Ontario

Ontario: reviewing laches and acquiescence

The Superior Court decision in Tsui-Wong v. Xiao contains a good summary of the principles of laches and acquiescence:

The Test for the Doctrine of Laches

[222]      I adopt the comments of Penny, J. in Indcondo v. Sloan, 2014 ONSC 4018 (CanLII), 121 O.R. (3d) 160, at paras. 157-159 as a succinct and current formulation for the defence of laches:

Laches is an equitable doctrine, akin to estoppel, founded on the principle that one is obliged to assert legal rights in a timely way or risk losing them. Laches is a form of equitable limitation period. Two factors dominate the consideration of this doctrine:

(1)     delay and its circumstances; and

(2)     prejudice resulting from that delay.

In Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221 (Ontario P.C.), at 239 -240 the principle was stated as follows:

…[it] is not an arbitrary or technical doctrine… Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.

[223]      The Supreme Court of Canada discussed these critical factors in M. (K.) v. M. (H.), 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6 (S.C.C.), at pp. 77-78:

What is immediately obvious from all of the authorities is that mere delay is insufficient to trigger laches… Rather, the doctrine considers whether the delay of the plaintiff constitutes acquiescence or results in circumstances that make the prosecution of the action unreasonable. Ultimately, laches must be resolved as a matter of justice as between the parties, as is the case with any equitable doctrine.

[224]      The doctrine of laches can be used to defend a claim under the Fraudulent Conveyances Act, R.S.O. 1990, c. F. 29.[5]

[225]      As confirmed in M.(K.), laches must be resolved as a matter of justice between the parties, as in any equitable doctrine.

Acquiescence

[226]      The Defendants argue first, that the Plaintiff has acquiesced to the claim being dismissed.

[227]      There is a lengthy consideration by Spence, J. in 392278 Ont. Ltd. v. Miletich Estate (2001), 38 R.P.R. (3d) 239, at para. 71, as to the meaning of laches, and acquiescence). The case law confirms that acquiescence must be equivalent of waiver, and is more than simply the passage of time: in that case 43 years.

[228]      Spence, J. cited with approval a decision of the British Columbia Court of Appeal in Irvine v. Irvine, [1977] 3 W.W.R. 37 (B.C.C.A), at para. 13,adopting Halsbury’s formulation :

The nature of laches. The legislature, in enacting a statute of limitation, specifies fixed periods after which claims are barred; equity does not fix a specific limit, but considers the circumstances of each case: Smith v. Clay (1767), 3 Bro. C.C. 639, 27 E.R. 419. In determining whether there has been such delay as to amount to laches the chief points to be considered are (1) acquiescence on the plaintiff’s part, and (2) any change of position that has occurred on the defendant’s part. Acquiescence in this sense does not mean standing by while the violation of a right is in progress, but assent after the violation has been completed and the plaintiff has become aware of it. It is unjust to give the plaintiff a remedy where he has by his conduct done that which might fairly be regarded as equivalent to a waiver of it; or where by his conduct and neglect he has, though not waiving the remedy, put the other party in a position in which it would not be reasonable to place him if the remedy were afterwards to be asserted. In such cases lapse of time and delay are most material. Upon these conditions rests the doctrine of laches: Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221 at 239, per Lord Selborne.

[229]      The Court in 392278 Ont. Ltd. concluded that the defendant remained in residence throughout the 43-year period. There was no evidence that she passed up opportunities or changed her position over the years. The delay was long, but did not constitute acquiescence. There was no evidence that the plaintiff had waived her rights.

[230]      The trial judge’s findings were upheld by the Court of Appeal in 392278 Ont. Ltd. v. Miletich Estate, [2002] O.J. No. 3795.

[231]      I find that the Defendants cannot rely upon the Plaintiff’s acquiescence. Admittedly, there is a significant delay of nine years of inactivity. Had the Plaintiff searched in 2005, she would have found out that June was residing in Ontario. Even after locating the Defendants, and in particular June, the Plaintiff did not commence the second Fraudulent Conveyance Action for almost two years after she located June.

[232]      The Plaintiff testified that she was always hopeful that Daniel would surface, and that she could pursue her judgment against him. The Plaintiff was litigation weary and for a period of time was ill and preoccupied by her children pursuing their studies. I accept that the Plaintiff always intended to pursue the Defendants once she was able to locate them, and once she determined that there may be assets to realize upon.

Ontario: the limitation of claims arising from solicitor’s undertakings

Lofranco v. Azevedo considers the limitation period applicable to claims arising from solicitor’s undertakings.

