Ontario: Court of Appeal holds no limitation period for applications for a declaration on a codicil’s validity

In Piekut v. Romoli, the Court of Appeal held that no limitation period applies to an application for a declaration on the validity of a codicil.

The motion judge held that such an application is a proceeding for a declaration without consequential relief and therefore free from limitation pursuant to s. 16(1)(a) of the Limitations Act.

The court rejected the appellant’s argument that the basic limitation period applied:

[11]      We do not accept this submission. Both Leibel and Birtzu are readily distinguishable from this appeal.

 [12]      In Leibel, Greer J. acknowledged the potential application of s. 16(1)(a) of the Limitations Act, but held that it did not apply because the applicants had clearly sought consequential relief in addition to a determination of the validity of the will. This consequential relief included: an Order revoking the grant of the Certificate of Appointment of Estate Trustees with a Will; an Order removing the Estate Trustees; an Order that the Estate Trustees pass their accounts; an Order appointing an Estate Trustee During Litigation; and an Order for damages in negligence against the drafting solicitor and her law firm. In addition, in Leibel the primary will of the deceased had been probated. Birtzu had a similar fact pattern.
 [13]      In contrast, in this case Helen sought none of this consequential relief. Nor has anyone done anything to propound the will. It sat there for seven years, presumably because the siblings were all trying to work out their disagreements. In these circumstances, Helen was entitled to seek declaratory relief, simply to establish the validity, or lack of validity, of the codicils – to define the rights of the parties in order to avoid future disputes.

As I wrote regarding the motion judge’s decision, this is the correct outcome by the wrong reasoning.

No limitation period applied to the proceeding because it didn’t pursue a “claim”.  The Limitations Act applies to “claims” pursued in court proceeding (s. 2).  If there’s no “claim”, no limitation period applies.  “Claims” derive from causes of action.  If there’s no cause of action, there’s no “claim”.

There’s no cause of action asserted in an application for a declaration regarding the validity of a codicil (or a will).  Accordingly, the applicants were not pursuing a “claim” in a court proceeding, and no limitation period applied to it.

Statutory limitation periods have always applied to causes of action, which is why there was no suggestion that they applied to will challenges under the former scheme.  The confusion arises from misapprehending the universality of the basic limitation period.  It is universal in that applies to all causes of action, not because it applies to every proceeding.

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

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

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

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

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

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

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

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

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

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

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

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

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

Ontario: Court of Appeal on the limitation of anticipatory breach claims

The Court of Appeal decision in Glen Schnarr & Associates Inc. v. Vector (Georgetown) Limited summarises the principles of the limitation of claims arising from the anticipatory repudiation of a contract:

[29]      Anticipatory repudiation occurs when a contracting party, “by express language or conduct, or as a matter of implication from what he has said or done, repudiates his contractual obligations before they fall due”: G.H.L. Fridman, The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011), at p. 585. The parties concede that LDGL by its correspondence of October 2004 did just that.

 [30]      However, an anticipatory repudiation of a contract does not, in itself, terminate or discharge a contract; it depends on the election made by the non-repudiating party: Guarantee Co. of North America v. Gordon Capital Corp., 1999 CanLII 664 (SCC), [1999] 3 S.C.R. 423, at p. 440; Brown v. Belleville (City), 2013 ONCA 148, 114 O.R. (3d) 561, at para. 42. As Cronk J.A. stated in the latter decision at para. 45:
 It appears to be settled law in Canada that where the innocent party to a repudiatory breach or an anticipatory repudiation wishes to be discharged from the contract, the election to disaffirm the contract must be clearly and unequivocally communicated to the repudiating party within a reasonable time. Communication of the election to disaffirm or terminate the contract may be accomplished directly, by either oral or written words, or may be inferred from the conduct of the innocent party in the particular circumstances of the case: McCamus, at pp. 659-61. [Emphasis added.]

[31]      In Chitty on Contracts, 28th ed. (London: Sweet and Maxwell, 1999), Vol. 1, at p. 25-012, the authors write:

 Acceptance of a repudiation must be clear and unequivocal and mere inactivity or acquiescence will generally not be regarded as acceptance for this purpose. But there may be circumstances in which a continuing failure to perform will be sufficiently unequivocal to constitute acceptance of a repudiation. It all depends on the “particular contractual relationship and the particular circumstances of the case.”

