where a person or persons seek to bring a claim on behalf of or for the benefit of all members of an unincorporated association or trade union. The rule addresses the problems facing unincorporated associations and trade unions seeking to sue in their own names.

[32]      Third, Rule 12.08 is meant to provide for a less costly and more convenient procedure than the Class Proceedings Act, 1992, S.O. 1992, c. 6 (“CPA”). Indeed, in determining whether to authorize a representative action under Rule 12.08, the court will take a similar approach to that taken in determining whether a class action should be certified under the CPA: see Ginter v. Gardon (2001), 2001 CanLII 28052 (ON SC), 53 O.R. (3d) 489 (S.C.), at para. 14; Ottawa (City) Police Assn. v. Ottawa (City) Police Services Board, 2014 ONSC 1584 (CanLII), 55 C.P.C. (7th) 183, at para. 38 (Div. Ct.).

[33]      Fourth, the rule is discretionary. One or more members of an unincorporated association or trade union “may be authorized by the court” to bring a proceeding on behalf of or for the benefit of all. Thus, unless and until authorization is granted, no representative proceeding may be brought.

[34]      Fifth, the rule is silent on the question of limitation periods.

The plaintiff argued that under the Limitations Act, the representative plaintiff need only have commenced a proceeding within two years of discovery, a representation motion is not a proceeding, and anyway the court can make a representation order nunc pro tunc. The court rejected these arguments:

[46]      First, under Rule 12.08, authorization is required “to bring a proceeding on behalf of or for the benefit of all” members of a trade union or unincorporated association. As I noted earlier, under s. 4 of the Limitations Act, “a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.” Reading Rule 12.08 harmoniously with s. 4, the limitation period does not stop running for the claims of class members until a proceeding has been brought on their behalf and that does not happen unless and until court authorization has been granted under Rule 12.08.

[47]      Second, Caetano is effectively arguing that Rule 12.08 suspends the limitation period – that once a proposed representative commences a proposed representative proceeding, the limitation period is suspended on behalf of all members of the trade union or unincorporated association. That, as explained above, is the situation under the CPA where s. 28 expressly suspends any limitation period applicable to a cause of action asserted in favour of class members on the commencement of a proceeding. In contrast, Rule 12.08 is silent on the question of limitation periods and does not purport to extend, suspend or otherwise vary any limitation period applicable to claims asserted in favour of class members.

[48]      Third, the Supreme Court’s decision in Green supports the view that, without a tolling provision, any limitation period applicable to the claims advanced on behalf of class members continues to run until the court authorizes the claims to be brought by the representative plaintiff: Green, paras. 74, 174-175.

[49]      Finally, I would reject the argument that a nunc pro tunc order would be available in the circumstances of this case where leave was not sought prior to the expiry of the limitation period: see Green, at paras. 94-111.

[50]      I recognize that a representative action under Rule 12.08 is meant to provide a less onerous and less expensive alternative to bringing a class action and yet a proposed representative plaintiff may feel it is necessary to proceed under the CPA instead of Rule 12.08 to avoid any limitations problems even if it would be more expensive and less convenient to do so. My interpretation, therefore, may seem to be at odds with concerns about expense and convenience. However, as Côté J. observed in Green, at para. 75, “policy concerns, as compelling as they are, do not override the plain meaning of the text and the intent of the Ontario legislature.”

The court then considered another rather esoteric limitations issue: can the court make a representation order under r. 10.01 in respect of claims that are statute-barred? The answer: no.

Rule 10.01, for those who need a refresher, provides

[56]      Rule 10.01 provides as follows:

In a proceeding concerning,

(a) the interpretation of a deed, will, contract or other instrument, or the interpretation of a statute, order in council, regulation or municipal by-law or resolution;

(b) the determination of a question arising in the administration of an estate or trust;

(c) the approval of a sale, purchase, settlement or other transaction;

(d) the approval of an arrangement under the Variation of Trusts Act;

(e) the administration of the estate of a deceased person; or

(f) any other matter where it appears necessary or desirable to make an order under this subrule,

a judge may by order appoint one or more persons to represent any person or class of persons who are unborn or unascertained or who have a present, future, contingent or unascertained interest in or may be affected by the proceeding and who cannot be readily ascertained, found or served.

The plaintiff argued that the because r. 10.01 representation orders are brought within an already commenced proceeding, if a representation order does not seek to add new parties, the Limitations Act does not bar the order.  However, the court found that it seeks to add new claims, which engages the Limitations Act:

[61]      While the Abreus do not seek to add parties to their action, the question is whether they can assert claims, through the device of a representation order, on behalf of persons who are not plaintiffs in the proceeding, after the limitation period in respect of such claims has already expired. The Abreus’ statement of claim seeks termination pay under the ESA and wrongful dismissal damages, as well as common employer and other declarations, and aggravated and punitive damages for themselves. It purports to assert claims for monetary amounts for approximately 125 other non-unionized former employees of the Defendants, relying on Rule 10.

