Appropriateness

Ontario: Court of Appeal on the knowledge required to plausibly infer liability

The Court of Appeal decision in Di Filippo v. Bank of Nova Scotia explains the degree of knowledge required to know the s. 5(1)(a) discovery matters. This includes a clarification that the knowledge necessary to plausibly infer liability is not actual knowledge of the discovery matters. Actual knowledge requires knowledge of the material facts upon which to plausibly infer liability.

Perhaps like me you’ll find this distinction somewhat obtuse. What’s the difference between plausibly inferring liability per se and plausibly inferring liability based on material facts? Practically speaking, I think the point the court is making is that if you plausibly infer liability per se you have a suspicion of liability, but if you make that inference based on material facts, you have more than a suspicion. And so it’s just a different way of formulating the “more than a suspicion, less than certainty” standard that the court applied prior to Grant Thornton.

Here are the relevant paragraphs:

[54]      The court explained how to assess the plaintiff’s knowledge at para. 44:

In assessing the plaintiff’s state of knowledge, both direct and circumstantial evidence can be used. Moreover, a plaintiff will have constructive knowledge when the evidence shows that the plaintiff ought to have discovered the material facts by exercising reasonable diligence. Suspicion may trigger that exercise. (Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 42).

[55]      This court explained in Crombie that suspicion may trigger the due diligence obligation, but suspicion does not constitute actual knowledge. The full paragraph clearly explains the difference:

That the motion judge equated Crombie’s knowledge of possible contamination with knowledge of actual contamination is apparent from her statement that “[a]ll the testing that followed simply confirmed [Crombie’s] suspicions about what had already been reported on” (at para. 31). It was not sufficient that Crombie had suspicions or that there was possible contamination. The issue under s. 5(1)(a) of the Limitations Act, 2002 for when a claim is discovered, is the plaintiff’s “actual” knowledge. The suspicion of certain facts or knowledge of a potential claim may be enough to put a plaintiff on inquiry and trigger a due diligence obligation, in which case the issue is whether a reasonable person with the abilities and in the circumstances of the plaintiff ought reasonably to have discovered the claim, under s. 5(1)(b). Here, while the suspicion of contamination was sufficient to give rise to a duty of inquiry, it was not sufficient to meet the requirement for actual knowledge. The subsurface testing, while confirmatory of the appellant’s suspicions, was the mechanism by which the appellant acquired actual knowledge of the contamination.

[56]      Similarly, in Kaynes v. BP p.l.c., this court held that knowledge of allegations in pleadings does not, without more, constitute actual knowledge of one’s claim. […]

 

[59]      These examples draw out an important distinction from Grant Thornton: actual knowledge does not materialize when a party can make a “plausible inference of liability.” Rather, actual knowledge materializes when a party has “the material facts upon which a plausible inference of liability on the defendant’s part can be drawn” [emphasis added]. While class counsel may have had reason to suspect that Bank of America, Merrill Lynch and Morgan Stanley were part of the conspiracy, that suspicion was not actual knowledge. The motion judge erred in law by finding actual knowledge.

[64]      The effect of s. 5(1)(b) is to impose an obligation of due diligence on those who have reason to suspect that they may have a claim, but who do not yet have actual knowledge of the material facts giving rise to that claim: Crombie, at para. 42. Where potential plaintiffs sit idle or fail to exercise due diligence, the limitation period will commence on the date that the claim would have been discoverable had reasonable investigatory steps been taken. In other words, it is the date when the potential plaintiffs have constructive, as opposed to actual knowledge of their claim: Grant Thornton, at para. 44.

[65]      A court determining this issue will require evidence of how the material facts could reasonably have been obtained more than two years before the motion to add was brought: Mancinelli, at paras. 28, 31; Morrison v. Barzo, 2018 ONCA 979, at paras. 61-62.

 

The decision also includes an interesting if somewhat esoteric addition to s. 5(1)(a)(iv) appropriateness jurisprudence. A proceeding can be an appropriate remedy only if the circumstances give rise to a legally recognised cause of action on which to base the proceeding:

 

[37]      With respect to criterion (iv)[6], a proceeding would only be appropriate if the circumstances give rise to one or more legally recognized causes of action on which to base the proceeding. The wrong must have a legally recognized remedy. It is only in this sense – that legal recourse must be appropriate to address a loss caused by the proposed defendant’s act or omission – that the term “claim” has any legal specificity.

I expect the court assumed this to be self-evident, and perhaps it is. But it has a curious implication. Because a novel cause of action is, by definition, not legally recognised, it follows that a claim based on a novel cause of action is never discoverable. If a claim isn’t discoverable, the basic limitation period will never begin. Accordingly, only the ultimate limitation period could bar an action based on a novel claim.

Lastly, the decision contains a comprehensive statement of the law of amending a pleading to advance a new claim after the expiry of the limitation period.

 

[40]      These cases make it clear that it is the pleading of the facts that is key. If a statement of claim pleads all the necessary facts to ground a claim on more than one legal basis, and the original statement of claim only asserts one of the legal bases – that is, one cause of action based on those facts – the statement of claim can be amended more than two years after the claim was discovered to assert another legal basis for a remedy arising out of the same facts – that is, another cause of action. This is because it is only the discovery of the claim, as defined in the Limitations Act and the case law, that is time barred under s. 4, not the discovery of any particular legal basis for the proceeding.

[41]      In the textbook The Law of Civil Procedure in Ontario, Paul M. Perell & John W. Morden 4th ed. (Toronto: LexisNexis Canada, 2020), at pp. 220-21, the authors explain when an amendment will be allowed in the following passage:

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… Thus, where a limitation period has run its course, allowing or disallowing the amendment depends upon whether the allegations of the proposed amendment arise out of the already pleaded facts, in which case the amendment will be allowed, but if they do not the amendment will be refused. An amendment of a statement of claim to assert an alternative theory of liability or an additional remedy based on facts that have already been pleaded in the statement of claim does not assert a new claim for the purposes of s. 4 of the Limitations Act. [Citations omitted.]

[42]      In Klassen v. Beausoleil, 2019 ONCA 407 at para. 30, this court instructed that the application of this test should not be stringent or overly technical:

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.