[32]      This commentary was accepted by this court in Brown v. Belleville, at para. 48, and by the Nova Scotia Court of Appeal in White v. E.B.F. Manufacturing Ltd., 2005 NSCA 167, 239 N.S.R. (2d) 270, at para. 91.

 [33]      The limitation period then depends on the election that is made in response to an anticipatory repudiation: Ali v. O-Two Medical Technologies Inc., 2013 ONCA 733, 118 O.R. (3d) 321, at para. 22-27; Hurst v. Hancock, 2019 ONCA 483, at para. 19.

Ontario: Court of Appeal holds s. 51(1) of the SABS is subject to discoverability

Is the limitation period in (the repealed) s. 281.1(1) of the Insurance Act and s. 51(1) of the Statutory Accident Benefits Schedule subject to discoverability? Yes, held the Court of Appeal in Tomec v. Economical Mutual Insurance Company.

Section 51(1) provided that “A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.”

Economical argued that the refusal to pay a benefit is a specific event that isn’t tied to the cause of action and therefore isn’t subject to discoverability. The court rejected this argument and found that the refusal to pay a benefit is an element of the cause of action:

[35]      I would not give effect to this argument. It is contrary to the admonition from the Supreme Court in Pioneer at para. 36 that:

In determining whether a limitation period runs from the accrual of a cause of action or knowledge of the injury, such that discoverability applies, substance, not form, is to prevail: even where the statute does not explicitly state that the limitation period runs from ‘the accrual of the cause of action’, discoverability will apply if it is evident that the operation of a limitation period is, in substance, conditioned upon accrual of a cause of action or knowledge of an injury.

[36]      The refusal to pay a benefit is clearly tied to the appellant’s cause of action. Absent a refusal to pay the benefit sought, there cannot be a claim made for mediation or an evaluation. Thus, the refusal to pay a benefit and the ability to make a claim are inextricably intertwined in the cause of action. The refusal cannot be stripped out of the cause of action and treated as if it is independent from it.

[37]      This distinguishes the case at bar from the situations in Ryan and Levesque. In both those cases, the courts were considering limitation periods that were wholly independent from the cause of action. The commencement of the limitation period was tied to the date of the deceased’s death. In contrast, the applicable limitation period in this case is tied to the accrual of the cause of action.

My only quibble is with the court’s discussion of the cause of action. What does it mean to be “tied” to a cause of action? A cause of action arises from certain factual elements (for example, the five elements of negligent misrepresentation, or the one element of a breach of contract). It’s imprecise to discuss a fact being “inextricably intertwined in the cause of action”; it’s either an element of the cause of action or it isn’t.

The decisions also has a rare example of an absurdity analysis in the context of limitation provision interpretation:

[46]      Statutes are to be interpreted in a manner that does not lead to absurd results. An interpretation is absurd if it “leads to ridiculous or frivolous consequences, if it is extremely unreasonable or inequitable, if it is illogical or incoherent, or if it is incompatible with other provisions or with the object of the legislative enactment”: Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, 36 O.R. (3d) 418, at para. 27.

[47]      Here, the decisions below thrust the appellant into a Kafkaesque regulatory regime. A hard limitation period would bar the appellant from claiming enhanced benefits, before she was even eligible for those benefits. However, if the appellant had not claimed any benefits until she obtained CAT status in 2015, she would not be caught by the limitation period: Machaj v. RBC General Insurance Company, 2016 ONCA 257, at para. 6. Alternatively, if the appellant had coincidentally obtained CAT status before 2012, the hard limitation period would not bar her claim for enhanced benefits.
[48]      This outcome is absurd. There is no principled reason for barring the appellant’s claim for enhanced benefits in the first scenario but allowing the claim in the second and third scenario. To do so would effectively penalize the appellant for accessing benefits she is statutorily entitled to, or for developing CAT status too late.

Ontario: Court of Appeal on the impact of a forum dispute on a third party claim

Will a third party claim become an appropriate remedy within the meaning of s. 5(1)(a)(iv) only once the court has determined the forum for the main action?  No, held the Court of Appeal in Lilydale Cooperative Limited v. Meyn Canada Inc.  The issues arising from a contested forum, in particular the risk of attornment, are tactical and do not impact on when the claimant discovers the claim.  The court’s analysis is well-reasoned:

[49]      Meyn’s position is that it was not legally appropriate under s. 5(1)(a)(iv) of the Limitations Act to bring the third party proceedings until the forum issue was finally decided in February 2008 and that the two years ran from that time. Its submission is based on what occurred in the main action where Lilydale took the position by letter dated March 10, 2006 that it would only be proceeding in one jurisdiction, Alberta or Ontario. Meyn did not defend or take any steps in the Ontario action. In its submissions on this appeal, Meyn explained that the reason for this was because it believed that doing so had the potential to undermine its position in support of the stay of the Ontario action.

