In Steele Industrial Supplies Inc. v. Elliott, the Superior Court found that an employer who knows that it has been defrauded by an employee, and has called the police in regards of that fraud, doesn’t necessarily know that a proceeding is an appropriate remedy for the fraud loss.
The decision is noteworthy as an example of how fact-driven discovery analyses are. I think most people would consider it safe to presume that an employer who learns that an employee has committed a fraud has discovered a claim against that employee, but, as this decision shows, it depends on the facts. These are the material paragraphs:
[35] I agree with the submission made on behalf of the defendants that, by the time Mr. D’Agostino placed his call to the police, the first three requirements of s. 5(1)(a) had been met. As the defendants correctly submit, the law does not require absolute certainty before the limitation clock starts to tick: Kowal v. Shyiak, 2012 ONCA 512, at para 18. Nonetheless, in my view, the clock did not start to tick regarding the requirement in s. 5(1)(a)(iv) until later.
[36] In Federation Insurance Co. of Canada v. Markel Insurance Co. of Canada, 2012 ONCA 218, the Court of Appeal considered the meaning of the fourth requirement set out in s. 5(1)(a)(iv). On behalf of the court, Sharpe J. A. wrote (para. 34):
In my view, when s. 5(1)(a)(iv) states that a claim is “discovered” only when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess [the] tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.
[37] Section 5(1)(a)(iv) requires that the court have regard to “the nature of the injury, loss or damage”. In that regard, it must be borne in mind that what was involved here was an allegation that Mrs. Elliott, a ten-year employee who was in a position of trust, had defrauded her employer. This was not a case of failed cosmetic surgery or faulty construction. Here, the act or omission was much less obvious, and the allegation was much more odious. I accept that an employer might not be in a position to know that an action was appropriate until it had confronted the suspected employee.
[38] In both his examination for discovery and in his statement of September 9, 2012 to the police, Mr. Wilson said he had not fired Mrs. Elliott before Mr. D’Agostino called the police because he was concerned that, if he did, Mrs. Elliott might have a claim for wrongful dismissal. While Mr. Watchorn told the police a few days after Mrs. Elliott was fired that he was reasonably sure that Mrs. Elliott was responsible for a loss by July 2012, he was much less sure before she confessed. In a statement he gave on August 31, 2012, Mr. Watchorn used the word “suspect” frequently when referring to his belief about Mrs. Elliott’s actions. Mrs. Watchorn stated at that time that he was still in the process of conducting a cash test to corroborate his findings.
[39] It is clear from the fact that Mrs. Elliott was not fired until she was confronted on September 24, 2012 that Mr. Wilson was not certain enough of Mrs. Elliott’s guilt to risk being a defendant in a wrongful dismissal suit, let alone being a plaintiff in an action for theft and fraud. In these circumstances, I believe it was reasonable for Mr. Wilson to wait to fire Mrs. Elliott until after he had confronted her, and to commence an action within two years of that date, which he did.
[40] For these reasons, the defendants’ motion to dismiss the action as being out of time must fail. However, I am not limited to simply dismissing the motion. Notwithstanding the fact that the plaintiff has not brought a motion seeking the opposite relief, the court may make a finding as to when the limitation period began and may make a declaration accordingly: Kassburg v. Sun Life Assurance Co. of Canada, 2014 ONCA 92, at para. 52. Based on the foregoing facts, I find that the limitation period began to run on September 24, 2012.
