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: Does the limitations act apply to Notices of Objection?

In the Wall Estate, the court held that the Limitations Act does not apply to a claim asserted in a beneficiary’s Notice of Objection to Accounts:

[1]               The discreet issue for consideration at this motion is as follows:  Can an estate trustee move to strike a beneficiary’s Notice of Objection to Accounts in the face of the estate trustee’s Application to Pass Accounts, based on the Limitations Act, 2002, or laches or acquiescence?  For reasons that follow, I am satisfied that the beneficiary, Elizabeth Wall, is not barred from filing an objection to the accounts for the entire period under administration.

Marjorie Wall died in 2005.  The objector was Elizabeth Wall, her daughter and beneficiary of the estate.  Marjorie left the bulk of her estate to her two children in trust until they attained the age of 60 years.  Both children were under 60 at the time of Marjorie’s death.  The trustee had absolute discretion to pay funds to the children during their lifetime prior to reaching 60.  If they didn’t reach 60, the will provided that the estate’s residue was to be divided amongst nieces and nephews.  Elizabeth was 54 at the time of the application, so she had a vested interested in the discretionary trust and a contingent interest in the residue of the estate.

In response to her objection, the trustee took the position that he was not required to address it because it was time-barred, either by the Limitations Act or equity.

The court disagreed.  Relying on the decision in Armitage, the court reasoned that if a passing of accounts doesn’t fit the definition of a “claim” in the Limitations Act, neither does a Notice of Objection:

[31]           Based on the facts in Armitage, Hourigan J.A. found that the passing of accounts does not fit within the definition of a claim within the Limitations Act, 2002.  In my view, if the passing of accounts does not constitute a claim, I am not satisfied that a Notice of Objection is a claim.  In filing a Notice of Objection, the beneficiary is seeking answers to questions about steps taken by the estate trustee during the currency of an administration of an estate.  Answers to those questions may assist the beneficiary in consenting to the passing of accounts without the necessity of a formal hearing.  An absence of consent will require a formal hearing.  A formal hearing will assist the court in determining if the fees sought and investment steps taken are appropriate under all the circumstances.

[32]           The objections taken at their highest may result in a reduction or loss of compensation for the estate trustee or other remedies.  In this case, if the objections are successful to any extent, no additional funds would be payable immediately to Elizabeth as beneficiary of the discretionary trust.  The corpus of the estate would be enlarged, increasing the funds available for the discretionary trust, and ultimately, could increase the amount available to be paid to Elizabeth, but only if she survives to age 60.  On the facts here, I am not satisfied that the Notice of Objection rises to the level of a “claim” as contemplated by the Limitations Act, 2002.

This reasoning is problematic.  The threshold question is whether the Notice of Objection contains a “claim”.  If so, as the Limitations Act applies to all claims pursued in court proceedings, it would limit the claim pursued in the Notice of Objection.  Section 1 of the Limitations Act defines “claim”:  “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”.  Accordingly, answering the threshold question requires assessing whether the elements that comprise a claim—wrongful conduct and resulting damage—are present.

In Armitage, the Court of Appeal found that an attorney for property’s application to pass accounts was not a “claim”. The application did not seek a remedy for any damage, but rather court approval of the attorney’s conduct.

The decision Wall does not quote the definition of “claim” and does not explicitly consider its elements. Rather, it reasons that if the application to pass accounts in Armitage was not a “claim”, then neither was the Notice of Objection.  This is not a sound limitations analysis.

Indeed, the decision certainly gives the impression that the Notice of Objection was “claim”.  In it, Elizabeth alleged that the trustee had wrongfully carried out his duties resulting in a diminution of the funds available to her; in other words, she sought to remedy damage resulting from wrongful conduct.

It may be that the court arrived at the correct decision, but from a limitations perspective it’s a very dubious decision.


Leigh Sands kindly brought to my attention Iaboni Estate v. Iaboni in which an application judge considered a limitations defence raised in response to a notice of objection without any suggestion that this is an unsettled area of the law:

Did the limitation periods expire, such that the claims made in his Notice of Objection are out of time?

[32]           The objections of Mr. C. Iaboni that the trustee ‘excluded’ many valuable assets such as a mortgage, two businesses, a condo and life insurance policy from the estate of Lidia Iaboni and that when Lidia Iaboni became disabled, her husband’s wealth evaporated and the applicant has no interest in marshalling this wealth is, in part, a complaint about the administration of Umberto Iaboni’s affairs, between the onset of his disability in 2006 and his death in 2010 and latterly a complaint about the administration of his mother’s affairs between the onset of her disability in 2006/2007 and before her death in 2012. His allegations in the Notice of Objection filed in his mother’s estate, as outlined above were in substance the same as those made in the litigation he initiated on December 15, 2010.  All of the transactions about which he complains were disclosed to him no later than the accounting delivered on behalf of his siblings pursuant to the Minutes of Settlement, with the possible exception of the discharge of the mortgage on his sister’s home, which was a matter of public record.  His civil action was dismissed on May 15, 2013.