 [50]      Meyn’s argument regarding discoverability has two prongs. First, it could not deliver any third party claim in the Ontario action to ensure that it did not attorn and thereby jeopardize the forum argument. Second, if it had been successful in establishing that Alberta was the correct forum, then the Ontario action would have been discontinued and there would have been no need for any third party proceedings. Therefore, the principle applies from 407 ETR Concession Co. v. Day, 2016 ONCA 709, 133 O.R. (3d) 762, and Presidential MSH Corp. v. Marr, Foster & Co. LLP, 2017 ONCA 325, 135 O.R. (3d) 321, that it would not be legally appropriate to commence a legal proceeding while another resolution process that may resolve the matter is ongoing.

[55]      While a finding that serving a third party claim amounted to attornment could be prejudicial, or even fatal to a party’s forum challenge, the strategic decision of how to deal with this risk of prejudice is the type of tactical consideration that does not affect the “legally appropriate” calculus in s. 5(1)(a)(iv) of the Limitations Act. The issue of whether serving a third party claim solely to protect a limitation period will amount to voluntary attornment is for the forum judge to decide. It does not affect the discoverability of the third party claim and therefore the commencement of the limitation period.

 [56]      I also note that a party such as Meyn, facing the expiry of a limitation period, had a number of procedural avenues to take to avoid that consequence rather than allow a limitation period to expire or be found to have expired on the application of discoverability principles.
 [57]      First, Meyn could have alerted Weishaupt that the third party claim was coming and sought its agreement under s. 22(3) of the Limitations Act to a stand-still pending the determination of the forum issue. I can see no reason for the third party not to agree. However, if there were one, then judicial authorization on the attornment issue could be sought. That is what occurred in Joyce v. MtGox Inc., 2016 ONSC 581, where Perell J., on a case management conference in advance of the expiry of the limitation period, involving a party in Meyn’s position, ruled that issuing the third party claim would not amount to attornment.
 [58]      Second, Meyn could have served the third party claim, with an express reservation of its rights, and then argued at its forum motion that it did so only to preserve the limitation period and therefore has not attorned to Ontario’s jurisdiction. Meyn brought a forum non conveniens motion. It was understood by all the existing parties that Meyn was not acknowledging the convenience of Ontario as the forum for the action by bringing the motion. While that motion was outstanding, it would be anomalous indeed if Meyn’s service of a third party claim to preserve a limitation period in Ontario would be found to amount to such an acknowledgement.
 [59]      To conclude, while risk of attornment was a potentially legitimate concern for Meyn, that concern related to its position on the forum issue and did not affect the discoverability of its third party claim and the need to take the steps necessary to preserve the claim within the limitation period.

The appellant also argued that the forum dispute had the potential to resolve the third party claim, and was therefore an alternative resolution process that could render the third party proceeding inappropriate until its conclusion.  The court rejected this submission.  The forum dispute couldn’t resolve the third party claim, it would only move it to another jurisdiction.

[63]      The forum challenge is conceptually similar to settlement discussions, which may resolve the entire claim so that no court proceeding need be commenced, but nonetheless do not postpone the running of the limitation period: see Presley v. Van Dusen, 2019 ONCA 66, 432 D.L.R. (4th) 712, at para. 25; and Markel at para. 34.

[64]      As in Ridel, Tapak v. Non-Marine Underwriters, Lloyd’s of London, 2018 ONCA 168, 76 C.C.L.I. (5th) 197, leave to appeal refused, [2018] S.C.C.A. No. 157, and Gravelle, in this case, there was no alternative resolution process to which Weishaupt was a party that could have resolved the issue between it and Meyn. Rather, Meyn was attempting to have the whole Ontario action dismissed, obviating the need for the third party claim.

