Ontario Act s. 5(1)(a)(iv)

Ontario: a rare and proper s. 5(1)(a)(iv) analysis

Chelli-Greco v. Rizk  includes a solid section 5(1)(a)(iv) discovery analysis (which appear in limitations jurisprudence quite infrequently).  Justice Hackland held that it did not become legally appropriate for the plaintiff to discover her claim against her dentist until their dentist-patient relationship ended:

[19]           In my view the present case is an equally compelling situation to support the proposition that the plaintiff’s action was not discovered until the dentist-patient relationship had ended.  It could not fairly be said that the plaintiff should have considered it appropriate to commence proceedings against her dentist while he was attempting to remediate her dental problems which she was given to understand arose from the poor health of her teeth which supported her bridge. As the plaintiff’s expert pointed out, a major problem for the plaintiff was the lack of an informed consent discussion surrounding the treatment she was receiving.  She remained under the defendant’s influence and professional guidance, without proper advice, for the duration of the dentist-patient relationship.  In these circumstances, I cannot be satisfied that it was appropriate for the plaintiff to opt for legal proceedings instead of seeking remediation by continuing to seek treatment form the defendant.

The situation that was equally compelling was that in Brown v. Baum, an excellent decision from Justice Mew that I wrote about here.

UPDATE: The Court of Appeal has upheld this decision.

Ontario: the limitation of subrogated claims

Subrogation is the right of a party that has indemnified another to stand in its shoes, to exercise any rights that the indemnified party had against third parties in order to reduce the loss that the indemnifying party has sustained.  It’s long settled that the subrogating party stands in no different position relative to the indemnified with respect to rights against third parties.  It necessarily follows that limitation periods which apply to the indemnified party apply to the indem­nifying party’s subrogated claim, or so it was generally understood.

In CMHC v. Greenspoon, Justice Perell found that the limitation period commenced at different times for the indemnified party’s claim and its subrogated claim.

The plaintiff CMHC had a subrogated claim to that of lenders whose mortgages had gone into default.  CMHC sued the defendant solicitor that acted on the mortgages for failure to disclose material facts to the lenders before they advanced CMHC insured loans.  Because the lenders had mortgage insurance, a proceeding against the defendant could not be an appropriate means to seek a remedy for their loss (CHMC would make them whole):

[44]           Since CMHC’s claim was a subrogated claim to that of the approved lenders, Mr. Greenspoon argued that the limitation period of the negligence claim began to run when the approved lenders objectively ought to have known that they had a solicitor’s negligence claim against him. I disagree, because given that the approved lenders had obtained mortgage default insurance and having regard to the nature of their loss, i.e., a deficiency in recovery on the mortgage security, a proceeding against Mr. Greenspoon would not be an appropriate means to seek a remedy for the deficiency, precisely because the approved lenders had insurance for the eventuality of a deficient recovery on the defaulted mortgage.

 

[45]           In other words, the benefits and burdens of discovering a claim moved from the approved lenders to their insurer, CMHC, which had a subrogated action in its own name pursuant to the National Housing Act.

[46]           This analysis of who must discover the subrogated claim avoids the peculiar result that if the running of the limitation period for claims against Mr. Greenspoon was based on the knowledge of the approved lenders, then their insurer’s subrogated claim could be statutorily barred before the CMHC could bring an action in its own name.

[47]           In my opinion, there is no genuine issue for trial that acting reasonably and using reasonable diligence, CMHC ought to have discovered its subrogated claim against Mr. Greenspoon around the time that it paid the approved lenders for the deficiency in the mortgage recovery. It was at that time that CMHC could have made inquiries of the approved lenders and required them to obtain Mr. Greenspoon’s report and conveyancing file material and anything else that it might require to follow-up on its own RFFI.

 

I don’t think the court got this right.  It seems to me that you can arrive at the same result–ensuring CMHC’s claim isn’t statute-barred before it has the opportunity to commence it–without departing from the principles of subrogation.

The crux of the issue is Justice Perell’s finding that a claim against the defendant was not an appropriate means to seek a remedy for the lenders.  This means that the lenders couldn’t discover their claim within the meaning of section 5(1)(a) of the Limitations Act (because they couldn’t know the section 5(1)(a)(iv) criterion that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”).  If the lenders couldn’t discover their claim, the basic two year limitation period couldn’t commence, and the claim would be subject only to the 15 year ultimate limitation period.  Once CMHC stands in the lenders’ shoes, the appropriateness of a proceeding becomes knowable and time can begin to run.  Meanwhile, there is no real risk of the limitation period expiring beforehand.

It will be interesting to see whether this decision is followed.

 

 

 

Ontario: Justice Perell on the interaction of the Insurance Act and the Limitations Act

In Farhat v. Monteanu, Justice Perell provides a typically thorough analysis of the interaction between the Insurance Act‘s section 267.5 threshold provisions and the limitation period.

The plaintiff sued for damages for his non-pecuniary injuries from a motor vehicle accident. The defendant pleaded a limitations defence and the plaintiff moved for partial summary judgment to defeat it.

The defendant ventured a novel defence. She argued that pursuant to section 5(2) of the Limitations Act, there is a presumption that a claimant discovers a motor vehicle accident claim when the accident occurs.  Because the plaintiff’s lawyer stated that the plaintiff’s injuries were serious in correspondence to the defendant eight days after the accident, this presumption was rebuttable only by the lawyer’s direct evidence that he delayed issuing the claim within two years of the accident because he wanted medical confirmation that the serious injury met the section 267.5  threshold.

