Ontario Act s. 5

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: The oppression remedy and the limitation period

In Maurice v. Alles et al., Justice Patillo provides a helpful summary of the principles governing the commencement of the limitation period in an oppression claim. It commences on the date the oppression first arises; the fact that the oppression is continuing will not delay commencement:

[54]        In Fracassi v. Cascioli, 2011 ONSC 178 (CanLII), 2011 ONSC 178 (Ont. S.C.), Pepall J., as she then was, held that pursuant to the Limitations Act, the applicable limitation period for an oppression claim begins two years after the day on which the claim for oppression was discovered. In reaching that conclusion, the learned judge relied on the following passage from Professor Koehnen’s text at p. 57:

 

Ordinarily, limitation periods begin from the time the plaintiff knows or ought to know of his cause of action. The fact that certain types of oppression continue until they are rectified has given rise to unusual results with respect to limitation periods. In Hart Estate v. Legacy Farms Inc., [1999] B.C.J. No. 312, the plaintiff complained of oppression in respect of a share issue that was completed more than six years before the action was commenced. The plaintiff knew about the share issue when it occurred. The British Columbia Supreme Court held that the claim was not caught by the Limitations Act because oppression continues until it is rectified. Manitoba courts have reached the opposite conclusion and have held that limitation periods do apply even to continuing conduct. This is generally the preferable approach. The concept that the limitation period does not begin to run until the oppression is remedied is counter-intuitive. Limitation periods begin when the cause of action arises, not when it is remedied. A limitation period for a breach of contract begins when the contract is breached, not when the breach is corrected. The idea that limitation periods begin to run when the oppression stops makes even less sense given the requirement of some courts that the oppression continue until the action is commenced. The combination of these two rules would result in an absurd situation. In essence, the limitation period does not begin to run until the oppression stops. But once the oppression stops, the plaintiff has no cause of action.

 

[55]        While at first blush, the above two excerpts from Professor Koehnen’s text appear contradictory, in my view they are not. The examples in the excerpt relied upon by Robert presuppose that the aggrieved shareholder was not aware of the oppressive conduct giving rise to the damage until sometime later. In that regard, the conduct is continuing. While the act of oppression may be ongoing, I agree with Pepall J. that such continuation does not operate to extend the limitation period beyond the time of two years from discovery.

[56]        There is no question that there are cases where the court has referred to the “ongoing” or “continuing” nature of the conduct to defeat a limitation period argument. See: Waxman v. Waxman, 2004 ONCA 39040 (C.A.) at paras. 534-536; Metcalfe v. Anobile, 2010 ONSC 5087 (CanLII), 2010 ONSC 5087 (Ont. S.C.). When the facts of those cases are viewed closely, however, it is discoverability that is the key factor in determining when the limitation period begins to run.

[57]        A claim for oppression can arise from many different factual situations. It is not until the plaintiff becomes aware of the material facts upon which a claim for oppression can be based that the limitation period will begin to run in respect of that claim. Similarly, if at some later point the plaintiff learns of other oppressive conduct that he or she was not otherwise aware of, the limitation period in respect of a claim for oppression relating to that conduct would only begin to run from the time the material facts giving rise to that claim became known.

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: A good discovery analysis in a medical malpractice claim

Justice Stinson’s Endorsement in Brown v. Wahl is a succinct and well-reasoned example of a discovery analysis in a medical malpractice claim where the injury is obvious and the issue is when the plaintiff ought to have inferred a potential claim against the defendant practitioners.

The defendant dentists moved for summary judgment based on a limitations defence. The limitations issue wasn’t the plaintiff’s knowledge of her injury. She encountered problems with her dentures immediately after one of the defendants constructed and inserted them. She knew, or ought to have known, that something was wrong with her dental work at that time.

The issue was when she should have known why she was experiencing the problems. Justice Stinson found that she ought to have inferred that she had a potential claim against the defendants once a third dentist, Dr. Singh, explained the source of the problems and advised her that he would have performed the procedure differently. No expert report was necessary.