Ontario: bankruptcy and appropriateness

The Superior Court decision in Caning Construction Limited v. Dhillon finds that a bankruptcy proceeding was not an alternative process that could impact on the appropriateness of a civil action.  The bankruptcy proceeding could have determined damages in the civil action, but not its merits.  Further, in the circumstances the case, there was no reasonable prospect of the bankruptcy proceeding making the plaintiff whole and so a civil action was always going to be necessary for full recovery:

 

[56]           As in both Gravelle and Lilydale, the Westport bankruptcy proceedings could not resolve the legal dispute involving Mr. Dhillon.  Here, Canning knew it had a claim in negligence against the Defendants before the bankruptcy proceedings against Westport were concluded.  Although the bankruptcy could have determined the amount of damages to be sought in the civil action, the proceedings could not determine the legal issues between the parties and were therefore not an alternative means of resolving the negligence allegations.  I conclude that the Westport bankruptcy proceedings are not an alternative process which delays the start of the limitation period in the action against the Defendants.

[57]           Even if a bankruptcy proceeding is an alternative remedy which could have the effect of delaying the start of the limitation period, it is my view that it does not do so in the circumstances of this case.  Section 5(1)(a)(iv) of the Act is subject to the modified objective test.  The determination of when a plaintiff “discovered” that the legal action against the defendant was legally appropriate takes into account what a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known.  Here, Canning had an unsecured claim in the amount of $1,638,018.89.  Based on the secured claims and assets of Westport as set out in the Statement of Affairs, there was no reasonable expectation that unsecured creditors would be fully compensated for their claims.  I conclude that a plaintiff with the abilities and in the circumstances of Canning would have known that it would not fully recover its claim in the Westport bankruptcy and therefore would have known that a tort action against the Defendants was legally appropriate before the bankruptcy proceedings were completed.

Ontario: when the court can determine the timeliness of an arbitral proceeding

The Superior Court decision in Maisonneuve v. Clark makes two findings about the limitation of arbitral proceedings.

First, when a party applies for an order referring a dispute to arbitration, the court has the jurisdiction to determine the timeliness of the arbitration pursuant to s. 7(2) of the Arbitration Act.

Second, where an arbitration clause requires the parties attempt to resolve a dispute prior to requesting arbitration, arbitration won’t become an appropriate remedy (and the claim pursued in the arbitration will not be discoverable) until the satisfaction of that requirement:

[46]           In at least two cases, Ontario courts have held that, where the parties have agreed to exchange information, negotiate or mediate prior to arbitration, the limitations clock does not begin to run until they have done so.

[47]           In L-3 Communication SPAR Aerospace Limited v. CAE Inc., 2010 ONSC 7133 (CanLII), Kershman J. considered the limitations applicable to a notice of arbitration by CAE issued pursuant to a contract with L-3 that specified that the “price and other adjustments that are not agreed between the parties may be referred to arbitration … by either party”.  He held that CAE’s request to arbitrate would have been premature if attempts to negotiate a price adjustment had not yet taken place.  As a result, until the failure of negotiations, an arbitration would not be an appropriate proceeding and limitations did not begin to run. Since the notice to arbitrate was served within two years of L-3’s refusal to engage in further negotiations, the arbitration was not time-barred.

[48]           In PQ Licensing S.A. v. LPQ Central Canada Inc., 2018 ONCA 331 (CanLII), the Court of Appeal dismissed an appeal of an arbitrator’s ruling rejecting a limitations defence.  The parties entered into a franchise agreement whereby they had to engage in mediation of any dispute before initiating arbitration. The arbitrator concluded that arbitration was not appropriate within the meaning of s. 5(1) of the Limitations Act until after the parties had mediated or one of the parties had refused to do so.  Although the franchisee served a notice to arbitrate almost four years after the parties’ contract was rescinded, it was within two years from the franchisor’s refusal to respond to a notice to mediate. The Court of Appeal upheld the arbitrator’s decision that, in the circumstances, the arbitration proceeding was not time-barred.

[49]           Applying these decisions to this case, if I find that Arbitration Clause required the parties to attempt to resolve the Excluded Issue prior to requesting arbitration, then arbitration did not become appropriate until this occurred.  As a result, the two-year limitation period would not have begun to run until Maisonneuve realized, or ought to have realized, that Clark refused to engage in any discussions on the issue.

Ontario: Court of Appeal on the factual nature of an appropriateness analysis

In Fercan Developments Inc. v. Canada (Attorney General), the Court of Appeal emphasizes the factual nature of the s. 5(1)(a)(iv) analysis.  The decision is also an example of an appeal in related proceedings impacting on appropriateness.

The AGC brought an unsuccessful criminal forfeiture application against the plaintiffs.  Then the AGO commenced unsuccessful forfeiture proceedings under the Civil Remedies Act. Leave to appeal was refused and an appeal from a costs award failed. The plaintiffs sued the AGC and the AGO alleging malicious prosecution, negligent investigation, misfeasance in public office, and civil conspiracy.  The defendants moved for summary judgment on their limitations defence.  The motion judge found the proceeding didn’t become an appropriate remedy for the loss until at least the civil forfeiture proceedings had concluded.  This meant discovery occurred within two years of the plaintiffs commencing the action.

The defendants appealed.  They argued that motion judge’s decision “significantly expands the application” of s. 5(1)(a)(iv) beyond the two circumstances the court has recognized might impact on the appropriates of a proceeding as a remedy:

[15]      The appellants argue that the motion judge’s decision significantly expands the application of the “appropriate means” element of the discoverability test under s. 5(1)(a)(iv) beyond any previous jurisprudence from this court, and that it injects uncertainty into the law of limitations. They contend that the motion judge relied on irrelevant factors, and that she ought to have restricted her analysis to a consideration of whether the respondents were pursuing an alternative means of remedying their alleged losses, such that it was not yet appropriate for them to commence an action in respect of those losses.

