The Court of Appeal decision in Hurst v. Hancock is a reminder that in a claim arising from anticipatory breach or repudiation of a contract, the limitation period may not commence until performance is due. There can no be no claim until there is a cause of action, and there will be no cause of action until claimant accepts the breach, or affirms the contract and performance is due.
The Court of Appeal decision in Marvelous Mario’s Inc. v. St. Paul Fire and Marine Insurance Co. is a noteworthy addition to “rolling limitation period” jurisprudence.
The appellants sought coverage under the business interruption cover of a commercial insurance policy issued by the respondent. The policy contained a contractual limitation period:
ACTION: Every action or proceeding against the insurer for the recovery of any claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs.
The trial judge held that the claim for business interruption losses was an ongoing claim and subject to a rolling limitation period. The appellants discovered it on a date more than a year before commencing the coverage action. However, it was subject to a rolling limitation period, a new claim accrued each day the appellant sustained a business interruption loss. Those days within a year of the action give rise to timely claims.
The Court of Appeal rejected this reasoning. First, it considered the nature of a rolling limitation period:
[35] The jurisprudence suggests that a rolling limitation period may apply in a breach-of-contract case in circumstances where the defendant has a recurring contractual obligation. The question is not whether the plaintiff is continuing to suffer a loss or damage, but whether the defendant has engaged in another breach of contract beyond the original breach by failing to comply with an ongoing obligation. In cases where there have been multiple breaches of ongoing obligations, it is equitable to impose a rolling limitation period.
Second, it found that the trial judge erred by considering whether the appellants were continuing to suffer damages rather than whether the respondent was breaching a recurring contractual obligation:
[37] In my view, where the trial judge erred was in focussing her analysis on the question of whether the appellants were continuing to suffer damages rather than on the issue of whether the respondent had a recurring contractual obligation. Unlike Pickering Square, where the tenant had a recurring obligation to occupy the premises every month during the term of the lease, the respondent was not obliged to make recurring payments. Rather, the policy covered business interruption losses and the respondent was obliged to pay those losses in their totality, subject to any limits in the policy. The fact that there was a 24-month cap on the business interruption losses does not convert the respondent’s obligation to indemnify into a recurring contractual obligation. Therefore, this was not a proper case for the application of a rolling limitation period.
[38] The appellants knew as of the closing date for the sale of the businesses that they no longer had the assets under their control and that consequently they would thereafter suffer business interruption losses. While the precise amount of the damages was unknown, the appellants knew at that point that they had suffered loss or damage and under the policy they were obliged to commence a claim within one year. The fact that the extent of damages may not be known with precision does not stop the commencement of the limitation period: Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 18. The Second Action was consequently time-barred in its entirety.
This reasoning raises some interesting issues (which, I note sheepishly, I missed entirely when writing about the trial decision).
First, a word on the “rolling limitation period”. The court’s language suggests that it’s an equitable principle: “In cases where there have been multiple breaches of ongoing obligations, it is equitable to impose a rolling limitation period”. This isn’t quite right.
Statutory limitation periods apply to causes of action. Subject to certain exceptions, one limitation period applies to one cause of action (in the case of the Limitations Act, one basic and one ultimate limitation period apply to one “claim”, which derives from a cause of action).
When there are circumstances that cause multiple causes of action to accrue periodically, one limitation period applies to each cause of action. In the case of a contractual obligation that recurs daily (the court’s example), each day the defendant fails to perform the obligation a discrete breach of contract occurs that gives rise to a discrete cause of action. Each discrete cause of action has its own limitation period.
Because these limitation periods have the same length, it will appear as if one limitation period commences anew each day, The limitation period appears to roll. This is the “rolling limitation period”.
A rolling limitation period is accordingly just convenient way to describe multiple limitation periods of the same length commencing regularly and consecutively. It’s not a special kind of limitation period that exists independently of the statutory limitation scheme to be invoked as equity requires.
On my reading, the Court’s analysis is correct. The Court found there was one cause of action that accrued on a particular date. There were no multiple causes of action, and there were accordingly no multiple limitation periods that could appear to roll.
All of this is to say that I question the value of the “rolling limitation period” in limitations analyses. What purpose does it actually serve? Instead of asking whether there is a rolling limitation period, you might just as easily, and certainly more accurately, ask whether there are recurring causes of action.
Now for the second issue: I’m doubtful cause of action accrual, or causes of action generally, had any place in the parties’ limitations analysis.
The limitation period is contractual. It reflects the parties’ agreement on when the insured can sue the insurer.
The limitation period commences on the occurrence of the “loss or damage” and bars “absolutely” an action “against the insurer for the recovery of any claim” under the policy (that is, a claim for indemnification).
