Ontario Act s. 5

Ontario: the discovery provisions apply to contribution and indemnity claims

In Mega International Commercial Bank (Canada) v. Yung, the Court of Appeal held that the discovery provisions of the Limitations Act determine the commencement of the limitation period for contribution and indemnity claims.  This is an excellent, sensible decision that resolves one of the last significant (and somewhat inexplicable) uncertainties about the Ontario limitations scheme.

A refresher: Section 4 provides the basic two-year limitation period that commences on when the plaintiff discovers the claim.  Section 5(1) defines when discovery occurs.  Section 5(2) provides a rebuttable presumption that it occurs on the date of the act or omission that gives rise to the claim.  Section 15 provides that the ultimate 15-year limitation period commences on the date of that act or omission.   Section 18 provides that for the purposes of s. 5(2) and s. 15, the date when a plaintiff serves a statement of claim on a defendant is the date of the act omission that gives rise to the defendant’s contribution and indemnity claim against another alleged wrongdoer.

There were two competing constructions of s. 18.  One line of jurisprudence originating from Miaskowski (Litigation Guardian of) v. Persaud held that s. 18 prescribes an absolute two-year limitation period that commences always on the date of service of the statement of claim.  Another line of jurisprudence originating from Demide v. Attorney General of Canada et al.  held that s. 18 merely identifies the presumptive trigger date for the limitation period for contribution and indemnity claims, subject to the s. 5 discovery provisions.

I’ve long argued that Miakowski was plainly wrong, and its continued application was hard to understand.  I noted with some satisfaction the trend toward preferring the Demide construction.

The Court in Mega International essentially adopted the reasoning in Demide.  It applied the principles of statutory interpretation: the words in s .18 interpreted in their grammatical and ordinary sense do not establish an absolute limitation period.  Rather, s. 18 works “hand in glove” with the provisions of s. 5(2) and s. 15 to identify the presumptive limitation period that applies in contribution and indemnity claims.  It is not an exception to the basic limitation period in s. 4, but part of the integrated scheme established by s. 4 and s. 5.

The Court acknowledged the injustice in constructing s. 18 as imposing an absolute limitation period.  It would allow for the possibility of claims becoming statute-barred before they are discoverable.  The Court also noted the absence of any basis for recalibrating the balance between plaintiff and defendant rights the Act strikes for this particular category of claims only.

Ontario: The knowledge required for discovery

This is a post purely to indulge my pedantry.  In Reece v. Toronto (Police Services Board), the Court of Appeal said this about discovery:

[5]         The motion judge correctly found that discoverability for the purpose of limitations is based upon knowledge of the facts necessary to support a claim and does not require knowledge of the law that supports the claim.

This isn’t quite right.  Discoverability for the purpose of limitations–what other purpose to does the principle have?–is codified in s. 5 of the Limitations Act and requires knowledge of the four discovery matters.  The facts necessary to support a claim are, pursuant to the definition in the s. 1 of the Limitations Act, but only two: wrongful conduct and resulting loss.  The existence of a claim and the discovery of a claim are different issues.

Ontario: Appealing s. 5 analyses

Nicholson v. McDougall is a reminder that the omission of a s. 5 analysis isn’t necessarily a ground for appeal:

[31]           There is no reference to s. 5 at all, or any of its detailed requirements, in the Reasons for Decision.  I agree with the respondent that this omission from the Reasons for Decision is not sufficient to grant this appeal.  The Deputy Judge could have implicitly applied s. 5, including the presumption in s. 5(2), without expressly referring to it.  To assess whether the Deputy Judge did so and therefore complied with the Limitations Act requirements, I begin with the law regarding s. 5(2) and then I will move to how it applies in this case.

Ontario: More on adding defendants (and some pedantry)

Bhatt v. Doe has a good analysis of adding a defendant to proceeding after the presumptive expiry of the limitation period.  If you want to cite a recent decision, this is a good option.

In the spirit of pedantry I have two quibbles.  First, this:

[11]           The passing of a limitation period is fatal to a motion to add a party (Limitations Act, 2002, s. 21(1)). The doctrine of special circumstances is no longer applicable (Joseph v. Paramount Canada’s Wonderland, (2008), 2008 ONCA 469 (CanLII), 90 O.R. (3d) 401 at paras. 27 and 28 as cited in Parent v. Janandee Management Inc., [2009] O.J. No. 3763 (Master) at para. 29).

