Discovery

Ontario: a lawyer’s letter asserting an intention to sue doesn’t necessarily start the limitation period

Does a lawyer’s letter stating that his clients intend sue the recipient commence the applicable limitation period?  Not necessarily.

In Naipaul v. State Farm Mutual Insurance Company, the plaintiffs had a motor vehicle accident in which one of the drivers was uninsured.  The plaintiffs’ lawyer wrote to their insurer, the defendant, to advise that they would be claiming against it “for damages arising out of personal injuries sustained […] in the motor vehicle accident”.  Through inadvertence, the plaintiffs’ lawyer commenced the action against the defendant more than two years later.  The insurer moved for summary judgment to dismiss the claim as statute-barred

It’s long settled that when an insured motorist sues her insurance company for uninsured motorist coverage, the limitation period begins on the day that the insured motorist knew or ought to have known that she had a claim based on the fault of the uninsured motorist.

The insurer argued that the lawyer’s letter established that the plaintiffs knew that they had a claim against the uninsured driver, and so it commenced the limitation period.  The plaintiffs replied that at the time of the letter there was wasn’t enough medical evidence that in the lawyer’s opinion could meet the statutory threshold in section 267.5(5) of the Insurance Act.

Justice Perell agreed with the plaintiffs:

 [18]            In the circumstances of the case at bar, it does not follow that because Mr. Lofranco wrote letters indicating that his clients intended to sue State Farm that at the time of the writing of the letters, the Naipauls immediately knew or ought to have known that they actually had a claim that would satisfy the statutory threshold. It also does not follow that because Mr. Lofranco admitted that it was only through inadvertence that State Farm was not joined as a party defendant to what would have been a timely claim, that the claim that they did bring in September 2012 was untimely.

[19]            In bringing its summary judgment motion, in the case at bar, State Farm relied entirely on Mr. Lofranco’s letters as triggering the running of the limitation period, but at the time of writing of those letters, i.e. 89 days after the accident, there was not sufficient available evidence to be placed before a judge that, in counsel’s opinion, had a reasonable chance of persuading a judge on the balance of probabilities that the injury satisfied the threshold set by s. 267.5 (5) of the Insurance Act. The limitation period did not begin to run with the posting of Mr. Lofranco’s letters.

[…]

[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.

Ontario: Discoverability applies to the Competition Act

In Fanshaw College v. AU Optronics, Justice Grace held that the limitation period applicable to Competition Act claims is subject to discoverability. The opportunity for a successful limitation defence in a competition class action is now much diminished. An appeal from this decision will be no surprise.

The action centres on LCD products. Fanshaw College alleges that the defendants unlawfully conspired to fix or artificially inflate the price of LCD products they purchased. The defendants moved for summary judgment on the basis that section 36(4) of the Competition Act bars the statutory claim and the expiry of the limitation period bars the conspiracy claim.

Section 36(4) imposes a two-year limitation period on claims for recovery of damages under the Act:

 (4) No action may be brought under subsection (1),

(a) in the case of an action based on conduct that is contrary to any provision of Part VI, after two years from

(i) a day on which the conduct was engaged in, or

(ii) the day on which any criminal proceedings relating thereto were finally disposed of,

whichever is the later […]

The defendants argued that the section 36(4) is not subject to discoverability. A line of jurisprudence originating from the Federal Court supported this position. Discoverability would not apply because the limitation period is linked to a fixed event unrelated to the claimant’s knowledge—”the day on which the conduct was engaged in”. Justice Grace rejected this rationale:

[117]     It seems obvious that participants in a price-fixing scheme would attempt to conceal their activities. It is impossible to say categorically when those affected will learn or have the means of learning of the offending conduct. It will depend on the circumstances of each case.

[118]     Unless the discoverability principle applies, strict application of s. 36(4)(a) might well result in a claim being statute-barred before a person affected could possibly have known of the illegal activity. The right of action would only be resurrected if criminal proceedings – initiated by the state – ensued. As a matter of construction it does not seem possible that Parliament intended the right of action to be illusory. I am not satisfied that the rights conferred by s. 36(1) should be restricted in the fashion AU and Hannstar advocate.

Though sound, this reasoning has problematic implications. If it’s impossible to say that in all circumstances an affected person will learn of the illegal activity within two years of the date it was engaged in, the equivalent is true of other limitation periods that commence on fixed dates. Section 38(3) of the Trustee Act is an example. This limitation period commences on the death of the plaintiff or defendant, and death being a fixed event, it’s not subject to discoverability. Nevertheless, there are surely circumstances where the limitation period will expire before a person affected could have known of the death that triggered it.

