Discovery

Ontario: can you assess intersection design? (the dangers of aggressive limitations defences)

Ontario courts are filled with pro forma and ill-conceived limitations defences.  Sometimes these stand out, particularly when advanced by institutions that maybe shouldn’t be too creative with limitations defences.  Take Sun v. Ferreira as an example.  The Plaintiffs claimed that the City of Toronto and the TTC are laible for the location of a bus stop and a cross-walk.  The TTC and the City of Toronto moved for judgment on a limitations defence that would have required the court to find that the plaintiffs, through their observations, ought to have known that an intersection was defectively designed.  It strikes me as rather fraught to suggest that a reasonable person with the abilities and in the circumstances of someone who knows nothing about standards of intersection design could assess whether one was designed competently.  The court agreed:

[45]           The Claims, in these proceedings against the moving parties are that there was an alleged design deficiency with respect to the TTC bus stop, and the adjoining crosswalks. Were the Moving Parties, by designing  an allegedly inherently dangerous situation, involving passengers, many of which would be children exiting a TTC bus, and crossing a busy highway to get to school, negligent as they did not take the appropriate care required in designing and constructing and whether the Moving Parties failed to warn of the hazard their design and construction created.  The main argument of the moving parties is that the responding parties were familiar with the accident location, the location of the TTC stop and location of the cross-walks adjacent to the School, and the absence of a traffic light or cross-walks.

[46]            The moving parties submit that the fact that the City or the TTC or both changed the configuration of the intersection following the accident “is not actionable”. The respondents, however, submit that the change raised the question of whether the change was made to remedy the negligent design of the accident location, and if so, whether the City and the TTC were aware of this negligent design, or ought to have been aware of this negligent design, prior to the accident. If they were aware of the negligent design, what steps, if any, did the Moving Parties take to rectify this deficiency before the accident occurred.  These will be the issues at trial.

[47]           The issue for this court is when did the Plaintiffs or Defendant know or ought to have known of the alleged deficient design, and the consequent failure to warn of the deficiency on the date of the accident.

[48]           Applying the analysis of the court in the cases of Shukster and Frederick, I find that there is a genuine issue requiring a trial on when the alleged deficiency with the intersection was known or ought to have been known by the responding parties. They knew of the accident location, but did they have the knowledge required to question if the intersection was defectively designed?  Further, when did they know that it was appropriate to take legal action against the moving parties?

[49]            The position of the Moving Parties is that the Respondents should have concluded that legal action would be appropriate to commence an action on the basis of their own observations and opinions of the alleged negligent design of municipal infrastructure or the configuration of the street and without the benefit of expert advice and the knowledge that the alleged design defect of the accident location had been corrected.  I do not agree that such is a reasonable conclusion for the court to reach.  In my view, such personal observations would not be sufficient for the Respondents to conclude that legal action would be appropriate, especially in light of the position taken by the City of Toronto that the intersection did not meet its criteria for the installation of a traffic light.

[50]           Rather, I am of the view that I can not make the findings that would be required to satisfy the test set out in Hryniak by our Supreme Court of Canada, namely, does the evidence allow me to fairly and justly adjudicate this dispute?

[51]           I find that following the guidance of our Courts, which I have referred to above, the respondents have established that there is a genuine issue requiring a trial on the discoverability of these causes of action, as it may not have been legally appropriate for the responding parties to commence litigation without any evidentiary basis, other than their own observations and opinions.  This issue requires a trial and for this reason, the motions must be dismissed

This decision is a reminder of the importance of considering the question asked by s. 5(1)(b) when advancing (and responding to) limitations defences.

Ontario: the dangers of arguing a particular step would have caused discovery

I often see defendants argue that if a plaintiff had undertaken a certain step, discovery would have occurred on an earlier date.  Without evidence that the plaintiff taking this step on a specific date would have resulted in the plaintiff learning on another specific date the facts necessary for discovery, this argument is purely hypothetical and can’t succeed.  The court in Ledoux v. Lee makes the point:

40.              Uber also argued that Mr. Ledoux’s lawyer should have served Co-operators with a formal notice of his claim against Mr. Lee after getting the police report. Mr. Giugaru contended that this is a standard practice because it allows a plaintiff to claim pre-judgement interest from the date of the notice.  Had Mr. Ledoux’s counsel put Co-Operators on formal notice of a potential claim, he argued, the insurer might have advised the plaintiff of the coverage issue and disclosed Mr. Lee’s activity as an Uber driver.

41.              This argument is speculative.  I could not conclude, on the evidence before me, that it is standard practice for plaintiff’s counsel in MVA claims to formally notify the defendant motorist’s insurer of a potential claim. Even if I had been able to, I could not infer that a formal notice letter to Co-Operators would have yielded information about its position on coverage.  Mr. Ledoux’s lawyers were in communication with Co-Operators from September 2017 forward, providing it with a copy of the police report and Mr. Ledoux’s hospital record.  There is no evidence that, in the course of this correspondence, the adjuster ever so much as hinted that it might deny coverage or disclosed that Mr. Lee was participating in the gig economy, even though it notified the insured of its denial of coverage on this basis two weeks after the accident.

