Ontario: the principles of s. 7 capacity

The Superior Court decision in Enns v. Goertzen provides a detailed consideration of the Limitation Act’s s. 7 capacity provisions.  Two points are particularly noteworthy:

  1. It summarises the authorities for the principle that s. 7 capacity is distinct from legal capacity.
  2. Although it acknowledges that the Limitations Act does not define “incapable of commencing a proceeding”, instead of considering what this means the court takes the now standard approach of applying the factors developed for determining whether a party is under disability and requires a litigation guardian.  Section 7 incapacity encompasses parties under disability, but is much broader.  For example, s. 7 arguably encompasses a circumstance where a person is physically unable to commence a proceeding, perhaps because of some incapacitating injury, but has no mental impairment.  This the analysis:

[273]      In evaluating whether evidence of the nature described above is available on this motion, it is helpful to first consider the scope of the subject matter of s. 7(1) of the Act, which focuses on an individual’s lack of capability to commence a proceeding in respect of a claim.  The phrase “incapable of commencing a proceeding” is not defined in the Act (nor is the word “incapable”).  Further, the Act does not prescribe enumerated criteria that either must or may be considered by a court in determining whether a claimant has rebutted the presumption prescribed by s. 7(2) of the Act, other than its general reference to an individual’s physical, mental or psychological condition in s. 7(1) of the Act. As I will address below, the decided cases offer some additional guidance in that regard.

[274]      First, the issue of an individual’s capability to commence a legal proceeding must not be confused with other forms of legal capacity. For example, in this instance, each of the parties has adduced evidence that they say either demonstrates that after her stroke, Ms. Enns possessed legal capacity to engage in certain activities, other than commencing a proceeding or that she did not possess legal capacity to engage in certain activities, other than commencing a proceeding, respectively.

[276]      Yet, s. 7 of the Act is exclusively focused on an individual’s capability to commence a proceeding in respect of a claim, which is distinct from an individual’s capacity, to: consent to medical treatment; manage financial affairs; or even to “discover” a claim. Indeed, in Cook v. Joyce, 2016 ONSC 2164, 130 O.R. (3d) 114, rev’d on other grounds 2017 ONCA 49, at para. 138, Perell J. articulates the clear distinction between the mental state that is required to subjectively and objectively discover that one has a claim (discoverability) and the capacity to sue.  He also distinguishes the capacity to commence an action from other legally recognized forms of capacity, at para. 178, as follows:

This type of legal phenomenon of different mental states coexisting is not unknown to the law.  The mental capacity to sue is not the same as the mental capacity to contract, or to marry, or to execute a will, or to consent to medical treatment.  To take a simple example, a teenager involved in a car accident might have discovered her claim without a litigation guardian having been appointed, the limitation period for that discovered claim would be suspended because the teenager would be a minor without the legal capacity to sue. [Emphasis added.]

Finally, he cautions that the issues of “discoverability and legal capacity to sue should not be conflated” (see: para. 180).

[277]      To that, I would add that an individual’s legal capability (or incapability) to commence a proceeding ought not to be conflated with the individual’s capacity to:  consent to medical treatment; consent to the disclosure of health related or other personal information; or to manage their own financial affairs. A conclusory finding that an individual was, for example, capable of consenting to medical treatment at a certain point in time, is not synonymous with a finding that an individual was, at that point in time, capable of commencing a proceeding in respect of a claim.  Similarly, a finding that an individual was or is incapable of managing his or her own financial affairs or property does not unequivocally prove that the person was or is incapable of commencing a proceeding.

[278]      Second, in order to negative the presumption prescribed by s. 7(2) of the Act (and stop the running of the limitation period) a claimant is not required to prove that he or she is a mental defective, a mental incompetent, or of unsound mind.  Instead, the issue remains whether a person’s physical, mental or psychological condition renders that person incapable of commencing a proceeding in respect of a claim, at any time before the appointment of a litigation guardian. If so, the accrual of the limitation period is suspended during the period of incapacity.  That standard recognizes that it is unfair to run a limitation period against a plaintiff who is incapable of commencing an action: see Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008, at paras. 29-32.
[279]      Third, the decided cases assist in identifying relevant factors for consideration when determining whether a person is incapable of commencing a proceeding in respect of a claim.  For example, in Huang v. Braga, 2016 ONSC 6306, at para. 19, leave to appeal to Divisional Court refused, 2017 ONSC 3826, Archibald J. curates from the jurisprudence, several factors that merit consideration when determining whether a party is under a disability and requires a litigation guardian specifically:
(a)        A person’s ability to know or understand the minimum choices or decisions required and to make them;

(b)        An appreciation of the consequences and effects of his or her choices or decisions;

(c)        An appreciation of the nature of the proceedings;

(d)      A person’s inability to choose and keep counsel;

(e)        A person’s inability to represent him or herself;

(f)        A person’s inability to distinguish between relevant and irrelevant issues; and,

(g)        A person’s mistaken beliefs regarding the law or court procedures.

[280]      In Hengeveld v. Ontario (Transportation), 2017 ONSC 6300, at para. 21, Hebner J. considered the foregoing factors when determining whether a party was “incapable”.  Subsequently, in Carmichael v. Glaxosmithkline Inc., 2019 ONSC 2037, at para. 40, Lederer J. similarly found that the foregoing factors merit consideration when determining if a party is incapable of commencing an action in accordance with s. 7 of the Act. Indeed, I have considered the foregoing factors, in the context of the available evidence, when determining whether the evidence discloses a genuine issue with respect to Ms. Enns’ historical capacity to commence a proceeding.

The decision also holds that there is no general rule requiring medical evidence to establish historical capacity:

[281]      In Carmichael, the court was assisted by expert opinion evidence concerning the plaintiff’s ability (or lack thereof) to commence a proceeding in respect of a claim during a specified time period that occurred before the proceeding was commenced.  Expert evidence directly addressing that issue has not been adduced by any party in the context of this motion.

[282]      The defendants seize on the absence of evidence from a qualified expert, expressly opining that Ms. Enns was incapable of commencing a proceeding in respect of her claim against them any earlier than she did, as a basis to conclude that there is no genuine issue that requires a trial to determine whether she has proved facts contrary to the presumption prescribed by s. 7(2) of the Act. They posit that a plaintiff relying on an alleged historical “incapacity to sue” as a means to extend the running of a limitation period must adduce specific medical evidence that he or she lacked capacity to bring a claim within the two year limitation period.
[283]      Yet, the provisions of the Act do not mandate that evidence of that nature be adduced. I am not persuaded that such evidence must necessarily and unequivocally be lead, in every case, on behalf of a person with a claim, who seeks to prove facts contrary to the presumption prescribed by s. 7(2) of the Act. I will explain.
[284]      The jurisprudence generally lends support to the proposition that a party seeking to prove facts contrary to the presumption set out in s. 7(2) of the Act is well served by adducing medical evidence on the issue.  For example, in Cook v. Joyce, Perell J. states at para. 152:
It should not escape notice that but for the presumption of incapacity available to victims of sexual assault, a plaintiff relying on incapacity to sue as a means to extend the running of a limitation period would likely have to provide medical evidence indicating that he or she lacked the capacity to bring a claim within the two year limitation period (see: Deck International Inc. v. Manufacturers Life Insurance, 2012 ONCA 309 (Ont. C.A.), at paras. 4 and 6; Klimec v. Klos, [2013] O.J. No. 3740 (Ont. S.C.J.), at para. 25; Reid v. Crest Support Services (Meadowcrest) Inc., 2013 ONSC 6264 (Ont. S.C.J.), at paras. 13-17). [Emphasis added.]