[64]      This court, however, has repeatedly held that parties cannot circumvent the Limitations Act by amending their pleadings to add additional claims: see Frohlick v. Pinkerton Canada Ltd. (2008), 2008 ONCA 3 (CanLII), 88 O.R. (3d) 401; Dee Ferraro Ltd. v. Pellizzari, 2012 ONCA 55 (CanLII), 346 D.L.R. (4th) 624; 1100997 Ontario Limited v. North Elgin Centre Inc., 2016 ONCA 848(CanLII), 409 D.L.R. (4th) 382. The addition of new statute-barred claims by way of an amendment to a statement of claim is conceptually no different than issuing a new and separate statement of claim that advances a statute-barred claim: Frohlick, at para. 24. An amendment will be statute-barred if, after the expiry of the limitation period, it seeks to advance “a fundamentally different claim based on facts not originally pleaded”: North Elgin Centre, at para. 23.

 

Ontario: an appropriateness analysis in a professional negligence claim

Update: the Court of Appeal upheld the decision.  The relevant paragraphs are 27-28.

Nelson v. Lavoie is a recent example of a s. 5(1)(a)(iv) appropriateness analysis in a claim against a financial planner.  The plaintiff alleged that the defendant planner gave negligent advice regarding an Individual Pension Plan, which the CRA found did not meet the qualifications for registration.

The defendant argued that the plaintiff discovered her claim by the time she had seriously considered suing the defendant:

[22]           On those facts, Ms. Nelson knew or ought to have known by August 2009 that she had a cause of action against the defendants. By then, she was aware that the monthly benefits were not what the defendants suggested. Further, her bookkeeper, two other accountants and one financial advisor informed her that the viability of the IPP was questionable. She had consulted with counsel. Her counsel had obtained an expert’s report that opined: “the IPP created for Ms. Nelson does not appear to meet the requirements for registration and is very likely to have its registration revoked by CRA.”

[23]           Ms. Nelson admitted during discoveries that they seriously considered a lawsuit by August 23, 2009. She stated, “I’m not sure if it was already in the work, but we knew, yeah, we were going to have to, yeah.” Yet, she waited until June 20, 2012, to institute an action claiming some $3,000,000 in damages sustained because of negligent financial advice and misrepresentation.

The plaintiff didn’t dispute these facts, but argued that a proceeding wouldn’t be an appropriate remedy until the CRA’s final determination regarding the pension plan:

[28]           Although she may have had suspicions on the validity of her IPP, she submits her claim did not materialize until the CRA deregistered her plan by notice dated September 28, 2011. Since the Statement of Claim was issued on June 20, 2012, it is well within the time prescribed by the Limitations Act, 2002. She submits it was not until that time that the essential elements of s. 5 of the Limitations Act, 2002, were met. At that point, she was aware that she would have to indemnify the CRA for back taxes, interest and any associated penalties.

After reviewing the s. 5(1)(a)(iv) jurisprudence, the court rejected the defendant’s argument:

[54]           When applying these principles to this factual situation, it is clear that Ms. Nelson had some suspicions by the August of 2009 regarding the conformity of the IPP. The advice that she received from the accountants and financial planners she consulted was concerning. The defendants submit that these facts satisfy the test at s. 5(1)(a) of the Act. However, I am unable to accept this argument because it fails to satisfy the requirement of s. 5(1)(a)(i) and s. 5(1)(a)(iv).

[55]           Firstly, the defendants’ reassurance prevented the plaintiff from discovering that loss or damage has occurred. The defendants, her financial advisors, insisted that the plan was not only acceptable to the CRA but it would be beneficial to her in the long-term. On at least two subsequent occasions, the defendants reassured her that the IPP complied with the Income Tax Act. This repeated advice casted doubts over the inadequacy of the IPP. In this light, Ms. Nelson could not conclude if damage had occurred.

[56]           Secondly, I cannot accept the defendants’ position concerning the right time for the institution of appropriate proceedings. It would not have been appropriate for Ms. Nelson to institute an action without a final determination from the CRA. Her counsel started a review process by notifying the CRA that something may be amiss. The CRA did not make a final decision until September 2011. Until then, the IPP’s compliance with the regulation remained uncertain. Ms. Nelson could not know that the advice she received from the defendants was in fact wrong. On September 28, 2011, the CRA made the decision to deregister the plan. Her suspicions and doubts about the plan crystallized with that notice. There was no doubt, at that point, that she would be responsible for tax arrears and additional penalties. It is only at that time that it was appropriate to institute an action. Had Ms. Nelson instituted an action in the fall of 2009, she would have very likely faced a summary judgment application dismissing her claim.

This seems to very good limitations analysis, and worth reviewing when considering the limitation of professional negligence claims.

Ontario: some self-evident points on the timing of limitations defences

The Court of Appeal’s decision in Filice v. Complex Services Inc. is a reminder of certain commonsense, probably generally self-evident principles about the timing of limitations defences.  Raise a limitations defence in response to an amendment motion (if there is one to raise) on the motion, and when you raise a limitations defence generally, it shouldn’t for the first time on appeal:

[55]      There is no information in the record whether the issue of the limitations period was argued when the respondent sought leave to amend his statement of claim.  That is where it ought to have been argued but I have to assume it was not. If so, it is, in my view, again too late to raise the issue in this court.  However, even if it were open to the appellant to raise the issue now, I would not give effect to it.  The appellant was on notice of the respondent’s essential claim, that is, that his dismissal was improper.  Whether the claim is styled as wrongful dismissal or constructive dismissal, the appellant was fully aware of the nature of the claim it was facing within the two year limitation period.