Discoverability principles

Ontario: Rebutting presumptive discovery is the plaintiff’s burden

The Court of Appeal decision in O’Brien-Glabb v. National Bank of Canada states the principle that the plaintiff bears the onus of establishing the inappropriateness of a proceeding as part of a discovery argument:

[13]      We agree with the appellant that it was the respondent who bore the onus of leading evidence to establish on a balance of probabilities that a proceeding was not appropriate in 2010 (see: Miaskowski (Litigation guardian of) v. Persaud, 2015 ONCA 758(CanLII) at para 27; Fennell v. Deol, 2016 ONCA 249 (CanLII) at para16; and Galota v. Festival Hall Developments Ltd., 2016 ONCA 585 (CanLII) at para 15).

Even a vague familiarity with the operation of s. 5 of the Limitations Act means this principle is self-evident, but it’s nevertheless helpful to have it stated explicitly.

Ontario: discovery doesn’t require knowledge of culpability

Update: The Supreme Court denied leave to appeal.

In Dale v. Frank, the Court of Appeal reiterated that discovery of a claim doesn’t require knowledge that the defendant’s act or omission was culpable.  To require a plaintiff to know with certainty that the defendant’s wrongful conduct caused her injuries would require her to come to a legal conclusion as to the defendant’s liability.  This is too a high a bar, and not what s. 5(1) of the Limitations Act requires.

The Appellants also argued that the motion judge erred by failing to consider s. 5(1)(a)(iv) of the Limitations Act in her analysis. The Court of Appeal rejected this argument.  The reasons permitted the inference that the motion judge considered this discovery matter:

[9]         We are not persuaded by this submission. Although the motion judge did not undertake a distinct analysis under this provision, her conclusion that each of the appellants knew or ought to have known of the other elements in s. 5(1)(a) was sufficient to infer that she also concluded that the appellants knew or ought to have known that a proceeding would be an appropriate means to seek a remedy for their losses even before the 2011 press release about Dr. Frank.

Unfortunately, in making this point the Court quoted its decision in Lawless for the principle that discovery requires the prospective plaintiff to know the material facts necessary to make a claim.  Knowledge of the material facts of the claim does not include knowledge of the matter in s. 5(1)(a)(iv)—that a claim is an appropriate remedy to the loss.  It’s disappointing to see the Court of Appeal continuing to rely on Lawless, given the mischief it causes.

 

Ontario: bad limitations analyses are why we can’t have nice things

Two recent decisions contain limitations analyses sufficiently flawed for me to ask that you indulge my pedantry.  This lesson is titled A bad limitations analysis makes everyone lose.   

 In Lawyers’ Professional Indemnity Company v. Lloyd’s Underwriters, the analysis begins with a flawed premise resulting in more questions than the decision answers.

LawPro applied for a declaration that Lloyd’s was obliged to contribute to the defence costs of a common insured.  Lloyd’s took the position that the LawPro’s claim for contribution was statute-barred.  Justice James considered the issue:

 

[18]           On the facts present here, the entitlement of the applicant to seek a contribution from the respondent has not proscribed. I base this view on my reading of section 5(1) of the Limitations Act and in particular sub-clause 5(1)(a)(iv). There is no mandated single point in time for the applicant to request a contribution from the respondent. For the LimitationsAct to apply, it would be necessary to conclude that the claim, having been “discovered” and the request for compensation having been rejected by the opposing party, “a proceeding would be the appropriate means to seek a remedy”. Put another way, when the applicant requested a contribution from the respondent and the respondent declined the request, was it appropriate for the applicant to respond by commencing an action? I would say not. Not enough was known to say that the claim had been discovered. It could equally be appropriate to await further developments in the claim against the insured and to defer bringing the matter to a head until more information is known and the facts had emerged with greater clarity.

“For the Limitations Act to apply…?”.  This is a bad start.  The Limitations Act applies to all claims pursued in court proceedings (subject to the s. 2 exceptions), not merely those that have been discovered.

The analysis ought to have begun with the the first question in any limitations analysis:  is there claim?  Limitation periods apply to proceedings commenced in respect of a claim. If a proceeding doesn’t advance a claim, it’s not subject to a limitation period.

Assuming LawPro did have a claim, the next question ought to have been determining the act or omission that the claim seeks to remedy.  The date of the act or omission is when the presumptive limitation period commences.

If LawPro brought the application within two years of that date, its application was timely.  If not, the next question ought to have been when a reasonable person with LawPro’s abilities and in its circumstances ought to have discovered the claim.  For its application to be timely, LawPro would have needed to file it within two years of this date.

When LawPro ought to have discovered its claim required asking when it ought to have known of its loss, that wrongful conduct caused the loss, and that it was Lloyd’s wrongful conduct.  It seems likely that it ought to have known all of this on the day of Lloyd’s refusal.  We can’t be sure, because the limitations analysis doesn’t determine this.

Instead, there are conclusions without explanation.  Not enough was known at the time of the refusal for the claim to have been discovered.  What did LawPro not yet know?  It was appropriate for LawPro to await further developments that would provide more information and greater factual clarity.  What information and factual clarity did LawPro require? Why was it inappropriate for LawPro within the meaning of s. 5(1)(a)(iv) to use a proceeding as remedy for its loss on the date of Lloyd’s refusal?  The analysis answers none of these questions.  Perhaps it’s correct, but it’s impossible for the reader to know.