[285]      Similarly, in Deck International Inc. v. Manufacturers Life Insurance, 2012 ONCA 309, the plaintiffs appealed an order of summary judgment dismissing their action for long term disability benefits.  After recounting: the motion judge’s finding that there was insufficient evidence to support a finding of incapacity, such that s. 7 of the Act would apply; and the appellants’ submission that the motion judge failed to consider all the evidence before the court, the Court of Appeal concluded, at para 6:

We do not accept this submission.  There was no medical evidence to the effect that Mr. Donaldson lacked the capacity to commence the action within the meaning of s. 7.  There was evidence from family members as to his disability, but that is not the same thing as medical evidence going to the issue of capacity to commence an action. [Emphasis added.]

[286]      Similar sentiments were expressed in Reid v. Crest Support Services (Meadowcrest) Inc., 2013 ONSC 6264, at para. 17, and Aletkina v. Hospital for Sick Children, 2014 ONSC 6263 (Div. Ct.), at paras. 11-14.

[287]      In my view, the foregoing authorities do not establish a general legal principle that: a party that seeks to prove facts contrary to the presumption prescribed by s. 7(2) of the Act is, by necessity, required to adduce an expert medical opinion that the plaintiff lacked capacity to commence a proceeding in respect of a claim prior to the expiration of the limitation period; or that a plaintiff is always required to lead expert medical evidence that he or she is under a “legal disability”.  Although such evidence has the potential to be of great benefit in proving facts contrary to the presumption prescribed by s. 7(2) of the Act, there may be situations where evidence of the narrative circumstances alone is sufficient to negative that presumption, without the need for specified expert evidence on the point.  For example, where the evidence reveals that a “person with a claim” was unconscious while in a coma for a prolonged period of time.  In that circumstance, the type of expert medical evidence that the defendants assert must always be adduced on behalf of a person with a claim, would not be necessary in order to establish that the person was incapable of commencing a proceeding, while unconscious.
[288]      Even in the absence of a specific expert opinion of the type described by the defendants, medical evidence will often be the most compelling and expedient manner through which a party may prove the contrary to the presumption prescribed by s. 7(2) of the Act. In the absence of such evidence, a party may very well fall short of meeting its onus in that regard. Nonetheless, there have been instances where courts have concluded that a party has successfully rebutted the presumption prescribed by s. 7(2) of the Act, even in the absence of confirmatory medical opinion evidence on the issue:  for example, see Landrie, at paras. 35 and 53-56.

The Supreme Court on the application of common law discovery

In Pioneer v. Godfrey, the Supreme Court considered the application of common law discovery to statutory limitation periods.  It is now the leading case on the subject.

The Court held that the common law discovery rule applies only when a limitation period runs from the accrual of a cause of action, or “some other event that can occur only when the plaintiff has knowledge of his or her injury”.

It doesn’t apply when a statutory limitation period runs from an event unrelated to the accrual of the cause of action.  This is because legislature displaces the discovery rule when linking the limitation period to an event unrelated to the plaintiff’s cause of action.

In determining whether a limitation period runs from the accrual of a cause of action, substance prevails.  Even where a statute doesn’t explicitly state that a limitation period runs from accrual, the discovery rule applies if the limitation period in substance commences on accrual .

Thus s. 36(4) of the Competition Act, which the appeal concerned, is subject to discoverability:

[44]                          The text of s. 36(4)(a)(i) provides that no action may be brought under s. 36(1)(a) after two years from a day on which conduct contrary to Part VI occurred. From this, it is clear that the event triggering this particular limitation period is an element of the underlying cause of action. That is, the limitation period in s. 36(4)(a)(i) is triggered by the occurrence of an element of the underlying cause of action — specifically, conduct contrary to Part VI of the Competition Act. Therefore, it is subject to discoverability (Fanshawe College of Applied Arts and Technology v. AU Optronics Corp., 2016 ONCA 621 (CanLII), 132 O.R. (3d) 81, at para. 18).

Justice Côté dissented.  When a limitation period commences on the occurrence of an element of a cause of action rather than the cause of action’s accrual, it does not necessarily follow that the discovery rule applies.  This is because the occurrence of the an element may not depend on the plaintiff’s knowledge:

[151]                     Conversely, “the occurrence of an element of the underlying cause of action” (Brown J.’s reasons, at para. 44) will not always fit within either category outlined above at para. 149. It may be that the occurrence of such an event does in fact depend on the state of the plaintiff’s knowledge, but unlike the accrual of a cause of action, this does not invariably follow as a matter of logical necessity. In Peixeiro, for example, this Court held that the point at which damages are sustained — a constituent element of (among other things) the tort of negligence — depends on when the plaintiff actually has knowledge of his or her injury. Knowledge will not form part of every element of the cause of action in negligence, however. A breach of a standard of care, for example, may occur years or even decades before the plaintiff first learns about it. Although such a breach is a prerequisite to a successful claim in negligence, it is also something that takes place without any regard to the plaintiff’s state of mind.

[153]                     With this in mind, I am respectfully of the view that my colleague’s approach is undermined by the well-settled principle that the discoverability rule is fundamentally a rule of statutory interpretation. The fact that a limitation period begins running upon the occurrence of anelement (and not upon the accrual or arising) of the plaintiff’s cause of action is not, on its own, indicative of any legislative intent regarding the applicability of the discoverability rule. As I have already indicated, my colleague’s conclusion is the same as the one reached by the Court of Appeal in this case and by the Ontario Court of Appeal in Fanshawe: in such circumstances, according to him, discoverability applies automatically. This, however, creates an arbitrary distinction between triggering events that are related to the cause of action and those that are not, despite the fact that both may occur independently of the plaintiff’s state of mind. How can it fairly be said that the legislature intended the discoverability rule to apply to one and not the other? Although knowledge is necessary for a cause of action to fully accrue to the plaintiff, it does not follow that an element of the cause of action also occurs only when the plaintiff has knowledge thereof.

[154]                     A preferable approach is instead one that considers each statutory limitation clause on its own terms, recognizing that a triggering event that relates to a cause of action can, but need not, be dependent upon the plaintiff’s state of mind. This approach is faithful to this Court’s jurisprudence, and respectful of the notion of discoverability as an interpretative tool and not a general rule that allows clear statutory wording to be disregarded. For my part, I would reaffirm the approach laid out in Fehr without any modification.

Thus discoverability doesn’t apply to the s. 36(4) limitation period:

[157]                     The wording of the limitation period set out in s. 36(4)(a)(i) provides ample support for the proposition that the two-year period commences independently of when the plaintiff first learns of the wrongdoing. Rather than having the limitation period commence upon the accrual of the cause of action (as was the case in Central Trust and M. (K.)), Parliament decided that it would instead commence on “a day on which the conduct was engaged in” — which, contrary to the position taken by my colleague, is not “wording to [the same] effect” as “accrual of the cause of action” (paras. 37 and 41). There is simply no link between this triggering event and the plaintiff’s state of mind; it is, in short, an “event which clearly occurs without regard to the injured party’s knowledge”. The Certification Judge’s reading of this provision led him to the same conclusion (para. 54 (CanLII)). It was the existence of conflicting jurisprudence on this point that caused him “not [to be] satisfied that it is plain and obvious that the discoverability principle can never apply to the limitation period in s. 36(4)” (para. 58).