No case law supported the defendant’s argument, and Justice Perell held that the jurisprudence “about the effect of the threshold on the running of limitation periods stands strongly against” it:

[27]           There is no onus on a plaintiff to prove or show: (a) that the limitation period was considered and a conscious decision made not to commence an action; (b) that a procedure was put in place to review the conscious decision at some reasonable point in the future; and (c) that a decision was made when additional information was obtained and counsel moved expeditiously.

[28]           Whether all this demonstration of what the lawyer must show “ought” to be the case is neither here nor there, because what “is” the case under the law about the running of limitation periods is that when an action is not commenced within two years after the accident the only onus on the plaintiff is to show that he or she could not have discovered the case during the period of delay before commencing the action […].

[29]           Mr. Farhat’s claim is apparently based on chronic pain becoming a permanent serious impairment of an important physical, mental or psychological function. Much to the dismay of insurance companies of defendants, almost invariably, it will take several months to determine whether ongoing pain suffered as a result of an accident is a permanent serious impairment. It will typically, almost invariably, be the case that a plaintiff with only a chronic pain claim will not know that the claim surpasses the Insurance Act threshold until sometime after the date of the accident.

[…]

[31]           Given the statutory presumption that a limitation period begins to run from the date of the accident, the onus is on the plaintiff to persuade the court that the seriousness of his or her injury was not discoverable within the applicable limitation period and the plaintiff must also persuade the court that he or she acted with due diligence to discover if there was a cause of action: Yelda v. Vu, 2013 ONSC 4973 (CanLII) at paras. 29-30.

[32]           In Everding v. Skrijel, 2010 ONCA 437 (CanLII), approving Vosin v. Hartin, [2000] O.T.C. 931 (S.C.J.), the Court of Appeal held that in applying the discoverability principle of the Limitations Act, 2002, the court should consider the threshold requirements of the Insurance Act, and the Court of Appeal held that a plaintiff will not have discovered his or her claim before he or she knows they have a substantial chance to succeed in recovering a judgment for damages. A person cannot be expected to commence an action before he or she knows that the necessary elements as set out in the legislation can be established on the evidence: Hoffman v. Jekel, 2011 ONSC 1324 (CanLII) at para. 9.

[33]           In Lawless v. Anderson, 2011 ONCA 102 (CanLII), the Ontario Court of Appeal stated at para. 23:

  1. Determining whether a person has discovered a claim is a fact-based analysis. The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant. If the plaintiff does, then the claim has been “discovered”, and the limitation period begins to run: see Soper v. Southcott (1998), 1998 CanLII 5359 (ON CA), 39 O.R. (3d) 737 (C.A.) and McSween v. Louis (2000), 2000 CanLII 5744 (ON CA), 132 O.A.C. 304 (C.A.).

[34]           When a limitation period defence is raised, the onus is on the plaintiff to show that its claim is not statute-barred and that it behaved as a reasonable person in the same or similar circumstances using reasonable diligence in discovering the facts relating to the limitation issue: Durham (Regional Municipality) v. Oshawa (City), 2012 ONSC 5803 (CanLII) at paras. 35-41; Bolton Oak Inc. v. McColl-Frontenac Inc., 2011 ONSC 6657 (CanLII) at paras. 12-14; Bhaduria v. Persaud (1985), 1998 CanLII 14846 (ON SC), 40 O.R. (3d) 140 (Gen. Div.). The limitation period runs from when the prospective plaintiff has, or ought to have had, knowledge of a potential claim and the question is whether the prospective plaintiff knows enough facts to base a cause of action against the defendant, and, if so, then the claim has been discovered and the limitation period begins to run: Lawless v. Anderson, supra at para. 23; Soper v. Southcott (1998), 1998 CanLII 5359 (ON CA), 39 O.R. (3d) 737 (C.A.); McSween v. Louis, 2000 CanLII 5744 (ON CA), [2000] O.J. No. 2076 (C.A.); Gaudet v. Levy (1984), 1984 CanLII 2047 (ON SC), 47 O.R. (2d) 577 at p. 582 (H.C.J.).

[35]           In some limitation period summary judgment motions, it may be necessary to demonstrate the time at which a plaintiff acting reasonably knew about his or her claim, but this motion is not one of those motions. For the purposes of the motions in the case at bar, for Mr. Farhat to rebut the presumption found in s. 5(2) of the Limitations Act, he need only show that he could not have discovered his chronic pain claim during the period between the date of the accident, May 18, 2006 and June 18, 2006 (two years before the date the action was commenced), which I am satisfied he has done.

[36]           Perhaps ironically, because s. 267.5 (5) of the Insurance Act was introduced to eliminate minor personal injury claims, its effect has also been to protect such claims from the running of a limitation period for a period of time commensurate with how long it would take a reasonable person with the abilities and in the circumstances of the plaintiff to have discovered that the threshold for a claim has been surpassed.

[37]           A simple comparison between Mr. Farhat’s automobile accident claim and a slip and fall case demonstrates why the operation of s. 267.5 on limitation periods rankles the insurance defence bar. Visualize, if Mr. Farhat had gotten out of his parked van and slipped and fell on a sidewalk in disrepair, there would be no waiting for a medical report and the limitation period for his occupier’s liability claim would immediately have commenced to run.

[38]           The law, however, for the discovery of slip and fall claims is not affected by s. 267.5 of the Insurance Act. Section 267.5, however, does influence the running of limitation periods for motor vehicle accident non-pecuniary claims.

