Category: Ontario

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).

Ontario: Put that best foot forward (or else)

Bergen v. Fast Estate is a reminder from the Court of Appeal that in a summary judgment motion on a limitations defence, the plaintiff needs to put her best evidentiary foot forward, or lose:

[11]      In response to Aviva’s motion for summary judgment, no evidence was filed that had the effect of rebutting the presumption that as at the date of his accident, the appellant knew he was not the owner of the motor vehicle but his father was. In particular, there was no evidence from either the appellant or his father, Johan Bergen Sr., both of whom were clients of the law firm when the appellant’s claim was issued. Given the appellant’s obligation to put his “best foot forward” in response to Aviva’s motion for summary judgment and his onus to rebut the presumption under s. 5(2), the motion judge was entitled to assume that there would be no additional evidence at trial to assist the appellant on these issues.

[12]      Absent any evidence rebutting the presumption, the appellant and his counsel (as the appellant’s agent) were presumed to know who owned the vehicle prior to the issuance of the statement of claim. Accordingly, they were also presumed to know at that time that the owner was a potential defendant and that an action against the owner would therefore be an appropriate remedy to recover damages for the appellant’s injuries. That it was not strictly necessary to add the owner of the vehicle as a defendant at the time the statement of claim was issued does not determine whether an action against the owner was an appropriate remedy. As the motion judge stated, “[t]here could never be an argument that the appropriate remedy against the owner of the vehicle was anything other than to include him as a defendant in the action when the Statement of Claim was issued”.

Ontario: the limitation of contribution and indemnity claims in regards of two proceedings

How does s. 18 of the Limitations Act apply when a party seeks contribution and indemnity in regards of claims pursued in separate proceedings commenced on different dates?  The decision in Berwick v. Samis and Kozmik provides the perhaps obvious answer.  Different limitation periods apply based (at least presumptively) on the date of service of the statement of claim:

[32]           Pearce made it clear in one of her prayers of relief for contribution and indemnity as against the defendants is with respect to the 2009 action.  In reading the words in “their grammatical and ordinary sense harmoniously with the scheme of the Act”[9], section 18 of the Act indicates that service of claims for indemnity and contribution commences on the date of service of the claim “which contribution and indemnity is sought”. The claim of which contribution and indemnity as against the defendants with respect the 2009 action “is sought” in that action which was commenced on September 14, 2009.  It is clear that the contribution and indemnity claims of Pearce as against the defendants in the 2009 action exceeds two years from September 14, 2009.  Accordingly, the claim of Pearce against the defendants with respect to “damages of the plaintiff, Ruo Hang Liu, in court file #CV-09-386969 (Toronto)” [10]is barred by the Act.

 

Ontario: s. 5(1)(a)(iv) and doctor-patient relationships

The decision in Kram v. Oestreicher is an example of a circumstance where a proceeding did not become an appropriate remedy while a doctor was attempting to remedy his error:

[125]      In my view, the circumstances here are analogous to those before the Court of Appeal in both Presidential MSH Corporation and Brown v. Baum. Assuming that I had concluded that Oestreicher was civilly liable for the manner in which the June 15, 2009 surgery was carried out, he was engaged in good faith efforts to remedy any damage caused for at least the next 14 months. This was reflected in the three subsequent surgeries he performed, the last of which occurred on August 17, 2010. Moreover, it is clear that Kram was relying on Oestreicher’s superior knowledge and expertise throughout this time period.

[126]      In my view, it would have been premature, and therefore inappropriate, for Kram to have commenced a legal action while Oestreicher’s good-faith efforts to remedy any negative effects from the June 15, 2009 surgery were ongoing. I conclude that the two-year limitation period in respect of her claims began to run, at the earliest, on August 17, 2010. She commenced this proceeding within two years of that date. Accordingly, Kram’s claims are not barred by the operation of the Act.

 

Ontario: the impact of partial payment on the limitation of debt claims

Hamilton and Son Roofing Inc. v. Markham (City) provides an example of a partial payment operating to restart the limitation period for a debt:

[51]           In any event, the Notice of Action was not issued until June 14, 2016, more than two years after the June 10, 2014 email was received.

[52]           The final issue is whether the payment of the deficiency holdback on May 6, 2015, was an acknowledgment of the debt through part payment under the contract, within the meaning of s. 13(11) of the Act.