[158]                     I acknowledge that the “discoverability rule has been applied by this Court even to statutes of limitation in which plain construction of the language used would appear to exclude the operation of the rule” (Peixeiro, at para. 38). However, a consideration of the context surrounding s. 36(4)(a)(i) lends further support to the conclusion that the discoverability rule does not apply.

[159]                     First, the cause of action in s. 36(1)(a) is based on two essential elements: (i) the defendant engaging in conduct contrary to any provision of Part VI, and (ii) the plaintiff suffering loss or damage as a result of such conduct. It is only upon the occurrence of both events that the plaintiff can commence proceedings on the basis of this statutory cause of action. Cognizant of this, and of the fact that conspiracies of this nature take place in secret, Parliament decided that the limitation period would not begin when the plaintiff actually sustained loss or damage, but rather when the defendant engaged in the prohibited conduct. It is important to keep in mind that the point at which the conduct is engaged in necessarily precedes the point at which a claimant will suffer loss or damage as a result of such conduct. I would also note that the offence under s. 45 is complete as soon as an unlawful agreement is made, meaning that the “conduct” is “engaged in” even if the agreement is not actually implemented or prices do not actually increase. It follows as a direct consequence of this legislative choice that the limitation period can in fact expire before the plaintiff is in a position to commence proceedings under s. 36(1)(a).

[160]                     Second, s. 36(4)(a)(ii) provides a mechanism for the plaintiff to advance a claim that may be barred by s. 36(4)(a)(i): even if two years have expired from the day on which the prohibited conduct was engaged in, the limitation period will restart on the day on which criminal proceedings relating to the impugned conduct are finally disposed of. While s. 36(4)(a)(ii) applies only where the alleged conduct contrary to Part VI is the subject of criminal prosecution, it nevertheless provides an indication that Parliament was aware of the strictness of s. 36(4)(a)(i) and chose to enact this provision as the only means of relieving against it.

[161]                     Third, and unlike claims subject to the general limitation period in British Columbia’s Limitation Act, S.B.C. 2012, c. 13, s. 21, Parliament has not subjected claims under s. 36(1)(a) to any ultimate limitation period. Interpreting s. 36(4)(a)(i) as commencing only when the underlying conduct becomes discoverable will therefore have the effect of leaving defendants at risk of lawsuit indefinitely. As Paul-Erik Veel helpfully observes, the result would be that “companies could face claims decades later, well after the employees involved in the alleged conspiracy may have left and documents lost, without any ability to defend themselves” (Waiting forever for the axe to drop? Discoverability and the limitation period for Competition Act claims, Lenczner Slaght, August 12, 2016 (online)). This runs contrary to the certainty and evidentiary rationales that underlie the law of limitations.

[162]                     Fourth, the two-year limitation period was enacted by Parliament at a time when limitation periods were comparatively much longer. For example, the provincial limitations statutes that were in force at the time in Ontario and British Columbia set out a general limitation period of six years (The Limitations Act, R.S.O. 1970, c. 246, s. 45(1); Statute of Limitations, R.S.B.C. 1960, c. 370, s. 3). The relatively short limitation period at issue here, which commences even before the cause of action fully crystalizes, provides a further indication of the premium that Parliament placed on granting repose to defendants and encouraging diligence by potential plaintiffs.

I find Justice Côté’s reasoning more persuasive.  I say that with the qualification that I am not as conversant with common law discovery jurisprudence as I am with codified discovery jurisprudence.

That said, I am sufficiently conversant to recognise a curious fiction that underlies the court’s competing arguments.  For the most part, courts apply common law discovery to limitation periods that predate the rule.

Take for example the limitation period in s. 38(3) of the Trustee Act, which commences on death.  It predates the 1997 Supreme Court decision in Peixeiro which determined that discoverability was of general application.  Thus in 2000, the Court of Appeal in Waschkowski noted that “Until the later decision of the Supreme Court of Canada in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, 151 D.L.R. (4th) 429, it was not clear whether the discoverability rule applied to all limitation provisions, or whether its application depended on the actual wording of the statutory limitation”

Section 38(3) dates from 1990.  It’s possible, but doubtful, that the legislature drafted s. 38(3) as a response to, say, the early SCC discoverability decisions like 1986’s Central Trust.  However, it’s beyond doubt that the Legislature did not draft the limitation periods in the former Limitations Act mindful of the discoverability rule.  Some of those limitation periods were centuries old before discoverability was even a glimmer in the Legislature’s eye.

Similarly, it’s not clear to me how Parliament could have intended discoverability to apply to s. 36 of the Competition Act when that provision appears to have been enacted in 1985, a year before Central Trust.

So, the court really isn’t arguing about what Parliament intended subjectively, because Parliament didn’t know that discoverability was going to be a rule of general application.  Instead, the court is trying to rationalise common law discovery with limitation periods drafted before the rule existed.  I think Justice Côté’s approach is the soundest conceptually.

In that regard, I note another problem with the majority’s analysis.  If a limitation period commences on the occurrence of an event that forms part of a cause of action, and if discoverability applies, it would be possible to discover the event before the cause of action accrues.  The limitation period would commence before there is a legal basis for an action.  This wouldn’t happen with s. 36(4), but insofar as the majority is setting out a rule, it’s one with problematic implications.

There are two other noteworthy aspects of the decision:

First, the decision includes what is now the leading consideration of fraudulent concealment.  Importantly, the court clarifies that the doctrine does not require a “special relationship between the parties” as its conventional formulation suggests:

[53]                          While it is therefore clear that equitable fraud can be established in cases where a special relationship subsists between the parties, Lord Evershed, M.R. did not limit its establishment to such circumstances, nor did he purport to define exhaustively the circumstances in which it would or would not apply (see T.P. v. A.P., 1988 ABCA 352 (CanLII), 92 A.R. 122, at para. 10). Indeed, he expressly refused to do so: “[w]hat is covered by equitable fraud is a matter which Lord Hardwicke did not attempt to define two hundred years ago, and I certainly shall not attempt to do so now” (Kitchen, at p. 249, emphasis added).

[54]                          When, then, does fraudulent concealment arise so as to delay the running of a limitation period? Recalling that it is a form of equitable fraud, it becomes readily apparent that what matters is not whether there is a special relationship between the parties, but whether it would be, for any reason, unconscionable for the defendant to rely on the advantage gained by having concealed the existence of a cause of action. This was the Court’s point in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19 (CanLII), [2002] S.C.R. 678, at para. 39:

[Equitable fraud] “… refers to transactions falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained” (p. 37). Fraud in the “wider sense” of a ground for equitable relief “is so infinite in its varieties that the Courts have not attempted to define it”, but “all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken” [Emphasis added.]

It follows that the concern which drives the application of the doctrine of equitable fraud is not limited to the unconscionability of taking advantage of a special relationship with the plaintiff. Nor is the doctrine’s application limited, as my colleague suggests, to cases where there is something “tantamount to or commensurate with” a special relationship between the plaintiff and the defendant (paras. 171 and 173-74). While a special relationship is a means by which a defendant might conceal the existence of a cause of action, equitable fraud may also be established by pointing to other forms of unconscionable behaviour, such as (for example) “some abuse of a confidential position, some intentional imposition, or some deliberate concealment of facts” (M. (K.), at p. 57, citing Halsbury’s Laws of England (4th ed. 1979), vol. 28, para. 919). In short, the inquiry is not into the relationship within which the conduct occurred, but into the unconscionability of the conduct itself.

