Ontario: limitations issues that shouldn’t need deciding

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.

Ontario: a solid addition to s. 7 jurisprudence

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:

  1. 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?
  2. 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.

 

Ontario: there’s no limitation period for an application for a declaration of a codicil’s validity

 

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.

Update! The Court of Appeal upheld this decision.

Ontario: a messauge doesn’t necessarily engage the RPLA

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.

Ontario: Court of Appeal says (again) that r. 21 isn’t for limitations defences

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.

Ontario: An insurer’s denial has to be (really) explicit to trigger discovery

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.

 

Ontario: is limitations law procedural in Ontario? (probably)

Lo Faso and Ferracuti contains the following statement on the substantive nature of limitation periods:

[17]          The defendants argue that the prejudice caused by the expiry of the limitation period makes the amendments untenable. The Supreme Court of Canada has held limitation periods are fundamentally substantive, and not procedural in nature. In para. 35 of Castillo v. Castillo, 2005 SCC 83 (CanLII), [2005] 3 S.C.R. 870, Justice Bastarache, in a separate yet concurring decision with the majority, held that “limitation periods have the effect of cancelling the substantive rights of plaintiffs, and of vesting a right in defendants not be sued in such cases…” Justice Bastarache referred also to the decision of Justice La Forest in Tolofson v. Jensen, [1994] 3 S.C.R. 1002 (SCC), where he stated that limitation periods are, by the very nature, substantive as they determine the rights of both of the parties in a cause of action. As Justice La Forest explained, “they destroy the right of the plaintiff to bring suit and vest a right in the defendant to be free from suit”.

I don’t think this is correct law in Ontario.  At common law, limitation periods are procedural so that the expiry of a limitation period is a procedural bar to asserting a cause of action, but doesn’t extinguish the cause of action.  The Limitations Act arguably recognises this implicitly:

Conflict of laws

23 For the purpose of applying the rules regarding conflict of laws, the limitations law of Ontario or any other jurisdiction is substantive law.

This provision is only necessary if the limitations law of Ontario is otherwise procedural.

To be fair, all of this is largely academic outside of conflicts .  I’ve been involved in just one case in the last five years where the impact of an expired limitation period mattered.

Ontario: Court of Appeal limits the impact of knowledge of a debtor’s assets on the limitation of foreign judgment proceedings

Endean v. St. Joseph’s General Hospital considers the impact of knowledge of a debtor’s exigible assets in the limitation of foreign judgment recognition proceedings.

The appellant obtained a default judgment against the respondent in a South Carolina court. The appellant commenced an Ontario action more than two years later to recognise and enforce the default judgment.  Twelve days later, the appellant secured an ex parte Mareva injunction against the respondent.  The respondent then obtained an order setting aside the Mareva injunction and holding that the appellant had commenced the Ontario action outside the limitation period.

The Court of Appeal upheld the motion judge’s decision.  It was legally appropriate for the appellant to commence his proceeding after the time to appeal the South Caroling judgment had expired.  The appellant’s subjective knowledge of whether the respondent had exigible assets in Ontario did not impact on the commencement of time.  This is perhaps the most interesting aspect of the Court of Appeal’s decision because it suggests that knowledge of a judgment debtor’s assets in Ontario won’t materially impact on the limitations analysis outside of unusual circumstances:

[55]      Now suppose the plaintiff settled with B before trial. In the Pierringer Order situation, the plaintiff reduces their recovery from A (who did not settle) by the amount it is determined that B is at fault. At trial, A and B are each found to be 50% at fault. The plaintiff reduces their claim against A by the amount of fault attributed to B. A’s net payment is the same 50%.

The Pierringer Order in the Hearsey Action Did Not Authorize Reduction of Recovery Due to Fault of Persons Other Than the Oral Surgeons

[56]      The Pierringer Order in the Hearsey Action is similar to the example above in so far as the hospital and the oral surgeons were concerned. For ease of reference, that Pierringer Order is attached as ‘Schedule A’ to these reasons. The hospital’s cross-claim against the oral surgeons in the Hearsey Action had been made so that the hospital could obtain indemnity from the oral surgeons if it was obliged to pay the plaintiff’s full damages. To the extent fault was attributed to the oral surgeons, the hospital could recover indemnity from them and thus reduce its net out of pocket expenditure. The Pierringer Order dismissed the cross-claim of the hospital against the oral surgeons. It did not prejudice the hospital by doing so, as it required the Hearsey appellants to reduce their claim against the hospital by the amount of fault that would be apportioned at trial to the oral surgeons, and it provided procedures whereby that determination could be made at trial. If that was all the Pierringer Order in the Hearsey Action did, it would meet the objectives generally ascribed to a Pierringer Order discussed above.