[53]           The effect of s. 13(11) of the Act was summarized by Perell J. in Montcap Financial Corporation v. Schyven, 2011 ONSC 4030 (CanLII), at para. 26:

With each payment, a debtor acknowledges or re-acknowledges his or her liability; partial payment acts as an acknowledgment that will restart the running of the two-year limitation period: ABC Lumber Ltd. v. Bodrenok, 2010 ONSC 769 (CanLII), 2010 ONSC 769 (S.C.J.) at para. 39; Emmott v. Edmonds 2010 ONSC 4185 (CanLII), 2010 ONSC 4185 (S.C.J.); Bank of Nova Scotia v. Christie, 2008 CanLII 37609 (ON SC), [2008] O.J. No. 2971 (S.C.J.) at paras. 58-59; Montreal Trust Co. of Canada v. Vanness Estate, [2005] O.J. No. 594 (C.|A.) at para. 2; Markham School for Human Development v. Ghods (2002), 2002 CanLII 62432 (ON SCDC), 60 O.R. (3d) 624 (Div. Ct.).

[54]           In my view, Markham’s payment of the deficiency holdback on May 6, 2015, was a part payment under s. 13(11) of the Act and had the effect of restarting the limitation period.

[55]           The three invoices delivered by Hamilton Roofing on April 7, 2014 all related to the same contract: Markham Purchase Order # PD13334. These invoices represented the total contract price of $151,035.80. Markham held back part of the purchase price – $9,000 plus HST – for deficiencies. When Markham paid this amount on May 6, 2015, it was not making a payment that was unrelated to the invoice at issue; it was making a “part payment” of the amount originally claimed by Hamilton Roofing. This was not the payment of a different or additional contract. It related to the original contract and invoices, even though payment was made in response to a new invoice for the deficiency hold back amount.

[56]           As this part payment occurred within two years of May 28, 2014, it had “the same effect as the acknowledgment” in s. 13(1) of the Act, and restarted the running of the two year limitation period as of May 6, 2015. Since the Notice of Action was issued on June 14, 2016, and the Statement of Claim issued on July 13, 2016, the action is not time barred.

Ontario: the timing of amendments to plead discoverability

Marvelous Mario’s Inc. et al. v. St. Paul Fire And Marine Insurance Co.  provides authority for the principle that an amendment to plead discoverability is available at any time:

[52]           The plaintiffs’ pleading is silent as to discoverability. Recognizing the gap in their pleading, the plaintiffs have moved for an order allowing them to amend their pleading to plead discoverability. St. Paul takes no position on the motion. Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194allows for an amendment to be made at any time, even after the conclusion of trial: Hardy v. Herr, 1965 CanLII 225 (ON CA), [1965] 2 O.R. 801 (Ont. C.A.), at para. 2. Discoverability was an issue thoroughly canvassed at trial. I see no prejudice to St. Paul in granting the amendment. Accordingly, the plaintiffs’ motion to amend their statement of claim to plead discoverability is granted.

All of that said, it’s worth noting that the facts setting up a discovery argument are properly pleaded in reply.

Ontario: Court of Appeal reminds us that arbitration doesn’t suspend the limitation period

 

In Gravelle (CodePro Manufacturing) v. Denis Grigoras Law Office, the Court of Appeal held that a party who writes a letter with the subject line “Notice of Pending Legal Malpractice Action”, and advises that “a statement of claim is currently being drafted against yourself […] such as to avoid the expiration of the applicable statute of limitation periods”, has discovered his claim.

If the party subsequently pursues arbitration in lieu of an action, that will not have the effect of suspending the commencement of the limitation period:

[6]         This is not a case in which the appellant was pursuing alternative means of resolving his negligence allegations against his former solicitors, the respondents. The appellant decided for tactical reasons not to bring his action against the respondents until the arbitration proceedings were completed. He was entitled to make this choice, but he must live with the consequences of it. The motion judge made no error in concluding that the appellant discovered his claim by November 23, 2009. The fact that a notice of possible claim has been delivered “may be considered by a court in determining when the limitation period in respect of the person’s claim began to run”: Limitations Act, 2002, s. 14(3).

This is a useful s. 5(1)(a)(iv) decision because it provides an example of the kind of tactical consideration that does not prevent a proceeding from being an appropriate remedy.

It’s also an interesting counterpoint to this decision.