[65]      To allow parties to wait, at their discretion, for other court or arbitral proceedings to conclude, where the result could obviate the need to bring a claim that they know exists, is inconsistent with the purpose of the Limitations Act for two reasons. First, this approach could extend the limitation period well beyond the two year original threshold in an uncertain and unpredictable manner. Second, there were no significant savings to be achieved by not commencing the third party claim until the forum challenge was complete. Procedurally, a stand-still or tolling agreement could be sought until the forum issue had been finalized by the court so that the third party would not be required to plead in response. However, it would be on notice that if the Ontario action proceeds, it is a named party, required to preserve its documents, and respond to the action as advised.
[66]      In my view, these factors drive the conclusion that the day Meyn was served with the statement of claim by Lilydale, it knew that a third party claim against Weishaupt was the appropriate means to seek a remedy from Weishaupt. It was therefore not “legally appropriate” for Meyn to wait until the forum issue had been decided before the commencing third party claim.

Ontario: the dismissal of a certification motion and the suspension of time

In R.G. v. The Hospital for Sick Children, the court held that after the dismissal of a motion to certify an action as a class proceeding, the limitation period applicable to the plaintiff’s claim remains suspended until the occurrence of one of the circumstances set out in s. 28 of the Class Proceedings Act, 1992:

[57]           In my opinion, in circumstances where a motion to certify an action as a class proceeding is dismissed and none of the other enumerated circumstances under s. 28 applies, a motion by the defendant is required in order to deactivate the suspension of the running of limitation periods. Until such a motion is brought, not having been formally dismissed, the proposed class action is still active albeit it has not been certified. This conclusion is a consequence of the plain meaning of section 28 of the Class Proceedings Act, 1992 read in the context of the whole Act and most particularly in the context of s. 29 of the Act.

[58]           This conclusion may come as a surprise to the class action bar because up to and including the case at bar, defendants have usually not found it necessary to address whether or not the limitation period has resumed because putative class members rarely advance actions if a certification motion is dismissed. The issue of whether the unadvanced claims are statute-barred is academic. Further, the absence of a flurry of individual actions may be explained, in part, by the circumstance that putative class members may not even be aware that there was a proposed class action. There is no provision in the Act that requires publication of a dismissal of a certification motion, and so the putative class members may not know that they can no longer rely on a class action as the means to access justice.

[59]           In practical effect, however, the dismissal of the certification motion is akin to a discontinuance of a proceeding commenced under the Class Proceedings Act, but pursuant to s. 29 of the Act, a proceeding cannot be discontinued without the approval of the court on such terms as the court considers appropriate.

[60]           The case law about s. 29 reveals that before approving an abandonment or discontinuance of a proceeding commenced under the Act, a court will consider what prejudice, if any, the putative class members might suffer by a discontinuance of the action.[10] Where there is a discontinuance, the terms of the court approval may include requiring the plaintiff to give notice to the putative class members that they can no longer rely on a possible class proceeding as the means to obtain access to justice and that they may need to bring individual actions. The terms of the order may provide an operative date for the discontinuance to come into effect in order to allow the putative class members to obtain legal advice and to commence an action if so advised.

[61]           In my opinion, analyzing s.28 of the Class Proceedings Act along with s. 29 of the Act reveals that a similar approach to that used when a proposed class action is discontinued is available when a proposed class action fails to be certified. If a putative class member’s cause of action is expressly mentioned in the statement of claim of a proposed class action, then that cause of action is suspended until the suspension is lifted by certain events, including a determination that dismisses the asserted cause of action without a determination of its merits.

[62]           In my opinion, should a defendant bring a motion to have the class proceeding dismissed without an adjudication on the merits, the motion would be akin to a discontinuance of the action, which also entails a termination of the proceeding without an adjudication on the merits. However, until the court rules on the terms of the discontinuance or dismissal without an adjudication on the merits, the suspension of the limitation period continues.

[63]           This interpretation of the operation of the Class Proceedings Act, 1992 is fair to both plaintiffs and defendants. In the normal course, the putative class members are given notice if the certification motion succeeds, and the above approach would give them notice when the certification motion fails. For the putative class members, who have been waiting to learn whether they have the option of a class proceeding rather than commencing their own action, they will be given notice of the outcome of the certification motion, and then they may act as they may be advised.