The two limitations periods are perhaps distinguishable. The Competition Act resurrects a right of action in the event of a criminal proceeding. There is a greater likelihood of concealment regarding a price-fixing agreement than a death. Neither distinction is especially compelling. Should there be an appeal, it will be interesting to see how the Court of Appeal addresses this issue.

The other noteworthy aspect of the limitations defence was the defendants’ argument that the plaintiff through its reasonable diligence ought to have discovered the conspiracy claim as a result of the media’s coverage of the probe into the LCD industry and the commencement of proceeding:

 [65]     It is acknowledged that there was extensive media coverage concerning probes into the LCD industry starting in December 2006.

[66]     Several articles were published in Ontario. On December 13, 2006, the Globe reported that European and U.S. regulators had announced an ongoing investigation of “a possible cartel involving makers of liquid crystal display monitors” and of “the possibility of anti-competitive practices in the LCD industry.”

[67]     On the same day the Star reported that “[l]iquid crystal display makers in Japan, Taiwan and South Korea are facing probes by trade watchdogs as a widening price-fixing investigation” in the LCD industry. Falling share prices of various companies were reported, including L.G. Philips and Samsung. The Star noted that LCDs were “the displays used in flat-panel televisions and personal computers.”

[68]     Mr. Smith acknowledged that Fanshawe was a Globe and Star subscriber at the time. At paragraph 6 of his affidavit, Mr. Smith deposed that:

To my knowledge, no member of Fanshawe brought the articles to the attention of Fanshawe’s Board of Directors or senior management.

[69]     In cross-examination, Mr. Smith agreed that from 2006 to 2009 he did not speak with board members or senior managers about articles concerning the LCD industry except those he described as “direct report”. No other details were requested or given.

[70]     The December 13, 2006 edition of the Citizen included a report concerning the LCD industry. It also noted that “AU Optronics plans to co-operate with the Justice Department and Japan’s antitrust regulator”. AU Optronics was one of several companies involved in the LCD industry mentioned in an article appearing on the Canadian Press Newswire that day.

[71]     A day earlier, a class proceeding had been commenced in the United States. AU Optronics, AU Optronics Corporation America and Hannstar were included in the long list of defendants.[18]

[72]     The B.C. action was commenced on March 6, 2007.

[73]     The First Ontario action followed on May 2, 2007. Michael Harris was named as the representative plaintiff. Siskinds has acted throughout. On the same day that law firm posted a notice on www.classaction.ca bearing the heading “Liquid Crystal Display”. The notice said in part:

This class action alleges that the Defendants unlawfully conspired to fix, increase, and/or maintain prices at which LCD or products containing LCD were sold in Canada.

The plaintiff alleges that from at least January 1, 1998 through to the present, the defendants and their senior executives participated in illegal and secretive meetings and made agreements relating to price targets, specific price increases, market share divisions and production capacity for LCD.

LCD is a thin, flat display device made of numbers of pixels arrayed in front of a light source or reflector. LCD is used in television screens, computer monitors (both desktop and notebook), mobile phones, personal digital assistants, digital cameras and other devices.

[74]     A link to the statement of claim was provided as were contact details for those seeking more information. AU and Hannstar were mentioned but not named as defendants.

[75]     On May 23, 2007, the Star reported that LCD market participant LG Philips “is one target of an investigation into anticompetitive practices in the industry by U.S. and Asian regulators.”

[76]     A class proceeding was commenced in the Province of Quebec the following month.[19]

[77]     All of these facts pre-date July 20, 2007. The moving parties submit that they support the conclusion that Fanshawe ought to have discovered the claim more than two years before it was commenced. Alternatively, AU and Hannstar maintain that Fanshawe has failed to prove that it acted with due diligence in determining if it had a cause of action.

Justice Grace disagreed. He couldn’t conclude on the evidence that the plaintiff ought to have known the section 5(1)(a) facts based on media reports. Nor did the commencement of the class action necessarily crystalise the plaintiff’s discovery of the claim. The commencement of a class action does not fix all members of the putative class with knowledge of the cause of action (in contrast to a conventional action, the commencement of which means that the plaintiff has discovered the claim even if the plaintiff lacks knowledge of the section 5(1)(a) facts):

 [79]       Fanshawe is a large educational institution. It might well be appropriate to conclude that a reasonable person in its position would have read and fully digested the reports appearing in Canadian publications. However, on the evidence introduced so far, it is a distant and unwarranted stretch to conclude Fanshawe ought to have known of any of the items listed in s. 5(1)(a), let alone all four of them as the subsection requires.

