Ontario: Limitations Act doesn’t apply to applications for attorney compensation

In April, I reported that in Armitage v. The Salvation Army, Justice Ray held wrongly that the limitation period for claiming compensation as a property attorney commences on the death of the person who granted the power of attorney.  I wrote that the Limitations Act doesn’t apply to such an application.  In December, the Court of Appeal agreed.

Armitage brought applications to pass her accounts as attorney for property and as estate trustee.  The Salvation Army filed notices of objection in both proceeding raising a limitations defence.  Justice Ray held that the death of the person who granted the power of attorney terminated the continuing power of attorney and was the commencement of the applicable limitation period.  The applications were accordingly timely.

Not so, I wrote.  While there may be sound policy reasons for limiting a claim for attorney’s compensation after the death of the grantor, no limitation period applies to such an application.  The application is not a “claim” within the meaning of the Limitations Act because it doesn’t seek to remedy loss resulting from an act or omission.  If it’s not a “claim”, the basic and ultimate limitation periods can’t apply.  In fairness to Justice Ray, we noted that neither party raised this point.

Armitage raised the point on appeal, and Justice Hourigan accepted it:

[19]      While I agree with the result reached by the application judge, I disagree with his conclusion that the Limitations Act, 2002had any application in the circumstances of this case. As I will discuss below, in my view, the Limitations Act, 2002 does not apply because compensation for an attorney for property through the passing of accounts process does not constitute a “claim” within the meaning of the Limitations Act, 2002.

[20]      It is useful to briefly consider the nature of compensation for attorneys for property and how the passing of accounts process works. An attorney for property is a fiduciary and has an obligation under s. 32(6) and 38(1) of the SDA to, among other things, keep accounts of all transactions involving the property.

[21]      The attorney for property may bring an application to the Superior Court to have his or her accounts approved. Through that process, the attorney for property may also seek court approval of compensation for his or her services. The responding parties to the application have an opportunity to file a notice of objection to the accounts, and to object to the compensation that the attorney for property proposes to take or has taken.

[22]      Where the attorney for property has not commenced an application for the passing of accounts, an interested party may bring an application under s. 42(1) of the SDA to compel the passing of accounts.

[23]      As noted by Matthew Furrow and Daniel Zacks in their very recent article “The Limitation of Applications to Pass Accounts” (2016) 46 Adv. Q. 2, historically in Ontario there was no statutory limitation period for the passing of accounts. The only bars were the equitable defences of laches and acquiescence. The question becomes whether the enactment of the Limitations Act, 2002changed the law and imposed the general two-year limitation period on claims for compensation for attorney for property.

[24]      At first blush it would appear that such claims might be captured by the general limitation period. The Limitations Act, 2002 was designed to comprehensively deal with all manner of civil claims, whether grounded in equity, law, or statute. There are specific carve outs in the legislation for claims that are not subject to the Act. It is arguable, therefore, that if compensation for attorneys for property was intended to be exempted from the general limitation period it would have been specifically exempted under the Limitations Act, 2002.

[25]      The difficulty with that argument is that the Limitations Act, 2002 applies only to the assertion of a “claim”, and a claim is defined in the Act as follows: “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.”

[26]      The appellant submits that the right under the SDA to seek compensation is a new statutory right and, as with all rights, where there is a right there must be a remedy. Further, the appellant argues that the respondent’s claim for compensation fits within the statutory definition of a claim. Counsel for the appellant submits that in seeking compensation at this time the respondent has suffered a loss because she chose not to seek self-help and take her compensation earlier. He goes on to argue that this loss is the result of the respondent’s omission in failing to claim compensation earlier.

[27]      I am unable to accede to this rather circular argument. The fact is that in seeking court approval of the passing of accounts, an attorney for property is not seeking redress for any loss, injury, or damage. Rather, he or she is seeking approval from the court of his or her actions in managing the property, including approval for compensation previously taken or now sought. A passing of accounts application is the opposite of remedial; it is a process that seeks a court order that no remedy is necessary with respect to the accounts: see Furrow and Zacks, at pp. 9-10. Thus, the passing of accounts does not fit within the first part of theLimitations Act, 2002 definition of claim.

[28]      An application for the passing of accounts also does not fit within the second part of the statutory definition of claim. Where the definition speaks of an act or omission, it must surely refer to an action taken or not taken by a third party that has the effect of causing loss, injury, or damage. It would be a strange result if a limitation period could not be triggered until the party asserting the claim took an action or omitted to do something.

[29]      The result, in my view, is that a passing of accounts under the SDA is not subject to the two-year general limitation period found in the Limitations Act, 2002.[1] The common law in that regard was not changed with the enactment of that legislation. Consequently, the only defences available are the equitable defences of laches and acquiescence, neither of which were asserted in the present case.

Obviously, I think this is sound reasoning (based as it is on a paper I wrote with my colleague Matthew Furrow).

Importantly, Justice Hourigan explicitly not does hold that the Limitations Act has no applicability to the passing of accounts process under the SDA:

[1] I do not mean to categorically provide that the Limitations Act, 2002 has no applicability to the passing of accounts process under the SDA. In particular, it may be that the filing by a beneficiary of a notice of objection after an attorney has sought a passing of accounts is a claim within the meaning of the Limitations Act, 2002. However, I leave this determination to another case where it arises directly on the facts.