The Court of Appeal rejected this argument and dismissed the appeal.  When a proceeding becomes appropriate is a question of fact, and there aren’t only two factual circumstances the impact on appropriateness:

[16]      We disagree. Contrary to the submissions of the appellants, the motion judge properly recognized that there were not simply two categories of cases in which it might not be legally appropriate to start a proceeding despite the claim having been discovered, within the meaning of s. 5(1)(a)(i)-(iii): Nasr, at para. 51. The motion judge did not err when she considered all of the relevant circumstances and not simply whether the forfeiture proceedings provided an alternative means for the respondents to remedy their alleged losses. She was required to consider the “nature of the injury, loss or damage” under s. 5(1)(a)(iv), as well as, under s. 5(1)(b), using a “modified objective” test, what a reasonable person with the abilities and in the circumstances of the respondents ought to have known: Presidential, at para. 18; Service Mold + Aerospace Inc. v. Khalaf, 2019 ONCA 369, 146 O.R. (3d) 135, at para. 32. While previous cases can assist in identifying certain general principles, whether a proceeding would have been an appropriate means to seek to remedy a claimant’s damage, injury or loss will turn on the facts of each case and the abilities and circumstances of the particular claimant: Presidential, at para. 19; ETR Concession Company, at para. 34.

The Court cautioned against conflating the considerations in s. 5(1)(a)(i)-(iii) with those in s. 5(1)(a)(iv).  Despite the plaintiffs’ knowledge of the first three discovery matters, it would have been premature for them to commence the action while responding to the state’s civil forfeiture proceedings.  If the forfeiture proceedings had been successful, the defendants would have had a strong to defence to the plaintiffs’ action.  Further, the costs decision implicated the defendants’ conduct, and the appeal from it challenged findings of the defendants’ misconduct:

[19]      In concluding that the time for commencement of an action against the AGC began to run “at the earliest” on June 26, 2014, the motion judge relied on the civil forfeiture proceedings that were commenced and pursued by the appellants against the respondents. She observed that the appellants, in undertaking such proceedings, were pursuing a process that, if successful, could have left the respondents with little to no loss to claim. We agree with the motion judge’s observation that it is important not to conflate the considerations under the first three elements of the discoverability test with the appropriate means element set out in s. 5(1)(a)(iv). The question is not, as the appellants suggest, whether an action could have been brought by the respondents, but when it was appropriate to do so. While knowledge of the extent of a plaintiff’s damages is not required under (i) to (iii), the motion judge was entitled to take into consideration the ongoing forfeiture proceedings that the parties were engaged in, when determining under s. 5(1)(a)(iv) whether it was appropriate for the respondents to bring an action. She concluded that, in the particular circumstances, it would have been premature to require the respondents to launch a lawsuit, as they were embroiled in the civil forfeiture application, a related matter brought against them “by the state with all of its resources”, which could have rendered their lawsuit non-viable and unworthy of pursuing.

[20]      We see no error in the motion judge’s determination that it was premature for the respondents to commence their action until after the civil forfeiture proceedings were completed on June 26, 2014. She came to this conclusion after considering all of the relevant circumstances. The facts were unusual. Despite the fact that the AGC was unsuccessful in obtaining an order for criminal forfeiture and was subject to an order for costs that was critical of its conduct, the provincial authorities commenced civil forfeiture proceedings with the same objective – to seize the proceeds of sale of the respondents’ properties. DC Hayhurst was involved in both sets of proceedings. If the civil forfeiture proceedings had been successful, no doubt all of the appellants would have had a strong defence to any action that was commenced by the respondents. The conclusion, on this record, that it was premature for the respondents to pursue a civil action while they were continuing to oppose the forfeiture proceedings, reveals no error.

[23]      The motion judge recognized that West J.’s costs decision “directly and explicitly addressed the conduct of the federal Crown”, and that he had determined that the Crown’s conduct “exhibited a marked and substantial departure from the reasonable standards expected of the Crown”. Nevertheless, she observed that costs against the Crown in such proceedings are a “rare and extraordinary remedy”, that the AGC’s appeal specifically sought to attack the findings of Crown misconduct, that there was precedent for this court taking a very different view, and accordingly, that there was a clear risk that West J.’s findings of misconduct might be rejected on appeal, which would have seriously undermined any action brought by the respondents. The fact that there was another ongoing proceeding – the appeal of West J.’s costs decision – that could have impacted the viability of the respondents’ action was relevant to the application of s. 5(1)(a)(iv) in the circumstances of this case.

 [25]      We see no palpable and overriding error in the motion judge’s conclusion that the time began to run under s. 5(1)(a)(iv) in respect of the claims against all appellants on April 14, 2016, when this court released its decision dismissing the appeal from West J.’s costs order. Again, the circumstances were highly unusual. The same parties were already involved in litigation commenced and pursued by the appellants, in which the appellants’ alleged misconduct had taken centre stage. In pursuing the appeal, the AGC did not accept and sought to overturn the findings of West J., ensuring that whether or not there was prosecutorial misconduct remained a live issue until it was determined by this court. As the motion judge reasonably observed, there was a clear risk of a successful appeal, which would have impacted the viability of an action based on the same allegations of prosecutorial misconduct.

[27]      After assessing the claims against all parties, it was open to the motion judge to conclude, as she did, that a successful appeal of the costs decision would have undermined the claims against all of the appellants, including the OPP Defendants. This was not, as the appellants contend, a tactical decision on the part of the respondents, as in Markel, or simply a question of a plaintiff waiting until the end of other proceedings that might improve their chances of success in a civil action, as in Sosnowski v. MacEwen Petroleum Inc., 2019 ONCA 1005, 441 D.L.R. (4th) 393. Rather, as in Winmill v. Woodstock (Police Services Board), 2017 ONCA 962, 138 O.R. (3d) 641, at para. 31, leave to appeal refused, [2018] S.C.C.A. No. 39, the result of the proceedings in which the parties were already involved, including the determination by this court of the prosecutorial misconduct allegations, would have been a “crucial, bordering on determinative factor” in whether the respondents had a civil claim to pursue.

Ontario: s. 5(1)(a)(iv) and the limitation of false arrest and imprisonment claims

Vu v. Attorney General of Canada considers the limitation of a claim arising from false arrest and imprisonment, and in particular the impact of s. 5(1)(a)(iv) of the Limitations Act on the analysis:

[30]           Not surprisingly, the defendant takes the position that the limitation period commenced when Vu was detained, on June 27, 2013.  At that time, they say, he must have known that his arrest and detention were wrongful.  Alternatively, the defendant argues that Vu would certainly have known it was wrongful by July 9, 2013, following the second detention hearing when the ID accepted the evidence contained in McNamara’s Statutory Declaration.