 

Ontario: Court of Appeal reviews appropriateness principles

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

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

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

 [17]      Second, this court has observed that two circumstances most often delay the date on which a claim is discovered under this subsection. The first is when the plaintiff relied on the defendant’s superior knowledge and expertise, especially where the defendant took steps to ameliorate the loss. The other situation is where an alternative dispute resolution process offers an adequate remedy, and it has not been completed: Nasr, at para. 50.
 [18]      Third, Sharpe J.A. in Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, 109 O.R. (3d) 652, at para. 34, provided the following guidance concerning the meaning of the term “appropriate”:
This brings me to the question of when it would be “appropriate” to bring a proceeding within the meaning of s. 5 (1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5 (1) (a)(iv) states that a claim is “discovered” only when “having a regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it,” the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess the tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions. [Emphasis in original.]

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

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

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

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

 

Ontario: Court of Appeal on s. 43(1) of the RPLA

In Hilson v. 1336365 Alberta Ltd., the Court of Appeal confirmed that the ten-year limitation period in s. 43(1) of the RPLA applies to a stand-alone mortgage guarantee.

The respondents argued that s. 43(1) should be read narrowly to deal only with the circumstances that existed when its predecessor provision was enacted, and that “instrument” as used in the provision should have the same definition prescribed in the Registry Act.  The court rejected both arguments in comprehensive reasons.  I think it’s a good decision.

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

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

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

These are the material paragraphs:

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

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

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

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

Ontario: Court of Appeal on the limitation of continuing oppressive conduct

The Court of Appeal decision in Zhao v. Li considers the limitation of continuing oppressive conduct.  It holds sensibly that discrete oppressive acts give rise to discrete claims (subject to discrete limitation periods):

[28]      Maurice stands for the proposition that where what is complained of is a series of singular discrete acts of oppression over a period of time, claims arising from the acts committed or discoverable within two years of the action are not statute barred, even if the series of acts commenced, and claims for earlier oppressive acts in the series were discoverable, more than two years prior to the commencement of the action. A later oppressive act, even if based on or in furtherance of earlier oppressive acts, gives rise to a new cause of action because it is new oppressive conduct: at paras. 3 and 50-54.

 [29]      Although not expressly stated in Maurice, it follows that claims arising from singular discrete acts of oppression (in a series of such acts) that are discoverable more than two years before an action are statute barred. As a result, a series of singular discrete acts of oppression that stretches over a period of time may result in some claims for oppression arising from earlier acts in the series being statute barred while claims arising from later acts in the series are not.
            (ii)        Is this a case alleging singular discrete oppressive acts?

[30]      In my view, the approach in Maurice applies because, as was the case there, what is alleged here are singular discrete oppressive acts, rather than “ongoing oppression”. I reach that conclusion for the following reasons.

[31]      A failure to distribute profits is the alleged act that underpins the profits distribution claim. It is said to have occurred beginning in June 2010. A different act, an unauthorized transfer or sale of the business without at the time of sale accounting for the proceeds, is the alleged act that underpins the sale claim. That act is said to have occurred sometime before September 3, 2011. A still different act, the unauthorized dissolution of the Corporation, is the alleged act that underpins the corporate dissolution claim. It occurred in October 2011.
[32]      These are each singular discrete oppressive acts, because they are different acts occurring at different times and because none of them is dependent upon either of the others having happened for oppression to be said to have occurred. If the respondent had failed to distribute profits but neither transferred the business nor dissolved the Corporation, the appellant would, upon discovery, have had an oppression claim for failure to distribute profits. Similarly, if the respondent had only sold the business and kept sale proceeds, or if he had only dissolved the Corporation, the appellant would still have an oppression claim for these singular discrete acts, even if none of the others occurred. As Maurice points out, conduct may consist of singular discrete acts of oppression even where  the later oppressive conduct was based on or in furtherance of the earlier oppressive conduct: at paras. 3 and 48-54.

[36]     […] The limitation period is not extended for acts of oppression that are actionable in themselves simply because a later singular discrete act of oppression occurs. As Maurice provides: “Courts must be careful not to convert singular oppressive acts into ongoing oppression claims in an effort to extend limitation periods. To do so would create a special rule for oppression remedy claims”: at para. 49.

[37]      Nor is the limitation period extended because a complainant hopes that the oppression will be remedied: Maurice, at paras. 46-49.

There is perhaps an easier of way of approaching the issue.   If there is a discrete cause of action, there is a discrete claim.  If oppressive conduct gives rise to multiple causes of action, there are also multiple claims; this is regardless of the period over which the conduct occurs.  The basic limitation period will apply to each claim independent of the others.  This analysis applies equally to any misconduct that is continuing.