Ontario: Court of Appeal narrows the s. 5(1)(a)(iv) “alternative process” principle

The Court of Appeal decision in Beniuk v. Leamington (Municipality) is an important addition to s. 5(1)(a)(iv) appropriateness jurisprudence.

It has become popular to argue that an alternative dispute resolution process with a clear and identifiable conclusion delays the appropriateness of a civil proceeding as a remedy, and therefore discovery of a claim.  Beniuk holds that this isn’t the law: whether an alternative process impacts on appropriateness is a question of fact that the plaintiff must prove.

The appellant in Beniuk argued that the Court of Appeal’s decision in 407 ETR stands for the principle that when there is an alternative dispute resolution process, an action becomes an appropriate remedy only when the alternative process concludes.  It followed that that the limitation period or the appellant’s action didn’t not run until the OMB confirmed that it did not have jurisdiction over its cause of action: if the OMB assumed jurisdiction, there would have been no need for the action; therefore, the OMB hearing was an alternative process that until concluded rendered an action inappropriate.

Nope, held the court.

A limitation period doesn’t run whenever there is an ongoing alternative process.  Whether an alternative process delays the running of time turns on the particular facts of each case.  Evidence is necessary to explain the basis for pursuing the alternative process rather than commencing a proceeding.

[60]      407 ETR does not stand for a general principle that a limitation period will not begin to run whenever an alternative process that might resolve the matter has not yet run its course. It is a matter of evidence. Indeed, Laskin J.A. noted, at para. 34, that when an action is “appropriate” will depend on the specific factual or statutory setting of each individual case, and that case law applying s. 5(1)(a)(iv) is of limited assistance because each case will turn on its own facts. In 407 ETR, the court considered the evidence on the motion about the statutory scheme and the effectiveness of the administrative process before deciding that it would be reasonable for such a process to run its course before a civil proceeding was appropriate.

[61]      Recently, several cases considering the application of s. 5(1)(a)(iv) have come before this court. The court has emphasized, echoing the words of Laskin J.A. in 407 ETR, that when a proceeding is appropriate will turn on the facts of each case: see, for example, Nelson v. Lavoie, 2019 ONCA 431, 47 C.C.P.B. (2d) 1, at para. 25, and Ridel v. Goldberg, 2019 ONCA 636, 436 D.L.R. (4th) 453, at para. 71.

[62]      This case did not involve an alternative process available under a statutory scheme. It did, however, involve an alternative process that the appellants were pursuing, as in 407 ETR, against the same party.

[63]      The fact that a plaintiff chooses to pursue an alternative process does not in itself suspend the running of the limitation period under s. 5(1)(a)(iv). Whether an alternative process will have this effect will depend on the particular factual circumstances and the evidence before the court in determining the limitations issue. In this case, there was no evidence to explain why the appellants chose to pursue the OMB route rather than commencing both an OMB proceeding and a civil action.

[74]      As I have already observed, 407 ETR does not stand for the general principle that it will always be appropriate to wait until another process has run its course before commencing a civil action in respect of a claim which has otherwise been “discovered” under s. 5(1)(a)(i), (ii) and (iii). It is incumbent on a party asserting that it was reasonable to pursue a claim in another forum to explain why this approach was reasonable. That is what occurred, and was ultimately successful, in the 407 ETR case.

[75]      While one of the principles recognized in connection with s. 5(1)(a)(iv) is the deterrence of unnecessary litigation, a plaintiff is not entitled in all cases to pursue one route, and to expect the limitation period to be tolled in respect of any other claim it may have in respect of its loss or damage. Said another way, s. 5(1)(a)(iv) does not permit a party to engage in litigation in stages for the same wrong. An example is Lilydale Cooperative Limited v. Meyn Canada Inc., 2019 ONCA 761, 439 D.L.R. (4th) 385, where this court considered the submission that a limitation period in respect of a third party claim in Ontario was suspended while the defendant was seeking to establish that Alberta was the correct forum for the litigation. Feldman J.A. rejected the argument that it was not legally appropriate to commence a legal proceeding while another resolution process that might resolve the matter was ongoing. She held that such an interpretation of “appropriate” was inconsistent with the purpose of the Limitations Act and could extend the limitation period well beyond the two-year threshold in an uncertain and unpredictable manner. There were also no significant savings to be achieved by not commencing the third party claim until the forum challenge was complete.

Here, the OMB wasn’t an alternative process, but an alternative forum, and the availability of multiple forums doesn’t impact on discovery because the law deems a party to know the applicable legal principles (that is, which forum is correct):
[70]      While I can appreciate why the appellants may have thought they had a claim for injurious affection, it has always been a principle of limitations law that a plaintiff knows, or could by the exercise of reasonable diligence, determine what legal principles apply. See, for example, Boyce v. Toronto Police Services Board, 2011 ONSC 53, aff’d: 2012 ONCA 230, leave to appeal refused: [2012] S.C.C.A. No. 265, where Low J. stated, at para. 23:
Section 5(1)(a)(iv) does not import an idiosyncratic limitation period calibrated by the claimant’s familiarity with or ignorance of the law. The test is an objective one. While it is possible to envisage that a new kind of right might arise that has not been hitherto protected, thus making it arguable that a civil proceeding might not be seen objectively as an appropriate means to seek to remedy, a battery causing personal injury is a classic example of the kind of wrong that is appropriate for redress by court action. A citizen is presumed to know the law of the land. [Emphasis added.]