In Leblanc v. Glass, the plaintiff Leblanc claimed that the defendants Glass and Vitiello conspired to deprive her of properties and committed breach of trust.  Vitiello moved for summary judgment on the basis that Leblanc’s claim was statute-barred.

Justice Hennessy framed the issue:

[9]               In order to determine the issue of discoverability, the following questions must be addressed. The answers will come from the pleadings, the productions or the examinations:

a.      What did Jonathan A. Glass tell Marie Leblanc?  What did Marie Leblanc discover in Feb 2014?

b.      What did Jonathan A. Glass disclose that Marie Leblanc did not already know or could have known?

c.      Did the contents of Jonathan A. Glass’ disclosure amount to evidence of fraud, conspiracy or breach of trust against Civita Vitiello?

The discovery analysis may require answering these questions, but they are not the questions that determine discovery.  Discovery, as we know, turns on knowledge of the matters in s. 5 of the Limitations Act.  Again, to determine the date of discovery you ask, in this order, what is the act or omission that is the basis of the claim, and when would a reasonable person with the abilities and in the circumstances of the plaintiff have known of her loss, that an act or omission caused the loss, that the defendant caused the act or omission, and that a proceeding was an appropriate remedy for the loss.

Importantly, the common law discovery principle does not determine discovery within the meaning of the Limitations Act:

 

[21]           The obligation is on the plaintiff is to use reasonable diligence in discovering the material facts in relation to the claim. The limitation period will run once the plaintiff knows the identity of the tortfeasor and that some damage has occurred. (Peixeiro v Haberman 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para 18) The plaintiff is then required to lead sufficient evidence before the court showing that they exercised this reasonable diligence.

A plaintiff does not discovery her claim under the Limitations Act when she knows the identity of the wrongdoer and that some damage has occurred.  She must also know that a proceeding is an appropriate remedy for her loss.

Lastly, it is long settled that the doctrine of special circumstances does not apply to the Limitations Act:

[34]           The limitation period under s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B applies. There are no special circumstances justifying an extension of the limitation.There is no reason to consider special circumstances, because the principle of special circumstances is of no application.

Muddled limitations analyses like these are not helpful to the parties or the jurisprudence.

 

Ontario: Highways are still subject to limitation periods

The Court of Appeal allowed the 407’s appeal of Justice Edward’s decision in 407 ETR Concession Company Limited v. Day.  Apart from settling the great question of how the passage of time limits 407’s claims for unpaid tolls, Justice Laskin’s decision suggests a maturity in s. 5(1)(a)(iv) jurisprudence.

 The circumstances of the claim are rather bewildering.  The defendant Day, a person of some means, refused to pay the approximately $13,000 plus interest he owed 407 for unpaid tolls.  407 sued him.  Day pleaded a limitations defence, and  407 brought a r. 21 motion to resolve questions of limitations law.  Justice Edwards determined when 407 discovered its claims against Day and rejected the validity of an agreement between Day and 407 extending the limitation period.  407 appealed.

Facts

Some facts are necessary to understand the limitations issue.

407 can collect its unpaid tolls by civil action in the courts or by license plate denial.  The statutory authorization for these two methods is set out in the Highway 407 Act, 1998.

When a person drives a vehicle on the 407, s. 13(1) of the 407 Act provides that the person in whose name the vehicle’s license plate is registered is liable to pay the tolls and related charges.

Sections 15(1) and (2) of the 407 Act provide that tolls are due and payable on the day 407 sends a toll invoice, and that interest begins to accrue 35 days later.  Section 15(3) provides the 407 with a cause of action for nonpayment .

407 can also initiate a license plate denial.  Under s. 16(1) of the 407 Act, if a toll isn’t paid within 35 days after 407 sends an invoice, 407 may send the person responsible for payment a notice of failure to pay.  If the debt remains unpaid 90 days later, s. 22(1) of the 407 Act entitles 407 to notify the Registrar of Motor Vehicles of the failure.  This notice puts the defaulting debtor into license plate denial.  Section 22(3) requires 407 to inform the recipient of a notice sent under s. 16(1) that 407 has given notice to the Registrar.

Once 407 notifies the Registrar, s. 22(4) provides that the Registrar must refuse to validate the vehicle permit issued to the recipient of the s. 16 notice at its next opportunity, and refuse to issue a vehicle permit to that person.  The Registrar’s next opportunity is typically the date the validation for a vehicle permit expires and must be renewed.  The Vehicle Permits Regulation under the Highway Traffic Act  provides that the maximum validation period for a vehicle permit is two years.

Lastly, s. 25 of the 407 Act provides that license plate denial is a complementary rather than exclusive remedy.

The r. 21 motion

407 raised two issues on the motion.

The first issue was the discovery of 407’s claim.  Justice Edwards held that 407 discovered its claim on the earliest date under the 407 Act that it could have notified the Registrar to put Day into license plate denial.

The second issue was the enforceability of the 15-year limitation period in Day’s transponder lease agreement with 407.  Justice Edwards held that 407 could not rely on s. 22 of the Limitations Act, which permits parties to contract out of the basic limitation period, because the lease agreement was not a “business agreement” as defined by that section.