[57]      However, the effect the hospital argues for goes much further. According to the hospital, the effect of the Pierringer Order was to also reduce the Hearsey appellants’ recovery from the hospital by the amount of fault the trial judge might attribute to the manufacturer and the distributor. These were entities against whom the hospital had not claimed indemnity under the Negligence Act, and from whom the hospital had no practical ability to recover indemnity even if claimed. The Pierringer Order, if so interpreted, would do more than maintain a level playing field for the hospital compared to its pre-Order position. The effect of the interpretation the hospital seeks is to put the hospital in a better position than it was in before the Pierringer Order. Before the Pierringer Order, the hospital was at risk, if found at fault to any degree, to pay all of the Hearsey appellants’ damages without the ability to obtain indemnity from the manufacturer and distributor. This risk was on the hospital, regardless of the degrees of fault of the concurrent tortfeasors. As interpreted by the hospital, the Pierringer Order would free the hospital of that risk. The hospital would be placed in as good a position as it would have been had it claimed indemnity from the manufacturer and distributor and had the manufacturer and distributor been creditworthy and able to pay indemnity, rather than being bankrupt. No reason why this should be the case was suggested.

[58]      The Pierringer Order’s language, including that incorporated into the amended statement of claim, does not, taken as a whole, support this broader interpretation. Paragraph 5 of the Pierringer Order provides that the “Plaintiffs will only claim from the Defendant Hospital those damages, if any, arising from the actions or omissions of the Defendant Hospital”, and refers to the “Defendant Hospital’s several liability, or proportionate share of joint liability, as may be proven against it at trial”. But that must be read in light of the context and the other provisions of the Pierringer Order, which demonstrate that this was only intended to ensure the Hearsey appellants’ claim and recovery from the hospital did not include anything for the fault that may be attributed to the oral surgeons.

[59]      The Pierringer Order was made in the context of an action that included the oral surgeons and the hospital as defendants — no one else. It was made in the context of a settlement by the appellants with the oral surgeons against whom the hospital had cross-claimed. It dismissed the hospital’s cross-claim against the oral surgeons. It expressly provided that the court at trial may apportion fault among “all Defendants named in the Statement of Claim” (emphasis added), which meant only the hospital and the oral surgeons. It did not refer to apportionment of fault to anyone else. And it provided procedures, including for the obtaining and use of evidence from and about the oral surgeons, clearly aimed at assisting the parties to present their cases on what fault should be apportioned to the oral surgeons. It provided no similar procedures regarding the fault of any other entities.

Ontario: Court of Appeal continues to disagree about limitations analyses (and clarifies that fraudulent concealment doesn’t apply to s. 5)

 

It’s not often that the Court of Appeal disagrees on a limitations issues (or at least until recently when there have been a number of dissents in limitations decisions), and it’s especially rare that the Court disagrees about whether there have been errors of fact.  That’s what make Zeppa v. Woodbridge Heating & Air-Conditioning Ltd. interesting.  Justice Brown, with Justice Strathy concurring, disagreed with Justice Feldman about what facts were necessary for the plaintiff to know that the defendant HVAC installer had caused or contributed to a faulty HVAC system.   

The motion judge found that problems with the HVAC system were necessarily the result of the defendants’ act or omissions because the defendant installed it:

It is crystal clear from these reports, as well as Christopher’s Examination, that the Plaintiffs knew long before February 2010 that the HVAC system was not functioning properly. Woodbridge was clearly responsible since they had installed the system…

Justice Brown did not find any error with this reasoning:

[46]      Unlike my colleague, I see no error in the factual findings that would justify appellate intervention. The motion judge did not misapprehend the evidence. His findings were solidly grounded in the record before him. Accordingly, I would not give effect to this ground of appeal.

However, Justice Feldman didn’t agree that it necessarily followed from the fact of the HVAC problems that the defendant had caused or contributed to them:

[92]      The motion judge found, at para. 33, that “it was not necessary for Christopher to have knowledge of the fact that the Quietside boilers were installed improperly in order for the limitation period to commence running. What was needed was knowledge, actual or imputed, that he had a “claim” against Woodbridge.” This was a legal error.

[93]      In the circumstances of this case, knowledge of the improper installation was an essential element of discoverability of the appellants’ claims for negligence and breach of contract.

[95]      Until Woodbridge’s improper installation was revealed, the Zeppas knew that the system had many problems, but they did not know that the problems were caused by the act of improper installation by the respondent. They did not know of any act or omission by Woodbridge or the day it occurred.

[96]      In fact, when the Zeppas first came to Woodbridge with complaints, Woodbridge informed them that the problems with the system were due to lack of maintenance. There were no problems with the HVAC system itself and no suggestion that the problem was caused by improper installation. On the basis of Woodbridge’s assurances, the Zeppas entered into a two-year maintenance agreement. This cost them approximately $4600.