This strikes me as a material and reasonable narrowing of the s. 5(1)(a)(iv) “alternative dispute resolution process” principle.  Whether an alternative process impacts on discovery is a question of fact, and the plaintiff will need to establish that it was reasonable in the circumstances to allow the process to complete before commencing a proceeding.  This should discourage some of the more creative alternative process arguments, of which I see many.

Also noteworthy is the confirmation that an action in nuisance or negligence for damages relating to real property is “an action to recover land” for the purpose of RPLA and subject to its ten-year limitation period:

[42]      Subsection 2(1)(a) of the Limitations Act provides that the Limitations Act does not apply to proceedings to which the RPLA applies. Section 4 of the RPLA provides for a ten-year limitation period for an action to recover land:

 No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it.

[43]      When the elements that do not apply to this case are removed, s. 4 provides that “no person shall bring an action to recover any land, but within ten years after the time at which the right to bring any such action first accrued to the person bringing it.” The issue here is whether the appellants’ claim is an “action to recover land” within the meaning of the RPLA.

 [44]      The appellants point to the definition of “land” in s. 1 of the RPLA:
 “land” includes messuages and all other hereditaments, whether corporeal or incorporeal, chattels and other personal property transmissible to heirs, money to be laid out in the purchase of land, and any share of the same hereditaments and properties or any of them, any estate of inheritance, or estate for any life or lives, or other estate transmissible to heirs, any possibility, right or title of entry or action, and any other interest capable of being inherited, whether the same estates, possibilities, rights, titles and interest or any of them, are in possession, reversion, remainder or contingency; [Emphasis added.]

[45]      They rely on the term “messuages”, which refers to a dwelling house, its outbuildings, the area immediately surrounding the dwelling, and the adjacent land appropriate to its use: McConnell v. Huxtable, 2014 ONCA 86, 118 O.R. (3d) 561, at para. 14. The appellants also parse out and rely on the phrase “any…right…of…action”. Putting these pieces together, the appellants submit that an “action to recover land” includes an action to recover rights that run with the land, and that a cause of action for nuisance is tied to and arises out of the right to use and enjoy land without substantial interference. Accordingly, the appellants submit that a cause of action for nuisance is an incorporeal or intangible right that runs with the property and is captured by the definition of “land” in the RPLA. They point to a passage in Equitable Trust Co. v. 2062277 Ontario Inc., 2012 ONCA 235, 109 O.R. (3d) 561, where Perell J. (sitting on this court ad hoc) stated that the RPLA is intended to cover actions “affecting” land: Equitable Trust, at para. 28.

 [46]      I do not accept the appellants’ submission. There is no support in the jurisprudence that an action in nuisance or negligence for damages relating to real property is “an action to recover land” for the purposes of the RPLA. That land or real property is involved in an action does not mean that the RPLA applies: Harvey v. Talon International Inc., 2017 ONCA 267, 137 O.R. (3d) 184, at paras. 51-52. Typically, actions to recover land seek to assert property rights. And Perell J.’s remark from Equitable Trust that the RPLA covers actions “affecting” land has been commented on specifically by this court, and later by Perell J. himself, as a statement that should be interpreted narrowly and not out of the context of that case.

Lastly, I note that the court stated the standard of review with respect to each limitations issue.  For whatever reason, the court frequently omits an explicit standard of review analysis when considering limitations issues.  This approach is helpful and I hope to see more of it.

[41]      The motion judge’s conclusion that s. 4 of the RPLA does not apply to the appellants’ civil action is reviewable on a standard of correctness: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 8. For the reasons that follow, I agree with the motion judge’s conclusion on this issue.

[53]      The question of whether a limitation period expired prior to the issuance of a statement of claim is a question of mixed fact and law and subject to review on the standard of palpable and overriding error: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, 323 O.A.C. 246, at para. 38. However, where there is an extricable error of principle, the standard of review is correctness: Housen, at paras. 8 and 36.

[79]      The appellants contend that the motion judge made a palpable and overriding error when he concluded that their claim was statute-barred even on the basis of what he described as a “rolling limitation period”. A “palpable and overriding error” is “an obvious error that is sufficiently significant to vitiate the challenged finding of fact”: Longo, at para. 39.

Ontario: s. 5(1) requires specific factual findings

Cooper v. Toronto (City) follows Morrison v. Barzo for the principle that the court must answer the questions asked by s. 5(1)(a) and (b) of the Limitations Act.  The court found that a Master’s failure to make these specific findings was a reversible error:

[17]           The first ground of appeal is that the Master erred by dismissing the Motion without making findings regarding: (1) the date on which the plaintiff first knew the requisite elements of her claim against Hydro; and (2) when “a reasonable person with the abilities and in the circumstances of [the plaintiff] first ought to have known of such claim.” Such findings are a requirement before any finding that claims against a proposed defendant are statute-barred: see Morrison v. Barzo at para. 30.

[18]           I agree that the Master erred in law in dismissing the Motion without making either of these findings.