The triggering event is not the accrual of a cause of action, but the occurrence of the “loss or damage” for which the insured claims indemnification. I suspect the policy provided coverage for some business interruptions that don’t arise from actionable misconduct. This means the insured could seek recovery for a claim for indemnification of a loss that has nothing to do with a cause of action.
This makes it bewildering that the parties appear to have agreed that common law discovery applied to this limitation period
As I read the provision, its language excludes discoverability of any kind. The limitation period commences on the date of an event—the occurrence of loss or damage—and expires absolutely one year later. The word “absolutely” would seem an explicit bar to discoverability or the suspension of time. If the parties intended for discoverability to apply, they could have used language like “…unless commenced within one year next after the insured could first reasonably have learned of the loss or damage”.
It’s also impossible to apply common law discovery to a limitation period that commences on the date of an event rather than on the accrual of a cause of action. Discovery is of a cause of action: the rule provides that a cause of action accrues when a plaintiff can first reasonably discover its material facts. This is why the rule doesn’t apply to statutory limitation periods that commence on the date of an event (like s. 38 of the Trustee Act) .
Further, discovery is always in relation to the cause of action that gives rise to the proceeding. In this case, the cause of action giving rise to the proceeding was the breach of the insurance agreement, and this is the cause of action to which the contractual limitation period applies. The discovery of some of other cause of action that may have resulted in the event that is the trigger of the limitation period wouldn’t in the normal course be material to the commencement of time. It’s so unusual for the limitation of one cause of action to be determined by the accrual of another cause of action that if the parties intended this to be so I’d expect explicit language to that effect in their agreement (I’ve never seen such language).
More generally, because this is a contractual limitation period, the parties ought to have grounded their positions in the language of the policy. The material question strikes me as being whether the “loss or damage” occurred within the meaning of the policy each day the business interruption lasted, or on the date of the event that caused the business interruption. This is a question of policy interpretation.
Without having read the policy, I see arguments on both sides. I think the strongest argument is the one the court accepted. The day of the peril that caused the business interruption—the transaction—caused the appellants to suffer the “loss or damage” for which they sought indemnification. That the interruption lasted days goes to quantifying the loss, not when it occurred. I would think the appellants’ notification would have been helpful; it’s easy to imagine that the appellants filed one notification in regards of the business interruption, which might have indicated they considered there to be one loss. I’m not sure why this didn’t appear to be part of the record.
The counterargument is that each day of business interruption was a new occurrence of loss. This is effectively the rolling limitation period argument, except not one based on cause of action accrual.
I welcome your thoughts on this!
Pryers Construction LTD. v. MVMB is a reminder that parties in a lien action may be added after the 90 day limitation period in the Construction Act at any stage of the proceeding if there are special circumstances.
The appointment of a litigation guardian will cause the limitation period to commence when the plaintiff is a minor or without capacity (see ss. 6, 7). Does the limitation period commence when the litigation guardian holds herself out as a litigation guardian, or when the litigation guardian files the affidavit required by r. 7 of the Rules of Civil Procedure? The court in Siddiqui v. Saint Francis Xavier High School found it’s the latter:
[40] In short, the courts have sought to protect the interest of minors and have found that it takes “clear and unequivocal” wording to strip protections away from minors and persons under disability who are incapable of protecting their own legal interests.
[42] I conclude that the court in Socha recognized the term “litigation guardian” as a term of art when it identified the lack of any mechanism of self-appointment under the Act and then referred to the process for appointment of a litigation guardian under the Rules of Civil Procedure.
[48] I agree with the Plaintiffs that the words of s. 6(b) of the Act must be given meaning otherwise the mere delivery of a notice letter would be sufficient. The consequence of such a proposition would allow the running of a limitation period against a minor without affording them any measure of protection while their rights begin to fade away and would permit such a letter to be sent by anyone simply holding themselves out to be a litigation guardian.
[49] I agree that that the determination of a minor’s rights should not turn on a question of the choice of words used in a letter. Such a proposition would not introduce certainty and would provide no protection to minors and persons under disability.
[50] This conclusion is reinforced by the other provisions of the Act; namely ss. 9 and 14, where a prospective defendant can trigger the running of a limitation period. In those circumstances, a mere notice letter will not suffice. In short, those provisions demonstrate the balancing of rights that is required under the Act.
[51] Section 9 (2) provides:
Appointment of litigation guardian on application or motion by potential defendant
(2) If the running of a limitation period in relation to a claim is postponed or suspended under section 6 or 7, a potential defendant may make an application or a motion to have a litigation guardian appointed for a potential plaintiff.
Effect of appointment
(3) Subject to subsection (4), the appointment of a litigation guardian ends the postponement or suspension of the running of the limitation period if the following conditions are met:
- The appointment is made by a judge on the application or motion of a potential defendant.