Second, the majority formulates discoverability as applying when “a limitation period runs from the accrual of cause of action or knowledge of the injury”.   The language “knowledge of the injury” comes from Peixero, which takes it from the MB CA decision in Fehr, where it appears without any explanation.  I don’t know what it means.  Is it a reference to a circumstance where a wrong isn’t actionable unless it causes an injury that rises above a threshold?  I struggle to think of other scenarios where knowledge of an injury causes time to run, but knowledge of the cause of action wouldn’t.

It’s odd to me that the majority thought this would be so self-evident that no explanation was required.  At risk of a little (inexcusable) immodesty, the majority and the dissent cite the my text book: this is good indication that if I don’t know what it means, I’m not sure the court could reasonably assume it’s common knowledge.

 

 

Ontario: whose knowledge binds a corporation?

Whose knowledge binds a corporation for the purpose of a s. 5 discovery analysis?

The Superior Court decision in 1511419 Ontario Inc. v. KPMG considers this issue:

[91]           The Defendants dispute that the Minutes of the Board are in fact the “best evidence” of what the Board knew in or around the time of the January 2012 Transaction.

[92]           They submit that a full meeting of the Board is not required for a corporation to acquire knowledge that it would otherwise obtain through its directing minds such as officers or directors: DBDC Spadina Ltd. v. Walton, 2018 ONCA 60 (CanLII), 419 D.L.R. (4th) 409, at paras. 59-60, leave to appeal to S.C.C. allowed, 2018 CarswellOnt 19181; Canadian Dredge and Dock Company Limited v. R., 1985 CanLII 32 (SCC), [1985] 1 S.C.R. 662, at pp. 679-685, 707-709, 713-714, and 717-718.

[93]           They further go on to submit that it is also not clear what was recorded in the Board or Audit Committee Minutes, and overall the Minutes are not reliable.

[94]           Cash Store responds by submitting that, as a matter of law, the directing mind of a public corporation is its board of directors, acting as a collective: Stern v. Imasco Ltd. (1999), 1999 CanLII 14934 (ON SC), 1 B.L.R. (3d) 198 (Ont. S.C.), at paras. 98-113.

[95]           I do not propose to determine this dispute on this motion. I am prepared to accept that the Board Minutes are, at the very least, some evidence of what Cash Store knew at the relevant time periods.

Surprisingly, this significant limitations question remains to my knowledge unanswered.  It seems to me that the answer will be, as it usually is in the context of discovery arguments, “it depends on the facts”.

However, I am also mindful of the policy implications of the issue.  It’s problematic to deem the knowledge of directing minds to be the knowledge of a corporation for discovery purposes.  If an employee discovers a claim, and that discovery does not bind the corporation, the employee could determine when the limitation period commences by determining when to disclose her knowledge of the discovery matters to a directing mind.  This risks encouraging corporations to sit on their rights until they consider it most advantageous to exercise them. A directing mind of a corporation might advise an employee to refrain from disclosing any fraud allegations until confident in the success of a claim arising from them. This would be antithetical to the basic purpose of the limitations scheme to encourage the diligent and timely prosecution of claims.

Lastly, the decision is a warning against asking the court to decide a too-complicated limitations defence on summary judgment:

[113]      I cannot determine this matter in a fair and just manner by way of summary judgment. A review of the aforementioned affidavits and voluminous yet limited record do not provide the adequate context to determine the limitation period dispute. Particularly, I have no meaningful understanding as to the interaction between the parties in and around the time of the January 2012 Transaction that would assist me in determining the limitation issue. I also have no meaningful understanding of the assistance, or lack thereof, the Defendants rendered to Cash Store before, during, or after the January 2012 Transaction closed. The actions involve a complicated factual matrix involving professional negligence and a significant damages claim. In my view, the usual rule enunciated by Nordheimer J.A. in Mason should be followed. A full evidentiary record including viva voce evidence of the parties is required to achieve a fair and just result.

 

Ontario: the timing of amendments, and some words on laches

The Superior Court in Barker v. Barker is perhaps the most extreme example of an eleventh-hour motion to amend to plead discoverability.  The plaintiffs moved in the third week of trial to amend their Statement of Claim to plead reliance on ss. 5 and 16 of the Limitations Act in response to the defendants’ limitations defence (the decision is silent on why the plaintiffs chose to amend their Statement of Claim rather than file a Reply).  Justice Morgan didn’t find that the delay was fatal to the motion:

[8]               Whether or not the motion to amend would have been better brought before trial began rather than in its third week, what is clear is that the limitations issues, including as the Court of Appeal says, the application of section 16(1)(h.2) and the doctrine of discoverability, come as no surprise to the Defendants. They knew these issues were raised by the Plaintiffs in the 2017 motion before Perell J. Plaintiffs’ counsel has reproduced in their motion record copies of the factums from the 2017 motion, where these issues were argued for many paragraphs by both sides. As indicated above, the Defendants all knew that the 2018 judgment of the Court of Appeal had specifically reserved these issues for a later date, mentioning the trial itself as the likely time for canvassing section 16(1)(h.2) and discoverability.

[9]               Although mid-trial pleadings amendments are not encouraged as a matter of case management, Rule 26.02(c) provides that a pleading may be amended at any time, without limitation, with leave of the court. Moreover, the amendment rule is written in mandatory language. Rule 26.01 provides that, “On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.” Accordingly, a party seeking to prevent a pleading from being amended “must establish a link between the non-compensable prejudice and the amendment. It must show that the prejudice arises from the amendment”: Iroquois Falls Power Corp. v Jacobs Canada Inc., 2009 ONCA 517 (CanLII), at para 20.

The decision is also noteworthy for its consideration of the role of discoverability in a laches analysis.  It is impossible to assess the impact of delay in suing without knowing when the plaintiff first ought to have known of the claim:

[25]           Embedded in this argument is the idea that different questions would be asked in an equitable laches case than in a statutory limitation case. More specifically, it assumes that discoverability, which is an integral part of a limitation period analysis both at common law and under statute, is not at issue in a laches analysis. That sounds somewhat plausible at first blush – after all, the equitable doctrine of laches is, like all doctrines of equity, related to but different in nuance from limitation periods as its nearest relative at law. Limitation periods are hard numerical rules while laches is a principle that requires a weighing of the competing equities: Manitoba Metis Federation Inc. v Canada (Attorney General), 2013 SCC 14 (CanLII), [2013] 1 SCR 623, at paras 145-6. That difference, however, is not always as substantive as it may appear.

[26]           Almost a century ago, English legal scholar John Brunyate stated, “since delay by a plaintiff who has been ignorant of his right of action will not amount to laches, we should expect that…time will not run until the plaintiff is aware of his right of action.” Limitation of Actions in Equity (London: Stevens & Sons, 1932), c. 2, cited approvingly in M(K) v M(H), 1992 CanLII 31 (SCC), [1992] 3 SCR 6. We need not delve into legal history to see that that logic makes sense. It would be impossible to evaluate the equities of a delay in bringing an action without knowing when the Plaintiff first realized he or she had been wronged.