[32]           In my view, armed with the foregoing knowledge and information, a reasonably prudent person in the position of the plaintiff would have inferred that either or both of the defendants Casciato and Wahl had been negligent. She knew that the problem she was experiencing flowed from their treatment. She had to know that the outcome was substandard. Based on what she was told by Dr. Singh on December 13, 2011, she should have known that her problem “must have been caused through some act or failure to act by one or more of the professionals involved in the procedure and there was the likelihood of negligence of some kind, either in what was done or what was not done but should have been.” See McSween v. Louis, (2000) 2000 CanLII 5744 (ON CA), 132 O.A.C. 304, 187 D.L.R. (4th) 446 (ON C.A.) at paragraph 47.

[33]           Here, based upon what she was told by Dr. Singh, the plaintiff ought to have known that the problems she was experiencing were caused by substandard treatment by one or both of the defendants. While she may have learned additional information about that substandard treatment once she received the expert reports in early 2014, in my view, those reports do not detract from the fact that she had sufficient knowledge to be aware of a breach by December 13, 2011 at the latest. Put another way, I find that the claims were discoverable by that date.

[34]           This is not a case in which an expert opinion was necessary for the plaintiff to conclude that there was the likelihood of negligence of some kind. As the cases mentioned above make plain, it is enough for the plaintiff to have prima facie grounds to infer that the defendants caused harm, and certainty of the defendants’ responsibility for the act or omission that caused the loss is not a requirement for the limitation period to begin to run.

Readers may find it helpful to bookmark the Endorsement for its statement of the basic principles of a section 5 discovery analysis (paragraphs 13 – 20). The Endorsement quotes Justice Perell’s thorough discussion of discoverability in 2013’s Tender Choice Foods v. Versacold Logistics Canada Inc., a decision which I expect will remain the best summary of section 5 jurisprudence for some time.

Update: Compare Brown with another recent medical malpractice decision involving dentists, Maurice v. Alles et al.

Ontario: Discovery of damage in an oppression claim

From Justice Newbould comes Solar Harvest Company v. Dominion Citrus Limited, a decision on the commencement of the limitation period for the oppression remedy.  This is not an especially developed area of limitations jurisprudence, and it’s of interest that Justice Newbould determined, for the purposes of section 5 of the Limitations Act, 2002, that damage in an oppression claim occurs when there is loss attributable to the alleged oppression.

The applicant Solar and Fortune owned preference shares of the respondent Dominion. Solar and Fortune sought oppression relief as a result of, among other things, a Plan of Arrangement involving Dominion that converted its business into an income trust in 2005.

The Arrangement affected Solar and Fortune as preference shareholders:

[10]           […] Prior to [the Arrangement], Dominion had had the option on the retraction of the preference shares to pay for them in common shares of Dominion or in cash, and if Dominion chose to pay for them in cash, there was no debt in priority to the preference shares and thus no concern that cash could not be paid. After the Arrangement, because there was no ability of Dominion to pay with its common shares on a retraction of the preference shares, whether Dominion had the cash to pay for the preference shares depended on whether Dominion had available cash after paying interest on the participating notes. For this reason, the applicants say they were oppressed.

Dominion objected to the application on the basis of the expiry of the limitation period. Its position was that the Solar and Fortune knew of the material facts of the alleged oppression more than two years before bringing the application. Solar and Fortune argued that they did not suffer any damage until they received a letter from Dominion refusing to redeem the preference shares and the limitation period ran from that date.

Justice Newbould noted that in the context of an oppression claim, the word “damage” in section 5 of the Limitations Act is the “condition of being worse off than if the oppressive activity had not occurred and at least some of the loss is attributable to that oppressive activity.” The damage was not Dominion’s refusal to redeem the preference shares, but the effect of the Arrangement on the ability of Solar and Fortune to have their preference shares redeemed, and a 2009 change to the participating notes to make them secured.