[31]           The plaintiff, on the other hand, asserts that the limitation period runs from the date of his release from detention in Vietnam, on October 8, 2014.  The plaintiff argues that he could not have initiated his claim for false imprisonment when first arrested and the act of wrongful detention was still ongoing. Plaintiff’s counsel analogized this to suing for battery while the knife is still in your arm. Further, the plaintiff claims that the CBSA represented to him many times that his release from immigration detention was “imminent,” yet he remained detained for a total of 15 months, without knowing or being able to know for how long he would remain in custody.

[32]           The defendant relies upon Kolosov v. Lowe’s Companies Inc., 2016 ONCA 973, O.J. No. 6702 (“Kolosov”), in which the Court of Appeal seems to accept that the limitation period commences on the first date of detention, stating at para. 11:

The law in relation to the commencement of the limitation period for the intentional torts of false arrest and imprisonment … is well-settled. As Chiapetta J. noted in Fournier-McGarry (Litigation Guardian of) v. Ontario, 2013 ONSC 2581 at para. 16,

 A claim for the common law torts of false arrest, false imprisonment and breach of Charter rights arising therefrom crystallizes on the date of arrest (see Nicely v. Waterloo Regional Police Force,  1991 CanLII 7338 (ON SC), [1991] O.J. No. 460 (Ont. Div. Ct.), at para. 14).

 [33]           The plaintiff, on the other hand, cites a conflicting Court of Appeal decision, Mackenzie v. Martin, 1952 CanLII 85 (ON CA), [1952] O.R. 849 (Ont. C.A.), at paras. 6-8, aff’d 1954 CanLII 10 (SCC), [1954] S.C.R. 361 (S.C.C.), which refers to case law dating back to the 18th century, and states that the limitation period for a false imprisonment claim commences upon the date of release. To my knowledge, while the case is dated, Mackenzie v. Martin has never been overturned.

[34]           The conflict is not easily resolved by the jurisprudence.  In Fournier-McGarry (Litigation Guardian of) v. Ontario, at para. 16, Chiapetta J. relied on Nicely v. Waterloo Regional Police Force (“Nicely”) in making her statement that the Court of Appeal subsequently adopted in Kolosov. However, while the Divisional Court held in Nicely, at para. 15, that the test “is as of the date of arrest and imprisonment,” it was discussing the question of liability and the grounds for arrest when the arrest took place, not the limitation period. This point was not addressed by Chiapetta J. in Fournier-McGarry, or by the Court of Appeal in Kolosov, both of which simply accept the statement as dealing with limitation periods. Elsewhere, the Divisional Court in Nicely suggested, at paras. 8-9, that the time period begins to run when the tort is “complete,” or upon release. In Nicely, however, the arrest, detention and release all occurred on the same day, as was also the case in Fournier-McGarry.

[35]           Ferri v. Root, 2007 ONCA 79, O.J. No. 397, leave to appeal refused, [2007] S.C.C.A. No. 175 (“Ferri”), is another, more recent, case in which the plaintiff was arrested and released on the same day. There, the Court of Appeal, at para. 102, reiterated the finding in Nicely that “the test for these torts is at the date of arrest and imprisonment,” but addressed the limitation period in the same context that it arose in Nicely, which was under s. 7 of the Public Authorities Protection Act, R.S.O. 1990, c. P.38. (“PAPA”). That Act required that an action be “commenced within six months next after the cause of action arose or in case of continuance of injury or damages within six months after the ceasing thereof” (emphasis added). Accordingly, the Court in Ferri, at para. 103, concluded that the injury of false imprisonment ceased when the plaintiff was released.

[36]           There is also the concern that a false arrest and an unlawful imprisonment may not occur at the same time. One may be lawfully arrested but unlawfully detained, or a detention that is lawful at the outset may become unlawful at a subsequent point in time. For example, a lawful immigration detention can become unlawful due to its conditions, its length, procedural fairness, or if it is “no longer reasonably necessary to further the machinery of immigration control:” Chaudhary v. Canada (Minister of Public Safety & Emergency Preparedness), 2015 ONCA 700, 127 O.R. (3d) 401, at paras. 81, 86; Re Charkaoui, 2007 SCC 9, [2007] 1 S.C.R. 350, at para. 123; Scotland v. Canada (Attorney General), 2017 ONSC 4850, 139 O.R. (3d) 191.

[37]           The plaintiff submits that the approach in Mackenzie v. Martin is also consistent with the law in the United States, where time runs from the date of release, not the date of detention: Milliken v. City of South Pasadena, 158 Cal. Rptr. 409, 412 (Cal. Ct. App. 1979); Donaldson v. O’Connor, 493 F.2d 507, 529 (5th Cir. 1974).

[38]           While I have concerns with the broad application of Kolosov urged on me by the defendant, I do not need to resolve the conflict in the cases in this matter. This case does not arise under the PAPA, which would cause me to consider a continuing injury. Rather, since section 5(1)(a) of the Limitations Act establishes a four-part test, I regard Kolosov as simply setting up a presumption (which was not rebutted in that case) that the cause of action arose on the date of arrest and detention or, at latest, the date of the second detention hearing, but it does not address all four parts of the test. This means I must still consider when the plaintiff had sufficient facts on which to base an allegation of wrongful arrest and detention, and whether, “[h]aving regard to the nature of the loss or damage, a proceeding would have been an appropriate means to seek to remedy it.”

[46]           In this case, however, the plaintiff did not delay the bringing of his claim for reasons of strategy. Rather, in the absence of the memorandum disclosing that McNamara’s Statutory Declaration was incorrect, he simply had no claim to bring. At the ID hearing on July 9, 2013, Vu tried to persuade the tribunal that he was in compliance with his terms of release and that the CBSA was mistaken, but the tribunal preferred McNamara’s more detailed evidence and made a finding of fact against the plaintiff. The plaintiff was without any evidence to rebut that finding until the disclosure on June 10, 2015. At no point during the hearing on July 9, 2013, or at any subsequent hearing, did McNamara reveal that she had relied on an interpreter; rather, the evidence in her Statutory Declaration (which itself was only disclosed in January 2014) was that the she and the witness had spoken to each other in English.