[39]           No doubt much to the chagrin of the defence bar, s. 267.5 (5) of the Insurance Act introduces some slack into the apparent rigidity of the presumption found in s. 5(2) of the Limitations Act, 2002. A plaintiff, and in some instances his or her negligent lawyer, can take comfort from this slack because the limitation period only begins to run when a sufficient body of information is available to determine whether the plaintiff has a claim that may meet the threshold. In this regard, I adopt the observations of Justice Langdon in Ioannidis v. Hawkings (1998), 1998 CanLII 14822 (ON SC), 39 O.R. (3d) 427 at pp. 433-434 (Gen. Div.), where he stated:

… [N]o one can seriously argue that the decision whether a particular injury meets the statutory criteria is an easy one or, perhaps more important, that it will be easy to predict the outcome of a motion to dismiss a claim which the defendant asserts is unworthy. Even in such a motion, the onus is upon the plaintiff to demonstrate that his or her injuries meet the statutory criteria. When one is seeking to apply the discoverability rule to the plaintiff in a case such as this, it behooves the court to grant a degree of latitude to a plaintiff before declaring that the limitation period has begun to run. … In practical terms, the question is not whether the plaintiff believes that her injury meets the criteria but whether there is a sufficient body of evidence available to be placed before a judge that, in counsel’s opinion, has a reasonable chance of persuading a judge, on the balance of probabilities that the injury qualifies. When such a body of material has been accumulated, then and only then should the limitation begin to run. This is not to say that the plaintiff is entitled to wait until he or she has an overwhelming case. It is only to say that the court must afford a degree of latitude to a plaintiff in making this very individual and complicated determination.

I have one quibble with this otherwise excellent decision.  The statement in paragraph 34 that a plaintiff discovers her claim when she “knows enough facts to base a cause of action against the defendant” is incorrect. A plaintiff subjectively discovers her claim on the date she knows each of the facts listed in section 5(1)(a) of the Limitations Act, including that a proceeding is an appropriate remedy (which is not a fact that bases a cause of action).

For the same reason, while there is a presumption that the limitation period begins on the date of a slip and fall accident pursuant to section 5(2) of the Limitations Act, it doesn’t necessarily commence on that date. It may be that the plaintiff can only reasonably discover that the claim is the appropriate remedy on a later date, and because the section 5(1)(a) criteria are conjunctive, the limitation period will not commence until this later date.  It’s simply wrong to analyse the commencement of the limitation period based on the accrual of a cause of action. (Consider this a second salvo in my fight against on diminishing the impact of Lawless on limitations jurisprudence).

Ontario: Where have all the 5(1)(a)(iv) analyses gone?

Today we consider why section 5(1)(a)(iv) of the Limitations Act features so infrequently in limitations analyses, and by extension, a trend in the jurisprudence toward analyses based on the common law principle of discoverability rather than the Limitations Act.

Section 5(1) of the Limitations Act provides the requirements for subjective discovery of a claim:

(1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it […]

Subject to a few notable exceptions, you rarely see a limitations analysis that turns on the fourth requirement, the appropriateness of a proceeding as a remedy.

My working theory is that, at least in recent years, this is largely the result of the Court of Appeal decision in Lawless v. Anderson (2011). Lawless has two much-cited paragraphs describing discoverability:

 

[22]         The principle of discoverability provides that “a cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence.  This principle conforms with the generally accepted definition of the term ‘cause of action’ – the fact or facts which give a person a right to judicial redress or relief against another”: Aguonie v. Galion Solid Waste Material Inc. (1998), 1998 CanLII 954 (ON CA), 38 O.R. (3d) 161 (C.A.), at p. 170.

[23]         Determining whether a person has discovered a claim is a fact-based analysis.  The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant.  If the plaintiff does, then the claim has been “discovered”, and the limitation begins to run: see Soper v. Southcott (1998), 1998 CanLII 5359 (ON CA), 39 O.R. (3d) 737 (C.A.) and McSween v. Louis (2000), 2000 CanLII 5744 (ON CA), 132 O.A.C. 304 (C.A.).

What’s noteworthy about this description, and to my knowledge never mentioned in the decisions that rely on it, is that this is the common law principle of discoverability. This is why the authorities cited by the Court in support of the principle all predate the current Limitations Act.

The legislature codified the common law principle of discoverability into section 5 of the Limitations Act, but not without materially altering it. Section 5 doesn’t use the language of “cause of action” (nor does the Limitation Act generally), and, above all, by operation of 5(1)(a)(iv) it makes the appropriateness of the proceeding a condition of discovery.

You can square sections 5(1)(a)(i) – (iii) with the common law principle of discoverability. These provisions require the claimant to know facts that comprise, more or less, the elements of most causes of action (that is, for any cause of action to accrue there needs to be injury caused by someone to the plaintiff). However, it’s a lot more difficult to square section 5(1)(a)(iv) with the common law principle. I can’t think of any cause of action that has as an element the appropriateness of a legal proceeding.

If you use the principle of discoverability in Lawless as the starting point of a discovery analysis, you either need to adopt an expansive and awkward limitations-specific definition of cause of action, which I don’t see happening, or you discount (if not ignore entirely) section 5(1)(a)(iv). And so we see so many limitations decisions since Lawless that don’t consider whether the appropriateness of a proceeding affects the commencement of the limitation period.

There are other reasons for this, too, I suspect. The jurisprudence offers rather little guidance on the meaning of “appropriate”. The leading decision, as you’ll see below, defines it vaguely as “legal appropriateness”.

In any event, this is all to say that it’s refreshing to encounter Brown v. Baum, a medical malpractice decision in which Justice Mew concludes that section 5(1)(a)(iv) operated to delay the commencement of the limitation period. This is the decision you should look to when considering a section 5(1)(a)(iv) response to a limitations defence.