It’s now ten years since the Court of Appeal held that the special circumstances doctrine is no longer generally available.  Why do bar and bench feel compelled to make this point?   Who still argues special circumstances?

Second, this:

[12]           With respect to claims pursuant to the provisions of unidentified automobile coverage, discoverability is triggered when the insured knew or ought to have known about the material facts on which the claim is based. As stated by Justice Mackinnon in July v. Neal, 1986 CanLII 149 (ON CA), [1986] O.J. No. 1101 (C.A.) at para. 16:

…I have concluded that the time begins to run under such circumstances as the instant case, when the material facts on which the claim 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 et al. [reported 1986 CanLII 29 (SCC), 31 D.L.R. (4th) 481], Supreme Court of Canada, released October 9 1986 – Le Dain J. (for the court) at p. 99 [p.535 D.L.R.].

See also July at para. 32, Hier v. Allstate Insurance Co. of Canada, 1988 CanLII 4741 (ON CA), [1988] O.J. No. 657 (C.A.) at para 35, Galego v. State Farm Mutual Automobile Insurance Co., 2005 CanLII 32932 (ON SCDC), [2005] O.J. No. 3866 (Div.Ct.) at paras. 8 and 9, Wilkinson v. Braithwaite, [2011] O.J. No. 1714 (S.C.J.) at paras. 31-35.

With respect to any claim, s. 5 of the Limitations Act determines discovery.  There is no “trigger” beyond knowledge of the discovery matters.  Cases decided under the former limitations scheme, and applying the common law discovery rule, are not helpful because, as here, they cause the court to frame the issue incorrectly.

Ontario: the CA on the impact of related criminal proceedings on the limitation of intentional torts

In Winmill v. Woodstock (Police Services Board), the Court of Appeal considered the appropriateness of a proceeding as a remedy to battery.  The decision is generally noteworthy for the quality of its s. 5(1)(a)(iv) analysis, but also of its application of s. 5 to the interaction between claims arising from intentional torts and related to criminal proceedings.  As the court’s dissent notes, the limitation of these claims is usually determined by the misapplication of common law principles, not s. 5.

The plaintiff sued the Woodstock police for negligent investigation and battery.  The police obtained summary judgment dismissing the claim arising from the battery as statute-barred, but not the claim arising from negligent investigation.  The plaintiff appealed successfully.

Justice MacPherson and Feldman undertook a refreshingly comprehensive and sound s. 5 analysis:

[18]      Turning to s. 5(1)(a) of the LA, in this case there is no issue with respect to the first three of the four factors set out in this clause. The appellant knew that he had been injured on June 1, 2014, that the injury was caused by physical blows to his body, and that at least some of the respondents administered those blows.

[19]      The crucial issue is the fourth factor: did the appellant know on June 1, 2016 that a legal proceeding would be an appropriate means to seek to remedy the injuries caused by the alleged battery committed against him?

The court summarised the principles of applicable to s. 5(1)(a)(iv) analyses:

[22]      First, the word “appropriate” means “legally appropriate”.

[…]

[23]      Second, this does not mean that determining whether a limitation period applies involves pulling two simple levers – date of injury and date of initiation of legal proceeding – and seeing whether the result is inside or outside the limitation period prescribed by the relevant statute. On the contrary, other important factors can come into play in the analysis.

[…]

[24]      Third, within the rubric of “the specific factual or statutory setting of each individual case”, s. 5(1)(b) of the LA requires that attention be paid to the abilities and circumstances of the person with the claim […]

Those principles applied to the plaintiff’s claim meant it was timely:

[25]      Against this background of general principles, I turn to the motion judge’s conclusion that the appellant’s battery claim was outside (by one day) the two year limitation period prescribed by s. 4 of the LA. With respect, I think that the motion judge erred, essentially for three reasons.