 [47]           Further, prior to receiving the memorandum in June 2015, Vu was pursuing other, more pressing and appropriate remedies, including detention reviews, the spousal sponsorship application, and attempts to address living arrangements for his infant daughter.  I find, as the Court of Appeal did in Presidential MSH Corporation v. Marr, Foster & Co. LLP, 2017 ONCA 325, 135 O.R. (3d) 321 (“Presidential MSH Corporation”), at para. 32, that “it would have been inappropriate to require the plaintiff to prematurely resort to court proceedings while the statutory alternative process was ongoing, which might make the proceedings unnecessary.” Moreover, a lawsuit would not have achieved Vu’s objective of being released.
 [48]           Had Vu known of the evidence that McNamara’s Statutory Declaration was incorrect when he was in custody, he undoubtedly would have raised that before the ID. Although he did not seek to review the ID’s detention order in the Federal Court, as his counsel explained Vu had good reasons not to do so: he accepted the CBSA’s representations that his removal was “imminent,” and perceived that making an application would have been a waste of time and money and might have delayed his deportation due to the CBSA’s need to defend the claim.  Further, as the Supreme Court of Canada observed recently in Canada (Public Safety and Emergency Preparedness) v. China, 2019 SCC 29, 433 D.L.R. (4th) 381, at paras. 61-67, judicial review of an Immigration Division decision is challenging.  The onus is squarely on the applicant to establish the decision is unreasonable, leave is required, and remedies are limited. Instead of releasing an applicant, Karakatsanis J. noted, at para. 65 that even a successful judicial review “will generally result in an order for redetermination, requiring further hearings to obtain release and thereby extending detention” (emphasis added).

[52]           In this case, however, rather than the contents of the disclosure having a negligible impact on the reasonable and probable grounds for Vu’s arrest and detention, the revelation that McNamara had used an interpreter while interviewing the witness was not merely a finding of helpful evidence – it was a finding that turned the evidence against Vu on its head, as it threw doubt on the veracity of the testimony that was used to justify the arrest and detention. This was evidence upon which the Tribunal clearly relied during the July 9, 2013 hearing and throughout Vu’s fifteen months in detention. As a result, I do not accept the defendant’s submission that the disclosure of the memorandum in June 2015 was simply something that strengthened an already “discovered” claim: see, e.g., Sosnowski, at paras. 19, 27-29. The plaintiff’s affidavit might have invited this argument where he stated that only after the June 13, 2016 disclosure he became “confident that my detention had been unlawful.” However, that date was in fact when the government actually settled the bond litigation, one year after the memorandum was released to him in June 2015. In any event, in my view this statement was simply recognition that he now had a basis for a civil action for damages, something that, it is to be remembered, is not to be embarked upon lightly. As the Supreme Court stated in Novak v. Bond,  1999 CanLII 685 (SCC), [1999] 1 S.C.R. 808 (S.C.C.), at para. 85:

Litigation is never a process to be embarked upon casually and sometimes a plaintiff’s individual circumstances and interests may mean that he or she cannot reasonably bring an action at the time it first materializes. This approach makes good policy sense. To force a plaintiff to sue without having regard to his or her own circumstances may be unfair to the plaintiff and may also disserve the defendant by forcing him or her to meet an action pressed into court prematurely.

[55]           Applying these principles, in my view, a lawsuit for damages over Vu’s arrest and detention was not an “appropriate means” to redress the wrong done to him when he was arrested and held in custody until he obtained the disclosure in June 2015 that the CBSA had misled the ID. This was many months after he had been removed from Canada. Prior to receiving that information, Vu appropriately pursued other avenues to address his detention and removal, relied on the good faith of the CBSA and the ID process, and did not have grounds for suing for damages. A lawsuit would have been premature, and therefore was not an appropriate means under s. 5(1)(a)(iv) until June 2015.

Ontario: Court of Appeal narrows the s. 5(1)(a)(iv) “alternative process” principle

The Court of Appeal decision in Beniuk v. Leamington (Municipality) is an important addition to s. 5(1)(a)(iv) appropriateness jurisprudence.

It has become popular to argue that an alternative dispute resolution process with a clear and identifiable conclusion delays the appropriateness of a civil proceeding as a remedy, and therefore discovery of a claim.  Beniuk holds that this isn’t the law: whether an alternative process impacts on appropriateness is a question of fact that the plaintiff must prove.

The appellant in Beniuk argued that the Court of Appeal’s decision in 407 ETR stands for the principle that when there is an alternative dispute resolution process, an action becomes an appropriate remedy only when the alternative process concludes.  It followed that that the limitation period or the appellant’s action didn’t not run until the OMB confirmed that it did not have jurisdiction over its cause of action: if the OMB assumed jurisdiction, there would have been no need for the action; therefore, the OMB hearing was an alternative process that until concluded rendered an action inappropriate.

Nope, held the court.

A limitation period doesn’t run whenever there is an ongoing alternative process.  Whether an alternative process delays the running of time turns on the particular facts of each case.  Evidence is necessary to explain the basis for pursuing the alternative process rather than commencing a proceeding.

[60]      407 ETR does not stand for a general principle that a limitation period will not begin to run whenever an alternative process that might resolve the matter has not yet run its course. It is a matter of evidence. Indeed, Laskin J.A. noted, at para. 34, that when an action is “appropriate” will depend on the specific factual or statutory setting of each individual case, and that case law applying s. 5(1)(a)(iv) is of limited assistance because each case will turn on its own facts. In 407 ETR, the court considered the evidence on the motion about the statutory scheme and the effectiveness of the administrative process before deciding that it would be reasonable for such a process to run its course before a civil proceeding was appropriate.

