Reconsidering mistakes of law and discoverability

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

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

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

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

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

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

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

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

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

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


Nova Scotia: It’s abusive to file a claim merely to toll a limitation period

It’s an abuse of process to file a statement of claim to toll a limitation period where there’s no intention to proceed with the claim.

In BCE Inc. v. Gillis, the same firm filed nine virtually identical national class actions brought on behalf of the same plaintiff.  The firm’s correspondence to a prothonotary indicated that it intended to pursue national certification in Saskatchewan.  The defendant moved to stay the claim commenced in Nova Scotia on the basis that, among things, the plaintiff had no intention of proceeding there.  The Nova Scotia Court of Appeal held that tolling the limitation period alone could not justify the Nova Scotia action:

[75]        Dr. Gillis submits that filing the statement of claim in Nova Scotia allowed the limitation period to toll.  I do not accept that it is appropriate to file an action for the sole purpose of tolling a limitation if there is no intention to prosecute the case.  I again refer to the MLG correspondence to the prothonotary.

[76]        It is not unusual for courts to see statements of claim filed to meet the limitation periods pending ongoing investigation or settlement efforts. Those cases are distinct from this case where there never was any intention to proceed. It is an abuse of process to file a claim for the sole purpose of tolling the limitation period absent any intention to proceed.

Nova Scotia: a limitations decision is not res judicata of the same issue elsewhere

In Coady v. Quadrangle Holdings Ltd., the Nova Scotia Court of Appeal held that a final decision on a limitations issue is not res judicata of the same issue in another jurisdiction. An order dismissing a cause of action as statute-barred in Alberta did not bar the same cause of action in Nova Scotia.

Quadrangle sued Coady in Nova Scotia. Coady brought a motion for a stay on the basis that Nova Scotia had no jurisdiction, and that in any event, Alberta was the preferable jurisdiction. The motion judge declined to decide the jurisdiction issue, but found that Alberta was the preferable forum and granted an unconditional stay.

Quadrangle then sued Coady in Alberta. The Alberta Court of Queen’s Bench dismissed the claim on the basis that it was statute-barred by the expiry of the limitation period.

Coady registered the Alberta dismissal order as an order of the Supreme Court of Nova Scotia pursuant to the Enforcement of Canadian Judgment and Decrees Act (“ECJDA“).

Quadrangle moved to revive the stayed Nova Scotia claim. The motion judge lifted the stay.  Coady appealed.

The Court of Appeal held that the motion was entitled to lift the stay:

[32]           Whether to lift Justice Coady’s stay was a matter of discretion for Justice Moir. He exercised that discretion in favour of Quadrangle because its case could not be heard in Alberta and that was not drawn to Justice Coady’s attention when the stay was granted. The action in Nova Scotia was timely […] None of the “forum shopping” or like concerns expressed by Lord Goff in Spiliada are present here. Accordingly, one cannot say that Justice Moir applied incorrect principles. Nor can it be a patent injustice that Quadrangle’s case be heard, rather than stifled, because of a limitation period in Alberta of which no one was apparently aware.

Coady raised another, clever if rather dubious argument.  He took the position that the Nova Scotia action was res judicata due to the registration of the Alberta order in Nova Scotia under the ECJDA. He argued that Nova Scotia courts are not permitted to “look behind” the Alberta dismissal or consider its merits.  By virtue of sections 6 and 8(3) of the ECJDA, the motion judge could not even examine the reasons to see what issues were decided by the Alberta Court in dismissing the action.

Quadrangle countered with the Ontario Court of Appeal decision in Wolfe v. Pickar, which stands for the proposition that a foreign judgment is not res judicata if it has not pronounced on the merits of the case. The Court noted that, arguably, decisions registered under the ECJDA enjoy  greater protection that foreign judgments, but cited a 1980 Ontario Superior Court decision, Vancouver Island Helicopters Ltd. v. Robertshaw Controls Co. et al., for its statement that “The dismissal of an action in one province on the basis of the expiry of the limitation period is not a dismissal on the merits and does not bar another action in another province with a longer limitation period.”

The Court rejected Coady’s argument. Registration of the Alberta dismissal order in Nova Scotia did not bar the Nova Scotia action; it just affirmed that Quadrangle could not sue Coady in Alberta:

 [54]           […] in this case, Quadrangle is not attempting to limit the effect of the Alberta dismissal or even to treat it differently than a decision from a Nova Scotia court. In contrast, Mr. Coady is attempting to use it as evidence of res judicata and, for that reason, it is wholly appropriate to consider the reasons for the decision to determine what it in fact decided. The ECJDA does not alter the rules of evidence in this regard.


[55]           All Justice McCarthy decided was that Quadrangle could not sue Mr. Coady in Alberta. This is obvious from the relevant language of the registered order:


The Application by Blair Coady for Summary Judgment dismissing the claims against Blair Coady based upon the Limitations Act is granted.


[56]           Registration of the order in Nova Scotia does not bar the action by Quadrangle against Mr. Coady everywhere for all purposes and all time. It simply affirms that Quadrangle could not sue Mr. Coady in Alberta. It says nothing about whether it could be done in Nova Scotia. Justice McCarthy did not decide which law properly applied to resolution of the dispute. It does not offend the purposes of the legislation or the principle of comity to confine Justice McCarthy’s decision to what he actually decided.

One wonders whether if Quadrangle had first sued in Alberta, it could have commenced a new action in Nova Scotia (rather than reviving a stayed action) once the Alberta action was dismissed.  Vancouver Island Helicopters and the Court’s statement that the Alberta order says nothing about what could be done in Nova Scotia suggests that Quadrangle could.  On the other hand, the fact that Quadrangle had first sued in Nova Scotia undoubtedly influenced the Court’s reasoning. It will be interesting to see how the courts follow this decision.