Should it be of interest, this is the discovery analysis:

[29]           Prior to the meetings of the shareholders and of the preference shareholders held on December 22, 2005, the preference shareholders were sent an information circular for their special meeting that included the entire information circular for the proposed Arrangement sent to the shareholders. Mr. Fortune, a chartered accountant, received this material. He was made aware that the participating notes would be issued by Dominion to Dominion Fund and was aware from the audited financial statements that the amount of the notes issued on January 1, 2006 was $19,258,000. The interest owing on that liability each year spelled doom for Dominion ever having enough cash to redeem the preference shares without being offside the OBCA solvency requirements.

[30]           As well, whereas before the Arrangement, Dominion had experienced earnings for the past four years of between $2.6 million and $1.3 million, after the Arrangement, Dominion had earnings losses each year, beginning with a loss of $2.4 million in 2006, $399,000 in 2007, $3.978 million in 2008, $2.364 million in 2009, $1.278 million in 2010, $4.152 million in 2011, $249,000 in 2012 and $357,000 in 2013. These were reported in the audited financial statements and known to Mr. Fortune. Mr. Fortune had to know that with these liabilities and losses occurring each year that the ability of Dominion to redeem the preference shares was remote.

[31]           Also known to Mr. Fortune from the audited financial statements was the amount of interest paid by Dominion to Dominion Fund each year. $2.5 to $2.7 million was paid out each year to 2009 when the rate on the notes was 13% and $881,000 was paid out 1n 2011 after the rate was reduced to 5%. In December, 2011 the participating notes were again changed to provide for another interest free holiday to the end of 2013.

[32]           In 2008 Dominion stopped paying interest on the preference shares. Mr. Fortune acknowledged on cross-examination that at that time he realized that there was something going on “that was not quite right”. Taken he was a chartered accountant, that is not a surprising statement.

[33]           In June, 2012, more than two years before this application was commenced, Mr. Fortune said that he opened negotiations with Dominion regarding the upcoming retraction date for the preference shares. He said he was told at that time that there was an issue with the participating notes taking priority over the preference shares. It would be surprising indeed if Mr. Fortune did not realize that before in light of all of the information that he had had since the Arrangement in 2005 and the change to the terms of the participating notes in 2009 that he knew about. If he didn’t know of this issue before, he ought to have, taking all of the information he had been given, but in any event, he knew of it by June 2012. He acknowledged that by that time he felt that his interests and rights or privileges as a preference shareholder had been disregarded, and that they had been disregarded by the restructuring of the notes in 2009.

[34]           Taking all of the evidence into account, I cannot help but find that Mr. Fortune well knew the material facts on which this claim is based before October 6, 2012, two years before he commenced this application. In the circumstances the application must be dismissed as being statute barred.

 

Ontario: For limitation purposes, an “Undertaking” can be a demand obligation

In Bossio v. Nutok Corporation, Justice Kershman held that a document referred to as an “undertaking” can still be a demand obligation for the purposes of section 5(3) of the Limitations Act, 2002:

 [224]     While the demand in the case at hand is referred to as an Undertaking, it does not set out the specific amount of debt owing, and it is not signed by the lenders or their authorized agents, the Court finds that, on this particular set of facts, sufficient demand has, nonetheless, been made (See: Dow v. Canadian Commercial Bank, 1986 CarswellOnt 4633, at paras 20 and 26). The Court is persuaded by the fact that the demand provided notice in writing, required immediate repayment via an immediate payment plan, set a deadline for repayment, as well as a reasonable period of time for repayment of 50% of the debts. Moreover, the fact that Mr. Bossio signed the demand ensured that notice was provided and received by the borrower, fulfilling the underlying purpose of the demand: to notify the borrower of the lender’s “right to immediate repayment of such loans”.

Justice Kershman found that the demand was delivered more than two years before the action was commenced, and was therefore barred by the expiry of the limitation period. If you’d like a reminder why the lender’s delivery of a demand causes the limitation period to commence, notwithstanding the apparent meaning of section 5(3), see the Court of Appeal decision in Hare v. Hare.