[61]      Recently, several cases considering the application of s. 5(1)(a)(iv) have come before this court. The court has emphasized, echoing the words of Laskin J.A. in 407 ETR, that when a proceeding is appropriate will turn on the facts of each case: see, for example, Nelson v. Lavoie, 2019 ONCA 431, 47 C.C.P.B. (2d) 1, at para. 25, and Ridel v. Goldberg, 2019 ONCA 636, 436 D.L.R. (4th) 453, at para. 71.

[62]      This case did not involve an alternative process available under a statutory scheme. It did, however, involve an alternative process that the appellants were pursuing, as in 407 ETR, against the same party.

[63]      The fact that a plaintiff chooses to pursue an alternative process does not in itself suspend the running of the limitation period under s. 5(1)(a)(iv). Whether an alternative process will have this effect will depend on the particular factual circumstances and the evidence before the court in determining the limitations issue. In this case, there was no evidence to explain why the appellants chose to pursue the OMB route rather than commencing both an OMB proceeding and a civil action.

[74]      As I have already observed, 407 ETR does not stand for the general principle that it will always be appropriate to wait until another process has run its course before commencing a civil action in respect of a claim which has otherwise been “discovered” under s. 5(1)(a)(i), (ii) and (iii). It is incumbent on a party asserting that it was reasonable to pursue a claim in another forum to explain why this approach was reasonable. That is what occurred, and was ultimately successful, in the 407 ETR case.

[75]      While one of the principles recognized in connection with s. 5(1)(a)(iv) is the deterrence of unnecessary litigation, a plaintiff is not entitled in all cases to pursue one route, and to expect the limitation period to be tolled in respect of any other claim it may have in respect of its loss or damage. Said another way, s. 5(1)(a)(iv) does not permit a party to engage in litigation in stages for the same wrong. An example is Lilydale Cooperative Limited v. Meyn Canada Inc., 2019 ONCA 761, 439 D.L.R. (4th) 385, where this court considered the submission that a limitation period in respect of a third party claim in Ontario was suspended while the defendant was seeking to establish that Alberta was the correct forum for the litigation. Feldman J.A. rejected the argument that it was not legally appropriate to commence a legal proceeding while another resolution process that might resolve the matter was ongoing. She held that such an interpretation of “appropriate” was inconsistent with the purpose of the Limitations Act and could extend the limitation period well beyond the two-year threshold in an uncertain and unpredictable manner. There were also no significant savings to be achieved by not commencing the third party claim until the forum challenge was complete.

Here, the OMB wasn’t an alternative process, but an alternative forum, and the availability of multiple forums doesn’t impact on discovery because the law deems a party to know the applicable legal principles (that is, which forum is correct):
[70]      While I can appreciate why the appellants may have thought they had a claim for injurious affection, it has always been a principle of limitations law that a plaintiff knows, or could by the exercise of reasonable diligence, determine what legal principles apply. See, for example, Boyce v. Toronto Police Services Board, 2011 ONSC 53, aff’d: 2012 ONCA 230, leave to appeal refused: [2012] S.C.C.A. No. 265, where Low J. stated, at para. 23:
Section 5(1)(a)(iv) does not import an idiosyncratic limitation period calibrated by the claimant’s familiarity with or ignorance of the law. The test is an objective one. While it is possible to envisage that a new kind of right might arise that has not been hitherto protected, thus making it arguable that a civil proceeding might not be seen objectively as an appropriate means to seek to remedy, a battery causing personal injury is a classic example of the kind of wrong that is appropriate for redress by court action. A citizen is presumed to know the law of the land. [Emphasis added.]

This strikes me as a material and reasonable narrowing of the s. 5(1)(a)(iv) “alternative dispute resolution process” principle.  Whether an alternative process impacts on discovery is a question of fact, and the plaintiff will need to establish that it was reasonable in the circumstances to allow the process to complete before commencing a proceeding.  This should discourage some of the more creative alternative process arguments, of which I see many.

Also noteworthy is the confirmation that an action in nuisance or negligence for damages relating to real property is “an action to recover land” for the purpose of RPLA and subject to its ten-year limitation period:

[42]      Subsection 2(1)(a) of the Limitations Act provides that the Limitations Act does not apply to proceedings to which the RPLA applies. Section 4 of the RPLA provides for a ten-year limitation period for an action to recover land:

 No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it.

[43]      When the elements that do not apply to this case are removed, s. 4 provides that “no person shall bring an action to recover any land, but within ten years after the time at which the right to bring any such action first accrued to the person bringing it.” The issue here is whether the appellants’ claim is an “action to recover land” within the meaning of the RPLA.

 [44]      The appellants point to the definition of “land” in s. 1 of the RPLA:
 “land” includes messuages and all other hereditaments, whether corporeal or incorporeal, chattels and other personal property transmissible to heirs, money to be laid out in the purchase of land, and any share of the same hereditaments and properties or any of them, any estate of inheritance, or estate for any life or lives, or other estate transmissible to heirs, any possibility, right or title of entry or action, and any other interest capable of being inherited, whether the same estates, possibilities, rights, titles and interest or any of them, are in possession, reversion, remainder or contingency; [Emphasis added.]

[45]      They rely on the term “messuages”, which refers to a dwelling house, its outbuildings, the area immediately surrounding the dwelling, and the adjacent land appropriate to its use: McConnell v. Huxtable, 2014 ONCA 86, 118 O.R. (3d) 561, at para. 14. The appellants also parse out and rely on the phrase “any…right…of…action”. Putting these pieces together, the appellants submit that an “action to recover land” includes an action to recover rights that run with the land, and that a cause of action for nuisance is tied to and arises out of the right to use and enjoy land without substantial interference. Accordingly, the appellants submit that a cause of action for nuisance is an incorporeal or intangible right that runs with the property and is captured by the definition of “land” in the RPLA. They point to a passage in Equitable Trust Co. v. 2062277 Ontario Inc., 2012 ONCA 235, 109 O.R. (3d) 561, where Perell J. (sitting on this court ad hoc) stated that the RPLA is intended to cover actions “affecting” land: Equitable Trust, at para. 28.