The Court of Appeal’s analysis

Discovery of 407’s claim turned on s. 5(1)(a)(iv) of the Limitations Act: when, having regard to the nature of the loss, a proceeding would be an appropriate means to seek to remedy it.

Assessing the date when a civil action became an appropriate means for 407 to recover its loss required considering the purpose of s. 5(1)(a)(iv) in the context of the statutory regime under which 407 operates.

To give effect to the legislature’s intent in the 407 Act, the limitation period must be tied to the license plate denial process: ” The legislature enacted that process for a reason: it was not content to force 407 ETR to sue in the courts for unpaid toll debts. I fully agree with the Divisional Court that licence plate denial is an effective, necessary and indeed integral feature of an open access toll highway. Tying the start date of the limitation period to the licence plate denial process acknowledges the significance the legislature attached to that process for the collection of unpaid tolls.”

A civil action becomes appropriate when 407 has reason to believe that it will not otherwise be paid.  This is when the usually effective license plate denial process runs its course.  This happens when a vehicle permit expires for failure to a pay a toll debt; thereafter, a claim becomes an appropriate remedy to recover the debt and the limitation period commences.

Justice Laskin cited four reasons in support of this conclusion.

[40]      First, under s. 5(1)(a)(iv) of the Limitations Act, 2002, the date a proceeding would be an appropriate means to recover a loss must have “regard to the nature of the … loss”. So, in fixing the appropriate date, it may not be enough that the loss exists and the claim is actionable. If the claim is the kind of claim that can be remedied by another and more effective method provided for in the statute, then a civil action will not be appropriate until that other method has been used. Here, a claim will not be appropriate until 407 ETR has used that other method, without success.

[41]      […] licence plate denial – is far more effective than a civil action. By providing for licence plate denial, the legislature must be taken to have recognized its effectiveness. People who cannot renew their vehicle permits until they deal with their toll debts have a powerful incentive to pay.

[42]      The statistical evidence bears out the effectiveness of licence plate denial. 407 ETR issues over one million invoices a month. Nearly 70 per cent of those invoices are paid within one month, which means just over 30 per cent are not. Significantly, about 75 per cent of permit holders in default pay their toll debts after being advised the Registrar has sent a s. 22 notice. Of those, just over one half pay before or on the date their vehicle permits have to be renewed; the remainder pay after their vehicle permits have expired.

[43]      These statistics show that the motion judge’s start date – the delivery of a s. 22 notice to the Registrar – is too early in the process. It comes at the beginning of the process instead of where I think it should come, at the end. The licence plate denial process should be allowed to run its course. As the statistics show, most people, fearing the consequences, eventually pay after receiving a s. 22 notice. Only if the process fails to prompt payment does litigation become an appropriate means to recover the debt.

[44]      Second, in determining when a claim ought to have been discovered, s. 5(1)(b) of the Limitations Act, 2002 requires the court to take account of “the circumstances of the person with the claim”. 407 ETR’s “circumstances” differ from those of many other creditors. Highway 407 itself is enormously busy: 380,000 trips on an average workday. As a consequence, 407 ETR must process an enormous number of invoices, almost all for amounts of no more than a few hundred dollars apiece. And unlike, for example a credit card company, which can cancel a customer’s credit card for non-payment of a debt, 407 ETR cannot bar a defaulting debtor’s access to the highway.

[45]      407 ETR’s “circumstances” strongly suggest that requiring it to sue before finding out whether licence plate denial has achieved its purpose would be inappropriate. An important case on the significance of a plaintiff’s “circumstances” is the majority judgment in Novak v. Bond, 1999 CanLII 685 (SCC), [1999] 1 S.C.R. 808. In that case, McLachlin J. considered s. 6(4)(b) of British Columbia’s Limitations Act, R.S.B.C. 1996, c. 266, which provided that time did not begin to run against a plaintiff until “the person whose means of knowledge is in question ought, in the person’s own interests and taking the person’s circumstances into account, to be able to bring an action” […].

[46]      […] holding that time begins to run against 407 ETR before it knows whether licence plate denial has prompted payment would be unfair, or to use the word of our statute, would not be “appropriate”.

[47]      Holding that the two-year period begins after the licence plate denial process fails to prompt payment does not raise the concern Sharpe J.A. referred to in Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218 (CanLII),109 O.R. (3d) 652, at para. 34. There, he said that “appropriate” must mean “legally appropriate”. By using that phrase he signified that a plaintiff could not claim it was appropriate to delay the start of the limitation period for tactical reasons, or in circumstances that would later require the court to decide when settlement discussions had become fruitless. In this case, however, 407 ETR seeks to delay the start of the limitation period for a legally appropriate reason: waiting until a statutorily authorized process has been completed.

[48]      A third consideration is what I take to be an important purpose of s. 5(1)(a)(iv). The overall purposes of limitation statutes are well-established and well-known: certainty, finality and the unfairness of subjecting defendants to the threat of a lawsuit beyond a reasonable period of time. But it seems to me one reason why the legislature added “appropriate means” as an element of discoverability was to enable courts to function more efficiently by deterring needless litigation. As my colleague Juriansz J.A. noted in his dissenting reasons in Hare v. Hare (2006), 2006 CanLII 41650 (ON CA), 83 O.R. (3d) 766 (C.A.), at para. 87, courts take a dim view of unnecessary litigation.