[27]           In fact, the weighing of equities in a laches analysis specifically involves asking whether the claimant has acquiesced in the delay, which in turn involves evidence of the claimant’s state of mind and level of knowledge of the facts on which the cause of action is premised: Manitoba Metis Federation, at para 147. One can’t acquiesce in something one hasn’t discovered. It is little surprise, therefore, that the Supreme Court of Canada has indicated that the equitable doctrine of laches essentially mirrors the common law doctrine of discoverability: “It is not enough that the plaintiff knows of the facts that support a claim in equity; she must also know that the facts give rise to that claim”: M(K), supra, citing Re Howlett, [1949] Ch. 767.

[28]           The Supreme Court in M(K) has specifically confirmed with respect to discoverability and laches that “both doctrines share the common requirement of knowledge on the part of the plaintiff.” The indicia of that knowledge – what did the Plaintiff know with respect to the alleged wrongs and his legal rights and when did he know it – will be the subject of discovery under both rules. It defies logic and the nature of the two very similar legal principles to say that a Defendant knew full well he had to discover on the issue of laches, but that he is greatly disadvantaged to now learn that he also had to discover on the issue of discoverability. The information sought and the questions asked will be virtually the same.

This analysis came in the context of a rather astonishing (and unsuccessful) argument by the Crown.  It denied having notice that discoverability was in issue despite having asked questions about discoverability on examination for discovery.  The Crown explained this contradiction by throwing a junior under the bus: apparently, the junior went rogue and asked the discoverability questions without instructions:

[19]           Turning to the discoverability doctrine, Defendants’ counsel contend that they have not had an opportunity to examine the Plaintiffs for discovery on the discoverability issue. They submit that at this late date, with the trial already underway, the motion to amend must either be dismissed outright or granted together with an adjournment of the trial so that further discovery can be conducted. Otherwise, they say, they are made to essentially defend a trial by ambush.

[20]           Counsel for the Plaintiffs responds with some incredulity. Plaintiffs’ motion record contains over a thousand pages of discovery transcripts in which the discoverability issue was explored with various Plaintiffs by Defendants’ counsel. Plaintiffs’ counsel point out that Defendants’ counsel canvassed everything from the dates that the Plaintiffs first contacted their present counsel, to previous complaints and law suits brought by any number of Plaintiffs, to the Plaintiffs’ awareness of and access to duty counsel while at Oak Ridge in the 1970s, to the letter writing campaigns engaged in by several of the Plaintiffs over the decades seeking to put a stop to the kind of acts in issue in this litigation. In addition, in the affidavits sworn by each of the Plaintiffs for the 2017 motion, and which by agreement of the parties now form part of the trial record, the Plaintiffs each provide information on the dawn of this case and how and when they personally became involved or realized that they could engage in a legal action.

[21]           Counsel for the government of Ontario at discoveries asked a number of the Plaintiffs for undertakings with respect to these issues, and followed up on those requests by sending Plaintiffs’ counsel an undertakings chart listing and describing each of the outstanding answers. The chart divided the outstanding undertakings into three categories, listing each of the undertakings as going to either “Liability”, “Damages”, or “Discoverability”. The label of this third category was not a Freudian slip; a perusal of the undertakings falling under this heading reveals precisely the kind of questions one would ask in order to unearth the opposing side’s discoverability position. Various Plaintiffs responded by indicating when in the past they learned about, and with whom and when in the past they had spoken about, the prospect of a law suit relating to their Oak Ridge experiences.

[22]           It is not surprising that Defendants’ counsel asked these questions. Discoverability, as Perell J. and the Court of Appeal pointed out, has long been an issue to be addressed in the case.

[23]           Defendants’ counsel responds by conceding that all of those questions were indeed asked, but says that they were for the most part meant to address the issue of laches as it pertains to the equitable claim of breach of fiduciary duties. It is the Defendants’ position that discoverability under the Act or at common law is a response to a defense which places an onus on the Plaintiff, and so it did not have to be canvassed at discoveries (or addressed at trial) if the Plaintiff did not specifically plead it.

[24]           At the same time, it is the Defendants’ position that with respect to the claim of breach of fiduciary duties the doctrine of discoverability does not apply either at common law or under the pre-Act limitations statutes in force in Ontario, but that the equitable doctrine of laches applies. Defendants’ counsel concedes that the onus is on the Defendant to establish the unfair delay on which the laches principle is premised. Accordingly, counsel for the Defendants explains that in their view, discoverability does not have to be explored in pre-trial examinations if the Plaintiff has not bothered to plead it, but laches has to be explored because it is clearly relevant and the Plaintiff need not plead it.

[29]           Interestingly, counsel for the Defendants conceded in argument that examinations on the issue of discoverability were in fact conducted with respect to 7 of the 28 Plaintiffs. Defendants’ counsel’s explanation for this is that, apparently, a very diligent young lawyer for the government of Ontario conducted the discoveries on those individual Plaintiffs, and was foresightful enough to pose questions exploring the discoverability issue. As for the rest of the individual Plaintiffs, other lawyers on the Defendants’ counsel team conducted those discoveries and the discoverability questions were not asked. Accordingly, the Defendants are not seeking to eliminate the doctrine of discoverability from the analysis of the limitation period with respect to 7 of the 28 Plaintiffs, but are seeking to eliminate it with respect to the remaining 21 Plaintiffs.

[30]            With respect, this position is not tenable. In the first place, counsel for Ontario asked for undertakings regarding discoverability from 13 of the Plaintiffs. If only 7 Plaintiffs were questioned about discoverability, how is it that undertakings were extracted from 6 more of them? Perhaps others on the Defendants’ counsel team were more foresightful and diligent than they have been given credit for.

[31]           But that is only part of the point. If the Defendants’ position is to be taken seriously, the young lawyer who supposedly on his or her own asked about facts going to the discoverability issue would have been fishing for information that, in the Defendants’ view, he or she had no right to ask about. Not surprisingly, Plaintiffs’ counsel did not object to this line of questioning and provided answers that now satisfy the Defendants such that they are not discounting the discoverability doctrine with respect to those 7 deponents. What was wrongful from the Defendants’ point of view when it was done has suddenly become rightful now that it helps explain some of the discoverability questions which the Defendants did in fact explore with the Plaintiffs.

[32]           Furthermore, if one lawyer on the Defendants’ team knew about the discoverability doctrine, they all knew about the discoverability doctrine. In order to put an opponent on notice in litigation, one conveys the notice to opposing counsel – any number of them or any one of them will do. If one member of a law firm of record has notice, or one member of the Ministry of the Attorney General is aware of an issue in the action, they all are presumed to have notice and be aware of the issue. The young lawyer who asked discoverability questions is not being presented as a rogue acting beyond his retainer; quite the opposite. He is being presented as a perhaps more thorough or diligent version of all the other Defendants’ lawyers.

Ontario: the limitation of indefinitely available internet defamation

At issue in Torgerson et al. v. Nijem was the limitation of a claim arising from internet defamation where the impugned words remain available indefinitely.  The plaintiff argued that each day the words remain available gives rise to a new cause of action, a new claim, and a new limitation period.  Justice Schabas rejected this argument: “When a plaintiff becomes aware of a specific posting on a website, time begins to run for the purpose of applying limitation periods. To hold otherwise, and allow plaintiffs to wait indefinitely to sue simply because the libel remains available, would render limitations defences meaningless and have serious implications for freedom of expression.”.  The decision is well-reasoned and persuasive; I have no quibbles. This is the analysis:

[12]           Section 4 of the Limitations Act, 2002 creates a general limitation period of two years from “the day on which the claim was discovered.” Section 5(2) of the Act creates a presumption that the claim is discovered when the act or omission took place, “unless the contrary is proved.”  Here, the defendant’s action in publishing the defamatory statements took place on January 18 and 19, 2016, and the plaintiff became aware of them within days, and no later than the end of January, 2016. The defendant therefore submits that it is plain and obvious that the action cannot succeed as the plaintiff did not commence this action until April 23, 2018, more than two years after the actions of the defendant were known, or “discovered”, by the plaintiff.