[26]      First, the appellant’s negligent investigation claim is proceeding. The parties agree that the discoverability date for this claim is February 17, 2016, the day the appellant was acquitted on the criminal charges against him. Factually, the negligent investigation claim covers almost precisely the same parties and events as the battery claim. There was virtually no investigation in this case. The police were called, they arrived and immediately entered the appellant’s home, and some kind of altercation quickly unfolded.

[27]      In my view, the appellant’s Amended Statement of Claim shows how inextricably intertwined are the two alleged torts:

14 e.  The Defendant officers were present and knew or ought to have known that the Plaintiff did not commit an assault against any police officer. There was no reasonable cause for the Defendant officers to arrest or charge the Plaintiff with assault of a police officer.

14 f.   As the Plaintiff stood motionless, he was pushed violently in the chest by the Defendant Dopf. He was then thrown to the floor. Knee strikes and punches were then delivered by both the Defendants Dopf and Campbell. He was handcuffed, removed from the house and taken to the police station.

[28]      Second, I agree with the appellant that, in the specific factual setting of this case (407 ETR), and bearing in mind the circumstances of the person with the claim (Novak), it made sense for him to postpose deciding whether to make a battery claim against the respondents until his criminal charges for assault and resisting arrest were resolved. The criminal charges of assault and resisting arrest against the appellant and his tort claim of battery against the respondents are, in reality, two sides of the same coin or mirror images of each other.

[…]

[31]      In a similar vein, it strikes me as obvious that the verdict in the appellant’s criminal trial, especially on the assault charge, would be a crucial, bordering on determinative, factor in the appellant’s calculation of whether to proceed with a civil action grounded in a battery claim against the respondents.

[32]      Third, and overlapping with the second reason, there is a case almost directly on point suggesting that the appellant was justified in waiting for the verdict in his criminal trial before commencing a civil claim against the respondents. In Chimienti v. Windsor (City), 2011 ONCA 16 (CanLII), the plaintiff was charged with assault following a tavern brawl. The charge was dropped. The plaintiff commenced a civil action with claims of negligent and malicious investigation. The motion judge dismissed the action on the basis of the relevant statutory limitation period. This court, although dismissing the appeal on other grounds, disagreed with the motion judge’s analysis of the discoverability issue. In doing so, the court said, at para. 15:

[T]here is something of a logical inconsistency in asking a civil court to rule on the propriety of a criminal prosecution before the criminal court has had the opportunity to assess the merits of the underlying charge.

[33]      In my view, this passage is particularly applicable to this appeal. As I said earlier, the criminal charges of assault and resisting arrest against the appellant and his tort claim of battery against the respondents are very close to being two sides of the same coin or mirror images of each other. Accordingly, it made sense for the appellant to focus on his criminal charges and deal with those before making a final decision about a civil action against the respondents.

Justice Hourigan dissented:

[40]      In my view, the decision of this court in Markel Insurance Company of Canada v. ING Insurance Company, 2012 ONCA 218(CanLII), 109 O.R. (3d) 652, is key to the correct outcome in this case. In that case, Sharpe J.A. explained that “appropriate” under s. 5(1)(a)(iv) of the Act must mean “legally appropriate”, and, at para. 34, admonished against giving the term a broad meaning:

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 … would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.

[41]      My colleague acknowledges the authority of Markel, but in my view undermines it by emphasizing the need to attend to the factual circumstances of individual cases, drawing on this court’s subsequent decisions in 407 ETR Concession Co. v. Day, 2016 ONCA 709 (CanLII), 133 O.R. (3d) 762, and Brown v. Baum, 2016 ONCA 325 (CanLII), 397 D.L.R. (4th) 161. But both of these cases are clearly distinguishable. An action in 407 ETR was not “appropriate” at the time of the injury because an alternative administrative means of settling the dispute had not been completed. An action in Brown was not “appropriate” at the time of the injury because the defendant surgeon was providing further treatment in an attempt to rectify the harm he was alleged to have caused in the initial surgery.

[42]      There was no alternative means of resolving the appellant’s allegations in this case, nor were the defendants in a position to rectify the harm they were alleged to have caused. My colleague considers it obvious that the appellant should await the outcome of the criminal proceedings against him, relying on dicta from Chimienti v. Windsor (City), 2011 ONCA 16 (CanLII), 330 D.L.R. (4th) 148. But that case, too, is distinguishable, among other reasons because it concerned claims of negligent and malicious investigation – claims that depended on the completion of the relevant criminal proceedings on which they were based.