Dr. Baum performed plastic surgery on Brown. It did not have the desired effect. Brown sued Baum, who moved for summary judgment on the basis of a limitations defence. The relevant paragraphs follow:

[41]           The defendant argues that by no later than July 2009, Ms. Brown had independently formed the view that Dr. Baum had done something wrong. Even if it accepted that Ms. Brown was not informed of all of the risks associated with the procedures she underwent, she knew that things had not gone well.  She did not need a second opinion or legal advice to reach that conclusion.

[42]           I agree with the defendant.  That does not, however, end the analysis.

[43]           There are four limbs to s. 5(1)(a) of The Limitation Act, 2002. All four must be satisfied before time will start to run against a plaintiff.

[44]           It is clear from the record that while Ms. Brown, by no later than July 2009, knew that (a) an injury loss or damage had occurred; (b) that the injury loss or damage had been caused or contributed to by an act or omission; and (c) that the act or omission was that of Dr. Baum; the fourth limb must also be established, namely, “that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”.

[45]           Following the initial surgery in March 2009, Ms. Brown returned to Dr. Baum on a number of occasions, including several surgeries, during the course of which Dr. Baum attempted to improve the outcome of the initial surgery.

[46]           Although this action was started well in excess of two years after both the March 2009 surgery and July 2009 (by which time Ms. Brown had formed the view that Dr. Baum had done something wrong), it was commenced within two years of the last in the series of surgical procedures undertaken by Dr. Baum, which was on 16 June 2010.

[47]           In Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218 (CanLII) at para. 34, the Court of Appeal considered the meaning of the term “appropriate” in the context of s. 5(1)(a)(iv). According to Sharpe J.A.:

…I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5(1)(a)(iv) states that a claim is “discovered” only when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened…would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.

[48]           Where, as in the present case, the defendant has conducted a series of surgical procedures on the plaintiff over 15 months with the goal of producing an optimal outcome, the limitation issue which arises is whether it would have been “appropriate” for the plaintiff to commence a proceeding against the defendant before the last in the series of surgeries performed by him.

[49]           Dr. Baum performed a series of surgeries on Ms. Brown over a period of 15 months. The defendant argues that, assuming that time would run from either March 2009 (the date of the first surgery) or July 2009 (the time by which the first three limbs of s. 5(1)(a)(iv) had been satisfied), even if Ms. Brown had wanted to refrain from commencing an action until she stopped seeing Dr. Baum, there would have been time for her to have done so following the final consultation visit in June 2010.

[50]           This argument misses the point of subparagraph (iv), which is to delay the commencement of the limitation period until such time as initiating a proceeding is an appropriate remedy. The point can be illustrated by assuming that, instead of the series of surgeries having been conducted over 15 months, the time span between the first surgery and the last surgery was, say, 36 months. If one assumes that the date of the first surgery is the date on which the limitation period runs (which, presumptively, it would be: Limitations Act, s. 5(2)), then the plaintiff would be required to commence an action against the defendant while still receiving treatment from him. The service of a statement of claim on a treating physician by a patient would almost certainly result in a termination of the doctor-patient relationship and, hence, efforts to ameliorate – or remedy – the patient’s condition through continued treatment of the plaintiff patient by the physician.

[51]           When considering the recommendation of legislation identical to s. 5(1)(a)(iv) in British Columbia, the British Columbia Ministry of Justice observed (The New Limitation ActExplained (Victoria, Civil Policy and Legislation Office, Ministry of Justice: 2013) (online www.ag.gov.bc.ca/legislation/limitation-act/pdf/LA_Explained.pdf at 26) that the provision:

…recognizes that courts will continue to have considerable discretion in interpreting the meaning of the discovery test, in order to come to a just result, and to achieve fairness for plaintiffs.

[52]           Each case will, of course, turn on its particular facts. It will not be every case in which the fact that a physician-patient relationship is ongoing that it would be appropriate to toll the running of the limitation period until that relationship has terminated.  Nor in every case where there is a series of surgical procedures undertaken will time not run until the last of those procedures has been undertaken.  It will depend on the facts and circumstances.

[53]           In the present case the defendant continued for over a year after the initial surgery to achieve a better outcome for the plaintiff.  There was no doubt about what he was doing or why he was doing it.  There is no indication in the evidence that the defendant was motivated by a concern to minimise his potential liability to the plaintiff.  It would be unreasonable and inappropriate in such circumstances to start the two year limitation clock running against Ms. Brown while the defendant’s good faith efforts to achieve a medical remedy continued.

[54]           In my view, the effect of s. 5(1)(a)(iv) in the present case is to delay the commencement of the two year limitation period until no earlier than the date of the last surgery on 16 June 2010.[1] As the plaintiff’s action was commenced within two years of that date, the action is not statute barred.  There is no triable issue based on the limitation defence.  The defendant’s motion for summary judgment is therefore dismissed.

Note that applying the common law principle of discoverablity from Lawless to these facts (instead of the Limitations Act) would almost certainly have resulted in the limitations defence succeeding.

Ontario: the limitations jurisprudence of 2014 in review

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This post is a paper I wrote for LawPro on the year’s limitations jurisprudence.  It may be of interest to Under the Limit readers; if you’d like a PDF version , just ask.