[19]           In dismissing the Motion without making the necessary findings of fact set out above to ground her decision, the Master erred in law by failing to apply the test as set out in Morrison v. Barzo. Accordingly, the Order must be set aside.
The decision also provides a good example of why taking the position that a particular step could have resulted in earlier discovery is not determinative of when discovery ought to have occurred.  Evidence that the step would have resulted in earlier discovery is necessary:
[27]           I pause to address the question of who has the onus of demonstrating that Cooper’s cause of action was actually discovered, or was reasonably discoverable, more than two years prior to the commencement of the Motion. While it is not made express in Fennell and Morrison, in circumstances such as the present where a plaintiff demonstrates a reasonable basis for concluding that a cause of action was discovered within the applicable limitation period, as a practical matter, a proposed defendant who asserts a limitation defence must demonstrate that the plaintiff had actual knowledge, or reasonably ought to have had knowledge, on an earlier date outside the limitation period.
 [28]           If the basis of the defendant’s position in such circumstances is not that the evidence demonstrates actual knowledge at an earlier date but rather that the plaintiff failed to conduct a duly diligent investigation, Morrison v. Barzo says that the plaintiff has the onus of providing a reasonable explanation for his or her failure to conduct any further investigation. As I understand the applicable case law including Skrobacky v. Frymer, in such event, a court may grant the defendant’s motion only if it finds the plaintiff’s explanation to be unreasonable. If, however, such a determination requires a finding of a material fact or a determination regarding the plaintiff’s credibility, a motions judge should not determine the reasonableness of the explanation without a trial to determine such matters. In such circumstances, therefore, the motions judge cannot make a determination of whether the plaintiff should reasonably have discovered his or her claim outside the applicable limitation period – that is, satisfied the plaintiff’s obligation of due diligence that is implicit in s. 5(1)(b) of the Limitations Act, 2002 – and must therefore dismiss the defendant’s motion.
 [29]           In my opinion, the Court finds itself in that position in the present circumstances.
 [30]           Cooper’s explanation for her failure to investigate the ownership of the Pole is essentially that her communications with the two most obvious potential defendants – the condominium corporation and the City – did not prompt a suggestion that Hydro might be the owner of the Pole. She says, in effect, that she was entitled to rely on the communication from the condominium corporation’s insurer and her communications with the City that suggested that the City was the owner in the absence of any suggestion to the contrary from the City until December 2016. Accordingly, Cooper’s argument proceeds on the basis that she never received any information that gave rise to a need to inquire further regarding the ownership of the Pole.
 [31]           Cooper submits that this is a reasonable explanation, given the low threshold for a reasonable explanation in the case law. She relies on the decisions in Galota v. Festival Hall Developments Ltd. et al., 2015 ONSC 6177; upheld 2016 ONCA 585; Madrid v. Ivanhoe Cambridge Inc., et al., 2010 ONSC 2235 and Kesian v. The City of Toronto, 2016 ONSC 6461 as evidence of this low threshold and as exhibiting similar circumstances in which courts have concluded that the threshold had been satisfied.
 [32]           Hydro effectively argues that Cooper’s explanation is not reasonable in view of either or both of her receipt of the Article and the City’s denial of jurisdiction in its statement of defence. In my view, however, given the evidence before the Master and this Court, neither Cooper’s mere receipt of the Article, without evidence that she actually read it, nor the City’s denial of jurisdiction in its statement of defence were sufficient to fix her with knowledge that required a further investigation for the following reasons.
 [33]           The mere existence of the Article cannot be a basis for concluding that Cooper ought reasonably to have conducted a further investigation. This would require a finding, by inference or otherwise, that she read the Article such that she was aware, at a minimum, of the subject-matter of the Article even if she did not have knowledge of the specific facts set out therein. However, the Court’s conclusion above that a trial is required to determine whether Cooper read the Article precludes such a finding by this Court.
 [34]           Accordingly, Hydro’s second submission really turns on whether Cooper’s receipt of the City’s statement of defence was sufficient to require a further investigation. I accept that a specific denial of jurisdiction could, in some circumstances, have such a result.  However, in this case, the denial was only one of at least ten alternative defences asserted by the City in its statement of defence. In addition, the denial was not accompanied by the assertion of any specific facts supporting this defence nor did it identify Hydro as the owner of the Pole. It is not reasonable to assume that a plaintiff would identify a potential issue of ownership from a bald denial of jurisdiction in such circumstances.
 [35]           I also note that Hydro has identified a number of searches that it says would have revealed its ownership of the Pole if Cooper had conducted one or more of them. I do not doubt the utility of such searches. However, the issue is not whether such searches would have revealed Hydro’s ownership of the Pole but rather whether any searches were required, that is, put in the negative, whether Cooper’s failure to undertake any of these searches was unreasonable.
 [36]           In summary, the relevant evidence before the Court is limited to the following. The Pole was located on a City sidewalk. There is no evidence of any indication on the Pole that Hydro was the owner. There is also no evidence that Cooper ever read, or understood the contents of, the Article prior to May 15, 2017, which would have alerted her to Hydro’s ownership. Lastly, for a period of more than 44 months after Cooper put the City on notice of her claim, the City did not deny ownership of the Pole in any communication with Cooper or her counsel. In these circumstances, I conclude that the determination of whether Cooper has a reasonable explanation for her failure to investigate further the ownership of the Pole will require a trial of the issue regarding whether, and if so when, Cooper or her counsel read the Article.