[…]

[44]      Nor can a claimant delay the start of a limitation period for an intentional tort in order to await the outcome of related criminal proceedings. This approach has been followed by Ontario trial courts in many cases. For example, in Brown v. Becks, 2017 ONSC 4218 (CanLII), the court held that a limitation period involving various claims against police including battery during an arrest ran from the date of the plaintiff’s arrest, not the date of his acquittal on criminal charges; in Boyce v. Toronto (City) Police Services Board, 2011 ONSC 54 (CanLII), aff’d 2012 ONCA 230 (CanLII), the limitation period in a civil action against police ran from the date of the battery rather than the officers’ conviction on assault charges. See also EBF v. HMQ in Right of Ontario, et. al, 2013 ONSC 2581 (CanLII), and Wong v. Toronto Police Services Board, 2009 CanLII 66385 (ON SC), 2009 CarswellOnt 7412 (Ont. S.C.). Similarly, in Kolosov v. Lowe’s Companies Inc., 2016 ONCA 973 (CanLII), 34 C.C.L.T. (4th) 177, this court affirmed the trial judge’s decision that a limitation period involving intentional tortious conduct alleged to have occurred on arrest ran from the date of the arrest rather than the date of the withdrawal of the criminal charges. See also Roda v. Toronto Police Services Board, 2016 ONSC 743 (CanLII), aff’d 2017 ONCA 768 (CanLII). My colleague offers no reason to depart from this body of law.

I disagree with this reasoning particularly in regards of the jurisprudence holding that the limitation period commence always on a certain date, like the date of an arrest.  That jurisprudence misapplies common law principles of cause of action accrual to the Limitations Act’s discovery provisions.  As I have discussed many times [cite], it is not the case under the Limitations Act that all plaintiffs will discover a claim always on the happening of a particular event, like an arrest.

Lastly, I noted that the court cited its decision in West for the principle different limitation periods may apply to different torts:

[17]      I begin with a structural point. In a single case where a plaintiff alleges different torts, it is possible and permissible for different limitation periods to apply to the different torts: see West v. Ontario, 2015 ONCA 147 (CanLII), at paras. 2-3.

It’s not clear to me how there could be any uncertainty about this point.  The Limitations Act applies to “claims” pursued in court proceedings, that is, claims to remedy damage resulting from an act or omission.  There can only be one act or omission in a claim.  Discrete acts or omissions give rise to discrete claims.  A court may define an act expansively, so that, for example, one act of deceit is comprised of multiple unlawful acts, but an act could never be the actionable conduct in deceit and, say, negligent misrepresentation.  This applies equally to claims where the actionable conduct doesn’t sound in tort.

Ontario: challenging discovery analyses on appeal

In Frederick v. Van Dusen, the Divisional Court reminds us that the court (in this case, a deputy judge of the Small Claims Court) need not make explicit findings with respect to the discovery matters:

[12]           Subsection 5(1) provides that a claim is discovered on the earlier of the day on which the plaintiff first knew of the matters set out in subsection 5(1)(a) and the day on which a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known of the matters referred to in subsection 5(1)(a).  The Deputy Judge found that the date on which the reasonable person with the abilities and in the circumstances of Mr. Frederick ought to have known of the matters set out in subsection 5(1)(a) was the spring of 2013.  Having made this determination under subsection 5(1)(b) of the Act, there was no requirement for the Deputy Judge to make an explicit finding as to what Mr. Frederick and Ms. Presley actually knew in relation to subsection 5(1)(a)(iv).

Ontario: undertaking alternative remedial processes can delay discovery

Presidential MSH Corporation v. Marr Foster & Co. LLP is another excellent decision from the Court of Appeal applying s. 5(1)(a)(iv) of the Limitations Act.  Where the plaintiff relies on an alternative process that would substantially eliminate its loss so that court proceedings would be unnecessary to remedy it, and the date the alternative process runs its course is reasonably ascertainable, a proceeding will not be an appropriate remedy until that alternative process concludes.