The plaintiff’s new personal injury lawyer undertook to protect the former lawyer’s reasonable account.  The limitation period for the claim to remedy the breach of the undertaking (that is, the failure to pay out the reasonable account) would commence only when the undertaking was revoked:

[40]           In my view, it is not open to the Estate to argue that the limitation period runs against the applicant.  Given my finding that there was a valid undertaking given on behalf of Mr. Pereira, as recently discussed by Quigley J. in Cozzi, at para. 62, the limitation period stops running once the undertaking is given, unless the undertaking is revoked:

63     First, Mr. Cozzi tries to counter that proposition by noting that Kilian D.J. correctly adopted the law that a personal undertaking from a solicitor is not discharged by notification. I agree. Moreover, I agree with the appellant on the general proposition that a solicitor’s undertaking and a client’s undertaking will continue to be enforceable without the interference of a limitation period: Sokoloff v. Mahoney. The Deputy Judge specifically recognized this in para. 17 when he quoted from para. 15 of Sokoloff as follows:

15 There is also clear case law that a solicitor’s undertaking as well as a client’s undertaking is enforceable, can be relied upon, and stops the clock running for the purpose of a limitation defence unless revoked. In Tembec Industries Inc. v. Lumberman’s Underwriting Alliance, (2001) 2001 CanLII 28252 (ON SC), 52 O.R. (3d) 334, [2001] O.J. No. 72 at paras 21-22, Ground J. held that an undertaking to pay a specified amount in damages gives rise to promissory estoppel where the recipient of the undertaking relied on it. Such reliance is expressly contemplated by a solicitor who gives an undertaking, as Wilton-Siegel J. held in Bogoroch & Associates v. Sternberg, [2005] O.J. No. 2522 at para 38.

The former lawyer also had “a charging lien” under the Solicitor’s Act to which no limitation period applied:

[42]           Another basis on which I would find that the limitation period does not run against the applicant is the nature of its interest in the funds held by the Azevedo Firm.  In Thomas Gold Pettinghill LLP, at paras. 88 and 89. Perell J. explained that, besides charging orders that can be made under the Solicitor’s Act, the Court has inherent jurisdiction “to charge assets recovered or preserved through the instrumentality of a lawyer for a client”.

[43]           Perell J. also noted, at para. 101, that, in circumstances where the Court is satisfied that the preconditions are met for a charging lien, the limitation periods in the Limitations Act, 2002, do not apply:

For present purposes, the three points to note from Justice Henry’s decision in Re Tots and Teens Sault Ste. Marie about a charging lien made under the court’s inherent jurisdiction are: first, the charging lien creates the proprietary interest of a secured creditor; second, subject to being declared, the charging lien is an inchoate interest that pre-dates the court’s declaration; and third, the charging lien is intrinsically declaratory in nature. The last point supports Cassel Brock’s argument that a charging lien comes within s. 16 (1) (a) of the Limitations Act, 2002 and is not subject to any limitation period.

[44]           I am satisfied that the applicant is entitled to a charging lien.  In Thomas Gold Pettinghill LLP, at para. 88, Perell J. explained that the preconditions for a charging lien are that “(a) the fund, or property, is in existence at the time the order is granted; (b) the property was recovered or preserved through the instrumentality of the lawyer; and (c) there must be some evidence that the client cannot or will not pay the lawyer’s fees”.

[45]           In this case:

(a)   the funds held in trust by the Azevedo constitute the fund;

(b)   the Lofranco Firm did some work on Mr. Pereira’s file.  While there is a dispute about the extent of the work done, there is no dispute that the firm was involved in moving the matter forward; and

(c)   It is evident from the position taken by the Estate on this application that it will not agree to pay the fees claimed by the Lofranco Firm.

[46]           Looking at the matter from a different perspective, both the Solicitor’s Act and the common law provide special protection to lawyers in recovering their fees in circumstances in which a plaintiff is successful, either through a settlement or by obtaining judgment. The undertaking Mr. Azevedo gave on Mr. Pereira’s behalf and the fact that Mr. Pereira consented to the money being held in trust by the Azevedo Firm once settlement was reached, in my view, constitute an acknowledgement by Mr. Pereira that he understood the Lofranco Firm’s proprietary interest in the funds. However, as discussed below, given that the undertaking was subject to the fees being reasonable and Mr. Pereira’s ability to assess the account, the issue remains whether the applicant is entitled to payment of its full account or whether the Estate is entitled to assess the account.

I’m not familiar with the jurisprudence cited for this conclusion.  A charging lien may well be declaratory, but surely here it would result in the consequential relief of the former lawyer being entitled to the disputed funds?

A declaration that results in consequential relief doesn’t fall within s. 16(1)(a).

 

Ontario: summary judgment on a partial limitations defence denied

In Lyall v. Whitehead the court denied summary judgment on a limitations defence because it would only partially dispose of the action. The limitations defence was not readily bifurcated from the merits.  This gave rise to the potential for duplicative results and credibility issues:

[13]           In an attempt to persuade me that partial summary judgment is appropriate the defendant relies upon the decision of Justice Myers in Mason v. Perras Mogenais, 2018 ONSC 1477 (CanLII) (“Mason”). Justice Myers held that discrete issues, like limitation periods, which do not overlap with the merits that are left for trial, are suitable for partial summary judgment motions. I do not read Mason to stand for the proposition that partial summary judgment motions are appropriate in each and every case that involves a limitation period issue. In Mason, partial summary judgment was granted in circumstances where the case was brought to an early end, in totality, against one of the defendants. In my view, that situation is more akin to a summary judgment motion than a partial summary judgment motion since the action was brought to an end against that defendant. That is certainly not the case here. As discussed below, the clear potential for duplicative results and major credibility issues in this case are outside the realm of what Justice Myers considered appropriate in Mason.