[97]      However, Woodbridge knew that maintenance would never fix the HVAC system. Woodbridge concealed the fact that its faulty installation of the boilers was the central cause of the Zeppas’ problems. Until Quietside revealed that fact to the Zeppas, Woodbridge’s fraudulent concealment prevented the Zeppas from knowing whom to hold responsible for the damage to their family home and why.

[99]      If the action had been pleaded as a breach of an implied warranty, or if Woodbridge had provided an explicit warranty, the Zeppas’ knowledge that the HVAC system was not working properly may have been sufficient to trigger the running of the limitation period. But that is not the claim here.

[100]   Problems that can be resolved through maintenance are not necessarily caused by the acts or omissions of the installer. The motion judge’s finding that the Zeppas’ problems were clearly caused by Woodbridge’s acts or omissions was not based on any evidence other than the fact that there were ongoing problems with the HVAC system. He treated the cause of action as if it were for breach of warranty and not for negligence or breach of contract in the installation of the system.

[101]   Mr. Zeppa first contacted Quietside because he had heard that its boilers were terrible and that was why Quietside was no longer operating in Canada, i.e. the boilers had a possible manufacturing defect or were inherently faulty. When he asked the manufacturer for assistance, Quietside responded to his inquiries with the letter that revealed Woodbridge’s faulty installation of the boilers and Woodbridge’s knowledge that its faulty installation was the cause of the problems.

[103]   Mr. Zeppa’s evidence demonstrates why knowledge that the HVAC system was not working properly was not enough to trigger the basic limitation period. In the face of Woodbridge’s assurances, Mr. Zeppa reasonably suspected that the boiler manufacturer may have been responsible for the HVAC problems. Woodbridge’s false assurances continued until late 2010.

I find Justice Feldman’s reasoning significantly more persuasive.  It’s not evident to me why the court considered it “crystal clear” that if the HVAC wasn’t working it was the installer’s fault.  Knowledge that the installation was faulty is not “the how it happened” that Justice Brown refers to (at para. 43) of his reasons, but prima facie knowledge of actionable conduct.  In the absence of prima facie knowledge that defendant at contributed to the loss, I don’t see how the plaintiff could have discovered the claim.  Perhaps there’s something in the record that explains this, but not on the face of the decision.

Two other aspects of the decision are noteworthy.

First, it reiterates that the principle of fraudulent concealment is not a consideration in a s. 5 analysis, a point on which the majority and the dissent agree.  This is because s. 5 achieves the same result:

[71]      The decisions in Dhaliwal and Kim, together with the plain language of ss. 4 and 5 of the Act, support the conclusion that there is no independent work for the principle of fraudulent concealment to perform in assessing whether a plaintiff has commenced a proceeding within the basic two-year limitation period. That is because the elements of the discoverability test set out in ss. 5(1)(a) and (b) address the situation where a defendant has concealed its wrong-doing. If a defendant conceals that an injury has occurred, or was caused by or contributed to by its act or omission, or that a proceeding would be an appropriate means to seek to remedy it, then it will be difficult for the defendant to argue that the plaintiff had actual knowledge of those facts until the concealed facts are revealed. Whether the plaintiff ought to have known of those matters, given their concealment, is a matter for inquiry under s. 5(1)(b).

[72]      If the defendant’s concealment of facts results in a lack of actual or objective knowledge by the plaintiff of the elements set out in s. 5(1)(a) of the Act, then the plaintiff does not discover his or her claim until the date the concealed facts are revealed to or known by the plaintiff, at which point time begins to run. That is to say, the analysis required by s. 5(1) of the Act captures the effect of a defendant’s concealment of facts material to the discovery of a claim.

Also note that this is now the leading description of the principle, as demonstrated by the Court’s reference to it in Endean.

Second, it contains a disappointing reference to Lawless:

[42]      As this court observed in Lawless, at para. 23, the question to be posed in determining whether a person has discovered a claim is whether the prospective plaintiff knows enough facts on which to base a legal allegation against the defendant. In support of that proposition, Lawless cited the decision of this court in McSween v. Louis (2000), 2000 CanLII 5744 (ON CA), 132 O.R. (3d) 304 (C.A.), where Feldman J.A., writing for the majority, stated, at para. 51:

The question to be posed when assessing discovery is when the plaintiff had knowledge of the discovery matters, not knowledge of the facts necessary for a legal allegation (which is the question required by common law discovery).  Nevertheless, the Court’s point regarding the amount of knowledge necessary to satisfy the discovery matters—prime facie knowledge—remains valid without reverting to common law discovery principles to describe discovery under s. 5.

Ontario: A defendant’s expertise can impact on discovery even when the defendant isn’t a professional

 

The Court of Appeal’s decision in Presley v. Van Dusen is a reminder that a s. 5 analysis requires making findings with respect to each s. 5(1) discovery matter, and reliance on a defendant’s expertise may delay the appropriateness of a proceeding even when the defendant is not a professional.