 

Ontario: the consequences of failing to plead discovery in reply

The defendant in Anisman v. Drabinsky argued that the plaintiff could not argue discovery in response to a limitations defence because he hadn’t served a Reply pleading the material facts of discovery.  The court rejected this (very optimistic argument) argument:

[17]           Finally, Defendants’ counsel submits that the Plaintiff’s factum makes improper reference to his response to the Defendants’ limitation argument. It is the Defendants’ position that since the Plaintiff never issued a Reply pleading in response to the limitation point raised in the Statement of Defence, the Plaintiff is prohibited from arguing any defence to the limitation challenge. Defendants’ counsel therefore asks that those paragraphs be struck from the Plaintiff’s factum.

[19]           The Plaintiff may not have a pleading to support his point, but there is evidence in the record that has been fairly adduced that supports it. The Court of Appeal has expressly held that under such circumstances it would be an error to proceed on the basis suggested by Defendants’ counsel: “Again, this was a summary judgment motion, the resolution of which depended on a consideration of the evidence adduced by the parties, and not their pleadings:” Collins v Cortez, 2014 ONCA 685, at para 12.

[20]           The Plaintiff here seeks summary judgment, and it is incumbent on me to consider the record as a whole rather than to focus narrowly on the pleadings alone. I therefore find no reason to redact or excise any portion of the evidentiary record or any factum.

[46]           The Statement of Claim herein was issued on June 18, 2019, some 3 years and 9 months after the impugned transfer of title. Defendants’ counsel submits that the 2-year limitation period under the Limitations Act, 2002 was missed by the Plaintiff. Defendants’ counsel further submits that the Defendants having pleaded a limitation defence, it was incumbent on the Plaintiff to serve a Reply pleading. He argues that failing that, the Plaintiff is foreclosed from including anything in the present Motion Record by way of a response to the limitation defence.

[47]           Counsel for the Defendants relies on Rule 25.08 for the proposition that a Reply pleading is necessary in these circumstances. That Rule provides:
25.08 (1) A party who intends to prove a version of the facts different from that pleaded in the opposite party’s defence shall deliver a reply setting out the different version, unless it has already been pleaded in the claim.

(2) A party who intends to reply in response to a defence on any matter that might, if not specifically pleaded, take the opposite party by surprise or raise an issue that has not been raised by a previous pleading shall deliver a reply setting out that matter…

[48]           It is evident from the wording of both parts of Rule 25.08 that it is the element of surprise that determines whether or not a Reply is required. That is, the Defendants must not be taken by surprise by facts of which they were unaware.

[49]           This court has long noted that, “[i]f a limitation defence is raised, the plaintiff should, where appropriate, serve a reply raising any facts and contentions relied upon to rebut the defence and pleading the basis for any discretion that the court may have in the matter”: D.S. Park Waldheim Inc. v Epping (1995), 1995 CanLII 7091 (ON SC), 24 OR (3d) 83 (Gen Div), quoting Graham Mew, The Law of Limitations (Markham: Butterworths, 1991), p. 54. This is particularly the case where “the plaintiff…relies on…the doctrine of discoverability…[which] depends on an unresolved question of fact”: Epping, at 85.
[50]           The Plaintiff makes a number of arguments in response. In the first place, he submits that there is nothing in his response to the limitation point that will take the Defendants by surprise. Secondly, he contends that the cause of action pleaded in the Statement of Claim was not discovered by him until substantially later, and that there was nothing in the conduct of the parties that would have tipped him off that a transfer of title had taken place with respect to the Property.
[51]           The Plaintiff points out that the Statement of Claim herein was served with a Certificate of Pending Litigation, which the Plaintiff had obtained on an ex parte basis at the outset. Since the Certificate was obtained without notice to the Defendants, the Plaintiff also served them at the same time with his Motion Record in support of the Certificate, as required. That Motion Record contained an affidavit sworn by the Plaintiff setting out how he had discovered the transfer of title. At paragraph 8 of his affidavit, served together with the Statement of Claim on June 25, 2019, the Plaintiff stated:
On September 11, 2015, shortly after my request for payment of August 24, 2015, Mr. Drabinsky transferred his interest in his house at 478 Spadina Road (the ‘Property’) to his wife. I learned of this transfer on April 20, 2019, before I examined Mr. Drabinsky in aid of execution.

[52]           The circumstances and date of discovery – i.e. that he first learned of the transfer when he searched title in preparation for an examination in aid of execution on the judgment he had obtained on November 15, 2018 – are the crucial facts on which the Plaintiff relies in responding to the limitation defence. It is this brief statement of fact that would likely have been contained in a Reply had one been served.  Given that it was contained in the package of materials served together with the Statement of Claim and Certificate of Pending Litigation, the Defendants were on notice in much the same way as they would have been had the sentence been repeated in a Reply pleading.