[14]           I agree with the plaintiffs that, whether the action succeeds or not, the dominant narrative of the broader underlying claim concerns the defendant’s conduct as Estate trustee and whether he breached his fiduciary duties to the plaintiffs. Even if the partial summary judgment motion was successful, the matter would move on to trial with several other significant issues and claims in play which raises the legitimate specter of inconsistent decisions. The facts underpinning the allegations the defendant seeks to dismiss are too deeply intertwined with the facts underpinning the remaining causes of action. It is not appropriate to grant summary judgment in this type of situation.

[15]           This case falls entirely within the ambit of cases discussed in Baywood and Butera. In this regard I am mindful of the reasoning in Butera, which makes it clear that a motion for partial summary judgment should be considered a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and may be dealt with expeditiously and in a cost effective matter. As stated in Butera, such an approach is entirely consistent with the objectives set out by the Supreme Court in Hryniak v. Mauldin, 2014 SCC 7 (CanLII). I entirely agree, and in any event, the decision is binding upon me.

[…]

[19]           In my view, this is exact type of case warned against by the Court of Appeal in Baywood. In this case, credibility is extremely important. As stated in Baywood, voluminous affidavit evidence can obscure the affiant’s authentic voice. That has happened here. I received the evidence in a decontextualized manner and to make any findings on credibility in this fashion would result in fundamental unfairness in a way it will not likely occur at trial where the trial judge will see all of the evidence. Put another way, I cannot make credibility findings on the issues before me without also impacting the trial judge’s ability to independently assess the facts at trial. The trial judge’s credibility findings will be based on a set of facts broader than mine, but will also inherently include those that the defendant has put before me. They are not readily bifurcated from the broader underlying claim.

Ontario: the Court of Appeal on failing the litigation finger test

The Court of Appeal’s decision Bertolli v. Toronto (City) is an example of a plaintiff failing to satisfy the litigation finger test in a misnomer matter.  The court found that the correct defendant would not have known on reading the statement of claim that it was defendant the plaintiff intended to name.

[5]         The appeal is dismissed. The delivery and content of the Notice of Claim were facts extraneous to the original accident, and not a record made by a participant or observer at the time of the accident who was in some way connected to the substituted defendants. Moreover, even when read in combination, the Notice of Claim and Statement of Claim were not capable of supporting an inference that the substituted defendants were the intended defendants. Absent reference to the pothole in the Notice of Claim and absent particulars of the precise location of the accident alleged in the Statement of Claim, the reasonable reader could not know, without further inquiry, that the documents referred to the same accident. Put simply, the Master’s inference that the substituted defendants would know they were the intended defendants was not available on any reasonable view of the evidence. The Master’s order was properly set aside.

I also note the court’s use of the language “substitute”.  This, as the court held in Ormerod that a misnomer does not involve a substitution:

[27] In this case, after finding that Dr. Ferner was a misnomer for Dr. Graham, the motion judge applied [at para. 18] the standard that despite the inordinate delay, he should allow the correction of the misnomer unless “the defendant to be substituted did not have timely notice of the claim and will be unduly prejudiced in preparing a defence to the claim”. The motion judge’s reference to “the defendant to be substituted” is unfortunate because in the case of a misnomer, the amendment is made under rule 5.04(2) “to correct the name of a party incorrectly named”. The correction of a misnomer does not involve the substitution of one defendant for another. However, his reasons, read as a whole, make clear that he viewed the remedy as the correction of the misnaming or the misdescription of the emergency doctor rather than the substitution of Dr. Graham as a defendant for Dr. Ferner. The appeal was argued on that basis.

I confess that this always seemed an especially pedantic point, even for me (and also, apparently, for the court itself, which ignored it in Bertolli), but the point is nevertheless valid.

 

Ontario: simple contracts haven’t been material to the limitations scheme for…nearly 15 years

It’s time for some limitations pedantry!

In Corona Steel Industry Private Ltd. V. Integrity Worldwide Inc., the court held that “an action for recognition and enforcement of a foreign judgment is treated as an action upon a simple contract for purposes of determining the limitation period.”

This was so until 2004 when the current Limitations Act came into force. The Limitations Act does not distinguish between categories of contracts, or causes of action.  The Limitations Act asks when the plaintiff discovered a “claim” (as defined by s. 1).  The Court of Appeal made the point explicit in addressed the issue squarely in Independence Plaza.

I think perhaps counsel had relied on a previous version of the Law of Limitations, or some obsolete jurisprudence.

Ontario: The finality of motions to add defendants

The Court of Appeal in Prescott & Russell (United Counties) v. David S. Laflamme clarifies some interesting aspects of motions for to add a defendant after the presumptive expiry of the limitation period.

The motion judge held that the plaintiff could add the proposed defendant “as a party to the litigation since its actions to do so were within the limitation period” (presumably meaning that the plaintiff moved to add the proposed defendant within the limitation period).  Like me, you might think this was a finding of timeliness precluding a limitations defence.  Not so, held the Court of Appeal.  The Order was without any language declaring the timeliness of the claims against the proposed defendant, and, notwithstanding the foregoing, the reasons were apparently without any language suggesting that the motion judge made a final determination regarding the limitations defence.

Because the Order did not preclude a limitations defence, it was not a final determination of the proposed defendant’s rights and therefore interlocutory.