[49]      If the limitation period runs concurrently with the licence plate denial process, as would be the case under the motion judge’s start date, then there would be the real possibility of numerous Small Claims Court claims. And these claims would be needless because the vast majority of defendants would likely pay their debts to avoid having their vehicle permits expire. […]

[51]      Finally, although 407 ETR has discretion when and even whether to send a s. 22 notice to the Registrar, that discretion does not detract from the appropriateness of using the end of the licence plate denial process as the start of the two-year limitation period. In theory, I suppose, as Mr. Day contends, 407 ETR could use its discretion to manipulate the start date. But why, one may ask rhetorically, would it do so? Its commercial interests dictate otherwise.

Justice Laskin also overturned Justice Edwards’s decision on the second limitations issue: whether the lease agreement could extend the applicable limitation period.  Justice Edwards correctly found that the lease agreement was not a business agreement.  However, under s. 22(3) of the Limitations Act, parties can agree to contract out of the basic limitation period even in the absence of a business agreement:

[62]      Under s. 22(3), parties can only suspend or extend the two-year limitation period. Under s. 22(5), parties may vary or exclude altogether the two-year period. Importantly, in s. 22(6) “vary” is defined to include “extend, shorten and suspend”. Thus, parties to an agreement under s. 22(3), such as the transponder lease agreement, in which one party is a consumer, can suspend or extend the two-year limitation period. They cannot, however, shorten it. Only parties to a business agreement can also agree to shorten the two-year period. As Mr. Day’s transponder lease agreement extends the two-year limitation period to 15 years, it is enforceable under s. 22(3).

Day also argued that the 15-year limitation period was unenforceable at common law.  The common law imposes specific requirements on an agreement to vary a limitation period.  These include expressly referring to and excluding the application of the statutory limitation period.  Justice Laskin held that the Court of Appeal decision in Boyce is determinative of the issue:

[68]      The resolution of this issue and its interplay with s. 22 is governed by this court’s decision is Boyce v. The Co-operators General Insurance Co., 2013 ONCA 298 (CanLII), 116 O.R. (3d) 56, leave to appeal refused, [2013] S.C.C.A. No. 296. […]

[70]      This court allowed Co-operators’ appeal. The panel held that the agreement was a business agreement, and at para. 16 held that an agreement could be enforceable under s. 22 without any of the requirements imposed by the motion judge:

We cannot accept that an agreement purporting to vary the statutory limitation period is enforceable under s. 22 of the Limitations Act, 2002 only if it contains the specific requirements set out by the motion judge. Nothing in the language of s. 22 offers any support for imposing these requirements. The only limitation in s. 22(5) is found in the definition of “business agreement”. No other limitation appears, expressly or by implication, and certainly no content related requirements appear in s. 22(5).

[71]      Instead, at para. 20, this court set out what was required for the enforceability of an agreement under s. 22:

A court faced with a contractual term that purports to shorten a statutory limitation period must consider whether that provision in “clear language” describes a limitation period, identifies the scope of the application of that limitation period, and excludes the operation of other limitation periods. A term in a contract which meets those requirements will be sufficient for s. 22 purposes, assuming, of course, it meets any of the other requirements specifically identified in s. 22.

[…]

[74]      Specifically in response to Mr. Day’s contention, it is unnecessary to refer expressly to the exclusion of the two-year period. There was no express reference to it in the agreement in the Boyce case, yet this court held the agreement was enforceable under s. 22. Similarly, I would hold that the transponder lease agreement signed by Mr. Day is enforceable under s. 22(3) of theLimitations Act, 2002 and is not rendered unenforceable at common law.

Why this decision matters

I think the real significance of this decision is a s. 5(1)(a)(iv) analysis that suggests s. 5(1)(a)(iv) jurisprudence is maturing into a settled, useful aspect of the discovery analysis.  I note in particular Justice Laskin’s recognition of the novelty of s. 5(1)(a)(iv):

[33]      The appropriateness of bringing an action was not an element of the former limitations statute or the common law discoverability rule. This added element can have the effect – as it does in this case – of postponing the start date of the two-year limitation period beyond the date when a plaintiff knows it has incurred a loss because of the defendant’s actions.

Given the Court of Appeal’s enthusiasm for citing the common law discoverability rule and applying it to limitations analyses under the current Act, this is noteworthy and refreshing.  I’ve written about the damage wrought by the Court of Appeal decision in Lawless, which is frequently cited for its statement of common law discoverability.  If you use the common law test (knowledge of the material facts of a cause of action) to determine the date of discovery, it becomes awkward if not impossible to apply the s. 5(1)(a)(iv), because it’s not a material fact of any cause of action.

I also think Justice Laskin’s consideration of the meaning of “appropriate” is significant:

[34]      Also, when an action is “appropriate” depends on the specific factual or statutory setting of each individual case: see Brown v. Baum, 2016 ONCA 325 (CanLII), 397 D.L.R. (4th) 161, at para. 21. Case law applying s. 5(1)(a)(iv) of the Limitations Act, 2002 is of limited assistance because each case will turn on its own facts.

In Markel, the Court of Appeal defined “appropriate” as “legally appropriate” and discouraged courts from giving it an “evaluative gloss”.  In this paragraph, Justice Laskin cites Brown rather than Markel.  Justice Feldman held in Brown that what is legally appropriate turns on the facts (it was not legally appropriate for the plaintiff in Brown to sue her doctor while he continued to treat her).  Justice Laskin later in his decision considered Markel, and found that it was legally appropriate for 407 not to sue Day until the statutorily authorised plate denial process completed.