Ontario: Condo owners take note, a special assessment may not be a demand obligation

Valentina Vasilescu Tarko et al. v. Metropolitan Toronto Condominium Corporation 626 (MTC 626) et al. holds that a special assessment levied on a condo owner is not a demand obligation within the meaning of section 5(3) of the Limitations Act, 2002. The section provides as follows:

Demand obligations

For the purposes of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made.

Because the assessment provided a date for repayment, it wasn’t a demand obligation:

The appellants suggested that the Special Assessment was subject to s. 5(3) of the Limitations Act concerning demand obligations. A debt obligation that does not specify a date for repayment is a demand obligation. See Skuy v. Greenough Harbour Corp., 2012 ONSC 6998 (CanLII), 10 B.L.R. (5th) 146, at para. 31. The 2011 Special Assessment was made payable in three instalments, the first of which was July 1, 2011. Accordingly, the Special Assessment was an obligation which did specify a date when it was payable and it is not therefore a demand obligation. Section 5(3) of the Limitations Act has no application.

In his decision, Justice Marrocco also emphasised that there is no requirement for a limitations decision to refer to the specific wording of the Limitations Act,2002:

The appellants argued that the Deputy Judge’s oral reasons did not refer to the specific wording of the Limitations Act. The Deputy Judge was not required to refer to the specific wording of the Limitations Act.  A review of the oral reasons reveals that the Deputy Judge considered the relevant factors set out in s. 5(1) of the Limitations Act in deciding to stay the appellants’ claim. The Court of Appeal in Ali v. Triple 3 Holdings Inc., 2002 CanLII 45126, at para. 4,¸stated that “an appellate court should not presume that the judge of first instance was not aware of or failed to apply the appropriate legal test merely because the test is not explicitly set out in the judge’s reasons.” A judge’s reasons are adequate if they demonstrate that judge has considered the relevant factors and important issues in the case. In R. v. Sheppard, 2002 SCC 26 (CanLII), [2002] 1 S.C.R. 869, at para. 42, the Supreme Court quoted with approval the words of Major J. in R. v. R.(D.), [1996[ 2 S.C.R. 191: “where the reasons demonstrate that the trial judge has considered the important issues in a case, or where the record clearly reveals the trial judge’s reasons, or where the evidence is such that no reasons are necessary, appellate courts will not interfere.”

This is a point that bears remembering when considering whether to appeal from a limitations judgment, particularly from a judgment of the Small Claims Court.

Ontario: Section 5 can require a plaintiff to bring a Wagg motion

Leave a Comment

In Lima v. Moya and Mata v. Moya, Master Haberman provides a detailed discussion of a plaintiff’s obligations under the Limitations Act, 2002 to investigate potential parties prior to the expiry of the limitation period. The relevant paragraphs are below.

Two issues bear noting. Firstly, Master Haberman refers to the discoverability doctrine and its application to the section 4 general limitation period.  Technically speaking, this is incorrect.  Section 5, which is the codification of the common law principle of discoverability, determines the commencement of the general limitation period.

Secondly, Master Haberman held that a plaintiff’s obligation to take reasonable steps to investigate a potential claim can include bringing a Wagg Rule 30.10 motion (see this helpful explanation of Wagg motions). She found it “inconceivable” that personal injury counsel would be unfamiliar with this procedure for gaining access to police records, and that the failure to bring such a motion in this case “amounts to a lack of due diligence, such that discoverability cannot be relied on” (at paras. 95, 117).

[59]        The applicable limitation period here is two years, as per s. 4, of the Act, so it expired in July 2011, subject to the application of the discoverability doctrine.   The Act states that a party is presumed to have known of all necessary matters to start its claim on the day on which the act or omission on which the claim is based occurred, so that the plaintiff bears the onus of establishing that the presumption should be ousted.

[60]        Discoverability is discussed in s.  5(1)(b) of the Act, which states that:

A claim is discovered on the earlier of the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in Clause (a).