- The judge is satisfied that the litigation guardian,
- has been served with the motion,
- has consented to the appointment in writing, or in person before the judge,
iii. in connection with the claim, knows of the matters referred to in clause 5 (1) (a),
- does not have an interest adverse to that of the potential plaintiff, and
- agrees to attend to the potential plaintiff’s interests diligently and to take all necessary steps for their protection, including the commencement of a claim if appropriate.
Non-expiry
(4) The limitation period shall be deemed not to expire against the potential plaintiff until the later of,
(a) the date that is six months after the potential defendant files, with proof of service on the litigation guardian,
- a notice that complies with subsection (5), and
- a declaration that, on the filing date, the potential defendant is not aware of any proceeding by the litigation guardian against the potential defendant in respect of the claim; and
(b) the date on which the limitation period would otherwise expire after it resumes running under subsection (3).
Notice
(5) The notice,
(a) shall not be served before the first anniversary of the appointment;
(b) shall identify the potential plaintiff, the potential defendant and the claim; and
(c) shall indicate that the claim could be extinguished if a proceeding is not promptly commenced. 2002, c. 24, Sched. B, s. 9 (5).
[52] Given all of the requirements of s. 9, it is clear that the few words found in s. 6(b) cannot be to be interpreted in such an informal manner as to negate the protections for minors available under law. Such an interpretation would be contrary to the scheme and purpose of the legislation. The balancing of rights is achieved through the provisions of s. 9 of the Act which ends the postponement of the running of the limitation period and provides a prospective defendant with a degree of certainty and finality.
There is a category of limitations jurisprudence that decides issues which shouldn’t need deciding. Three decisions recently expanded it.
Having commenced a proceeding by notice of action within the limitation period, can a plaintiff add defendants to the proceeding outside the limitation period by naming them as defendant in the statement of claim? No, obviously, the court held in Bercovici v. Attorney General of Canada:
[13] The plaintiff’s action was commenced by notice of action. Under rules 14.03(1)(a) and (2), where a plaintiff commences an action by notice of action, the notice of action, and not the statement of claim, is the originating process. Under rule 14.06(1), the originating process shall contain “a title of the proceeding setting out the names of all the parties”. Therefore, where the originating process is a notice of action, it is the title of proceeding in the notice of action that identifies the parties to the action.
[14] The plaintiff relies on rule 14.03(2), which provides that a notice of action contain “a short statement of the nature of the claim” [emphasis added] and rule 14.03(5), which provides that “in an action commenced by the issuing of a notice of action, the statement of claim may alter or extend the claim stated in the notice of action”. The plaintiff argues that these two rules read together allow the plaintiff to add to the statement of claim both claims and parties not included in the notice of action. Specifically, the plaintiff submits that where the notice of action referred to the conduct of “responsible officials”, it was open to her to name those officials as defendants in the statement of claim as an extension of the claim in the notice of action.
[15] Rules 14.03(1) and (2) and 14.03(5) must be interpreted in the context of the rules as a whole, which include rule 5.04(2).
[16] Rules 14.03(1) and 14.06(1) read together provide that the parties to an action, which include the defendants, be named in the originating process, which in this case was the notice of action. Rule 5.04(2) provides the means by which parties may be added to an action: “[T]he court may by order add, delete or substitute a party . . .” [emphasis added]. However, there is no provision in rule 14.03 that allows parties to be added to a proceeding commenced by notice of action simply by including them in the statement of claim. In the face of the specific provision in rule 5.04(2) requiring a court order to add parties, the fact that rule 14.03(5) allows a plaintiff who has issued a notice of action to “alter or extend the claim” when filing her statement of claim does not enable that plaintiff to add new defendants simply by including them in the statement of claim.
[17] Rule 14.03(2) enables a plaintiff to comply with a limitation period by commencing an action by notice of action “where there is insufficient time to prepare a statement of claim”. The notice of action is therefore intended to be a document that can be prepared and issued quickly before the limitation period expires. However, in order to defeat the operation of the limitation period, the plaintiff must still name all defendants within the limitation period, subject to the considerations discussed below.
[18] If a plaintiff wishes to add defendants to an action commenced by notice of action, she must, as concluded above, do so by way of a motion under rule 5.04(2). The registrar was therefore correct in refusing to accept for filing the statement of claim naming five new defendants.
Can you object to a request for documents on the basis that they are dated prior to the limitation period? No. A thousand times no! The court in Nanton v. Julien had no trouble dismissing this bizarre argument:
The defendants object to a number of requests for documents on the basis of the Limitations Act. Limitations apply to bar claims, not requests for documentary production. So long as the claim is properly pleaded and has not been dismissed by reason of a limitations defence, the parties are obliged to produce relevant documents, even if those documents date back to a time beyond the limitations period.