The Court of Appeal may have defined “appropriate” as “legally appropriate”, but as a practical matter the meaning of “legally appropriate” seems to be settling as “what is appropriate in the circumstances of the case”. I think this is a reasonable approach, though it doesn’t bring any more certainty to the commencement of limitation periods.

Interestingly, Justice Laskin does not cite Justice Juriansz’s decision in Clarke, where he gave “appropriate” an especially expansive meaning (“appropriate” means having good reason to believe there is a legal claim).  Clarke‘s influence on s. 5(1)(a)(iv) jurisprudence may prove to be limited.

Justice Laskin’s analysis also raises some interesting questions:

  • A civil action became appropriate when 407 had reason to believe that it will not otherwise be paid. Does this reasoning apply to other claims arising out of non-payment of invoices? If I bill you for my services, does my claim become appropriate only when it becomes reasonable for me to believe that you won’t pay me?
  • The fact that 407 could remedy its claim against Day by “another and more effective method” was a consideration in the s. 5(1)(a)(iv) analysis. The more effective remedy was statutory, which I think will limit the relevance of this decision to other s. 5(1)(a)(iv) analyses.  Still, what if another more effective non-statutory remedy is available? For example, what if the statistics indicate that engaging a collection agency to recover my many small debts is more effective than small claims court? Will a legal claim only become appropriate when the collection agency’s efforts fail?

Ontario: Common law discoverability, and how it applies to the Competition Act

In Fanshaw College v. AU Optronics, Justice Grace held that the limitation period applicable to Competition Act claims is subject to discoverability. We wrote about it here.  The Court of Appeal has upheld this decision.

The appellant argued that the discoverability principle shouldn’t apply for the same reason that it doesn’t apply to section 38(3) of the Trustee Act: the limitation period is linked to a fixed event (in the case of the Trustee Act, death).  The Court rightly rejected this argument.  The limitation period in section 36(4)(a)(i) is linked to the accrual of the cause of action—the wrongful conduct—not a fixed event.  The term “conduct” in section 36(4)(a)(i) refers to the conduct giving rise to damages mentioned in section 36(1) (the statutory cause of action) and is a constituent element of the cause of action that is subject to the limitation period.

Apart from its significance to the competition bar, the decision is noteworthy because it includes a thorough discussion of the common law discoverability principle.  Common law discoverability became mostly academic in Ontario when the legislature codified it into sections 4 and 5 of the Limitations Act, but it remains relevant in certain circumstances.  I’m involved in a proceeding (ever more like Jarndyce and Jarndyce) that is subject to the previous limitations scheme and common law discoverability.

This is the Court’s discussion of discoverability:

[32]      The discoverability principle is a common law rule providing that “a cause of action arises for 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”: Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147, at p. 224; see also Graeme Mew, Debra Rolph & Daniel Zacks, The Law of Limitations, 3rd ed. (Toronto: LexisNexis Canada Inc., 2016), at p. 75.

[33]      Discoverability is also an interpretive rule relevant to the construction of limitation statutes: Ryan v. Moore, 2005 SCC 38 (CanLII), [2005] 2 S.C.R. 53, at para. 23. As explained below, it provides certain presumptions for courts interpreting statutory limitation periods.

[34]      The approach for determining whether a particular statutory limitation period is subject to the discoverability principle was discussed by Twaddle J.A. in Fehr v. Jacob (1993), 1993 CanLII 4407 (MB CA), 14 C.C.L.T. (2d) 200 (Man. C.A.), at p. 206:

[T]he judge-made discoverability rule is nothing more than a rule of construction. Whenever a statute requires an action to be commenced within a specified time from the happening of a specific event, the statutory language must be construed. When time runs from “the accrual of the cause of action” or from some other event which can be construed as occurring only when the injured party has knowledge of the injury sustained, the judge-made discoverability rule applies. But, when time runs from an event which clearly occurs without regard to the injured party’s knowledge, the judge-made discoverability rule may not extend the period the legislature has prescribed.

The Supreme Court of Canada has endorsed this passage in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 37, and in Ryan, at para. 23.

[35]      Ryan is the latest statement from the Supreme Court of Canada on this issue. In that decision, at para. 24, Bastarache J. concluded as follows:

Thus, the Court of Appeal of Newfoundland and Labrador is correct in stating that the rule is “generally” applicable where the commencement of the limitation period is related by the legislation to the arising or accrual of the cause of action. The law does not permit resort to the judge-made discoverability rule when the limitation period is explicitly linked by the governing legislation to a fixed event unrelated to the injured party’s knowledge or the basis of the cause of action.

[36]      The applicability of discoverability is a matter of statutory construction. The jurisprudence noted above only provides presumptions and, in Ryan, at para. 23, Bastarache J. cautioned against applying the principle automatically or “systematically without a thorough balancing of competing interests”.

 

Ontario: when no investigation is a reasonable investigation

 

Galota v. Festival Hall Developments Limited is a noteworthy, well-reasoned limitations decision from the Court of Appeal holding that in the circumstances, it was reasonable for the plaintiff to have taken no steps to discover her claim for about five years after her injury.