These are the relevant paragraphs:

[7]         The distinction between a final and interlocutory order for the purposes of determining the appropriate appellate forum is not always easy to make: see Salewski v. Lalonde, 2017 ONCA 515 (CanLII); Azzeh v. Legendre, 2017 ONCA 385 (CanLII).  In the present context, the order will be said to be final if it deprives WSP of a substantive defence.  If WSP can no longer rely on the Limitations Act defence, the order is final.  However, if WSP can raise the Limitations Act defence at trial, the order is not final. To determine whether the order is final or interlocutory, one must examine the terms of the order, the motion judge’s reasons for the order, the nature of the proceedings giving rise to the order, and other contextual factors that may inform the nature of the order.

[8]         Looking first at the order itself, there is nothing in the language to suggest that any final determination was made on theLimitations Act issue.  The order, presumably drawn with the cooperation of counsel, makes no reference to the Limitations Act or any findings made in respect of that Act. The order simply allows the respondent to add WSP as a defendant.

[9]         The motion judge’s reasons contain no language suggesting that any finding made in respect of the application of the Limitations Act had application beyond the motion itself.  The motion judge did not purport to decide the issue for any purpose other than the determination of the motion to add WSP as a party.

[10]      The nature of the motion is also relevant to the nature of the order arising from the motion. Some motions tend to generate final orders. For example, orders made on r. 21 motions brought to determine a question of law, will generally apply to the litigation as a whole. Depending on the question of law decided, the order may well be final. Motions to add parties that are successful, however, do not as a rule generate findings that are binding in the rest of the litigation.

[11]      We also cannot accept the contention that because the motion judge was required to make a finding as to the application of the Limitations Act, her finding must be regarded as binding in the litigation and therefore final.  Section 21 of the Limitations Actforbids adding a party where the limitation period has expired. It does not foreclose adding a party absent an affirmative finding that the limitation period has not expired.

[12]      Having regard to the factors outlined above, we conclude that the trial judge’s determination that the action was brought within the limitation period was made for the purposes of the motion only. The motion judge was satisfied that, for the purposes of determining whether to add WSP as a party, the limitation period had not expired.

[13]      The order under appeal is interlocutory.  This court has no jurisdiction to hear the appeal.  WSP may, if so advised, seek leave to appeal in the Divisional Court, or it may raise the limitations argument at trial.

I confess that I’m not entirely persuaded by the Court’s reasoning.  It’s settled law (or at least was settled until this decision) that on a motion for leave to add a defendant, the court can determine the timeliness of the claim.  That is, the court can find that the plaintiff has established that it discovered its claim against the proposed defendant within the limitation period.  The court would then make the order denying the proposed defendant leave to plead a limitations defence.

I wonder whether the issue here was nothing more than the plaintiff neglecting to insist on such language in the order given the motion judge’s finding that the plaintiff brought the motion in time.

Lastly, I indulge some pedantry in regards of legal sloppiness:

[3]         On the motion, the respondent contended that its claim against WSP was not reasonably discoverable until a date within the two year limitation period.  WSP contended that the respondent had ample information upon which to base its claim years earlier.  The motion judge accepted the respondent’s position, concluding, at para. 38:

Consequently, I find that the United Counties [respondent] can add WSP as a party to the litigation since its actions to do so were within the limitation period.

[4]         WSP appeals claiming that the motion judge erred in concluding that the claim could not reasonably have been discovered at a point beyond the applicable time limit under the Act.  The respondent argues that the motion judge was correct in her analysis of the Limitations Act provisions.  The respondent also raises a preliminary jurisdictional point.  Counsel argues that the order under appeal is interlocutory and not final, meaning that any appeal lies with leave to the Divisional Court.

[5]         The respondent acknowledges that if the order is not final, the respondent cannot claim that the order is binding on the trial judge, meaning that WSP can re-litigate the limitation issue at trial.  Counsel has raised the issue, however, because in his submission, the jurisprudence from this court dictates that the order is interlocutory and cannot be appealed to this court.

A claim is not discoverable within a limitation period.  Pursuant to s. 4 of the Limitations Act, it is the discovery of a claim that causes the limitation period to run.

The proper question on these motions is whether the plaintiff discovered the claim within two years of the motion.  This isn’t because the limitation period runs retrospectively two years from the date of the motion.  Rather, it’s because discovery of the claim any earlier than two years from the motion means the limitation period commenced earlier than two years from the motion, and therefore expired before the motion.

Ontario: the evidentiary threshold for adding a defendant after the limitation period’s presumptive expiry

The Court of Appeal’s decision in Mancinelli v. Royal Bank of Canada is now a leading decision on the addition of a defendant to proceeding after the presumptive expiry of the limitation period.  The Court set out the test, and held that it applies equally to limitations periods that are not subject to the discovery provisions in the Limitation Act:

[23]      When a person opposes a plaintiff’s motion to add it as a defendant on the basis of the apparent expiry of a limitation period, the motion judge is entitled to assess the record to determine whether, as a question of fact, there is a reasonable explanation on proper evidence as to why the plaintiff could not have discovered its claim through the exercise of reasonable diligence. If the plaintiff does not raise any credibility issue or issue of fact about when its claim was discovered that would merit consideration on a summary judgment motion or a trial and there is no reasonable explanation on the evidence as to why the plaintiff could not have discovered the claim by exercising reasonable diligence, the motion judge may deny the plaintiff’s motion: Arcari v. Dawson, 2016 ONCA 715 (CanLII), 134 O.R. (3d) 36, at para. 10. 