Does the limitation period for a claim arising from an auto accident commence on the date of the accident if the plaintiff can’t reasonably know the identity of the auto’s owner at that time? Also no, as the court in Miano v. Campos held (while sighing, I imagine):
[30] The Defendant’s position that the limitation period for a claim for damages arising from an automobile accident commences to run on the date of the accident even if the plaintiff does not know and cannot reasonably discover the identity of the owner and operator of the automobile on the date of the accident is misguided. It ignores the plain language of s. 5(1)(a)(iii) and 5(1)(b) and renders those provisions meaningless. Given these provisions, it is unnecessary to commence a claim against “Jane Doe” in order to “preserve” a limitation period, as the limitation period does not commence to run until the identity of the owner or operator, as the case may be, is known or ought to have been known. Such an approach adds nothing of value, clutters the record and, if Jane Doe was later identified, would then necessitate an unnecessary step in this proceeding to remove Jane Doe as a defendant and add the identified defendant.
Carmichael v. GlaxoSmithKline is an important addition to s. 7 capacity jurisprudence.
The facts are tragic. The plaintiff killed his son during a psychotic episode and was found not criminally responsible by reason of a mental disorder. The plaintiff sued the defendant manufacturer of the drug he alleged caused the episode. The defendant moved for judgment on a limitations defence.
These paragraphs summarise the parties’ positions:
[21] Counsel for GlaxoSmithKline summarizes these submissions by noting that “the contemporaneous medical records reflect the finding of mental health professionals on more than 23 occasions, commencing on October 19, 2005 and extending through December 2009, that David Carmichael had capacity, and was assessed as being capable to consent to treatment, to view his record of personal information, to provide informed consent to disclose information and to manage his financial affairs.[36]
[22] Counsel for David Carmichael does not agree that he had the capacity to decide to commence and conduct this litigation at any time prior to his absolute discharge, by the Ontario Review Board, on December 2, 2009. It goes without saying, this was less than two years from the date on which this proceeding was started, being October 5, 2011.
Justice Lederer undertook a nuanced and sensible approach in concluding that s. 7 operated to render the proceeding timely.
First, he acknowledged that a person may be capable of functioning in the world, including by dealing with professional contracts, difficult life events, and significant financial transactions, without necessarily having the capacity to commence a proceeding within the meaning of s. 7.
[29] In the context of the case I am asked do decide, it may well be that David Carmichael was capable of dealing with the death, the contracts, the sale as well as the other changes to his family’s circumstances and, yet, remained unable to contemplate, that is remained incapable, of beginning this action. Counsel for GlaxoSmithKline points out that the expert retained on behalf of David Carmichael, Dr. Stephen Fleming, “did not dispute” that David Carmichael had the capacity “to consent to treatment, to view his record of personal information, to provide informed consent to disclose information and to manage his financial affairs”.[41] This may be so but is his capacity to cope with these events demonstrative of the capacity to commence an action or could it be that each would be a step on the way to the rehabilitation and reconciliation required to allow him to accept what he did, confront it and live with the constant reminder that would inherently come with the commencement and continuation of a legal case? As of November 15, 2007, at the time of his conditional discharge, a Clinical Risk Assessment of David Carmichael done by Dr. A. G. Ahmed at the Brockville Mental Health Centre was, as follows:
It is the opinion of the treatment team that Mr. Carmichael continues to constitute a significant risk that will require treatment under a detention order that will allow him to live in the community in an approved accommodation. The clinically significant risk factors… include his mental disorder which though in remission on medication in a hospital setting at this stage, has presented with reoccurrence in the past. His insight into the role of stress and likely impact on his mental health remains suboptimal and will require close monitoring in a less structured environment. Reintegration into the community and the relocation of his family to a home that is yet to be settled continues to constitute significant psychosocial stresses that will require close monitoring by the treatment team… His business is not earning money at this stage and he relies solely on his savings…. This transitional situation and uncertainty about the future is significant bearing in mind the role of natural stress at the time of the index offence.[42]
[30] Dr. Stephen Fleming states that David Carmichael was psychologically incapacitated from taking on the stress and risk of confronting GlaxoSmithKline in a legal proceeding.[43]. Dr. Stephen Fleming was clear in his view that the ability to confront some of life’s challenges does not inherently indicate capacity to start an action:
- But you do agree with me, Doctor Fleming, that if you can go out and function and sell a house, get a job, draft a website, you can also file a lawsuit?