In our paper, Matthew and I argue a notice of objection that asserts a claim within the meaning of the Limitations Act is subject to its limitation periods.  Send me a note if you’d like a copy.

Ontario: The Court of Appeal on adding new claims to a proceeding

The Court of Appeal in 1100997 Ontario Limited v. North Elgin Centre Inc. sets out the test for amending a pleading to add a new claim outside a limitation period (making our last post rather unnecessary).  The court will refuse an amendment when it seeks to advance after the expiry of the limitation period a “fundamentally different claim” based on facts not originally pleaded:

[19]      A cause of action is “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person”: Letang v. Cooper, [1965] 1 Q.B. 232 (C.A.), at pp. 242-43, as adopted by this court in July v. Neal (1986), 1986 CanLII 149 (ON CA), 57 O.R. (2d) 129 (C.A.), at para. 23.

[20]      In Morden & Perell, The Law of Civil Procedure in Ontario, 2nd ed. (Markham: LexisNexis Canada Inc., 2014), at p. 142, the authors state:

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. [Footnotes omitted.]

[21]      In Dee Ferraro Ltd. v. Pellizzari, this court noted the distinction between pleading a new cause of action and pleading a new or alternative remedy based on the same facts originally pleaded. The appellants had commenced an action against their lawyer claiming damages for breaches of contract, trust and fiduciary duty and for fraud and negligence. The appellants then sought to amend their pleading. This court, in overturning the motion judge’s dismissal of the motion to amend, concluded that the proposed amendments, such as claims for a mandatory order and a constructive trust over shares, could be made because they flowed directly from facts previously pleaded.

[22]      By contrast, a proposed amendment will not be permitted where it advances a “fundamentally different claim” after the expiry of a limitation period: Frohlick v. Pinkerton Canada Ltd. In that case, the court did not permit the plaintiff in a wrongful dismissal action to amend the statement of claim to assert a claim for damages for constructive dismissal on the basis that the limitation period had expired. This court dismissed the appeal. The amendment regarding constructive dismissal related to events that occurred prior to the events described in the original statement of claim that were unrelated to that claim. The defendant was unaware of the new allegations prior to the plaintiff seeking the amendments, and the events were not put in issue or encompassed within the original claim.

[23]      Based on the foregoing, 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.

I think this is a sound conclusion. Allowing amendments so long as they don’t advance a fundamentally different claim based on the facts originally pleaded makes sense, though it doesn’t seem like much of a departure from the “same factual matrix” test.  Indeed, later in the decision Justice van Rensburg refers to the factual matric concept:

[38]      I therefore conclude that the proposed amendments contained in the statement of claim ought not to have been refused on the basis that they raised new claims based on new causes of action.

Perhaps this new formulation’s chief virtue is that it doesn’t necessarily require a cause of action analysis.  Comparing claims is materially different than comparing causes of action.  “Claim” is a defined term in the Limitations Act, whereas the words “cause of action” don’t appear at all in the Limitations Act, and particular causes of action and their accrual are immaterial to a limitations analysis.  Mischief results when the court forgets this.

Other aspects of the decision are noteworthy.  Justice van Rensburg concludes that when a notice of application commences a proceeding, the court should consider both the notice of application and the supporting affidavit material to determine whether a proposed amendment sets forth a new claim.

Justice van Rensburg follows the 1989 Court of Appeal decision in Energy Probe v. Canada (Attorney  General) for the principle that affidavit materials on an application form part of the pleadings.  The interesting question that arises from this principle is its interaction with the affirmative nature of a limitations defence.  In an action, the defendant must plead the Limitations Act in the statement of defence.  The plaintiff may then plead the facts supporting a discovery argument in reply.  See the Court of Appeal decision in Collins.

Does this mean that the respondent to an application should “plead” the limitations defence in  a responding affidavit? Should the applicant then plead the facts supporting a discovery argument in a reply affidavit?  Increasingly, I’m of the mind that it’s impossible to square limitations law and application procedure (with certain exceptions, especially contested applications to pass accounts), but this is an issue (and likely an article) for another day.

Lastly, Justice van Rensburg  also reminds us that an order refusing leave to amend a pleading to add a new claim outside a limitation period is a final order:

[17]      In Energy Probe v. Canada (Attorney General) (1989), 1989 CanLII 258 (ON CA), 68 O.R. (2d) 449 (C.A.), leave to appeal refused 37 O.A.C. 160 (S.C.C.), in determining whether a cause of action was disclosed, this court stated that “affidavit materials on an application are to be considered as the pleadings” (at para. 10). Further, where oppression proceedings commenced by notice of application were converted into an action in Przysuski v. City Optical Holdings Inc., 2014 ONSC 3686 (CanLII), Perell J. refused to strike paragraphs of the statement of claim as raising unanticipated claims as an abuse of process because “[t]he Notice of Application should be read with its supporting affidavits and with the evidentiary record for the Application” (at para. 11).