[24]      However, the evidentiary threshold that must be met by a plaintiff on such a motion is low: Pepper v. Zellers Inc. (2006), 2006 CanLII 42355 (ON CA), 83 O.R. (3d) 648 (C.A.), at para. 14; Burtch v. Barnes Estate (2006), 2006 CanLII 12955 (ON CA), 80 O.R. (3d) 365, at paras. 26-27. The plaintiff’s explanation should be given a “generous reading”: Wakelin v. Gourley (2005), 2005 CanLII 23123 (ON SC), 76 O.R. (3d) 272, at para.15, aff’d 2006 CarswellOnt 286 (Div. Ct.). Whether the plaintiff and its counsel acted with reasonable diligence must be considered in context: Fanshawe College of Applied Arts and Technology v. Sony Optiarc Inc., 2014 ONSC 2856, at para. 45 (the “Fanshawe Pleadings Motion”.)

[25]      While Arcari, Pepper and Wakelin dealt with motions to add defendants that were opposed based on the apparent expiry of the limitation period under the Act, the same approach, and the same low threshold, is warranted where the motion is opposed or also opposed based on the apparent expiry of any statutory limitation period subject to the discoverability principle: see, for example, Fanshawe Pleadings Motion.

[…]

[30]      A plaintiff’s failure to take reasonable steps to investigate a claim is not a stand-alone or independent ground to find a claim out of time. Instead, the reasonable steps a plaintiff ought to take is a relevant consideration in deciding when a claim is discoverable under s. 5(1)(b): Galota v. Festival Hall Developments Ltd., 2016 ONCA 585 (CanLII), 133 O.R. (3d) (C.A.), at para. 23; Fennel v. Deol, 2016 ONCA 249 (CanLII), 265 A.C.W.S. (3d) 1029, at paras. 18, 24.

[31]      Where the issue on a motion to add a defendant is due diligence, the motion judge will not be in a position to dismiss the plaintiff’s motion in the absence of evidence that the plaintiff could have obtained the requisite information with due diligence, and by when the plaintiff could have obtained such information, such that there is no issue of credibility or fact warranting a trial or summary judgment motion: Wong v. Adler (2004), 2004 CanLII 8228 (ON SC), 70 O.R. (3d) 460 (Ont Master), at para. 45; Pepper, at para. 18.

The Court overturned the motion judge’s decision (which I noted for its summary of the relevant principles) for applying too high a standard to high an evidentiary threshold.

[26]      In the context of a motion to add defendants in a class action alleging a secret conspiracy brought before any statements of defence had been filed or any discoveries had taken place, the motion judge required the appellants to meet too high an evidentiary threshold.

[27]      Giving the requisite generous, contextual reading to the appellants’ explanation, the appellants provided a reasonable explanation why they could not have identified the respondents as co-conspirators before July 20, 2014. I note that in the Fanshawe Pleadings Motion, the motion judge permitted plaintiffs alleging a price-fixing conspiracy to amend their statement of claim to add defendants on evidence as to due diligence that essentially consisted of reviewing publically available documents, albeit a more detailed list of those documents was provided.

[28]      In the face of the appellant’s evidence of their search for other potential defendants, the respondents led no evidence of further reasonable steps that the appellants could have taken to ascertain their identities before July 20, 2014. Rather, the motion judge suggested that the appellants should have taken further steps to investigate whether the respondents were co-conspirators. At least some of the steps he suggested go beyond those a reasonable plaintiff would have taken in the circumstances, indicating that he held the appellants to too high an evidentiary standard. By way of example, it is not apparent how a plaintiff alleging a conspiracy that the defendants took active steps to conceal and that was conducted through secret “chats” could have possibly obtained the suggested Anton Pillar and Norwich orders. The evidentiary foundation required to obtain such orders is high.

[29]      Further, a representative plaintiff is not akin to the investigative arm of a regulator. Regulators often have investigative powers that civil plaintiffs do not. There was no evidence that any of the sophisticated regulators investigating the alleged conspiracy had identified any of the respondents as co-conspirators before the UBS proffer.

The decision is also noteworthy for what is arguably the addition of a new consideration to the test.  The Court criticized the motion judge for having failed to determine with sufficient precision when the plaintiffs ought to have discovered their claim.  Prior to this decision, I think it was generally understood that when a proposed defendant argues that leave is inappropriate based on evidence that the plaintiff could through reasonable diligence have discovered the claim within two years of the motion, it wasn’t necessary for the proposed defendant to provide an exact date on which discovery ought to have occurred.  Going forward, should the court neglect to make a finding in regards of the date when discovery ought to have occurred, there may be ground for appeal:

[32]      As the respondents appropriately conceded, there was no evidentiary foundation for the motion judge’s finding that the respondents’ identities as co-conspirators could have been established with reasonable diligence. The fact that UBS – one of the co-conspirators and a participant in the “collusive chats” – was able to identify other participants in the secret chats is no indication that the appellants, who were not co-conspirators, could have done so.