[33]           It appears, therefore, that Mr. C. Iaboni’s Notice of Objection raises issues as particularized above that are outside of the 2-year period within which they may have been pursued.

The Court of Appeal upheld the decision:

[10]      We are not persuaded that the motions judge made any error. The appellant consented to the passing of accounts from the time of the appointment of BNS, and has not appealed that aspect of the order. Even if the appellant were able to identify errors with respect to the abuse of process and Limitations Act claims, the motions judge’s findings of fact on the merits are fatal to the appeal. She made findings that the appellant had not substantiated his suspicions with respect to the discharge of mortgage, the share certificate, or general dissipation of funds. She also found the evidence of the respondent Norma to be credible and reliable. Those findings are entitled to deference and are dispositive of the appeal.

It is certainly arguable that this decision is determinative of the issue, even if the court determined it without analysis or acknowledgement that it is the subject of debate.

However, Matthew Furrow, who is a far greater authority on these issues than me, disagrees.  He notes that really, all the Court held was that the facts were dispositive of the appeal, and not the limitations analysis.  I think he’s right, which means uncertainty remains.




Ontario: damage occurs when there is a change in position


In Sirois v. Weston, the Court of Appeal cites its decision in Hamilton for the principle that damage occurs when the plaintiff suffers a change in a position, not when the change of position monetises into a specific amount:

[11]      … the plaintiff suffers damage sufficient to complete the cause of action when he enters into the transaction, not when the loss is monetized into a specific amount.

This is an essential principle in any limitations analyses.  The Limitations Act applies to “claims” (as defined by s. 1) pursued in court proceedings, and damage is an element of a “claim”.

What is not an essential principle in any Limitations Act analysis is the accrual of the cause of action.  Cause of action accrual determined the commencement of time under the former act.  If you look it up, you’ll see that limitation periods commenced when the cause of action arose.  Now look at the Limitations Act, and you’ll see that the words “cause of action” do not appear at all.  This is because MAG recommended removing the cause of action as determinative of the commencement of time in 1991 because three centuries or so of cause of action accrual had demonstrated that it was a pretty lousy animating principle of a limitations scheme.

Ontario: no limitation period without a claim

Justice Emery’s decision in Inzola Main Street Inc. v. Brampton (City of) is a statement of a very often overlooked but fundamental principle of the Ontario limitations scheme: there is no claim, and therefore no applicable limitation period, until the claimant suffers damage:

[51]           Inzola has made the basic submission on this motion that a limitation period for damages claim does not commence running until damage actually occurs. Mr. Svonkin refers to the definition of “claim” in section 1 of the Limitations Act 2002 as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. This language is consistent with section 5(1)(a) that sets out the components of the discoverability rule, and provides that a claim is discovered on the earlier of the day on which the person with the claim first knew that the injury loss or damage “had occurred”.

[52]           From reading the definition “claim” in section 1 that a claim must relate to damage, and to the qualifier “had occurred” to injury, loss or damage in section 5(1)(a)(i), the legislature has employed definitive language to require that the damage to which the claim relates must have taken place for the injury, loss or damage to be known. Where damage is an element of a cause of action or claim, a limitation period can only commence when the person with the claim suffers some damage that has occurred, and that damage is discoverable: Peixeiro v. Haberman1997 CanLII 325 (SCC)[1997] S.C.J. No. 31, at paras. 18 and 36, andPickering Square Inc. v. Trillium College Inc.[2016] O.J. No. 1118, at para. 33.

[53]           The prospect of injury, loss or damage at some future date is not sufficient to commence a limitation running. A claim does not arise only because a person recognizes or is concerned that they may suffer that injury, loss or damage at some point in the future. Justice Belobaba explained it this way in IPEX v. Lubrizol2012 ONSC 2717 (CanLII), at para. 22:

22.   In my view, it is self-evident that the injury, loss or damage that “has occurred” must be injury, loss or damage that was sustained by the person with the claim. It is also, in my view, a self-evident proposition of modern limitations law that the clock begins to run with actual harm (known or discoverable) and not just the possibility of future harm. The latter proposition doesn’t make any sense either in terms of public policy or otherwise.