- No I don’t agree with you.[44]
[31] It was the opinion of Dr. Stephen Fleming that David Carmichael was incapable of commencing a proceeding before his absolute discharge because of his psychological condition:
In my opinion David was incapable of commencing a proceeding in respect of his claim because of his psychological condition. A number of factors contributed to David’s inability to initiate the process of launching a civil suit against GSK until his absolute discharge in December 2009[45].
Justice Lederer then set the out factors for determining capacity to commence a proceeding and applied them to the plaintiff:
[40] The factors to be considered in determining whether a party is capable of commencing an action are set out in the case of Huang v. Braga[58] and repeated in Hengeveld v. Ontario (Transportation):[59]
(a) A person’s ability to know or understand the minimum choices or decisions required to make them;
(b) An appreciation of the consequences and effects of his or her choices or decisions;
(c) An appreciation of the nature of the proceeding;
(d) A person’s ability to choose and keep counsel;
(e) A person’s ability to represent himself or herself;
(f) A person’s ability to distinguish between relevant and irrelevant issue; and
(g) A person’s mistaken beliefs regarding the law or court procedures.
[41] The factum filed on behalf of the GlaxoSmithKline asserts that in this case each of these factors was established no later than 2005. The presumption appears to be:
- that because David Carmichael was able to participate in the determination of the defence to be put forward at his criminal trial he had capacity to commence this action;
- that he accepted the risk of speaking publicly through newspapers and television and website postings and other writings in spite of his expressed fear that he was concerned that bringing an action might pose a risk to his being discharged from the Brockville Mental Health Centre; and
- that he thought about and talked about commencing litigation, in particular his discussions with Andy Vickery;
he satisfied the seven factors.
[42] To my mind, the application of those factors, in this way, continues the same mistake. It fails to recognize the fundamental distinction between the cognitive ability to commence an action and the psychological strength required to actually undertake the initiation of a lawsuit. Understood from the perspective of the psychological burden being carried by David Carmichael, taking into account the evolution of his coming to terms with his role in the death of his son, particularly as interpreted by the treating professionals along the way, as assessed thereafter by Dr. Stephen Fleming, accounted for in the decisions of the Ontario Review Board and confirmed by his wife and daughter I am unable to take each of these factors as having been met prior to his absolute discharge. By way of example, I have no trouble in finding that David Carmichael would not have been able to understand the minimum choices or the decisions he would have been required to make, to appreciate the consequences of those choices, to fully understand the nature of the proceedings, to choose and keep counsel and to represent himself or to distinguish between relevant and irrelevant issues.
[43] The death of a child would cause any parent to be devastated. It would be that much more terrible for a parent to accept being the instrument of that death:
Finally, and importantly, the launching of legal proceedings prior to December 2009 would have placed David at considerable psychological risk. The trauma of Ian’s death resulted in the forced surrendering of David’s comforting illusions and assumptions that his sense of self (i.e., organizing principles and values that maintain self-esteem and shape the data of experience). His assumptive world, that set of assumptions or beliefs that secure and ground individuals and provide a sense of reality, purpose, and meaning, was sorely challenged if not destroyed by David killing his son. The fracturing of David’s assumptive world resulted in substantial psychological upheaval and left him feeling fearful, insecure, and vulnerable. Launching legal proceedings prematurely would threaten the process of re-building shattered assumptions, finding meaning after Ian’s death and precipitate a relapse.[60]
[44] I end where I began, with the comments of the judge who found David Carmichael not criminally responsible for the death of his son:
… one can only begin to imagine Mr. Carmichael’s anguish when, through medical intervention, his depression began to lift, his delusional beliefs began to abate and the terrible knowledge of his actions descended – the crash into reality described by Dr. Hucker.[61]
[45] It is not difficult to understand and accept a professional judgement that a person struggling with such a realization would be psychologically impaired if not destroyed, at least for a period of time and that his capacity to function fully would take time to return.
Two quibbles.
First, the court asked the wrong question:
[18] It is on this basis that it is submitted that any claim David Carmichael may have against GlaxoSmithKline would have been discovered by “a reasonable person with the abilities and in the circumstances of the person with the claim.”[29] But was David Carmichael the “reasonable person” to whom the legislation refers? This is the question that is at the core of this motion.
The Limitations Act doesn’t refer to one reasonable person. It refers to a reasonable person with the abilities and in the circumstances of the plaintiff. The question isn’t “who is the ‘reasonable person’?”, but “what are the plaintiff’s abilities and circumstances that inform the ‘reasonable person’ test?”.
In any event, as the court noted, this is a matter of discovery, and discovery is unrelated to s. 7. A person can have capacity to discover a claim while being without capacity to commence a proceeding in respect of that claim. Or, perhaps more likely, a person can have the capacity to discover a claim but then, as a result of a psychological or physical condition, lose the capacity to commence a proceeding in respect of the claim. This is why s. 7 suspends a limitation period instead of delaying its commencement.