[13]           The plaintiff, however, relies on the “multiple publication” rule, that each publication of a defamatory communication is a separate and distinct libel, subject to its own limitation period. In the context of an electronic communication or publication on the internet, the argument goes, every time a person accesses or downloads the information there is a new claim and a new limitation period applies. In my view, the plaintiff’s position misunderstands the “multiple publication” rule and how it has been applied to the internet.

[14]           The “multiple publication” rule dates back to the somewhat infamous case of Duke of Brunswick v. Harmer (1849), 14 Q.B. 185, in which a cause of action arose after the Duke dispatched his manservant to purchase a back issue of a newspaper from the publisher in order to sue for a libel first published 17 years earlier. This, it was held, constituted a republication by the newspaper, allowing the plaintiff to avoid the limitation period.  The “multiple publication” rule established in that case has been subject to criticism, especially in light of the development of the internet.  American courts have rejected it, adopting a “single publication rule” in which limitation periods begin to run from the date of first publication: see, e.g., Firth v. State of New York, 775 N.E.2d 463 (NY Ct App 2002); Canatella v. Van de Kamp, 486 F. 3d 1128 (9th Cir. 2007).  And the British have now adopted a somewhat similar approach in s. 8 of the Defamation Act 2013, (U.K.) 2013, c. 26.

[15]           The multiple publication rule continues to find acceptance in Canada: see, e.g.,Carter v. B.C. Federation of Foster Parents Assn., 2005 BCCA 398 (CanLII); Shtaif v. Toronto Life Publishing Co. Ltd., 2014 ONCA 405 (CanLII).  In this case it is not necessary to address the validity of the rule, other than to note that it may be seen as another way of expressing the “repetition rule”, where someone has chosen to repeat or re-publish a defamatory statement, as the law provides that every person who repeats a libel is liable as if he or she is the original speaker: see Downard, Libel (Lexis Nexis, 3rd Ed., 2014) at paras. 5.32–5.44.

[16]           Another form of republication is found in Breeden v. Black, 2012 SCC 19 (CanLII), on which the plaintiff relies. Statements posted on the internet in the United States were read, downloaded and republished by newspapers in Ontario, creating a cause of action against the American defendants in Ontario, as the tort of defamation occurs when and where the words are read by a third party, and the republication in Ontario was foreseeable as a natural and probable consequence of the posting of the statements on the internet. This does not mean, however, that every time a person reads the defamatory words in those newspapers a new cause of action arises and limitation periods can be avoided.  Applying the discoverability principle, a plaintiff must sue within two years of when he or she becomes aware of the defendant’s action in publishing the defamatory words, whether in print or on the internet.

[17]           The Ontario Court of Appeal considered republication and the multiple publication rule in Shtaif.  There, the plaintiffs had not provided notice of their intention to sue over the print article within six weeks of becoming aware of it, as required by s. 5 of the Libel and Slander Act.  However, they became aware of the internet publication later and did provide notice of it within the required time.  The plaintiffs then sought to include their complaint about the print version in their action against the magazine, relying on s. 6 of the Act which permits adding other claims for libel against the defendant that occurred within the previous year.

[18]           The Court considered and rejected applying the single publication rule, as it would be inconsistent with s. 6 of the Act. The analysis in Shtaif must be seen in the context of that case, which dealt with separate publication in two different mediums – print and online.  As the Court of Appeal observed more recently in John v Ballingall, at para. 35, Shtaif  “does not mean that each day of online publication grounds a new cause of action.”

[19]           In John v. Ballingall the plaintiff had missed the notice and limitation periods for publications by the media under the Libel and Slander Act, and argued that “for every day the defamatory words are published online, a new and distinct cause of action accrues and a new limitation period begins to run.” The Court of Appeal rejected that position, stating, at para. 35:

The appellant seeks to rely on an incorrect interpretation of the “multiple publication rule”. That concept provides that when an alleged libel is republished across different mediums, including the Internet, those republications are treated as distinct libels. In Shtaif, the court rejected the notion that the limitation period for a suit about an online magazine article starts to run when the plaintiff becomes aware of the printed version. This was the basis for the conflicting evidence on discoverability in Shtaif. This decision does not mean that each day of online publication grounds a new cause of action. The court in Vachon v. Canada Revenue Agency, 2015 ONSC 6096 (CanLII), expressly rejected this interpretation of Shtaif. I concur with Hackland J., who said, at para. 22:

The plaintiff argues that the alleged defamation should be taken as having been republished every day [while it] remained accessible on the internet … Shtaif does not support that proposition … any limitation period based on discoverability will run from the point where the internet defamation is discovered. [emphasis added]

[20]           The plaintiff seeks to distinguish John v. Ballingall on the basis that it only deals with notice periods under the Libel and Slander Act.  While that was the context, the case also engaged the 3 month limitation period under the Libel and Slander Act, and the same reasoning must apply.   The Libel and Slander Act simply creates a shorter limitation period, together with a notice requirement, in recognition of the special position of the media, allowing it the opportunity to publish timely corrections to minimize damage and to prepare defences when facts remain fresh.

[21]           In my view, the Court of Appeal in John v. Ballingall clearly rejected the proposition that just because defamatory words remain online and are available to be downloaded and read indefinitely, there is continuous publication allowing limitation periods to be ignored. As the Court noted, the multiple publication rule applies when something is “republished across different mediums”.  Such republications require specific acts by the publisher, or republisher, to further disseminate, or repeat, the libel, as was the case in Shtaif.

[22]           Furthermore, to give effect to the amendment in the Statement of Claim would create the potential for endless retriggering of limitation periods simply because the words remain on the internet. This would allow plaintiffs to sit on their rights until it suited them to take action, rather than sue when they become aware of the wrong. This would be unfair to defendants who would be subject to lawsuits indefinitely, and raises concerns about freedom of expression.

 

Ontario: the Court of Appeal on adding a new claim

In Klassen v. Beausoleil, the Court of Appeal provides a helpful summary of the analysis for determining whether proposed amendments assert a fundamentally new claim:

(1)         The test to be applied

[24]      I begin with the text of r. 26.01 of the Rules. It provides:

On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. [Emphasis added.]

[25]      The rule is framed in mandatory terms: the court must allow the amendment, unless the responding party would suffer non-compensable prejudice, the proposed pleading is scandalous, frivolous or vexatious, or the proposed pleading fails to disclose a reasonable cause of action: 158844 Ontario Ltd v. State Farm Fire and Casualty Co., 2017 ONCA 42 (CanLII), 135 O.R. (3d) 681, at para. 25; Iroquois Falls Power Corp. v. Jacobs Canada Inc., 2009 ONCA 517 (CanLII), 264 O.A.C. 220, at paras. 15-16.