[33]      Nor did the motion judge determine with sufficient precision by when the appellants ought to have discovered that they had a claim. As noted above, the appellants claim would be statute barred only if the s. 5(1)(b) date were before July 20, 2014. The motion judge found the identity of BMO and TD could have been established “before the expiry of the limitation period”. It is not clear what the motion judge meant by “the expiry of the limitation period”. The respondents submitted that the limitation period expired on December 31, 2015 (two years after the end of the alleged conspiracy period). If the motion judge’s intended finding were that the appellants could have established the identities of BMO and TD by December 31, 2015, then the appellants’ claim against them would not have been statute-barred.

Ontario: Court of Appeal says don’t use r. 21.01(1)(a) to advance limitations defences

In Brozmanova v. Tarshis, the Court of Appeal has brought certainty to the question of whether a defendant may advance a limitations defence in a r. 21.01(1)(a) motion.  The answer is no.   Rule 21.01(1)(a) is for the determination of questions of law.  The expiry of the limitation period is a question of fact (or mixed fact and law).  Further, evidence is not admissible without leave under r. 21.01(1)(a), which puts the plaintiff in the unfair position of needing to seek leave to admit the evidence relevant to the limitations defence when it should be admissible as of right:

[10]      The Rules of Civil Procedure make available two sets of procedural devices by which a party can seek to dispose finally of a proceeding on a contested basis.

[11]      One set is evidence-based, under which the parties adduce evidence by various means, on the basis of which the court decides whether to grant or dismiss a proceeding. The Rules permit or offer several standard evidence-based procedural devices by which to obtain such a final adjudication on the merits: (i) the conventional trial; (ii) the hybrid trial; (iii) two forms of summary judgment – rules 20.04(2)(a) and 20.04(2)(b); and (iv) a rule 38 application.

[12]      The second set of procedural devices enables a party to ask the court to determine a question of law that may dispose of all or part of a proceeding. These law-based devices include: (i) a rule 22 special case; (ii) rule 21.01(1)(a), where a question of law is raised by a pleading; and (iii) rule 21.01(1)(b), where a pleading discloses “no reasonable cause of action or defence”.

[13]      The law-based character of the devices available under rules 21.01(1)(a) and (b) is reinforced by the limits placed on the use of evidence on motions brought under those rules. No evidence is admissible on a “no reasonable cause of action” motion; nor is evidence admissible on a “question of law” motion, except with leave of the judge or on consent of the parties: rule 21.01(2).

[14]      The rationale for these prescriptions is a simple one: the allegations asserted in the pleading, which the court must accept as provable at trial, are sufficient to determine the question of law or whether the pleading discloses a cause of action or defence recognized by law: see Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959, at pp. 980, 988 and 990-991. No further facts are required to determine the legal sufficiency of the claim.

[15]      In the present case, Dr. Tarshis was sued for conduct as a medical practitioner. He and Ms. Brown are represented by a law firm with long experience in representing medical practitioners. They sought to dismiss Ms. Brozmanova’s action relying on two law-based rules: 21.01(1)(a) and (b).

The “question of law” under rule 21.01(1)(a)

[16]      The “question of law” the respondents raise under rule 21.01(1)(a) is that Ms. Brozmanova commenced her action outside of the two-year limitation period.

[17]      Relying on rule 21.01(1)(a) to advance a limitation period defence is a problematic use of the rule. Some decisions of this court characterize the issue of whether a plaintiff has commenced a proceeding within the limitation period as one involving a question of fact: Pepper v. Zellers Inc. (2006), 2006 CanLII 42355 (ON CA), 83 O.R. (3d) 648 (C.A.), at para. 19; and Arcari v. Dawson, 2016 ONCA 715 (CanLII), 134 O.R. (3d) 36, at para. 9, leave to appeal refused, [2016] S.C.C.A. No. 522. Others describe it as involving a question of mixed fact and law: Salewski v. Lalonde, 2017 ONCA 515 (CanLII), 137 O.R. (3d) 762, at para. 45; and Ridel v. Goldberg, 2017 ONCA 739 (CanLII), at para. 12. Regardless, it does not involve a question of law.

[18]      In the basic case, the court must ascertain “the day on which the claim was discovered”: Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, s. 4 (the “Limitations Act”). This, in turn, requires making two findings of fact: (i) the day on which the person first knew of the four elements identified by s. 5(1)(a)(i)-(iv) of the Limitations Act;[1] and (ii) under s. 5(1)(b), “the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in” s. 5(1)(a). The earliest of the two dates is the date on which the claim is discovered: s. 5(1).

[19]      The analysis required under s. 5(1) of the Limitations Act generally requires evidence and findings of fact to determine. It does not involve a “question of law” within the meaning of rule 21.01(1)(a).

[20]      Yet, here the respondents invoked a law-based rule to establish a largely fact-based defence. I recognize, as respondents’ counsel submits, that some jurisprudence exists that has allowed a defendant to resort to rule 21.01(1)(a) to determine its limitations defence “where it is plain and obvious from a review of a statement of claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired”: see the commentary on rule 21.01(1)(a) in Todd. L. Archibald, Gordon Killeen & James C. Morton, Ontario Superior Court Practice, 2018 (Toronto: LexisNexis Canada, 2017), at p. 1128. See also Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3d ed. (Toronto: LexisNexis Canada, 2017), at p. 611.