Second, the court didn’t address the most vexing aspect of s. 7: what does it mean to be “incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition”? Instead, the court applied the factors developed for determining whether a party is under disability and requires a litigation guardian. Section 7 encompasses parties under disability, but is much broader. For example, s. 7 arguably encompasses a circumstance where a person is physically unable to commence a proceeding, perhaps because of some incapacitating injury, but has not mental impairment. None of the considerations applied by the court would be relevant in that circumstance: the plaintiff’s decision-making abilities would be fine; he would simply be physically unable to commence a proceeding.
As a practical matter, I suspect the court’s approach is fine. I’m doubtful we’ll see a case where a plaintiff’s broken legs and arms are the bar to commencing a proceeding. Still, from a legal perspective, this approach, while practical, does little to assist in the interpretation of s. 7.
In Piekut v. Romoli, the applicant sought a declaration as to whether codicils were valid. The respondent moved to dismiss the application as statute-barred. The court denied the motion on the basis that no limitation period applied pursuant to s. 16(1)(a), which prescribes no limitation period for a proceeding for a declaration if no consequential relief is sought. The applicant was not seeking consequential relief:
[50] I find that Helen’s question with respect to the validity of the codicils is restricted to declaratory relief. She is not seeking consequential relief. She is not asking the court to determine the ultimate beneficiary of Dundas St. properties or to vest the properties in any particular beneficiary or beneficiaries.
This is the correct outcome by the wrong reasoning. No limitation period applied to the proceeding because it didn’t pursue a “claim”. The Limitations Act applies to “claims” pursued in court proceeding (s. 2). If there’s no “claim”, there’s no limitation period. “Claims” derive from causes of action. If there’s no cause of action, there’s no “claim”.
There’s no cause of action asserted in an application for a declaration regarding the validity of a codicil (or a will). Accordingly, the applicants were not pursuing a “claim” in a court proceeding, and no limitation period applied to it.
The decision in Beniuk v. Leamington (Municipality) affirms an esoteric aspect of real property limitations (though to be fair, most aspects of the RPLA are esoteric). It affirms that the presence of a messuage doesn’t necessarily engage the RPLA.
The plaintiffs argued that the tort of private nuisance to land was effectively an action to recover messuages and therefore subject to the s. 4 limitation period, which applies to actions for recovery of land. Section 1 of the RPLA defines land to include “messauges”—a dwelling house, its out buildings, the area immediately surrounding the dwelling, and adjacent land appropriate to its use. Whether or not the property was a messuage, the action concerned land, but was not to recover land.
The Court of Appeal’s decision in Clark v. Ontario (Attorney General) is another emphatic instruction not to bring motions for judgment on a limitations defence under r. 21:
[40] The second problem is that the Attorney General seeks to use a r. 21.01(1)(a) motion to assert the Limitations Act defence that it has not pleaded. That rule involves the determination of a question of law raised in a pleading, and it is clear that the application of the Limitations Act is not a matter of law. This point has been made by this court on several occasions. For example, in Beardsley this court stated as follows, at paras. 21-22:
The motion to strike based on the expiry of a limitation period could only be made pursuant to rule 21.01(1)(a), which provides that a party may move for the determination of a question of law “raised by a pleading”. The expiry of a limitation period does not render a cause of action a nullity; rather, it is a defence and must be pleaded.
…
Plaintiffs would be deprived of the opportunity to place a complete factual context before the court if limitation defences were determined, on a routine basis, without being pleaded. Adherence to rules that ensure procedural fairness is an integral component of an appearance of justice. The appearance of justice takes on an even greater significance where claims are made against those who administer the law.
[41] Despite these remarks, this court stated in Beardsley that it would be “unduly technical” to require a statement of defence to be delivered if “it is plain and obvious from a review of the statement of claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired”: at para. 21. To the extent that this comment created an exception, it was extremely limited in scope, as the example given makes clear: the expiry of the two-year limitation period under the Highway Traffic Act, R.S.O. 1990, c. H. 8, in connection with a claim for property damage only, in circumstances in which the panel noted that the discoverability rule clearly did not apply.
[42] Although this court has not categorically precluded the use of r. 21.01(1)(a) on limitations matters in subsequent cases, in several cases it has sought to discourage its use. In Metropolitan Toronto Condominium Corporation No. 1352 v. Newport Beach Development Inc., 2012 ONCA 850 (CanLII), 113 O.R. (3d) 673, at para. 116, Laskin J.A. said that a defendant could move to strike a claim based on a limitation defence“[o]nly in the rarest of cases” if the defendant has yet to deliver a statement of defence. A fuller explanation was provided in Salewski v. Lalonde, 2017 ONCA 515 (CanLII), 137 O.R. (3d) 762, at para. 42, in which the panel stated that “this court’s comment in Beardsley” had “likely been overtaken by the enactment of the Limitations Act, 2002”. The court in Salewski further limited the effect of the Beardsley comment by stating that it “was never intended to apply to a case that is legally or factually complex”: at para. 42.