While this decision doesn’t break new ground, it clarifies the impact remedial measures can have on discovery of a claim.  This is of particular consequence in professional negligence claims, which was the case in Presidential.

The respondents filed the appellant’s corporate tax returns after their due date. As a result, the CRA denied tax credits that would have been available had the returns been filed on time.

The appellant received the CRA’s Notices of Assessment disallowing each of the claimed credits on April 12, 2010. When the appellant received the notices, he immediately asked the respodnents what to do and how to fix the problem.

The motion judge inferred that the respondents advised the appellant to retain a tax lawyer to determine how to solve the tax problem but didn’t advise him to obtain legal advice about a professional negligence claim against the respondents.

The appellant did retain a tax lawyer on April 15, 2010, but there was no discussion of a possible action against the respondents. The tax lawyer filed a Notice of Objection to the CRA assessments, as well as an application for discretionary relief. The respondent helped the appellant prepare its appeals to the CRA by drafting the application for relief and helping the appellant and its lawyer with whatever else they needed, until at least November 2011.

By letter dated May 16, 2011, the CRA responded to the Notice of Objection advising that it intended to confirm the assessments. It did in fact confirm them on July 7, 2011.

The motion judge found that, as late as July 2011, there was still a reasonable chance that the application for discretionary relief would mitigate some or all of the appellant’s loss.

On August 1, 2012, the appellant issued its statement of claim against the respondents. This was more than two years after the initial denial by CRA of the credits, but within two years of CRA’s refusal to alter the assessments in response to the Notice of Objection.

The motion judge held that the appellants claim would have been appropriate while the CRA appeal was still ongoing because the appeal would not have fully eliminated the appellant’s claim against the respondents.  In particular, it would not have eliminated the appellant’s claim for the costs of retaining a tax lawyer to prosecute it.

Justice Pardu rejected this reasoning.  She summarised the applicable principles:

[20]      First, the cases suggest that a legal proceeding against an expert professional may not be appropriate if the claim arose out of the professional’s alleged wrongdoing but may be resolved by the professional himself or herself without recourse to the courts, rendering the proceeding unnecessary.

[…]

[26]      Resort to legal action may be “inappropriate” in cases where the plaintiff is relying on the superior knowledge and expertise of the defendant, which often, although not exclusively, occurs in a professional relationship. Conversely, the mere existence of such a relationship may not be enough to render legal proceedings inappropriate, particularly where the defendant, to the knowledge of the plaintiff, is not engaged in good faith efforts to right the wrong it caused. The defendant’s ameliorative efforts and the plaintiff’s reasonable reliance on such efforts to remedy its loss are what may render the proceeding premature.

[27]      Finally, I note that cases in which a defendant who is an expert professional attempts to remedy a loss that a plaintiff has discovered and alleges was caused by the defendant (engaging the potential application of s. 5(1)(a)(iv)) are distinct from  cases in which courts have held that  a client has not discovered a potential claim for solicitor’s negligence until being advised by another legal professional about the claim: see Ferrara, at para. 70; and Lauesen v. Silverman, 2016 ONCA 327 (CanLII), 130 O.R. (3d) 665, at paras. 25-31. In the latter category of cases, the issue is whether the plaintiff knew or ought reasonably to have knowninjury, loss or damage had occurred (under s. 5(1)(a)(i)) that was caused by or contributed to by an act or omission of the defendant (under ss. 5(1)(a)(ii) and (iii)). Section 5(1)(a)(iv) comes into focus where the plaintiff knew or ought reasonably to have known of his or her loss and the defendant’s causal act or omission, but the plaintiff contends the limitation period was suspended because a proceeding would be premature. Although discoverability under more than one subsection of s. 5(1)(a) may be engaged in a single case, it is important not to collapse the analysis of discoverability of loss or damage and the defendant’s negligence or other wrong with the determination whether legal action is appropriate although other proceedings to deal with the loss may be relevant to both questions.

(3)         The effect of other processes which may eliminate the loss

[28]      A second line of cases interpreting and applying s. 5(1)(a)(iv) of the Act involves a plaintiff’s pursuit of other processes having the potential to resolve the dispute between the parties and eliminate the plaintiff’s loss.