 [46]      I do not accept the appellants’ submission. There is no support in the jurisprudence that an action in nuisance or negligence for damages relating to real property is “an action to recover land” for the purposes of the RPLA. That land or real property is involved in an action does not mean that the RPLA applies: Harvey v. Talon International Inc., 2017 ONCA 267, 137 O.R. (3d) 184, at paras. 51-52. Typically, actions to recover land seek to assert property rights. And Perell J.’s remark from Equitable Trust that the RPLA covers actions “affecting” land has been commented on specifically by this court, and later by Perell J. himself, as a statement that should be interpreted narrowly and not out of the context of that case.

Lastly, I note that the court stated the standard of review with respect to each limitations issue.  For whatever reason, the court frequently omits an explicit standard of review analysis when considering limitations issues.  This approach is helpful and I hope to see more of it.

[41]      The motion judge’s conclusion that s. 4 of the RPLA does not apply to the appellants’ civil action is reviewable on a standard of correctness: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 8. For the reasons that follow, I agree with the motion judge’s conclusion on this issue.

[53]      The question of whether a limitation period expired prior to the issuance of a statement of claim is a question of mixed fact and law and subject to review on the standard of palpable and overriding error: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, 323 O.A.C. 246, at para. 38. However, where there is an extricable error of principle, the standard of review is correctness: Housen, at paras. 8 and 36.

[79]      The appellants contend that the motion judge made a palpable and overriding error when he concluded that their claim was statute-barred even on the basis of what he described as a “rolling limitation period”. A “palpable and overriding error” is “an obvious error that is sufficiently significant to vitiate the challenged finding of fact”: Longo, at para. 39.

Ontario: a limitations defence appropriate for r. 21(1)(a)

The decision in Kaynes v. BP, PLC is a rare example of a limitation defence appropriately determined on a r. 21(1)(a) motion:

[68]           In my opinion, as explained below, there are no material facts that could be pleaded or any discoverability issues that could or would postpone the running of the limitation period for the fraudulent misrepresentation cause of action. It is plain and obvious that all of the possible claims arising from the Deepwater Horizon disaster were discovered by June 1, 2012. In my opinion, as explained below, the case at bar is one of those cases where pursuant to rule 21.01 (1)(a), the court can and should strike a claim as statute barred.

The defendants had also moved for judgment based on admissions in the Statement of Claim pursuant to r. 51.06(2).  Plainly, they had heeded the Court of Appeal’s direction in Brozmanova v. Tarshis to move under this rule where the allegations in the Statement of Claim entitle the defendant to judgment on a limitations defence.  Having allowed the motion to strike, the court didn’t consider r. 51.06(2) relief, which from a limitations law perspective is unfortunate because to my knowledge it would have been the first instance of a r. 51.06(2) limitations analyses.

The decision also provides an excellent overview of the distinction between the cause of action and the claim in the limitations scheme:

[73]           Before the enactment of the current Limitations Act, 2002, a limitation period commenced when a cause of action accrued and when the cause of action was discovered.

[74]           There are over a hundred causes of action and there were rules for when a cause of action accrued and rules about when an accrued cause of action was discovered. Prior to the enactment of s. 5(1)(a)(iv) of the current Limitations Act, 2002, the judge-made discoverability principle governed the commencement of a limitation period. The discoverability principle stipulated that a limitation period begins to run only after the plaintiff has the knowledge, or the means of acquiring the knowledge, of the existence of the material facts that would support a claim for relief; i.e. knowledge of the factual constituent elements of a cause of action.[24] The discoverability principle conforms with the idea of a cause of action being the fact or facts which give a person a right to judicial redress or relief against another.[25]

[75]           A cause of action is a set of facts that entitles a person to obtain a judgment in his or her favour from a court exercising its common law, equitable or statutory jurisdiction.[26] In Ivany v. Financiere Telco Inc.,[27] and 1309489 Ontario Inc. v. BMO Bank of Montreal,[28] Justice Lauwers observed that the idea of cause of action is used in two related senses: (1) it identifies a factual matrix from which claims or complaints arise; and (2) it identifies the legal nature of those claims, which is the nominal or technical meaning of cause of action.

[76]            With the enactment of the Limitations Act, 2002, a limitation period commences when a “claim” is discovered”. The words “cause of action” do not appear in the Act, and the goal of the legislators was that for the purpose of determining when a limitation period began to run, “claim” and “claim” discovery would replace cause of action accrual and cause of action discovery. [29] This goal, however, was not achieved and the case law continues to use the idea of a cause of action in association with the idea of a “claim” under the Act. Under the Act, a claim is discovered on the earlier of two dates: the day on which a plaintiff either knew or ought to have known the constitutive elements of the claim and that a proceeding in Superior Court would be an appropriate means to seek a remedy.[30]

[77]           This continued connection between the ideas of claims as defined by the Limitations Act, 2002 and causes of action as understood under statutes and in law and equity is understandable, because civil procedure requires a plaintiff to plead the material facts of a viable cause of action and just pleading that the defendant’s conduct harmed the plaintiff does not provide the plaintiff with a remedy for his or her legal grievance or give the defendant notice of the cause of action that he or she must defend.

[78]           Section 1 of the Limitations Act, 2002 defines “claim” to mean: “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. A claim is a function of cause of action, which is the fact or facts which give a person a right to judicial redress or relief against another.[31] In Lawless v. Anderson,[32] the Court of Appeal stated at paras. 22-23:

  1. The principle of discoverability provides that “a cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence. This principle conforms with the generally accepted definition of the term “cause of action” — the fact or facts which give a person a right to judicial redress or relief against another”….
  2. Determining whether a person has discovered a claim is a fact-based analysis. The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant. If the plaintiff does, then the claim has been “discovered”, and the limitation period begins to run: seeSoper v. Southcott(1998), 1998 CanLII 5359 (ON CA), 39 OR (3d) 737 (C.A.) and McSween v. Louis (2000), 2000 CanLII 5744 (ON CA), 132 OAC 304 (C.A.).