The limitations jurisprudence of 2014 in review

Dan Zacks[1]

January 1, 2014 marked ten years since the Limitations Act, 2002 came into force. Now many aspects of the old limitations regime are forgotten, or will be soon. Consider for instance the classification of actions. Once a key step in the limitations analysis, it is barely remembered, and rarely fondly.[2]

Meanwhile, the courts have developed an extensive body of jurisprudence interpreting and applying the new Act. To be sure, this jurisprudence remains in development. Many of 2014’s leading decisions consider fundamental limitations issues arising from the Limitations Act for the first time. For example, in 2014 we learned from the Court of Appeal how a plaintiff should plead a discoverability argument (by reply), and that there is no legislative gap that would prevent the Limitations Act from applying to claims for unjust enrichment (Collins v. Cortez and McConnell v. Huxtable respectively, both discussed below). The Superior Court also delivered decisions of consequence, in particular by confirming that the Limitations Act applies to will challenges (Leibel v. Leibel, also discussed below).

While it is difficult to identify definite trends in the year’s limitations jurisprudence, several lower court decisions point toward an increasing receptiveness to boundary-pushing discovery analyses. In one case, the “no, I won’t pay my 407 toll” decision, the Court found that proportionality can be a factor when determining whether a plaintiff has discovered that a proceeding is an appropriate means to seek a remedy.[3] In another somewhat eccentric case, the Court found that, pursuant to “cultural dimension theory”, being Slovenian can determine when a plaintiff discovers her claim.[4] It will be interesting to see whether courts follow either of these decisions, and more generally, whether they remain open to creative discovery arguments.

What follows is a summary of the more consequential Ontario limitations decisions from 2014. For mostly up-to-date reporting on this year’s limitations jurisprudence, you are welcome to visit limitations.ca.

McConnell v. Huxtable: In which the Court of Appeal says yes, a claim for unjust enrichment is subject to the Limitations Act[5]

McConnell is a family law decision involving an unmarried couple. The applicant made a constructive trust claim for an ownership interest in the respondent’s house and, in the alternative, for compensation in money. The respondent sought the dismissal of the claim on the basis that it was barred by the expiry of the limitation period.

The motion judge’s 2013 decision[6] was sensational, at least in the rather staid world of limitations. In thorough and persuasive reasons, Justice Perkins held that the discovery provisions of the Limitations Act cannot apply to a remedial constructive trust based on a claim of unjust enrichment. Taken to its logical conclusion, this meant that in a great many circumstances, only the equitable doctrine of laches and acquiescence would limit a claim for unjust enrichment.

A limitation period commences when the injured party discovers the claim within the meaning of section 5 of the Limitations Act. Justice Perkins concluded that a claim for constructive trust is not in all circumstances discoverable as contemplated by this section. If a claim is not discoverable, the limitation period will never commence. If the limitation period never commences, there is no limitation period. This is how he described the problem:

I think that section 5(1)(a) makes it impossible to know when if ever the limitation [period] would start running because the claimant may never (reasonably) know of a “loss, damage or injury” and because there is no act or omission of the respondent that the claimant is required to or is even able to point to in order to “discover” a claim for a constructive trust. Claims to recover land aside, the Limitations Act, 2002 may have been meant to but does not manage to encompass constructive trust claims. I am unable to give effect to the precise and detailed wording of sections 4 and 5 so as to make them apply to constructive trusts in family law cases.[7]

Not surprisingly, Justice Rosenberg, writing for the Court of Appeal, disagreed, and held that there is no legislative gap:

I do not agree with the motion judge that a remedial constructive trust claim does not require any act or omission by the person against whom the claim is brought. Generally speaking, a claim of unjust enrichment requires that the defendant retain a benefit without juristic reason in circumstances where the claimant suffers a corresponding deprivation. In other words, the relevant act of the defendant is simply the act of keeping the enrichment (or the omission to pay it back) once the elements of the unjust enrichment claim have crystallized. In the family law context, this may typically occur on the date of separation, when shared assets, including real property, are divided and the possibility therefore arises of one party holding onto more than a fair share.[8]

Justice Rosenberg acknowledged that in some cases it may be difficult to apply section 5 to a claim for unjust enrichment, but it applies nonetheless. Even if the difficulty means the claim is never discovered, the ultimate limitation period will still limit it. This is sound reasoning, but terribly disappointing to the plaintiffs’ bar, who had begun to think very hard about how to make every old claim one for unjust enrichment.

McConnell also brings clarity to the application of the Real Property Limitations Act. The fact that the respondent sought a monetary award in the alternative to an interest in land did not mean that the claim wasn’t for a share of property, and subject to section 4 of the Real Property Limitations Act with its plaintiff-friendly ten year limitation period.[9]

Longo v. McLaren Art Centre: The Plaintiff must not delay, not even for Rodin[10]

This Court of Appeal decision written by Justice Hourigan quickly became a leading authority on the duty imposed by the Limitations Act on plaintiffs to investigate potential claims. It is already much-cited by defendants when arguing that a plaintiff was dilatory in discovering their claim and, more specifically, when envoking section 5(1)(b) of the Act.

Justice Hourigan’s reasoning is not especially novel; rather, he adopts a line of discoverability jurisprudence developed under the previous Act exemplified by Soper v. Southcott (1998)[11]. In essence, a plaintiff must take reasonable action to investigate the matters described in section 5(1)(a) of the Act. What is reasonable depends on the plaintiff’s circumstances and the nature of the potential claim. However, it is never necessary for the plaintiff to investigate to the point where she knows with certainty that a potential defendant is responsible for the impugned acts or omissions. It is enough that she has prima facie grounds to infer that the potential defendant caused the acts or omissions. Establishing these grounds may require an expert report.[12]

Longo has almost glamorous facts.   At issue was the appellants’ discovery of damage to their sculpture Walking Man, possibly the work of Rodin. The sculpture was harmed while in the respondents’ care and the appellants claimed for damages. The court dismissed the claim on motion for summary judgment on the basis that it was commenced out of time.