[21]      However, courts must always remember that permitting a defendant to move under 21.01(1)(a) to establish a limitations defence could prove unfair to a plaintiff, especially a self-represented one. By selecting rule 21.01(1)(a) as the procedural means to adjudicate its fact-based limitations defence, a defendant puts a plaintiff in the position where she cannot, as of right, file evidence to explain when she discovered her claim. Instead, she must seek leave of the court.

[22]      A plaintiff who risks the dismissal of her action on the basis of a limitations defence should not have to ask a court for permission to file evidence on the issue of when she discovered her claim. She should be entitled to do so as of right. It is unfair for a defendant to attempt, tactically, to deprive her of that right and put her to the unnecessary expense (and risk) of asking permission to do so.

[23]      Notwithstanding the jurisprudence that opens the rule 21.01(1)(a) door to some efforts to prove a limitations defence, in my respectful view such an approach risks working an unfairness to a responding plaintiff. Requiring a defendant to move under an evidence-based rule – either rule 20 (summary judgment) or rule 51.06(2) (concerning admissions of the truth of facts in a pleading) – avoids such potential unfairness and is to be preferred.

This strikes me as an excellent, well-reasoned decision.

The Court also noted that it would have been available to the defendant to move under r. 51.06(2) on the basis that the plaintiff had admitted discovery of her claim in the statement of claim:

[34]      The material facts pleaded by Ms. Brozmanova at paras. 8-9 and 15-16 of her statement of claim were admissions of the truth of certain facts. She clearly pleaded that in 2009, as a result of dealing with an insurance company on a matter regarding her ankle injury, she discovered that her OHIP record contained entries for billings by Dr. Tarshis, which she alleges were fraudulent.

[35]      Given the admissions in her pleading, it would have been open to the respondents to move on those admitted material facts to dismiss the claim on the basis that Ms. Brozmanova had discovered it in 2009 and therefore the action was statute-barred: rules 20 or 51.06(2).[3] In 2009, she knew that some “damage” had occurred within the meaning of s. 5(1)(a) of the Limitations Act because she knew that her actual position was worse than her position before: Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156 (CanLII), 290 O.A.C. 42, at para. 42. That the “damage” she discovered in 2009 was not the same damage for which she sought recovery in her action – her alleged inability in 2015 to purchase travel insurance – does not matter. Knowledge of “some damage” is sufficient for the cause of action to accrue and to start the limitation period: Hamilton, at para. 61.

While I’ve not seen a limitation defence advanced using this procedure, it makes good sense for those rare circumstances where a plaintiff unwittingly pleads facts that demonstrate discovery of a claim.

 

Ontario: the defendant’s inability to satisfy a debt doesn’t make a proceeding inappropriate

 

Davies v. Davies Smith Developments Partnership is another decision from the Court of Appeal that delineates when a proceeding will be an appropriate remedy for a plaintiff’s loss.  The defendant’s lack of funds to satisfy its debt to the plaintiff did not prevent a claim from being an appropriate remedy for the debt.  The decision also reiterates the distinction between damage and damages:

[11]      In asserting that the limitation period had not expired, the appellant submits that: (a) the amount owing to the appellant was in dispute; (b) the profits could not be ascertained until the partnership’s projects had been completed; (c) an action was not an “appropriate” means to remedy the appellant’s loss because he knew the partnership did not have funds; and (d) there had been forbearance or novation, making it inappropriate to commence an action. The appellant submits that the claim was not discovered until 2011, when he realized that the respondent had made improper charges to his capital account.

[12]      We agree with the respondent that the first two submissions confuse “damage” with “damages”. The appellant knew by the end of June 2008 that he had suffered damage, even though the amount of his damages was a matter of dispute and had not been quantified: see Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156 (CanLII), 347 D.L.R. (4th) 657, at paras. 54 and 58.

[13]      The third submission that the respondent did not have the funds to pay, while perhaps explaining the appellant’s conduct, did not stop the limitation period from running. The appellant’s claim was “fully ripened” by July 2008. The word “appropriate”, as it appears in s. 5 of the Limitations Act, means “legally appropriate”. The appellant cannot rely on his own tactical reasons for delaying the commencement of legal proceedings: see Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218 (CanLII), 348 D.L.R. (4th) 744, at para. 34.

Ontario: the limitation of Crown claims under s. 258(1) of the Insurance Act

 

When the Motor Vehicle Accident Claims Fund obtains an assignment of a passenger’s judgment against the vehicle’s owner, is the Fund obliged to bring an action against the owner’s insurer within the one year limitation period in s. 258(2) of the Insurance Act?

No, held the Court of Appeal in Ontario (Finance) v. Traders General Insurance (Aviva Traders).  The Fund had no obligation to bring an action under s. 258(1) because the Insurance Act does not bind the Crown.  However, had the Crown chosen to claim under that section than it would have been bound by the one-year limitation period in s. 258(2).

These are the material facts:

[1]         This action arose out of a catastrophic car accident involving a 1991 Hyundai owned by Peter Leonard. The accident occurred a couple of weeks after the appellant insurer purported to terminate its policy of insurance on the vehicle. The driver, a friend of Peter Leonard’s son, was killed. The passenger, another friend, was seriously injured, claimed statutory accident benefits, and also sued Peter Leonard for damages. The appellant insurer did not defend the action on behalf of Peter Leonard, because it had cancelled the owner’s policy insuring the Hyundai for non-payment of premiums before the accident occurred.