The plaintiff fell off a dance stage at a bar and broke her arm.  She sued the bar and its insurer defended.  The bar then closed, and the bar’s insurer became insolvent.

After learning of the insurer’s insolvency, the plaintiff sued the bar’s landlord.  She argued that she couldn’t have discovered her claim against the landlord until examination for discovery of the bar’s representative.  It was then that she learned the landlord participated in the design and construction of the dance stage from which she fell.

The bar moved for summary judgment to dismiss the action on the basis that it was statute-barred by the expiry of the limitation period.  The bar argued that the claim against it was discoverable well before examinations for discovery.

The motion judge agreed with the plaintiff.  He found that she wasn’t put on notice of the potential involvement of the landlord in the design and construction of the dance floor until examinations for discovery, and didn’t show a want of diligence in investigating the landlord’s potential involvement before then.

On appeal, the landlord challenged the motion judge’s finding that the plaintiff exercised sufficient due diligence on the basis that she took no steps at all to investigate her claim until three and a half years after her accident.  The landlord also challenged the trial judge’s call for expert evidence on the standard of care of a solicitor prosecuting an occupier’s liability claim.

The Court of Appeal upheld the motion judge’s decision.  The Court accepted the plaintiff’s position and held that the expert evidence was not material.

Justice Laskin cited the Court’s decision in Fennell for the principle that a plaintiff’s failure to take reasonable steps to investigate a claim is not a stand-alone or independent ground to find a claim out of time.  The reasonable steps a plaintiff ought to have taken to discover her claim is merely a consideration in deciding when a claim is discoverable under section 5(1)(b) of the Limitations Act.

The record supported the motion judge’s conclusion that there were no steps the plaintiff reasonably ought to have taken that would have enabled her to discover her claim against the Landlord before her lawyer examined the bar’s representative for discovery:

[24]      In substance, the motion judge found that there were no steps Ms. Galota reasonably ought to have taken that would have enabled her to discover her claim against Festival Hall before her lawyer examined a representative of Republik in November 2009. Some may view the motion judge’s finding to be questionable. But all these cases are very fact-specific. And the motion judge’s finding is a finding of fact, which in my opinion is well supported by the record, and therefore to which we should defer: Burtch, at para. 22; Longo, at para. 38.

Some aspects of Just Laskin’s analysis will be of interest, particularly to the personal injury bar:

  • The plaintiff had no need to pursue the landlord. Her claim against the bar was an insured claim.  The bar’s insurer responded to it and appointed an adjuster to investigate.  Accordingly, the plaintiff “had every reason to believe the insurer would settle her claim or pay any judgment she obtained after a trial […] the need to pursue another party would hardly have seemed reasonable.”  It would have been unreasonable for her to foresee the insurer’s insolvency.
  • While the bar and its insurer had no obligation to notify the plaintiff about the landlord’s potential liability, their failure to do so is a practical consideration in a section 5(1)(b) analysis. The insurer’s adjuster didn’t suggest that the landlord or any other party was potentially liable for her injury.  The bar didn’t allege that the landlord bore any responsibility or take third party proceedings against it.  Prior to examinations for discovery, neither the bar nor the adjuster suggested that there had been renovations to the bar and that the landlord had involvement in them.  The Court adopted Justice Lauwers’s point in Madrid v. Ivanhoe that a naked denial of liability doesn’t trigger a duty on the plaintiff to make further enquiries:

[27]      Second, the insurer’s adjuster never suggested that Festival Hall or any other party was potentially liable for Ms. Galota’s injury. Similarly, in its statement of defence, Republik did not allege Festival Hall bore any responsibility and Republik did not take third party proceedings against Festival Hall or anyone else. Indeed, before the examinations for discovery neither the adjuster nor Republik ever suggested there had been extensive renovations of the nightclub or that Festival Hall was involved in those renovations. I do not suggest either the insurer or Republik had any obligation to notify Ms. Galota about the potential liability of Festival Hall, but their failure to do so is a practical consideration supporting the motion judge’s finding. As Lauwers J. (as he was then) said in Madrid v. Ivanhoe, 2010 ONSC 2235(CanLII), 101 O.R. (3d) 553, at para. 17:

  • If Ivanhoe’s insurance adjuster had advised the plaintiff that liability was being denied because another party was liable, then the plaintiff’s duty to make further inquiries would have been triggered. But, on the actual facts of this case, a naked denial of liability should not trigger a duty on the plaintiff to make further inquiries.
  • On the date of her injury, the plaintiff couldn’t have known that the landlord was an “occupier” of the bar.  Perhaps the plaintiff’s lawyer should have obtained a title search early in the litigation, but this wouldn’t have determined whether the landlord was an occupier.  This would depend on the terms of its lease with the bar. The lease was not a public document, and the plaintiff had no automatic ability to require the landlord to produce it before litigation. Even if she had obtained the lease earlier in the litigation, she could only have discovered her claim against the landlord when she applied the lease to the facts that the landlord extensively renovated the bar, and the renovations might have breached the Building Code.  The plaintiff only learned of these facts after examinations for discovery.
  • Justice Laskin found that expert evidence is not needed to decide when a claim is discoverable under section 5(1)(b).

Curiously, Justice Laskin described the test in section 5(1)(b) as objective.  This is a departure from the Court’s more accurate description of it as “modified-objective” in Ridel and Ferrara. The “reasonable person” component of the test is modified by the subjective component of “with the abilities and in the circumstances of the claimant.”  Presumably, this was just inadvertence.