Justice Hourigan set aside the decision of the motion judge and held that there was a genuine issue requiring a trial. Determining whether a reasonable person with the abilities and in the circumstances of the appellants ought to have discovered the claim required a full trial record. Justice Hourigan nevertheless shared his view on what was appropriate in the circumstances. On learning of concerns about the condition of Walking Man, a reasonable person would arrange for an inspection of the sculpture.

 

Collins v. Cortez: Respond with a reply[13]

This decision is a primer on how pleadings should address a limitations defence, which is often a point of confusion for counsel.

Cortez moved to dismiss Collins’s personal injury claim on the basis that it was commenced two years after her accident and statute-barred by the expiry of the limitations period. Justice Gordon granted the motion. He gave effect to the presumption in section 5(2) of the Limitation Act that the limitation period commenced on the date of the accident. He held that because Collins did not plead discoverability facts in her Statement of Claim, she could not make out a section 5(1) discoverability argument.

Not so, held the Court of Appeal. In the normal course, if a limitations defence is raised in a Statement of Defence, and the plaintiff relies on the discoverability principle, the plaintiff should plead the material facts relevant to discoverability in reply, not the Statement of Claim. The expiry of a limitation period is a defence to an action that must be pleaded in a Statement of Defence. As such, a plaintiff needn’t anticipate discoverability and address it in her Statement of Claim.

Leibel v. Leibel: Two year to challenge a will[14]

Since the Limitations Act came into force, the estates bar has speculated as to whether a limitation period applies to will challenges. Many thought that it would not, based in part on an influential article by Anne Werker on limitation periods in estate actions:

It has been suggested that the 15-year absolute limitation period applies to will challenges. I do not agree. Section 16(1)(a) of the new Act expressly states that there is no limitation period in respect of “a proceeding for a declaration if no consequential relief is sought”. [15]

The courts have tended increasingly toward asserting the application of the Limitations Act, and it came to seem likely a court would apply the Act to a will challenge. This is what Justice Greer did in Leibel.

The case involved two wills. The testatrix’s son Blake applied for a declaration that the wills were invalid, and another son and other respondents moved for an order dismissing the application on the basis that it was statute-barred by the expiry of the limitation period.

Justice Greer held that the limitation period began running in June 2011, the date of the testatrix’s death, because a will speaks from death. However, Blake discovered his claim within the meaning of the Limitation Act about a month later in July 2011 (for reasons that don’t bear mentioning here, but are at paragraph 39 of the decision). This meant that he commenced his application out of time.

In particular, Justice Greer rejected Blake’s argument that no limitation period applied to his will challenge pursuant to section 16(1)(a). She held that the legislature did not intend for section 16(1)(a) to exclude will challenges from the two-year limitation period:

To say that every next-of-kin has an innate right to bring on a will challenge at any time as long as there are assets still undistributed or those that can be traced, would put all Estate Trustees in peril of being sued at any time. There is a reason why the Legislature replaced the six-year limitation in favour of a two-year limitation.[16]

Kassburg v. Sun Life Assurance Company of Canada: In business agreements, the party isn’t literal[17]

Kassburg demonstrates the Court’s commitment to protecting individuals from contracts that impose shortened limitation periods. It deals with section 22(5) of the Limitations Act, which permits contracting out of the statutory limitation period through “business agreements” unless one of the parties to the contract is an individual. Rather than limiting the word “parties” in this section to its literal meaning, the Court of Appeal instructs us to adopt a meaning consistent with the objective of protecting individuals from unexpectedly or unfairly abridged limitation periods.

Kassburg was an insured under a group policy issued by the appellant Sun Life to the North Bay Police Association. The respondent submitted a claim for long-term disability benefits that Sun Life denied.

She commenced an action claiming entitlement to the benefits. Sun Life moved for summary judgment on the basis that her claim was out of time. Among other things, Sun Life relied on a one-year limitation period contained in the insurance contract. It argued that this was a limitation period subject to section 22(5).

The motion judge held that the insurance policy fit within the business agreement exception. Because the parties to the insurance contract were the Police Association and the appellant, the contract was not entered into by an individual.

Justice van Rensburg rejected this reasoning. The word “parties” in section 22(5) must be given a broad, purposive reading. The literal reading of “parties” is inconsistent with the objective of section 22, which is to restrict the circumstances in which a contract can alter the statutory limitation periods in the Limitations Act. Although the group insurance contract under which Kassburg made her claim was between the Police Association and Sun Life, Justice van Rensburg deemed Kassburg to be a party for the purpose of asserting her claim, and for Sun Life’s limitations defence.[18]

Green v. Canadian Imperial Bank of Commerce: Plaintiffs must fully control whether they commence an action in time[19]

In Green, the Court of Appeal overturned its decision in Sharma v. Timminco (2012)[20], thus restoring peace and order to the limitation scheme under the Securities Act. [21]

Timminco created a distinctively perverse phenomenon in limitations jurisprudence: a limitation period that did not allow plaintiffs to control whether they commenced an action in time. As Justice Feldman noted in her decision for the Court of Appeal, this was unprecedented and entirely foreign to the concept of limitations.