[26]      The expiry of a limitation period is one form of non-compensable prejudice. A party cannot circumvent the operation of a limitation period by amending their pleadings to add additional claims after the expiry of the relevant limitation period: Frohlick v. Pinkerton Canada Ltd, 2008 ONCA 3 (CanLII), 88 O.R. (3d) 401, at para. 24; 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848 (CanLII), 409 D.L.R. (4th) 382, at paras. 21-23; United Food and Commercial Workers Canada, Local 175 Region 6 v. Quality Meat Packers Holdings Limited, 2018 ONCA 671 (CanLII), at paras. 64; Davis v. East Side Mario’s Barrie, 2018 ONCA 410 (CanLII), at paras. 31-32. In this regard, the “addition of new statute-barred claims by way of an amendment is conceptually no different than issuing a new and separate Statement of Claim that advances a statute-barred claim” (emphasis added): Quality Meat Packers, at para. 64; citing Frohlick, at para. 24.

[27]      An amendment will be statute-barred if it seeks to assert a “new cause of action” after the expiry of the applicable limitation period: North Elgin, at paras. 19-23, 33; Quality Meat Packers, at para. 65. In this regard, the case law discloses a “factually oriented” approach to the concept of a “cause of action” – namely, “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person”: North Elgin, at para. 19; Quality Meat Packers, at para. 65.

[28]      An amendment does not assert a new cause of action – and therefore is not impermissibly statute-barred – if the “original pleading … contains all the facts necessary to support the amendments … [such that] the amendments simply claim additional forms of relief, or clarify the relief sought, based on the same facts as originally pleaded”: Dee Ferraro, at paras. 4, 13-14; North Elgin Centre Inc., at paras. 20-21; East Side Mario’s Barrie, at paras. 31-32; Quality Meat Packers, at para. 65. Put somewhat differently, an amendment will be refused when it seeks to advance, after the expiry of a limitation period, a “fundamentally different claim” based on facts not originally pleaded: North Elgin, at para. 23.

[29]      The relevant principle is summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3rd ed. (Toronto: LexisNexis, 2017), at p. 186:

A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon [which] the original right of action is based.[2]

[30]      In the course of this exercise, it is important to bear in mind the general principle that, on this type of pleadings motion, it is necessary to read the original Statement of Claim generously and with some allowance for drafting deficiencies: Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources), 2016 ONSC 6359 (CanLII), 134 O.R. (3d) 390 (Div. Ct.), at para. 23.

[31]      Finally, the court may refuse an amendment where it would cause non-compensable prejudice. The prejudice must flow from the amendment and not some other source: Iroquois Falls, at para. 20. At some point the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party is presumed. In this event, the onus to rebut the presumed prejudice lies with the moving party: State Farm, at para. 25.

[32]      Alternatively, the responding party may resist the amendment by proving actual prejudice – i.e. by leading evidence that the responding party has lost an opportunity in the litigation that cannot be compensated by an adjournment or an award of costs as a consequence of the amendment. It is incumbent on the responding party to provide specific details of the alleged prejudice: State Farm, at para. 25.

[33]      Irrespective of the form of prejudice alleged, there must be a causal connection between the non-compensable prejudice and the amendment. The prejudice must flow from the amendment and not from some other source: State Farm, at para. 25.

[34]      Bearing in mind these principles, the framework to determine the issues raised by this appeal is as follows:

  •     Are the proposed amendments to assert a claim to a 33% ownership interest the assertion of a “new cause of action”? If the proposed amendments are the assertion of a new cause of action, are the amendments statute-barred?

  •     Irrespective of the above, is this a case where non-compensable prejudice will arise as a consequence of the amendments?

Ontario: contract repudiation and the commencement of time

 

The Court of Appeal decision in Hurst v. Hancock is a reminder that in a claim arising from anticipatory breach or repudiation of a contract, the limitation period may not commence until performance is due.  There can no be no claim until there is a cause of action, and there will be no cause of action until claimant accepts the breach, or affirms the contract and performance is due.

Ontario: Court of Appeal on rolling limitation periods and contractual limitation periods

The Court of Appeal decision in Marvelous Mario’s Inc. v. St. Paul Fire and Marine Insurance Co. is a noteworthy addition to “rolling limitation period” jurisprudence.

The appellants sought coverage under the business interruption cover of a commercial insurance policy issued by the respondent.  The policy contained a contractual limitation period:

ACTION: Every action or proceeding against the insurer for the recovery of any claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs.

The trial judge held that the claim for business interruption losses was an ongoing claim and subject to a rolling limitation period.  The appellants discovered it on a date more than a year before commencing the coverage action.  However, it was subject to a rolling limitation period, a new claim accrued each day the appellant sustained a business interruption loss.  Those days within a year of the action give rise to timely claims.

The Court of Appeal rejected this reasoning.  First, it considered the nature of a rolling limitation period:

[35]      The jurisprudence suggests that a rolling limitation period may apply in a breach-of-contract case in circumstances where the defendant has a recurring contractual obligation. The question is not whether the plaintiff is continuing to suffer a loss or damage, but whether the defendant has engaged in another breach of contract beyond the original breach by failing to comply with an ongoing obligation. In cases where there have been multiple breaches of ongoing obligations, it is equitable to impose a rolling limitation period.

Second, it found that the trial judge erred by considering whether the appellants were continuing to suffer damages rather than whether the respondent was breaching a recurring contractual obligation:

[37]      In my view, where the trial judge erred was in focussing her analysis on the question of whether the appellants were continuing to suffer damages rather than on the issue of whether the respondent had a recurring contractual obligation. Unlike Pickering Square, where the tenant had a recurring obligation to occupy the premises every month during the term of the lease, the respondent was not obliged to make recurring payments. Rather, the policy covered business interruption losses and the respondent was obliged to pay those losses in their totality, subject to any limits in the policy. The fact that there was a 24-month cap on the business interruption losses does not convert the respondent’s obligation to indemnify into a recurring contractual obligation. Therefore, this was not a proper case for the application of a rolling limitation period.

[38]      The appellants knew as of the closing date for the sale of the businesses that they no longer had the assets under their control and that consequently they would thereafter suffer business interruption losses. While the precise amount of the damages was unknown, the appellants knew at that point that they had suffered loss or damage and under the policy they were obliged to commence a claim within one year. The fact that the extent of damages may not be known with precision does not stop the commencement of the limitation period: Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 18. The Second Action was consequently time-barred in its entirety.

This reasoning raises some interesting issues (which, I note sheepishly, I missed entirely when writing about the trial decision).

First, a word on the “rolling limitation period”.  The court’s language suggests that it’s an equitable principle: “In cases where there have been multiple breaches of ongoing obligations, it is equitable to impose a rolling limitation period”.  This isn’t quite right.

Statutory limitation periods apply to causes of action.  Subject to certain exceptions, one limitation period applies to one cause of action (in the case of the Limitations Act, one basic and one ultimate limitation period apply to one “claim”, which derives from a cause of action).

When there are circumstances that cause multiple causes of action to accrue periodically, one limitation period applies to each cause of action.  In the case of a contractual obligation that recurs daily (the court’s example), each day the defendant fails to perform the obligation a discrete breach of contract occurs that gives rise to a discrete cause of action.  Each discrete cause of action has its own limitation period.

Because these limitation periods have the same length, it will appear as if one limitation period commences anew each day,  The limitation period appears to roll.  This is the “rolling limitation period”.

A rolling limitation period is accordingly just convenient way to describe multiple limitation periods of the same length commencing regularly and consecutively.  It’s not a special kind of limitation period that exists independently of the statutory limitation scheme to be invoked as equity requires.