The Court’s decision also includes this potentially helpful summary of certain principles of discovery under section 5:

[15]      Three points about these provisions are relevant to the submissions on appeal:

  • Section 5(1)(b) codifies the common law rule of discoverability. If s. 5(1)(b) applies, the two year limitation period will run from a date later than the date the plaintiff was injured.
  • Under s. 5(1)(b), a plaintiff “first ought to have known” of the claim when the plaintiff has enough evidence or information to support an allegation of negligence, including facts about an act or omission that may give rise to a cause of action against a possible tortfeasor: Zapfe v. Barns (2003), 2003 CanLII 52159 (ON CA), 66 O.R. (3d) 397 (C.A.), at paras. 32-33; Burtch v. Barnes Estate (2006), 2006 CanLII 12955 (ON CA), 80 O.R. (3d) 365, at para. 24. The plaintiff cannot delay the start of the limitation period until he or she knows with certainty that a defendant’s act or omission caused the injury or damage: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526 (CanLII),323 O.A.C. 246, at para.
  • The rebuttable presumption in s. 5(2) means that a plaintiff has the onus of showing that the rule of discoverability in s. 5(1)(b) applies: Fennell v. Deol, 2016 ONCA 249(CanLII), at para. 26

 

Ontario: The Court of Appeal getting discovery right

In upholding the decision in Chelli-Greco v. Rizk, which we wrote about here, the Court of Appeal described when discovery of a claim occurs:

[3]         Under s. 5 (1)(a) of the Act, a claim is discovered on the date the claimant knew, or ought to have known, the material facts giving rise to the claim, and that a proceeding would be an appropriate means to seek to remedy the claim. The date is determined on a fact-based analysis.

This statement of law is deceptively significant.

Since its decision in Lawless, the Court of Appeal has often described discovery in terms of the old common law test—discovery occurs when the plaintiff reasonably ought to have knowledge of the material facts of her cause of action.  This is problematic because discovery under section 5 of the Limitations Act occurs not just when the claimant has knowledge of the material facts of the cause of action, but, pursuant to section 5(1)(a)(iv), when she knows that a proceeding is an appropriate remedy for her claim.  Using the common law test to determine discovery necessarily removes the section 5(1)(a)(iv) criterion from the analysis.  This is problematic, and I’ve written about it before.

The Court of Appeal’s explicit acknowledgement that discovery requires satisfaction of section 5(1)(a)(iv) is a departure from its jurisprudence that follows Lawless.  This is the decision you should cite when describing discovery under the Limitations Act.

This is the Court’s analysis:

[4]         The issue before the motion judge was when did the respondent know that a proceeding would be an appropriate means to seek a remedy. The motion judge accepted the respondent’s evidence that her decision to continue treatment with the appellant beyond September 21, 2011 was based on the appellant’s advice to her that “her failed bridge was not his fault and he would endeavour to repair and remediate the problem.”  . Given this finding, we see no error in the motion judge’s conclusion that the respondent’s action was not discovered until after the treatment and the dentist-patient relationship had ended and that her action was not statute barred as a result. See Brown v. Baum, 2016 ONCA 325(CanLII), at para. 18.

Ontario: modified objective discovery

Justice Parfett’s decision in Fernandes v. Goveas is a textbook example of applying the modified objective test in a discovery analysis.

Section 5(1)(b) of the Limitations Act contains the test.  This provision asks when a reasonable person (the objective component) with the abilities and in the circumstances of the claimant (the modifying subjective component) first ought to have known of the discovery criteria in section 5(1)(a).

The facts in Fernandes were unusually sordid.  The plaintiff sued her sister for unpaid wages and damages for wrongful dismissal, leading Justice Parfett to observe “This case is a lesson in why family should not always be treated ‘like family’.  The Plaintiff in this case was misled, overworked and underpaid by her family.”

This is how Justice Parfett applied the test:

[16]           A reasonable person is defined at s. 5(1)(b) of the Limitations Act as someone ‘with the abilities and in the circumstances of the person with the claim’.  In this case, that means someone who

  •                  Was not born in Canada;
  •                  Spoke only minimal English;
  •                  Was living exclusively in the home of her employers and had little social interaction outside the family;
  •                  Trusted her employers implicitly given they were family;
  •                  Had a moderate education;
  •                  Was diagnosed as autistic and noted as having problems with speech and social interactions.

[…]

[21]           In my view […The Plaintiff’s] language, psychological and social limitations created a situation where the Plaintiff was unable to exercise due diligence in order to discover the state of her financial affairs until after she left the Defendant’s employ.

 

Ontario: Officers of the court, slow down

That the courts discourage officers of the courts from immediately commencing litigation is a proper factor in a limitations analysis.

In Salewski Inc. v. BDO Canada Ltd., the defendant moved for summary judgment on a limitations defence.  The defendant was retained by a creditor to assign its debtor into bankruptcy.  The court appointed the defendant trustee in bankruptcy.  Friction developed between the defendant and the bankrupt’s interim receiver, the plaintiff.  The plaintiff claimed against the defendant for breach of fiduciary duty.  The defendant pleaded the expiry of the limitation period.