[61]        Case law has interpreted first ought to have known to mean would have found out had they used reasonable diligence.  Thus, a plaintiff is bound to start his claim within two years of becoming aware of the material facts on which it is based having been discovered, or ought to have been discovered by the plaintiff by the exercise of reasonable diligence. (see Central Trust Co. v. Rafuse 1986 CanLII 29 (SCC), [1986] 2 SCR 147).

[62]        Where the plaintiff relies on their failure or inability to learn all of the facts they deem necessary to start their claim against a particular defendant, the onus is on him to lead cogent evidence to the effect that it would have been inappropriate or abnormal for him to have investigated further during the life of the limitation period (see Mercurio v. Smith [2011] OJ No. 5040).

[63]        In Aguonie v. Galion Solid Waste 1998 CanLII 954 (ON CA), 1998 CANLII 954, the Ontario Court of Appeal discussed the why discoverability was a necessary addition to the law of limitations.  One of the scenarios considered was a case where the seriousness of the injuries sustained by a plaintiff was not clear within the two-year limitation period.  Thus, though it might appear that a plaintiff was aware of all of the elements to allow the him to know he had a claim and against whom it should be brought within the limitation period, the essential ingredient of whether his injuries were serious enough to pass threshold may not have crystalized during that time frame.  In such cases, the court was of the view that the deadline for starting the action should be extended until he could know, and discoverability principles were used as a basis for doing so.

[64]        The Court of Appeal has also looked at cases where identifying tortfeasors was the issue, pointing out that:

The discovery of a tortfeasor involves more than the identity of one who may be liable.  It involves the discovery of his or her acts, or omissions, which constitute liability.     

[65]        Again, the plaintiff will be held to a standard of having used reasonable diligence to obtain this information.

[66]        It is also understood that, in certain types of actions, identifying possible defendants is not always a straightforward exercise.  For example, in medical malpractice cases, hospital charts may be illegible or not all medical staff in an operating room or on duty in the emergency room may be identified.  In slip and fall actions, it may take time to determine all possible occupiers, or those contractually bound to maintain the upkeep of the property where the accident occurred.

[67]        It is understood that there will be cases where the plaintiff is not even aware that he is missing critical information leading to the identity of a possible defendant until examinations for discovery so he cannot be found at fault for failing to pursue further information (see Madrid v. Ivanhoe Cambridge Inc. 2010 ONSC 2235 (CanLII).

[68]        As the court pointed out in Western Mercantile Financial Corp. v. Ernst & Young Inc., 1999 ABQB 144 (CanLII), 11, CBR (4th) 149, not every item of evidence to support the plaintiff’s claim need be known before the limitation period commences to run.

[69]        Similarly, in Lawless v. Anderson, 2011 ONCA 102 (CanLII), the court stated:

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.

…Certainty of a defendant’s responsibility for the act or omission that caused or contributed to the loss is not a requirement.

[70]        Further, in The Investment Administration Solution Inc. v. Silver Gold Glatt & Grosman LLP 2011 ONCA 658 (CanLII), the Court of Appeal pointed out that discovery of new facts that might help the plaintiff’s case does not restart the limitation period.

[71]        In summary, as long as the identity of a potential tortfeasor is known and there is some information on which a court could make a finding of liability, there is no room for discoverability to delay the starting point of the limitation period.   Having enough information to form an allegation of negligence is quite different from having a winning case against a particular defendant – it is only the former that is required for the limitation clock to start running.

[72]        Further, while new information may emerge down the road that strengthens the case against the proposed defendant, this will not restart the clock.  A plaintiff should not wait until he has a good case against a defendant before starting a claim against him – as long as he has a case he can try to make, he must move within the limitation period.

[73]        In terms of what does and does not constitute due diligence in assessing whether grounds to sue a particular individual exist, Master Dash noted in Wakelin v. Gourley et al 2005 CanLII 23123 (ON SC), 76 OR (3d) 272, that if all the plaintiff does during the two years after an accident in order to identify tortfeasors is request a copy of the police report, that will not constitute reasonable diligence.