[43] Significantly, the panel in Salewski stated at para. 45 that, because the basic limitation period is now premised on the discoverability rule, the application of which raises mixed questions of law and fact, “[w]e therefore question whether there is now any circumstance in which a limitation issue under the Act can properly be determined under rule 21.01(1)(a) unless pleadings are closed and it is clear the facts are undisputed”.
[44] The situation contemplated in Salewski – the close of pleadings and the absence of any factual dispute – is very narrow, and this court has continued to discourage the use of r. 21.01(1)(a) motions on limitations matters. In Brozmanova v. Tarshis, 2018 ONCA 523 (CanLII), 81 C.C.L.I. (5th) 1, at para. 19, this court emphasized that “[t]he analysis required under s. 5(1) of the Limitations Actgenerally 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).” Justice Brown described reliance on r. 21.01(1)(a) to advance a limitation period defence as “a problematic use of the rule”, one that risks unfairness to a responding plaintiff: at paras. 17, 23.
The Divisional Court decision in Western Life Assurance Company v. Penttila demonstrates that if an insurer intends for a denial to commence a limitation period for a coverage proceeding, that denial needs to be as explicit as explicit can be.
The insurer, Western, denied its insured Penttila’s claim for LTD benefits in February 2013, and told her that she could appeal the denial within 60 days by written request. At the same time, Western stated explicitly that it wasn’t waiving its right to rely on any “time limitations”.
Penttila initiated an appeal within the prescribed time. Western wrote to Penttila in October 2014 that its position “remained unchanged”. Pentilla didn’t understand this to mean Western had denied her appeal. She wrote to Western in May 2015 asking about the decision in her appeal. Western responded in June 2015 by confirming that benefits remained declined. Penttila commenced a proceeding in June 2016. Western defended, pleaded a limitations defence, and moved for judgment on it. The motion judge held that a trial was necessary to determine the defence.
Penttila’s evidence was that she believed Western continued to consider appeal June 2015. She didn’t understand Western October 2013 correspondence to be determinative of her appeal.
Western appealed. It argued that the Penttila should have known that a proceeding was an appropriate remedy for her loss once it terminated her LTD benefits.
Penttila’s position was that a proceeding wasn’t appropriate as of that date:
[24] Ms. Penttila takes the position that it was not appropriate for her to file a claim as of March 7, 2013, as her appeal had not yet been finally determined by Western because:
a) She was told she had a right to appeal provided she took certain steps which she did. It was therefore not clear that the process had run its course;
b) There was no denial of the appeal or any reason to believe that the matter would not be amicably resolved;
c) She was not represented by legal counsel;
d) There was no clear reference to the fact that the limitation period was running in the communications from the insurer. The insurer said only that “the limit”, whatever it was, was not being waived;
e) She made concessions and repaid monies paid pursuant to her CPP disability setoff, believing that she was engaging in an attempt at dispute resolution. This was done at the request of the insurer;
f) There was no reason for her to do this except to attempt to resolve the claim instead of litigating; and
g) There is no suggestion that the delay was a tactical decision to delay the proceeding.
[25] Moreover, the courts have recognized that there is a clear policy objective to encourage parties to resolve matters instead of going directly to litigation. Waiting for the appeal to be determined is consistent with that important policy objective.
The Divisional Court rejected Western’s argument:
[50] For the reasons set out herein, we find that the motion judge was correct to hold that the triggering event for the commencement of the two-year limitation period was the date upon which it would be legally appropriate to commence legal proceedings to seek payment of long-term disability benefits that the insurer refused to pay.
[51] We further find that the motion judge made no palpable and overriding error in dismissing the motion for summary judgment on the basis that Western had not established that the claim was statute-barred. We come to this conclusion for the following reasons:
(i) Right of Appeal
[52] Before March 7, 2013, Ms. Penttila was advised that as of March 7, her benefits would no longer be paid by the insurer but that, “you may appeal this claim decision by sending your written request for review to our office within 60 days from the date of this letter.”
[53] On April 8, 2013, Ms. Penttila advised that, “I wish to appeal this claim.”
[54] On November 13, 2013, Western wrote her to advise that: “[u]pon receipt of all the above requested information, we will complete our review of your appeal and advise you of the decision.”