Ontario: sometimes issuing a statement of claim doesn’t mean discovery of the claim

 

Is commencing a proceeding in respect of a claim determinative of the discovery of that claim?  Not always, according to the Court of Appeal in Har Jo Management Services Canada Ltd. V. York (Regional Municipality).

Flood waters flowing from adjacent land, which the respondent municipality had expropriated for a construction project, damaged the appellant’s property.

In 2011, the appellant commenced proceeding before the Ontario Municipal Board claiming damages for injurious affection in respect of the expropriation.

On June 3, 2013, the appellant sent a letter to the respondent stating that its activities on the adjacent land caused the flooding and resulting damage.  The respondent denied causing the flooding on June 28, 2013.

The appellant commenced an action two years form the respondent’s denial.  The respondent pleaded a limitations defence and move for summary judgment .

The Statement of Claim tracked the language of the appellant’s claim to the respondent.  The Motion Judge found that the appellant knew of his claim on the day he issued it.

Not so, held the Court of Appeal.  The Expropriations Act provides for damages for injurious affection and gives the OMB exclusive jurisdiction to award such damages.  If the flooding damage was caused by the respondent’s construction, the Superior Court would have no jurisdiction to hear the claim.

The appellant’s evidence explained that, to the extent the damage from the flood properly formed part of a claim for damages for injurious affection under the Expropriations Act, it would be part of the appellant’s existing OMB claim.  The action was merely “out of an abundance of caution” in case it turned out that the flooding was not caused by the respondent’s construction, but by some other factors that did not meet the definition of injurious affection.

There was no suggestion that something other than the construction might have caused the flooding until the respondent’s June 28, 2013 letter.  It was on this date that that appellant knew that a proceeding was an appropriate remedy for a claim against the respondent and not a proceeding before the OMB.

The curious aspect of this decision is that issuing a statement of claim (or even drafting the statement of claim) was not determinative of the discovery of the claim it pleads.  There is authority for the principle that it is logically inconsistent for a plaintiff to commence an action before discovering a claim.  See also s. 14(3) of the Limitations Act.

It’s certainly hard to understand how a court could find that a statement of claim does not indicate discovery of the claim pleaded in it, or that objective discovery can occur after subjective discovery.

Here, the Court seems to have avoided this problem by finding that the appellant’s evidence demonstrated that the statement of claim did not indicate subjective discovery of the claim.  This is likely to happen very rarely, and I expect that this decision will be an outlier.

I think the limitations defence might have been avoided if the statement of claim (which I haven’t seen) had pleaded explicitly that it advanced a claim only in regards of the damage that was not within the OMB’s exclusive jurisdiction.

Ontario: amendments are subject to time-bars

In Lucky Star Developments Inc. v. ABSA Canada International, the Court of Appeal rejected the doubtful argument that because the basic limitation period applies to the commencement of proceedings, it does not apply to proceedings that have already been commenced, and therefore does not bar amendments under r. 26.01:

[7]         In oral submissions, the appellant argued that s. 4 of the Limitations Act 2002, S.O. 2002, c. 24, Sched. B does not apply to proceedings that have already been commenced, and so does not bar amendments under r. 26.01. We disagree. As the court noted in Joseph, the rules must be read in light of the Act and its purpose in establishing a basic limitation period in s. 4. Amendments adding claims after the limitation period has expired constitute prejudice.

 

Though it’s  plain this argument was bound to fail—it would mean there is no limitation of new claims asserted in already-commenced proceedings—it’s a symptom of the conceptual difficulties that arises from the language “proceeding in respect of a claim”.

The jurisprudence seems to have settled on “proceeding” having the same meaning as it does under the Rules.   Rule 1.03 defines “proceeding” to include an action and an application, and the Court of Appeal has applied this definition to the term “proceeding” as used in the Limitations Act: see e.g. Giglio v. Peters, 2009 ONCA 681 at paras. 21-22 [“Giglio”]. See also Guillemette v. Doucet, 2007 ONCA 743 at para. 20.

Strictly applied, this means that s. 4 bars actions or applications commenced in respect of a claim.  A proposed amendment to add a claim to an existing action is of course not a proposal to commence a new action.  I’ve argued before that the solution to this tension is to abandon a narrow definition of “proceeding” and to define the commencement of a proceeding broadly enough to include amending a pleading to introduce a new claim.