On my reading, the Court’s analysis is correct.  The Court found there was one cause of action that accrued on a particular date. There were no multiple causes of action, and there were accordingly no multiple limitation periods that could appear to roll.

All of this is to say that I question the value of the “rolling limitation period” in limitations analyses.  What purpose does it actually serve?  Instead of asking whether there is a rolling limitation period, you might just as easily, and certainly more accurately, ask whether there are recurring causes of action.

Now for the second issue: I’m doubtful cause of action accrual, or causes of action generally, had any place in the parties’ limitations analysis.

The limitation period is contractual.  It reflects the parties’ agreement on when the insured can sue the insurer.

The limitation period commences on the occurrence of the “loss or damage” and bars “absolutely” an action “against the insurer for the recovery of any claim” under the policy (that is, a claim for indemnification).

The triggering event is not the accrual of a cause of action, but the occurrence of the “loss or damage” for which the insured claims indemnification.  I suspect the policy provided coverage for some business interruptions that don’t arise from actionable misconduct.  This means the insured could seek recovery for a claim for indemnification of a loss that has nothing to do with a cause of action.

This makes it bewildering that the parties appear to have agreed that common law discovery applied to this limitation period

As I read the provision, its language excludes discoverability of any kind. The limitation period commences on the date of an event—the occurrence of loss or damage—and expires absolutely one year later.  The word “absolutely” would seem an explicit bar to discoverability or the suspension of time.  If the parties intended for discoverability to apply, they could have used language like “…unless commenced within one year next after the insured could first reasonably have learned of the loss or damage”.

It’s also impossible to apply common law discovery to a limitation period that commences on the date of an event rather than on the accrual of a cause of action.  Discovery is of a cause of action: the rule provides that a cause of action accrues when a plaintiff can first reasonably discover its material facts.  This is why the rule doesn’t apply to statutory limitation periods that commence on the date of an event (like s. 38 of the Trustee Act) .

Further, discovery is always in relation to the cause of action that gives rise to the proceeding.  In this case, the cause of action giving rise to the proceeding was the breach of the insurance agreement, and this is the cause of action to which the contractual limitation period applies.  The discovery of some of other cause of action that may have resulted in the event that is the trigger of the limitation period wouldn’t in the normal course be material to the commencement of time.  It’s so unusual for the limitation of one cause of action to be determined by the accrual of another cause of action that if the parties intended this to be so I’d expect explicit language to that effect in their agreement (I’ve never seen such language).

More generally, because this is a contractual limitation period, the parties ought to have grounded their positions in the language of the policy.  The material question strikes me as being whether the “loss or damage” occurred within the meaning of the policy each day the business interruption lasted, or on the date of the event that caused the business interruption.  This is a question of policy interpretation.

Without having read the policy, I see arguments on both sides.  I think the strongest argument is the one the court accepted.  The day of the peril that caused the business interruption—the transaction—caused the appellants to suffer the “loss or damage” for which they sought indemnification.  That the interruption lasted days goes to quantifying the loss, not when it occurred.  I would think the appellants’ notification would have been helpful; it’s easy to imagine that the appellants filed one notification in regards of the business interruption, which might have indicated they considered there to be one loss. I’m not sure why this didn’t appear to be part of the record.

The counterargument is that each day of business interruption was a new occurrence of loss.  This is effectively the rolling limitation period argument, except not one based on cause of action accrual.

I welcome your thoughts on this!

Ontario: special circumstances applies to Construction Act limitation periods

Pryers Construction LTD. v. MVMB is a reminder that parties in a lien action may be added after the 90 day limitation period in the Construction Act at any stage of the proceeding if there are special circumstances.

Update: this was overturned by the Divisional Court.

Ontario: you’re not a litigation guardian until you file an affidavit

The appointment of a litigation guardian will cause the limitation period to commence when the plaintiff is a minor or without capacity (see ss. 6, 7).  Does the limitation period commence when the litigation guardian holds herself out as a litigation guardian, or when the litigation guardian files the affidavit required by r. 7 of the Rules of Civil Procedure? The court in Siddiqui v. Saint Francis Xavier High School found it’s the latter:

[40]           In short, the courts have sought to protect the interest of minors and have found that it takes “clear and unequivocal” wording to strip protections away from minors and persons under disability who are incapable of protecting their own legal interests.

[42]           I conclude that the court in Socha recognized the term “litigation guardian” as a term of art when it identified the lack of any mechanism of self-appointment under the Act and then referred to the process for appointment of a litigation guardian under the Rules of Civil Procedure.

[48]           I agree with the Plaintiffs that the words of s. 6(b) of the Act must be given meaning otherwise the mere delivery of a notice letter would be sufficient.  The consequence of such a proposition would allow the running of a limitation period against a minor without affording them any measure of protection while their rights begin to fade away and would permit such a letter to be sent by anyone simply holding themselves out to be a litigation guardian.

[49]           I agree that that the determination of a minor’s rights should not turn on a question of the choice of words used in a letter. Such a proposition would not introduce certainty and would provide no protection to minors and persons under disability.

[50]           This conclusion is reinforced by the other provisions of the Act; namely ss. 9 and 14, where a prospective defendant can trigger the running of a limitation period. In those circumstances, a mere notice letter will not suffice. In short, those provisions demonstrate the balancing of rights that is required under the Act.

[51]           Section 9 (2) provides:

Appointment of litigation guardian on application or motion by potential defendant

(2) If the running of a limitation period in relation to a claim is postponed or suspended under section 6 or 7, a potential defendant may make an application or a motion to have a litigation guardian appointed for a potential plaintiff.

      Effect of appointment

(3) Subject to subsection (4), the appointment of a litigation guardian ends the postponement or suspension of the running of the limitation period if the following conditions are met:

  1.   The appointment is made by a judge on the application or motion of a potential defendant.
  1.   The judge is satisfied that the litigation guardian,
  1. has been served with the motion,
  2. has consented to the appointment in writing, or in person before the judge,

iii. in connection with the claim, knows of the matters referred to in clause 5 (1) (a),

  1. does not have an interest adverse to that of the potential plaintiff, and
  2. agrees to attend to the potential plaintiff’s interests diligently and to take all necessary steps for their protection, including the commencement of a claim if appropriate.

      Non-expiry

(4) The limitation period shall be deemed not to expire against the potential plaintiff until the later of,

(a)   the date that is six months after the potential defendant files, with proof of service on the litigation guardian,

  1.                                                                  a notice that complies with subsection (5), and
  1.                                                               a declaration that, on the filing date, the potential defendant is not aware of any proceeding by the litigation guardian against the potential defendant in respect of the claim; and

(b) the date on which the limitation period would otherwise expire after it resumes running under subsection (3).

Notice

(5) The notice,

(a) shall not be served before the first anniversary of the appointment;

(b) shall identify the potential plaintiff, the potential defendant and the claim; and

(c) shall indicate that the claim could be extinguished if a proceeding is not promptly commenced.  2002, c. 24, Sched. B, s. 9 (5).

[52]           Given all of the requirements of s. 9, it is clear that the few words found in s. 6(b) cannot be to be interpreted in such an informal manner as to negate the protections for minors available under law. Such an interpretation would be contrary to the scheme and purpose of the legislation. The balancing of rights is achieved through the provisions of s. 9 of the Act which ends the postponement of the running of the limitation period and provides a prospective defendant with a degree of certainty and finality.