This was an appeal from an appeal from a Small Claims Court trial decision.  The trial judge found that he could determine the commencement of the limitation period without considering s. 5(1)(a)(iv):

[9]         The trial judge did not consider the s. 5(1)(a)(iv) criterion as to when the appellants did know or should have known that a proceeding would be an appropriate means to remedy their claim. He gave the following reason for not considering s. 5(1)(a)(iv): “It is not necessary for me to make any determination under that subsection and I do not do so as I only have to find the earliest date and I have no difficulty, as I have said, in finding that that date was the spring of 2013.”

This is plainly an error of law; you can’t determine discovery without considering all four discovery matters.

The Divisional Court nevertheless upheld the trial judge’s decision.  Having determined when a reasonable person ought to have known of the discovery matters pursuant to s. 5(1)(b), it found that there was no requirement for the trial judge to make an explicit finding as to when the plaintiff ought to have known the matter in s. 5(1)(a)(iv).

The Court of Appeal overturned the Divisional Court’s order.  It was an error for the trial judge not to consider s. 5(1)(a)(iv).  The law required the trial judge to consider all four discovery matters:

[14]      The analysis of both the trial judge and the Divisional Court judge of ss. 5(1)(a)(iv), 5(1)(b) and s. 5(2) of the Limitations Act is flawed. The trial judge explicitly stated that he was not considering s. 5(1)(a)(iv). A determination under s. 5(1)(b) as to the date a reasonable person would have discovered the claim requires consideration of all four “matters referred to in clause (a)”. Similarly, the finding that there was insufficient evidence to rebut the presumption under s. 5(2) that the plaintiff knew all the matters referred to in s. 5(1)(a) cannot stand as there was no consideration of s. 5(1)(a)(iv).

[15]      This court has repeatedly held that consideration of when a proceeding was an appropriate means to remedy a claim is an essential element in the discoverability analysis and that failure to consider s. 5(1)(a)(iv) is an error of law: Gillham v. Lake of Bays (Township), 2018 ONCA 667 (CanLII), 425 D.L.R. (4th) 178, at paras. 33-34; Kudwah v. Centennial Apartments, 2012 ONCA 777(CanLII), at paras. 1-2; Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469 (CanLII), 91 R.P.R. (5th) 1, at paras. 21 and 35.

It’s common for the court to making a determination under s. 5(1)(b) without making explicit findings as to the plaintiff’s knowledge of the discovery matters (though I think everyone benefits from explicit findings).  What makes this case unusual, and something of an outlier, is that the trial judge made this s. 5(1)(b) determination while finding that it was unnecessary to consider one of the discovery matters.  That’s the kind of error that seems especially prevalent in the Small Claims Court.

The Court of Appeal undertook its own s. 5(1)(a)(iv) analysis, which is noteworthy for emphasising that the superior knowledge and expertise that might engage s. 5(1)(a)(iv) is not restricted to strictly professional relationships.  Accordingly, the plaintiffs could reasonably rely on the expertise of a person licensed to install septic systems:

[21]      These principles are applicable to the facts of this case. Van Dusen is licenced to install septic systems. The appellants contracted with him because of his special training and expertise. While the respondents argue he may not qualify as “an expert professional”, there can be no question he did have expertise upon which the appellants reasonably relied.

[22]      Moreover, reliance on superior knowledge and expertise sufficient to delay commencing proceedings is not restricted to strictly professional relationships: Presidential, at para. 26. I acknowledge that the previous cases where this court has made a finding that it was reasonable for the plaintiff to rely on the defendant’s superior knowledge and expertise have concerned defendants belonging to traditional expert professions. For instance, Brown v. Baum, 2016 ONCA 325 (CanLII), 397 D.L.R. (4th) 161, involved a physician, Chelli-Greco v. Rizk, 2016 ONCA 489 (CanLII), involved a dentist, and Presidential MSH involved an accountant. However, recent Superior Court decisions have applied the superior knowledge and expertise prong of Presidential MSH to persons who are members of non-traditional professions or who are not professionals at all. For instance, in YESCO Franchising LLC v. 2261116 Ontario Inc., 2017 ONSC 4273 (CanLII), the court found that s. 5(1)(a)(iv) applied in a franchisor-franchisee relationship where the franchisees relied on the franchisor’s superior knowledge and expertise, even though the franchisor was not a member of an expert profession. Similarly, in Barrs v. Trapeze Capital Corp., 2017 ONSC 5466 (CanLII), aff’d 2019 ONSC 67 (Div. Ct.) (CanLII), the Superior Court and the Divisional Court found that s. 5(1)(a)(iv) applied to investors who relied on the superior knowledge and expertise of their investment portfolio managers.