[53]           It is the Defendants’ position that if the relevant facts did not find their way into a Reply, they are to be ignored in assessing the merits of the limitation defence. I do not accept that position. To ignore what was in the Plaintiff’s motion record and affidavit because it was not repeated in a Reply would be to elevate form over substance to an unacceptable degree: Marshall v Watson Wyatt & Co., 2002 CanLII 13354, at para 25 (Ont CA).
[54]           As is evident from the narrative in Part II above, prior to the examination in aid of execution there was nothing to prompt the Plaintiff to search title of the Property. Mr. Drabinsky consistently lead him to believe that he would be receiving payment imminently, and even provided him with replacement cheques when the previous ones became stale-dated. Further, Mr. Drabinsky was more than just another debtor; he was a rather renowned debtor who was very much in the public eye. It did not occur to the Plaintiff (or, presumably, to any other creditors) that Mr. Drabinsky would be denuding himself of substantial assets such as the Property. As the Plaintiff submits, there is only a duty to investigate when there is something that leads one to investigate: Fennell v Deol, 2015 ONSC 4835, para 8.

Ironically, the issue was moot because the plaintiff was seeking to recover land, which means the ten-year RPLA limitation period applied.

Ontario: the Court of Appeal on the commencement of benefit denial claims

The Court of Appeal’s decision in Clarke v. Sun Life Assurance Company of Canada is another addition to the jurisprudence considering when time runs for a benefits denial claim.  It delineates the extent to which a denial must be unequivocal to cause the claimant to know the insurer has breached the benefit obligation.

The appellant made a claim for long-term disability benefits after she stopped working due to health problems in 2011. By letter of March 19, 2012, Sun Life denied her claim and advised that three levels of appeal were available. She appealed. By letter of February 24, 2014, Sun Life advised the appellant that it had approved the benefits for a period ending in April 2013 but was otherwise denying her claim.

The motion judge found that the February 2014 letter was not a sufficiently clear denial to cause the appellant to know that she had sustained damage (the benefits denial). The Court of Appeal overturned this finding.  The letter informed the appellant that Sun Life was denying her benefits, which is the breach that founded her cause of action.  More explicit correspondence was unnecessary:

[15]      The motion judge started her analysis under the Limitations Act, 2002 by considering the date the injury, loss or damage occurred: ss. 5(1)(a)(i) and (b). The motion judge did not accept Sun Life’s submission that the February 24, 2014 letter marked the time at which Ms. Clarke first knew that an injury, loss or damage had occurred. She described the letter as “equivocal” and noted that it “did not use the language of refusal or denial”: at para. 21. She concluded that it was “not clear that the words used by the Sun Life letter of February 24, 2014 [were] a denial of disability benefits that amounted to ‘injury, loss or damage’”: at para. 23. She ultimately found, at para. 30, that the limitation period commenced with the denial communicated to Ms. Clarke by Sun Life on June 19, 2017, notwithstanding that that letter also did not use language of denial.

[16]      With respect, the motion judge erred in law by failing to apply the principle stated by this court in Pepper v. Sanmina-Sci Systems (Canada) Inc., 2017 ONCA 730, [2018] I.L.R. I-5996, at para. 1, that an insured has a cause of action for breach of contract against her insurer when the insurer stops paying long-term disability benefits. In its February 24, 2014 letter, Sun Life informed Ms. Clarke that her disability benefits terminated as of April 25, 2013, which was the date the “Own Occupation” benefits period ended. Sun Life went on to state that it would not pay “Any Occupation” benefits. Accordingly, by February 24, 2014, a “loss, injury or damage” had occurred that would have been known to a reasonable person with the abilities and in the circumstances of Ms. Clarke: Limitations Act, 2002, ss. 5(1)(a)(i) and (b).
[17]      I note that in reaching her conclusion on s. 5(1)(a)(i), the motion judge relied on the decision of the Divisional Court in Western Life Assurance Company v. Penttila, 2019 ONSC 14, 144 O.R. (3d) 198. The motion judge appears to have misapplied Western Life Assurance on the issue of when an insured knows that a loss, injury or damage has occurred. As that decision clearly stated, at para. 17, the parties agreed that for the purposes of s. 5(1)(a)(i) the insured knew that a loss had occurred on the date her benefits came to an end, which is the governing principle as stated in Pepper.

The decision also describes the findings of fact required by s. 5(1) and (2) of the Limitations Act:

[19]      The discoverability analysis required by ss. 5(1) and (2) of the Act contains cumulative and comparative elements.

[20]      Section 5(1)(a) identifies the four elements a court must examine cumulatively to determine when a claim was “discovered”. When considering the four s. 5(1)(a) elements, a court must make two findings of fact:
(i)      The court must determine the “day on which the person with the claim first knew” all four of the elements. In making this first finding of fact, the court must have regard to the presumed date of knowledge established by s. 5(2): “A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved”; and

(ii)      The court must also determine “the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known” of the four elements identified in s. 5(1)(a).

Armed with those two findings of fact, s. 5(1) then requires the court to compare the two dates and states that a claim is discovered on the earlier of the two dates: see Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725, 142 O.R. (3d) 561, at paras. 34-35.

The motion judge erred by failing to make “any specific finding about either”:

[22]      The motion judge’s reasons disclose that she failed to make any specific finding about either date.