[29]      This approach to discoverability is consistent with  the rule in administrative law that it is premature for a party to bring a court proceeding to seek a remedy if a statutory dispute resolution process offers an adequate alternative remedy and that process has not fully run its course or been exhausted: see Volochay v. College of Massage Therapists of Ontario, 2012 ONCA 541 (CanLII), 111 O.R. (3d) 561, at paras. 61-70.

[…]

[39]      Non-administrative, alternative processes have also been seen in other cases as having the potential to resolve a dispute, thus rendering a court proceeding inappropriate or unnecessary.

[…]

[45]      Many of the cases dealing with the effect of alternative processes on the appropriateness of a court proceeding have applied the concept of a proceeding being “legally appropriate” articulated by this court in Markel. Markel involved a dispute between sophisticated insurers claiming indemnity under statutory loss transfer rules. The limitations issue that arose concerned whether a legal proceeding was “inappropriate” while settlement discussions between the parties were ongoing and thus, whether a claim was not discovered until these negotiations broke down.

[46]      Recall that, in Markel, the court held that the term “appropriate” in s. 5(1)(a)(iv) means “legally appropriate”. This interpretation avoided entangling courts in the task of having to “assess [the] tone and tenor of communications in search of a clear denial” that would indicate the breakdown of negotiations between the parties. That would permit a plaintiff to delay the discoverability of a claim for “some tactical or other reason” and “inject an unacceptable element of uncertainty into the law of limitation of actions” (at para. 34).

[47]      Similarly, in 407 ETR Concession Company, at para. 47, Laskin J.A. stated that the use of the term “legally appropriate” inMarkel “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” (emphasis added).

[48]      These cases instruct that if a plaintiff relies on the exhaustion of some alternative process, such as an administrative or other process, as suspending the discovery of  its claim, the date on which that alternative process has run its course or is exhausted must be reasonably certain or ascertainable by a court.

Accordingly, the motion judge erred in holding that the appellant knew or ought to have known that its proceeding was appropriate as early as April 2010, when it received the CRA’s Notices of Assessment disallowing its tax credits. The proceeding was not appropriate, and the appellant’s underlying claim was not discovered, until May 2011, when the CRA responded to the appellant’s Notice of Objection and advised that it intended to confirm its initial assessments. The motion judge erred by equating knowledge that the respondents had caused a loss with a conclusion that a proceeding would be an appropriate means to seek a remedy for the loss.

Had the respondents together with the tax lawyer prosecuted the CRA appeal successfully, the appellant’s loss would have been substantially eliminated, and it would have been unnecessary to resort to court proceedings to remedy it. The fact that the appellant would have been unable to recover the fees it paid the tax lawyer, except through litigation, was inconsequential. It is the claim that is discoverable, not the full extent of damages the plaintiff may be able to recover. It would not have been appropriate under s. 5(1)(a)(iv) of the Act for the appellant to commence a proceeding until the respondents ameliorative efforts concluded.

The CRA appeal process had the potential to eliminate the appellant’s loss. As an alternative process to court proceedings, it could have resolved the dispute between the appellant and the respondents. These results would have made a proceeding unnecessary. It would not have been appropriate for the appellant to commence a proceeding until the CRA appeal process was exhausted in May 2011.

The court’s decision in Markel, as interpreted in 407 ETR Concession Company, about the meaning of the concept of a proceeding being “legally appropriate” under s. 5(1)(a)(iv) of the Act supported the appellant’s position. It was not a case where the appellant sought to toll the operation of the limitation period by relying on the continuation of an alternative process whose end date was uncertain or not reasonably ascertainable. It was clear that the end date of the CRA appeal was when the CRA responded to the appellant’s Notice of Objection advising that it intended to confirm the assessments. Thus the motion judge erred in invoking Markel to dismiss the appellant’s claim as time barred.

A last note: the Court of Appeal seems to still be ignoring its decision in Clarke where it held that  the section 5(1)(a)(iv) discovery criterion requires the claimant to have “good reason to believe he or she has a legal claim for damages”.  I don’t think any decision has followed this construction of the provision.

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?