[2]         After Peter Leonard settled the action for $234,574.33, the passenger assigned the judgment to the respondent, representing the Motor Vehicle Accident Claims Fund. The Fund paid the amount of the judgment to the passenger and began to obtain re-imbursement from Peter Leonard. The Fund also sued the appellant insurer in this action for restitution based on unjust enrichment, claiming that the appellant insurer had not effectively terminated its policy, that the policy remained in force at the date of the accident and that it should have responded to the passenger’s claim.

This is the Court’s analysis:

[49]      The appellant submits, however, that having obtained an assignment of the passenger’s judgment against the owner of the vehicle, Peter Leonard, the Fund was obliged to bring its action against his insurer, Traders, under s. 258(1) of the Insurance Act, and further that the one-year limitation period provided in s. 258(2) bars any such claim.

[50]      Subsection 258(1) provides:

Any person who has a claim against an insured for which indemnity is provided by a contract evidenced by a motor vehicle liability policy, even if such person is not a party to the contract, may, upon recovering a judgment therefor in any province or territory of Canada against the insured, have the insurance money payable under the contract applied in or towards satisfaction of the person’s judgment and of any other judgments or claims against the insured covered by the contract and may, on the person’s own behalf and on behalf of all persons having such judgments or claims, maintain an action against the insurer to have the insurance money so applied.

[51]      Prior to its repeal in 2004, s. 258(2) provided:

No action shall be brought against an insurer under subsection (1) after the expiration of one year from the final determination of the action against the insured, including appeals if any.

[52]      The appellant argues that Mr. Bogdanovic could have sued the appellant insurer under s. 258(1) and would have been bound by the limitation in s. 258(2). Because the Fund took an assignment of the Bogdanovic judgment, the appellant argues that the Fund stood in the shoes of the assignor and had to bring its action within the same time limit. It argues further that the Fund was therefore precluded from bringing its claim as an action for unjust enrichment.

[53]      The validity of this submission turns on whether it was mandatory for the Fund to make its claim under s. 258(1). That question turns on whether the Crown on behalf of the Fund was bound by the provisions of the Insurance Act at the relevant time, or whether it had Crown immunity.

[54]      Section 11 of the Interpretation Act, R.S.O. 1990, c. I.11, which was in force until July 2007, provided that specific words were required for an act to bind the Crown:

No Act affects the rights of Her Majesty, Her heirs or successors, unless it is expressly stated therein that Her Majesty is bound thereby.

[55]      Section 71 of the Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, which replaced the Interpretation Act, continues this provision:

No Act or regulation binds Her Majesty or affects Her Majesty’s rights or prerogatives unless it expressly states an intention to do so.

[56]       These provisions constitute the codification of the common law principle of Crown immunity. In Canada (Attorney General) v. Thouin, 2017 SCC 46 (CanLII), [2017] 2 S.C.R. 184, the Supreme Court stated at para. 20, following Friends of the Oldman River Society v. Canada (Minister of Transport), 1992 CanLII 110 (SCC), [1992] 1 S.C.R. 3, that the equivalent section in the federal Interpretation Act, R.S.C. 1985, c. I‑21, is treated as a starting point for the immunity analysis, so that where there are no express words in an Act making it applicable to the Crown, “it … remains to be decided whether the Crown is bound by necessary implication.”

[57]      There was no express provision in the Insurance Act that bound the Crown in 2003, when Mr. Bogdanovic obtained judgment against Peter Leonard and assigned that judgment to the Fund, or in 2008, when this action was commenced.

[58]      Nor was the Crown bound by necessary implication. The only reference to the Crown in the 2003 Act was s. 101(5), which describes when certain returns of insurers become a debt owing to the Crown. The Act was also amended in May 2008 to include in s. 1 the definition of “entity” as including the Crown. However, the references to “entity” in the Act are discrete and involve provisions dealing with corporate law rules and investment rules for various entities operating in the insurance context.

[59]      There were also a number of sections that refer to the Fund, specifically: ss. 268(2), 268.0.1(2), and 267.12(2)(b). These bind the Fund specifically in the particular circumstances described in those sections. Paragraph 267.12(2)(b) sets out how to calculate the insurance coverage entitlements of lessors. Subsections 268(2) and 268.0.1(2) both allow for recovery of statutory accident benefits from the Fund in certain circumstances. None of these provisions relate or apply to s. 258.

[…]

[63]      Having said that, the Crown was not precluded from bringing a claim under s. 258(1), and had it chosen to do so, it would have been obliged to bring its claim within the one-year limitation provided in s. 258(2)[1]. As Ruth Sullivan explains in Sullivan on the Construction of Statutes, 6th ed. (Toronto: LexisNexis Canada, 2014), this is the “benefit/burden” exception to Crown immunity: if the Crown chooses to take the benefit of a statutory provision, it must also accept any conditions that are imposed.

[64]      In this case, the Fund did not pursue an action using s. 258(1): it did not invoke that provision, and therefore was not caught by the corresponding burden imposed by s. 258(2). Instead, the Fund brought its claim as an action for unjust enrichment. It was entitled to do so, as it was not bound either expressly or by necessary implication to assert a cause of action under s. 258(1).