At issue in both cases was the statutory cause of action in section 138.3 of the Securities Act. This section creates a cause of action for misrepresentations regarding shares trading in the secondary market. A plaintiff, most often a representative plaintiff in a class proceeding, can only commence a section 138.3 claim with leave. Pursuant to section 138, a plaintiff has three years from the date of the misrepresentation to obtain leave and commence the action. [22]

The Timminco Court held that a claim for damages under section 138.3 is statute-barred if the plaintiff does not obtain leave to commence it within the three-year limitation period, and that section 28 of the Class Proceedings Act[23], which suspends limitation periods in favour of class members once a claim is asserted in a class proceeding, will not operate in respect of a 138.3 claim until leave is obtained.

The Timminco Court reasoned that a section 138.3 claim is “asserted” within the meaning of section 28 of the Class Proceedings Act only when leave is granted because leave is a component of the cause of action. Given the dictionary definitions before the Court of “assert”, this conclusion was sound, at least in theory.

In practice, it was problematic. Its effect was to require representative plaintiffs to move for and obtain leave to commence a section 138.3 claim within three years, but the plaintiffs could not control the timeliness. Obtaining leave within three years was challenging, if not impossible.

This limitation period is not subject to the discoverability provisions of the Limitations Act because it commences on the date of the misrepresentation. The longer it takes to discover the misrepresentation, the shorter the time for obtaining leave and commencing the action. Even if a plaintiff brought the motion in good time, the defendant could initiate procedural steps resulting in delay, and court availability could affect the timing of the hearing and the rendering of the decision.

And so the Court reversed itself. Justice Feldman set aside the Timminco Court’s interpretation of the Class Proceedings Act, holding instead that when a representative plaintiff brings a section 138.3 claim within the limitation period, pleads section 138.3 together with the facts that found the claim, and pleads an intent to seek leave to commence, the claim has been “asserted” for the purposes of the Class Proceedings Act, and the limitation period is thereby suspended for all class members.

This decision is obviously of great significance to the securities bar, but beyond that, it preserves the fundamental principle of limitations that a plaintiff must have unilateral control over whether it misses a limitation period.

 

And for the insurance bar…

Lastly, several insurance decisions bear noting.

From Sagan v. Dominion of Canada General Insurance Company, we learned that time begins to run for a claim for denied accident benefits on the date of the denial.  A party can’t stop the commencement of the limitation period by sneakily (or inadvertently) omitting certain documents from the accident benefits application.[24]

In Sietzema v. Economical Mutual Insurance Company,[25] the Court of Appeal held that the limitation period begins to run for a claim for statutory accident benefits when the insurer denies the application for those benefits.

In Schmitz v. Lombard General Insurance Company of Canada[26], the court determined when the limitation period commences for a claim for indemnity under OPCF 44R, an optional endorsement for underinsured motorist coverage to the standard form automobile insurance policy. The limitation period does not start to run when the demand for indemnity is made because default must first occur. The limitation period begins to run the day after the demand for indemnity is made.

[1] Dan is a contributor to the upcoming fourth edition of The Law of Limitations and a lawyer at Clyde & Co. His practice focuses on commercial litigation and lawyers’ professional negligence. He also publishes Under the Limit, a blog about developments in the always riveting world of limitations jurisprudence.

[2] This is subject to the occasional exception. See for example Economical Mutual Insurance Company v. Zurich Insurance Company, 2014 ONSC 4763, in which the Court undertakes a classification of actions analysis, presumably out of nostalgia.

[3] See 407 ETR Concession Company v. Ira J. Day, 2014 ONSC 6409.

[4] See Miletic v. Jaksic, 2014 ONSC 5043 and the related post on Under the Limit, <http://limitations.ca/?p=19>.

[5] 2014 ONCA 86.

[6] 2013 ONSC 948.

[7] 2013 ONSC 948 at para. 143.

[8] 2014 ONCA 86 at para. 51.

[9] Conversely, the mere fact that a claim affects real property will not exclude the application of the Limitations Act. See Zabanah v. Capital Direct Lending, 2014 ONCA 872.

[10] 2014 ONCA 526 (“Longo”).

[11] 1998 CanLII 5359 (Ont. C.A.).

[12] See Longo, supra note 1, at paras. 41-44.

[13] 2014 ONCA 685.

[14] 2014 ONSC 4516.

[15] Anne Werker, “Limitation Periods in Ontario and Claims by Beneficiaries”, (2008) 34:1 Advocates’ Q at 24-28.

[16] 2014 ONSC 4516 at para. 52.

[17] 2014 ONCA 922.

[18] 2014 ONCA 922 at paras. 58-61.

[19] 2014 ONCA 90.

[20] 2012 ONCA 107.

[21] R.S.O. 1990, C. S.5.

[22] See also section 19 of the Limitations Act, 2002.

[23] S.O. 1992, C. 6.

[24]2014 ONCA 720.

[25] 2014 ONCA 111.

[26] 2014 ONCA 88.

Ontario: Even highways are subject to limitation periods (plus a novel discovery argument)

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Readers of Under the Limit rejoice! There is now an answer to the question that worried us so while driving the 407: what limitation period applies to the collection of unpaid 407 tolls?

Not only did the Court answer this question in 407 ETR Concession Company v. Ira J. Day, it emphasised the universal application of the Limitations Act, 2002 and added a novel proportionality component to the discovery analysis.

Mr. Day refused to pay his 407 tolls.  Unfortunately, the cameras of the 407 ETR Concession Company are all-seeing, and so in June 2013 the 407 ETR commenced an action against Mr. Day for payment of $9,808, plus interest, owed for driving the 407 on 2,194 occasions.  Mr. Day admitted his use of the 407, but chose to fight a portion of the 407’s claim against him on the basis that it was statute-barred.  407 brought a r. 21 motion to determine the limitation issues. The 407 ETR was represented by a team of three from Lenczners led by Tom Curry.  Mr. Day was represented by a team of two captained by Ronald Manes of Torkin Manes.  The 407 is, evidently, serious business.