Ontario: Court of Appeal reviews appropriateness principles

The Court of Appeal decision Sosnowksi v. MacEwan Petroleum provides a useful summary of s. 5(1)(a)(iv) jurisprudence:

[15]      This court’s jurisprudence has developed certain principles for the interpretation and application of s. 5(1)(a)(iv).

[16]      First, the determination of whether a proceeding is an appropriate means to seek to remedy an injury, loss, or damage depends upon the specific factual and/or statutory setting of each case: Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725, 142 O.R. (3d) 561, at para. 46.

 [17]      Second, this court has observed that two circumstances most often delay the date on which a claim is discovered under this subsection. The first is when the plaintiff relied on the defendant’s superior knowledge and expertise, especially where the defendant took steps to ameliorate the loss. The other situation is where an alternative dispute resolution process offers an adequate remedy, and it has not been completed: Nasr, at para. 50.
 [18]      Third, Sharpe J.A. in Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, 109 O.R. (3d) 652, at para. 34, provided the following guidance concerning the meaning of the term “appropriate”:
This brings me to the question of when it would be “appropriate” to bring a proceeding within the meaning of s. 5 (1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5 (1) (a)(iv) states that a claim is “discovered” only when “having a 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. [Emphasis in original.]

[19]      In other words, appropriate means whether it is legally appropriate to bring an action. Appropriate does not include an evaluation of whether a civil proceeding will succeed.

It’s also another addition to the jurisprudence considering the impact of a criminal proceeding on the timeliness of a civil proceeding. The outcome of a criminal proceeding may assist in assessing the merits of a civil proceeding, but that’s not a material consideration in the limitations analysis:

[28]      The appellant’s principal submission is that he should have been permitted to wait until the criminal proceedings concluded so that he could evaluate his chances of success in litigation. He argues that litigation is an expensive and risky proposition, and he should not have been forced to commence a civil proceeding until he knew that he had a chance of success. This argument, of course, is precisely what this court in Markel said a plaintiff is not permitted to do.

 [29]      If such an evaluative analysis could effectively stop the running of the limitation period, questions will necessarily follow regarding the nature of that analysis and the factors that could be considered. For example, is it open to a plaintiff to argue that he or she can await the outcome of a related discipline process in a professional negligence claim? May a potential plaintiff commence a claim many years after the events if there is a change in the law that increases his or her chances of success? If a critical witness goes missing and is later discovered, is it open to the plaintiff to assert that he or she did not know whether it was appropriate to bring an action until the witness was found?

 

Ontario: don’t rely on a lawyer’s affidavit to establish discovery

The Superior Court decision in 1365 California Ltd. v. Moss Property Management Inc. is an appeal from a master’s decision granting leave to add a proposed defendant.  It provides two important reminders: a lawyer’s affidavit is a lousy way of rebutting presumptive discovery and sometimes lawyers get cross-examined on their affidavits.

The court held that the master’s determination of when the plaintiffs subjectively discovered their claim was in error.  The plaintiffs had not filed any evidence of when they discovered their claims.  They had filed only a lawyer’s affidavit that did say when discovery occurred.  On cross-examination by the proposed defendants, the lawyer admitted that he didn’t know what the plaintiffs knew, and that he hadn’t spoken with them.  Accordingly, for want of evidence the plaintiffs couldn’t rebut the presumption that subjective discovery occurred on the date of the act or omission giving rise to the claim .

These are the material paragraphs:

[19]           With respect, the Master’s finding that the Respondents did not have actual knowledge of the claims against the Proposed Defendants until they received the Second Report is not supported by the evidence.

 [20]           In support of their motion for leave to amend, the Respondents relied upon the affidavit of Mark Russell (the “Russell Affidavit”), an associate at the firm representing the Respondents in this litigation but who is not involved in the file.  The Russell Affidavit gives a chronology of the steps in the proceeding, as described above.  It does not state when the Respondents had actual knowledge of the facts underlying the New Claims against the Proposed Defendants.  Nor does the Russell Affidavit state that the Respondents did not know that they had claims against the Proposed Defendants until the Second Report was received, or at any time before December 16, 2016.  The affidavit is silent as to what the Respondents knew and when they knew it.
 [21]           On cross-examination, Mr. Russell admitted that he did not know what the Respondents knew, and that he did not know whether they knew more or less than he did.  Mr. Russell stated that he had not spoken to the Respondents and repeatedly stated that he did not have carriage of the file.
 [22]           Since the Respondents bear the burden of showing that they lacked the requisite knowledge as of two years before the motion was brought, the “critical issue” is “what the plaintiff or its agents (chiefly its lawyers) knew or ought to have known about the facts underlying the [proposed claim.]”  Sealed Air, at para. 18.

[24]           In determining whether the Respondents rebutted the statutory presumption, the issue was not, as the Master stated, whether the Respondents had actual knowledge as of the date of the First Report, but whether they had actual knowledge at any time before December 16, 2016.  At no time did the Respondents state that they did not know facts underlying the New Claims when the acts took place.  The Respondents adduced no evidence as to when they knew those facts.  The lack of any “suggestion” that the Respondents knew of the claims when they occurred was not sufficient to rebut the presumption.  In the absence of any evidence from the Respondents as to when they had actual knowledge, the Master committed a palpable and overriding error in finding that they had no knowledge until they received the Second Report.