[55] Ms. Penttila thereby accepted a clear offer to allow her to appeal the denial of her claim for benefits. A process was established, and her appeal was determined by the insurer. She was advised by letter dated October 21, 2014, of the decision that her appeal had been rejected. (Ms. Penttila says she did not receive written confirmation until June 15, 2015.)
[56] The right to appeal was not simply part of an insurer’s general obligation to accept any material; it was a specific and agreed right of appeal, a clear articulation of the process to be followed, and a specific decision in respect of the appeal.
[57] A reasonable person in Ms. Penttila’s position would have pursued her right of appeal. Until that process ran its course, it would be premature to commence legal proceedings against the insurer.
(ii) No Need to Review the Tone and Tenor of Discussions
[58] The court was not required to assess the “tone and tenor” of communications between the parties as there was a clear beginning and end to the process. Western told Ms. Penttila that she had a right to appeal and that a decision would be rendered, and it was.
(iii) No Litigation Counsel Engaged
[59] Ms. Penttila did not retain counsel while the appeal was ongoing. This fact does not “[belie] any suggestion of a lack of awareness of the appropriateness of commencing a lawsuit at that point in time”: Pepper, at para. 1.
[60] The words “in offering to review additional evidence we are not waiving our right to rely on any statutory or policy provisions including any time limitations”, in this factual context, were not sufficiently clear to demonstrate to Ms. Penttila that the insurer intended to rely on the fact that the limitation period was running before the appeal had been decided.
(iv) Ms. Penttila’s Evidence as to Her Belief
[61] On the contrary, Ms. Penttila’s uncontradicted sworn evidence was that she at all times believed that, from the time the initial benefits were denied (in the letter dated February 19, 2013), to the time she received the final decision on appeal, Western was considering her appeal.
[62] This belief is supported by the fact that, on November 13, 2013, Western advised that: “[u]pon receipt of all the above requested information, we will complete our review of your appeal and advise you of the decision.” There was no statement in respect of time limitations.
[63] Lastly, unlike Nasr, Ms. Penttila never conceded that the insurer never told her that it would not be relying on a limitations defence.
(v) No Tactical Delay
[64] Ms. Penttila made good faith efforts to avoid unnecessary litigation believing Western was considering her appeal. There is no suggestion that Ms. Penttila engaged in a tactical delay of the proceeding.
(vi) Meets the Policy Objectives
[65] The motion judge’s decision is consistent with the policy objective of avoiding unnecessary litigation and discouraging parties from rushing to litigation, provided there is no tactical delay.
The court also provided a good summary of the principles for assessing the appropriateness of a proceeding against an insurer:
[35] In assessing when it is legally “appropriate” to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act, 2002, the courts have articulated the following guidelines:
a) The determination of whether legal action is “legally appropriate” takes into account what a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known: Presidential, at para. 18.
b) Parties should be discouraged from rushing to litigation or arbitration. Rather, they should be encouraged to resolve claims as courts take a dim view of unnecessary litigation: Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218 (CanLII), 109 O.R. (3d) 652, at para. 34; and 407 ETR, at para. 48.
c) It is premature for a party to bring a court proceeding to seek a remedy if a statutory dispute resolution process offers an adequate alternative remedy and that process has not fully run its course or been exhaustive: Volochay v. College of Massage Therapists of Ontario, 2012 ONCA 541 (CanLII), 111 O.R. (3d) 561, at paras. 61-70.
d) However, where the insurer has been clear that it intends to rely on the limitation period, and the claim has “ripened”, the court should be wary of getting involved in assessing the “tone and tenor of communications” to determine where and when there was a denial of the claim by the insurer as this would inject an undesirable element of uncertainty into the law of limitation of actions: Markel, at para. 34.
e) The courts should also be wary of allowing a party to delay the commencement of proceedings simply for tactical reasons: 407ETR, at para. 47; and Markel, at para. 34.
f) It is appropriate for the court to consider what was communicated to the insured and whether the claim was clearly and unequivocally denied: Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922 (CanLII), 124 O.R. (3d) 171, at para. 42.
g) The courts have specifically recognized two circumstances in which the issue of “appropriate means” may delay the date on which a claim was discovered.
• First, where the insured relies on the superior knowledge and expertise of the insurer, especially where the insurer made efforts to ameliorate the loss.
• Second, where other proceedings remain ongoing (such as criminal proceedings or arbitration): Presidential, at paras. 28-48.
h) Where an insured seeks to preclude an insurer from relying on a limitations defence on the basis of promissory estoppel, the insurer’s conduct must amount to a promise on which the insured acted to its detriment: Maracle v. Travellers Indemnity Co. of Canada, 1991 CanLII 58 (SCC), [1991] 2 S.C.R. 50; and Marchischuk v. Dominion Industrial Supplies Ltd., 1991 CanLII 59 (SCC), [1991] 2 S.C.R. 61.