The 407 ETA’s argument was threefold. First, they argued that the Limitations Act, 2002 does not apply to claims brought by the 407 ETA. The basis for this position was the Highway 407 Act, which provides that “a toll and any related fee or interest is a debt owing to the owner, and the owner has a cause of action enforceable in any court of competent jurisdiction for the payment of that debt”.  If the legislature intended this debt to be like any other, the 407 ETA suggested, there would be no reason to specify separately that the 407 ETR has a cause of action to enforce the debt.  By implication, the cause of action is a stand-alone remedy available to the 407 ETA that is not subject to the Limitations Act, 2002 (presumably, the limiting principles of equity would still apply, though the 407 ETA doesn’t appear to have addressed this).

This is a problematic argument because it’s entirely at odds with a limitation period of general application. Justice Edwards rightly had none of it, noting that it “flies in the face” of the universal limitation period in section 4 of the act:

[41]      There is nothing from my review of the Limitations Act nor the Highway 407 Act which would explicitly exempt the 407 ETR from Ontario’s limitation regime, nor is there anything that prescribes a separate limitation period for the toll debt.  Presumptively the toll debt owed to the 407 ETR is, in my view, subject to sections 4 and 15 of the Limitations Act.

[…]

[43]      In my view it would take explicit language in the 407 Act, and or an exception provided for in the Limitations Act, to give to the 407 ETR an ability to make a claim free of any limitations defence.  No such language can be found in the 407 Act, nor is there any exception in the Limitations Act.

The 407 ETA’s second argument was that the applicable limitation period was 15 years pursuant to the transponder lease agreement Mr. Day signed. It argued that the agreement was valid under section 22 of the Limitations Act, 2002, which permits parties to extend a limitation period by agreement.

This argument also failed.  Section 22(5) allows for the variance and exclusion of limitation periods under the act in respect of “business agreements”. The act defines “business agreement” as “an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002”.  The Consumer Protection Act, 2002 defines a consumer as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.”

The lease agreement could not be a business agreement:

[51]      The application for the Transponder Lease signed by Mr. Day makes quite clear on its face that he is signing for personal use as opposed to business use.  The 407 ETR must have therefore known of the distinction between a consumer applying for a transponder in his personal capacity versus someone acting in his business capacity.  Mr. Day, when he leased the transponder, did so as a consumer as defined by the Consumer Protection Act.  As such, the 407 ETR cannot rely upon the 15 year limitation period set forth in the Transponder Lease Agreement, as the 407 ETR does not fall within the exception set forth in section 22(5)(1) of the Limitations Act given that it only applies in respect of business agreements.  The Transponder Lease Agreement as signed by Mr. Day was not a business agreement.

This serves as a reminder to carefully word agreements excluding the Limitations Act, 2002.

The 407 ETA’s last argument was that the limitation period commenced when Mr. Day’s license plate went into “denial”, and not, as Mr. Day argued, on the date the 407 ETA issued each invoice. The Highway 407 Act empowers the 407 ETR to ask the Registrar of Motor Vehicles to deny the renewal of a license plate associated with outstanding 407 invoices.

Justice Edwards undertook a discovery analysis. He focussed on the criterion in section 5(1)(a)(iv) of the Limitations Act, 2002, whereby a party must discover that, “having regard to the nature of the injury,  loss or damage, a proceeding would be an appropriate means to seek to remedy it”:

[57]           It would be difficult to argue that the 407 ETR would not have the means to discover when an invoice is unpaid.  In this age of computers it would undoubtedly be possible for the 407 ETR to have available to it the necessary information to determine that with the non-payment of an invoice 30 days after its issuance, that in fact “injury, loss or damage had occurred”.  To require the 407 ETR to issue a claim for every unpaid invoice would not be an effective means, nor would it be an appropriate means to seek its remedy.  The invocation of section 5(1)(a)(iv) of the Limitations Act is not a question of discoverability, but rather an application of proportionality, common sense and the effective means emphasized by the Divisional Court in 407 ETR Concession Company Limited (supra).

To my knowledge, this is a novel reading of section 5(1)(a)(iv). If there’s a standard definition of “appropriate”, it’s “legally appropriate” (see Markel Insurance Company of Canada v. ING Insurance Company of Canada at para. 34). This section is mostly invoked to delay the commencement of a limitation period while the underlying damage, though discovered, is trivial and a claim for damages is legally inappropriate. Here the issue isn’t the triviality of the 407 ETR’s damage, but the burden of imposing a limitation period that would oblige it to commence thousands of claims.

If this proportionality approach to section 5(1)(a)(iv) finds traction, I look forward to seeing how the courts determine the balance. If the prospect of thousands of actions means a claim is not legally appropriate, what of the prospect of just a thousand actions, or five hundred, or fifty? How much burden must there be to prevent a claimant from discovering its claim?

Another implication of Justice Edwards’s analysis is to give the 407 ETR control of the commencement of the limitation period.  It’s the 407 ETR that initiates a plate denial.  In theory, the 407 ETR could wait years before causing the limitation period to run, subject only to the 15 year ultimate limitation period, and enjoy the benefit of accruing interest.  This gives defendants no security that they “will not be held to account for ancient obligations”, a fundamental purpose of limitations legislation (see M.(K.) v. M.(H.)).