[25]           Without any evidence on the Respondents’ knowledge, it could not be inferred that the Respondents did not have actual knowledge until they received the Second Report.  A chronology of steps taken in the litigation, without more, is insufficient to draw any inference as to the state of the Respondents’ knowledge in this case.
[26]           The Respondents’ failure to rebut the statutory presumption of knowledge under s. 5(2), means that, pursuant to s. 5(1)(a), the claim was discoverable when the act or omission took place.  The two-year limitation period would run from that date.  The allegations in the Statement of Claim end in November 2011.  Other than to give the chronology leading up to the delivery of the Second Report, the Amended Statement of Claim does not allege specific acts or dates in relation to the Proposed Defendants.  Accordingly, the limitation period expired in November 2013.  Pursuant to s. 21(1) of the Limitations Act, if a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.

Ontario: some pedantry in response to the Court of Appeal decision in Rumsam

The Court of Appeal’s decision in Rumsam v. Pakes overturned the motion judge’s order granting the plaintiff leave to add a doctor as a defendant to the proceeding.  The doctor had opposed the motion on the basis of an expired limitation period.  The motion judge found the proceeding timely.

The Court’s conclusion seems right to me, but it contains some statements of law that are problematic and require comment.

First, there is this description of s. 5(1)(b):

[30]      As of August 29, 2013, Ms. Rumsam was obliged to exercise reasonable diligence to secure the name of the second doctor to satisfy the requirement in s. 5(b) [sic] of the Limitations Act that a “cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence” (emphasis added): Lawless, at para. 22.

This is not an accurate description of s. 5(1)(b).  That section provides that discovery occurs “the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a)”.

What paragraph 30 describes is common law discovery.  Discovery as codified in s. 5(1)(b) differs from common law discovery in two material ways.  First, the knowledge required by s. 5(1)(b) isn’t the material facts of a cause of action, but the four discovery matters in s. 5(1)(a); while these may accord generally with some causes of action, they don’t accord with many others (like breach of contract, which doesn’t have “injury, loss or damage” as a material fact.  Second, the knowledge is modified-objective, not purely objective; it’s the knowledge of a reasonable person with the abilities and in the circumstances of the plaintiff.

It’s unfortunate that the Court of Appeal continues to treat common law discovery as the same as statutory discovery.  Relatively recent Court of Appeal jurisprudence distinguishing the “claim” form the “cause of action” has been promising (see Apotex and Gillham Bay), but apparently without the impact one might have hoped for.

Then there is this summary of conclusions:

[33] In conclusion:

1. A claim must be brought within two years of a claim being “discovered”.

2. A claim is discovered when the claimant first knew the injury occurred, that it was caused by an act or omission, that the act or omission was caused by the person against whom the claim is made, and that there was loss.

3. The injury was sustained on July 11, 2007, so normally the limitation period would have expired on July 11, 2009.

4. Given that Ms. Rumsam did not turn 18 until June 4, 2010, the presumptive limitation period did not begin to run until that date.

5. The limitation period would have expired on June 4, 2012, but for the discoverability principle.

6. By August 29, 2013 at the latest, Ms. Rumsam knew all of the material facts except the name of the “second clinic physician” in question.

7. By August 29, 2013 at the latest, she was required to exercise reasonable diligence to get the name within the two-year period as she knew she likely had a claim against this person for her injuries, and August 29, 2013 was “the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to” as set out in s. 5(1)(b) of the Limitations Act.

8. The onus to prove reasonable diligence is on Ms. Rumsam.

9. She failed to exercise reasonable diligence as no steps were taken for at least a year.

10. As such, as the court held in Safai, there is no basis to extend the limitation period for more than two years as, from August 29, 2013, Ms. Rumsam knew of the likely claims and was in a position to ascertain the name by reasonable diligence.

Let’s go through the issues.

  1. A claim must be brought before the expiry of the limitation period, not within two years of discovery. Discovery causes the limitation period to commence, but it’s not determinative of its expiry.  There are multiple circumstances in which the limitation period will stop running—for a example a tolling agreement—so that it will expire more than two years from its commencement.
  2. Discovery does not require knowledge that an injury has occurred and that there was a loss, because for limitations purposes in injury and loss are effectively the same thing. There Limitations Act always refers to “injury, loss or damage”; “injury” never has a separate function from “loss” (which prompts the question why the act uses this language–I suspect it was intended by the drafters to signal that the act applies to all causes of action regardless of whether they require damage to be actionable).  In any event, all that discovery requires with respect to damage is knowledge that “injury, loss or damage” has occurred, so knowledge of injury or loss alone will suffice.
  3. There is no presumptive limitation period. There is basic limitation period in s. 4 that commences presumptively on the date of the act or omission that gives rise to the claim pursuant to s. 5(2). This is because of the “discoverability principle”, not despite it.  Section 5(2) creates a presumption that discovery occurs on the date of the act or omission, which the plaintiff can rebut.  The s. 5 discovery provisions always determine the commencement of the basic limitation period.

 

Ontario: discovery analyses are fact-driven

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.