In denying the defendant’s motion, Justice Garson made some helpful observations about the effect of a trustee’s behavior on the commencement of the limitation period:

[77]           In my view, it is inappropriate to start the limitations clock while good faith efforts are ongoing to achieve a remedy.

[78]           Officers of the court should be discouraged from immediately commencing litigation and encouraged to discuss and negotiate differences.

[…]

[80]           The obstacles and delays erected by BDO throughout these proceedings have impeded the exercise of reasonable diligence on the part of DSI to discover the cause of action in this matter.  These obstacles are also sufficient to impact the start of the limitations clock.

[…]

[91]           It would be both unfair and improper for DSI to have been required to commence a legal action any earlier than 2009.  Both parties are officers of the court and should be discouraged from pursuing adversarial proceedings against each other until reasonable efforts to resolve the matter have been addressed.

[92]           To determine otherwise on the facts before me would send the wrong message regarding the duties of a trustee to act fairly and impartially to all creditors, even those opposing its SRD’s.  BDO should not benefit from their prior misconduct.

[93]           This court has and will continue to expect the highest standard of conduct on the part of trustees in the discharge of their duties to the court and the Estate:  see Murphy v. Sally Creek Environs Corporation, supra, at paras. 139, 151 and 155.

[…]

[96]           BDO’s behavior in withholding or not distributing pertinent and relevant information to DSI prevented DSI from discovering the material facts upon which this claim is based.

[97]           Although DSI was suspicious in 2006 and 2007 that BDO had (i) made false statements and omitted relevant facts in an affidavit; (ii) was pursuing a commercially unreasonable course of action; (iii) had made serious allegations about the behavior of DSI, and (iv) was being influenced by Unique, these suspicions were unsupported by material facts.

Ontario: Determining limitations defences before trial advances justice

In Sutton v. Balinsky, Justice Dunphy, who’s delivering consistently excellent limitations decisions, eloquently describes the policy goals advanced by determining limitations defences prior to trial:

[113]      The Limitations Act is a statute of repose and the policy of the Act is that claims barred by it should not be subject to further inquiry.  By its very nature, a limitation period bids the meritorious claim to sleep undisturbed alongside the meritless.  Reserving judgment on a limitations defence until after a full trial has subjected the parties to a thorough investigation into the merits of a claim that the Limitations Act has decreed should be allowed to rest undisturbed defeats the policy of the Limitations Act to a degree.  If the facts underlying an allegation that an action is barred under the Limitations Act can properly be brought as a summary judgment motion under Rule 20.04 of the Rules of Civil Procedure, it seems to me to advance the policy of the Act to do so and the interests of justice will tend to weigh against requiring a trial in such circumstances.  That is not to say that every such case should necessarily proceed by way of summary judgment without first ascertaining whether justice can be done in doing so or whether a trial is necessary.  I do however suggest that it is appropriate to recognize the public policy underlying the Limitations Act when making the decision as to whether the interests of justice require a trial and consider it as a factor to be weighed.  A factor to be considered does not rise to the level of presumption.  Neither plaintiff nor defendant interests are served by undergoing a lengthy trial on numerous issues when the entire matter could potentially be resolved by a consideration of only a few.  The policy of the Limitations Act is thus a factor but cannot be presumed to be the controlling one in considering the requirements of justice in a particular case.

Justice Dunphy also conveniently summarises the major principles of discoverability under the Limitations Act.  Notably, the summary is untainted by principles applicable to common law discoverability only.

[146]      Our courts have developed a considerable body of case law since 2002 under the new Limitations Act and the case law under the old still has application as regards many issues.  Several themes that have consistently emerged from that jurisprudence that are of particular relevance here include:

a.      it is not necessary to have all of the facts underlying the complete claim – it is enough to have sufficient facts to bring a claim: Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., 2013 ONSC 80 (CanLII) at para. 55-61;

b.      It is enough that the plaintiff has prima facie grounds to infer that a defendant’s actions caused or contributed to her loss even if the responsibility of each of multiple possible defendants is not yet known – certainty is not a requirement: Longo v. MacLaren Art Centre Inc.,2014 ONCA 526 (CanLII) at para. 44 and Johnson v. Studley, 2014 ONSC 1732 (CanLII) at para. 61;

c.      “Neither the extent of damage nor the type of damage need be known.  To hold otherwise would inject too much uncertainty into cases where the full scope of the damages may not be ascertained for an extended time beyond the general limitation period”:  per Major J. in Peixero v. Haberman, 1997 CanLII 325 (SCC), 1997 3 S.C.R. 549 at para. 18;

d.       “error or ignorance of the law or legal consequences of the facts does not postpone the running of the limitation period”:  per Perell J. inNicholas v. McCarthy, 2008 CanLII 54974 (ON SC), 2008 CanLII 54974 (Ont. S.C.) at para. 27-29, aff’d 2009 ONCA 692 (CanLII), leave to appeal denied 2010 CanLII 12967 (SCC);

[147]      A corollary of these principles is the over-arching obligation of due diligence.  Limitation periods are designed to incent claimants not to sleep on their rights.  Ignorance of the law is not an excuse if the facts giving rise to legal claims are known.  A party alerted to circumstances where a reasonably prudent person of similar abilities and in the same circumstances would seek professional advice must do so or risk having the claim struck as being out of time.  Knowledge of the existence of damage, its source and a reasonable understanding of who is or might be expected to be responsible for some of it at least is enough.