[80]     According to the press, a price-fixing investigation was underway involving a component used in flat-panel televisions and personal computers. No conclusions had been reached, even on a tentative basis. The possible implications were unaddressed beyond declining prices of the shares of some of the participants in the LCD industry. None of the defendants in this action were mentioned in the two publications to which Fanshawe subscribed; the Globe and the Star. The Citizen mentioned AU Optronics but Fanshawe was not a subscriber. In any event, that article simply indicated that AU planned to cooperate in the investigation.

[81]     Class proceedings were commenced in various jurisdictions including Ontario. A short notice was posted by Siskinds on one website concerning the First Ontario action. There was no evidence that anyone from Fanshawe accessed the website or saw the notice.

[82]     Nothing else was done that I recollect seeing or hearing about. There were no press releases. There were no media reports of any of the proposed class proceedings. Notices do not appear to have been created, let alone disseminated.

[83]     Hannstar noted that Mr. Harris, initially the representative plaintiff in the First Ontario action, was a consumer. In its factum Hannstar submitted that:

It defies logic to suggest that a large academic institution like Fanshawe was less capable of ascertaining the facts giving rise to the claim than individual consumers.

[84]     I disagree. I have no knowledge of Mr. Harris. I do not know how he came to be a representative plaintiff. Did he approach Siskinds? Mr. Smith deposed that Siskinds approached Fanshawe. Was Mr. Harris in the same position? I simply do not know. It is not self-evident to me that a high level of sophistication necessarily leads to greater knowledge about a particular topic. It would be folly to equate Fanshawe and Mr. Harris simply because Fanshawe is a large academic institution and Mr. Harris is an individual.

[…]

[92]     I do not understand why commencement of an action would fix all members of the putative class with knowledge of the cause of action. As noted, aside from one short notice on a website created by Siskinds, the proceeding was not publicized.

[93]     In Lipson v. Cassels Brock & Blackwell LLP (2013), 2013 ONCA 165 (CanLII), 114 O.R. (3d) 481 (C.A.) at para. 84, the Court of Appeal noted that the commencement of a limitation period “may be an issue that must be determined individually for each class member, depending on what individual class members were told and when.”

[94]       Determining that the commencement of a proposed class proceeding serves as the last possible day for the commencement of a limitation period would be arbitrary. It would not be based on the evidence in this case. It would be a legal fiction. A procedural vehicle would be converted into something more.[21] I decline the invitation to be its creator.

[95]     At this stage I am not satisfied that Fanshawe knew or ought to have known of the elements set forth in s. 5(1)(a) of the Limitations Act. I simply cannot make dispositive findings based on the evidence before me.

 

 

 

 

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 corporate revival won’t revive an expired limitation period

A corporate revival will not extend a limitation period that expired while the corporation was dissolved.

In 65519 Ontario Limited v. Sacks, the plaintiff corporation commenced an action after its corporate charter was revoked. This rendered its claim a nullity. The plaintiff revived its corporate status, but after the limitation period had expired. The defendant brought a motion under rule 21.01(b) to strike the claim on the basis of a limitations defence.

The motion judge accepted the defence and struck the claim. The Court of Appeal dismissed the appeal.

Writing for the Court, Justice Cronk held that the plaintiff must be taken to have known the material facts supporting its claim when it issued its statement of claim. The limitation period began running on this date at the latest, and expired before the plaintiff’s corporate revival.

There was more. The individual plaintiffs had moved before the Superior Court for leave under section 246 of the Business Corporations Act to pursue a derivative action on the plaintiff corporation’s behalf. They argued that if leave were granted on a nunc pro tunc basis, it would regularise the action commenced by the plaintiff corporation so that, as a matter of law, the action would no longer be statute-barred.

The Court rejected this rather fraught reasoning. Even assuming that leave would be granted on a nunc pro tunc basis, the leave order could not deprive the defendant of its limitations defence. The expiry of the limitation period is a legal right that accrued to the defendant while the plaintiff corporation was dissolved, and the defendant was entitled to use it to defeat the plaintiff corporation’s claim.

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: 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

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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

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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

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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.