[74]        The plaintiffs rely on the case law that dictates the approach the court should take when dealing with motions such as there, where the issue of discoverability is on the table and there is a credibility issue.  They maintain that the case law suggests that leave should be granted to add the proposed party, while also allowing the defendant to plead the expiry of the applicable limitation period.

[75]        However, it appears clear that such an approach is only advocated when there is an issue of credibility that has to be resolved regarding who knew what and when, such that a trial is a better mechanism for resolving the issue (see Wong v. Sherman [1998] OJ No. 1534).   The “let it go and flesh out the facts at trial” approach is only appropriate when the basis for the discoverability of the claim must be explored in more depth and the evidence about it needs to be tested.

[76]        I should not have to point this out in 2015, the plaintiff’s only salvation in the face of an expired limitation period is the application of the discoverability doctrine.  The doctrine of “special circumstances” was clearly laid to rest in Joseph v. Paramount Canada’s Wonderland, 2008 ONCA 469 (CanLII), a decision of the Ontario Court of Appeal released in February 2008.   Cases that talk about lack of prejudice are generally dealing with special circumstances so the presence or absence of prejudice really is not a factor here.   When dealing with discoverability, the issue is whether someone discovered, or ought to have, that they have a claim, along with the essential elements that go with it to enable them to start an action.  This is a fact-based analysis [emphasis in original].

Ontario: Justice Perell on the operation of the section 5 discovery provisions

Leave a Comment

In Zhu v. Matadar, Justice Perell provides a succinct and helpful description of how sections 5(1) and (2) of the Limitations Act, 2002 operate:

[6]               Not surprisingly, in bringing a summary judgment motion, a defendant advancing a limitation period defence will rely on the statutory presumption in s. 5 (2) of the Limitations Act, 2002 that unless the contrary is proven, the claimant is presumed to have known the elements for his or her claim on the day the events of the claim occurred.

[7]               Not surprisingly, on the summary judgment motion, a plaintiff will attempt to rebut the statutory presumption by tendering evidence that he or she both subjectively and objectively did not discover the claim until sometime after the day the events of the claim occurred.

[8]               In order to rebut the presumption, the claimant must meet both a subjective and an objective standard because s. 5 (1) of the Act defines discovery by relation to “the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).”

[9]               Practically speaking, applying s. 5 (2) of the Limitations Act, 2002 to any case and focussing on the commencement of the running of the limitation period means that for the claimant to prove that his or her claim is timely, the claimant must prove that he or she subjectively and objectively did not discover the claim in the period between the events giving rise to the claim and a date that is two years before an action was commenced; otherwise the two year period will begin at the date of the event and end at the second anniversary of the event.

Nothing in this description is novel, and one might assume it’s well familiar to lawyers who have practiced under the Limitations Act, 2002 for the past ten years. Nevertheless, I often encounter misunderstandings about the interaction of section of 5(1) and (2), from both bench and bar.

This is particularly so regarding Justice Perell’s reminder that the practical implication of section 5(2) is to require a plaintiff to meet the “modified objective” test in section 5(1)(b) (see Ridel v. Cassin at para. 4), rather than merely the subjective test in section 5(1)(a).  There’s no gain in establishing when the plaintiff subjectively discovered the claim when the defendant will establish that the plaintiff ought to have discovered it earlier.

Ontario: Remember, knowing of a possible claim doesn’t start the limitation period

Leave a Comment

AIG Insurance Co. v. Canjam Trading Ltd is of interest because it relies on the practically ancient (at least in terms of limitations jurisprudence) decision in Consumers Glass Co. v. Foundation Co. of Canada Ltd (1985) for the principle that “mere knowledge of a possible claim is not sufficient to trigger the commencement of time for limitation purposes.”

This principle has been codified in section 5(1)(a) of the Limitations Act, 2002 since January 2004. Nevertheless, it’s good that the Court is emphasising the point, even if by relying on dusty, albeit still frequently-cited authority. It remains frustratingly difficult for many who practiced under the old Act to accept that the limitation period doesn’t necessarily commence on the date of the loss.