[79]           Although functionally closely related to causes of action, a claim as defined under the Limitations Act, 2002 is somewhat different from a cause of action. A cause of action has discrete constituent elements. For example, as noted above, negligent misrepresentation has five specific constituent elements, but a claim under the Limitations Act, 2002 has just two generic elements; namely: (1) and act or omission of misconduct; and (2) injury, loss or damage caused by the misconduct. Strictly speaking, the application of the Limitations Act, 2002 does not require identifying the cause of action, it requires only determining whether the plaintiff has discovered wrongful conduct and harm for which a lawsuit would be appropriate to remedy the harm. Another  difference between claims and causes of action is that all claims have the element of damages, but some causes of action are actionable without damages having occurred. The cause of action for contract, for instance, requires a contract and a breach of the contract; damages, which typically do occur when a contract is breached, are, however, not a constituent element of the cause of action for breach of contract. Another difference is that no causes of action have appropriateness of a lawsuit as a constituent element, which is a factor in what counts for a discovered claim under the Limitations Act, 2002. A subtle deviation between claim and cause of action is that discovery of a claim under the Limitations Act, 2002 requires the plaintiff to have knowledge of an occurrence of injury caused by the defendant’s misconduct for which a law suit would be an appropriate means to seek a remedy, but discovery of a cause of action under the common law requires the plaintiff to have knowledge that the defendant’s conduct occasioned the material facts of the constituent elements of a particular cause of action.

[80]           All of the above reveals that the relationship between claim and cause of action is subtle and sometimes confusing. When a proceeding would be an appropriate means to seek to remedy, it is not enough for the plaintiff to just plead a claim as defined under the Limitations Act, 2002, he or she must still plead a reasonable cause of action. To assert a cause of action so as to interrupt a limitation period, the pleading must allege the facts necessary to identify the constituent elements of the cause of action.[33]

[81]           With some statutory adjustment, the discoverability principle continues to operate for claims, and the principle has been codified by the Limitations Act, 2002.  Discoverability has been adjusted by s. 5(1)(a)(iv), and thus subject to s. 5(1)(a)(iv), a limitation period commences at its earliest when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence, but because of s. 5(1)(a)(iv), discoverability may be postponed.

[82]           Under the Limitations Act, 2002, the discoverability of a claim for relief involves the identification of the wrongdoer, and also, the discovery of his or her acts or omissions that constitute liability.[34] It is not enough that the plaintiff has suffered a loss and has knowledge that someone might be responsible; the identity and culpable acts of the wrongdoer must be known or knowable with reasonable diligence.[35]

[83]           For the limitation period to begin to run, it is not necessary that the plaintiff know the full extent or quantification of his or her damages; rather, the period begins to run with the plaintiff’s subjective or objective appreciation of being damaged, i.e., of being worse off than before the defendant’s conduct.[36]

[84]           Section 5(1)(a)(iv) of the Limitations Act, 2002 adjusts the operation of the discoverability principle, and s. 5(1)(a)(iv) can have the effect of delaying the commencement of the running of limitation period. Where a person knows that he or she has suffered harm; i.e., when the plaintiff knows the elements of ss. 5(1)(a)(i),(ii), and (iii), the delay lasts until the day when a proceeding would be an “appropriate” means to remedy the harm having regard to the nature of the injury, loss or damage.

[85]           The appropriateness factor of 5(1)(a)(iv) introduces some uncertainty in the operation of the Limitations Act, 2002 but it also introduces some flexibility and fairness in the application of the discovery principle, which presumptively operates against the claimant as soon as a cause of action becomes objectively apparent.[37] In Markel Insurance Co. of Canada v. ING Insurance Co. of Canada,[38] the Court of Appeal held that for s. 5(1)(a)(iv) to have a delaying effect, there must be a juridical reason for the person to wait; i.e., there must be an explanation rooted in law as to why commencing a proceeding was not yet appropriate. Appropriateness must be assessed on the facts of each particular case, including taking into account the particular interests and circumstances of the plaintiff.[39]

[86]           Subject to the adjustment made by s. 5(1)(a)(iv), with respect to the basic limitation period of two years under the Limitations Act, 2002, a claim is “discovered” on the earlier of the date the claimant knew – a subjective criterion – or ought to have known – an objective criterion – about the claim.[40] Pursuant to s. 5(2) of the Act, the discovery of a claim presumptively occurs for the plaintiff on the date of the act or omission, but the plaintiff may rebut the presumption by demonstrating that he or she could only have reasonably discovered the underlying material facts after the date of the act or omission.

This is the impact of the distinction:

[88]           Applying these principles to the circumstances of the immediate case, pursuant to the Limitations Act, 2002 around June 1, 2010, presumptively and also subjectively and objectively factually, Mr. Kaynes discovered he had a “claim” against BP. He subjectively knew that BPs misconduct had caused him harm and he knew that court proceedings would be appropriate. For the purpose of the commencement of limitation periods, it was not necessary for Mr. Kaynes to put a cause of action name to his “claim”. Whatever way the statement of claim was later framed to name a cause of action, the “claim” to which the cause of action was connected had been discovered in 2010 and the limitation period clock was running.

[89]           In other words, having discovered a “claim” in 2010, Mr. Kaynes had two years to plead the misconduct connected to the claim by pleading the material facts of negligence, negligent misrepresentation, fraudulent, misrepresentation, an oppression remedy, nuisance, or whatever. For the purpose of commencing a proceeding, however he might label his claim as a cause of action in a statement of claim, the limitation period for the “claim” was running by June 1, 2010. As it happened, albeit late, in November 2012, Mr. Kaynes pleaded a cause of action for negligent misrepresentation in Ontario, and he gave his claim a cause of action name, but regardless of its name in accordance with the principles of the Limitations Act, 2002, the negligent misrepresentation claim was already statute barred. A fraudulent misrepresentation claim had it been pleaded in November 2012 in Ontario would also have been statute barred.

The court also found that uncertainty as regards forum does not impact on appropriateness (consistent with Lilydale Cooperative Limited v. Meyn Canada Inc., which held similarly but isn’t cited in the decision):

[90]           In a creative argument, Mr. Kaynes, however, argues that his April 2012 action in Alberta was a timely claim in Alberta, with which I would agree, and until the Alberta court declined to take jurisdiction with respect to that claim, which did not occur until November 2012, it could not be said that a claim in Ontario had been discovered until November 2012. In this regard, he submits that under s. 5 (1)(a)(iv) of Ontario’s Limitation Act, 2002, it was only after Alberta declined to take jurisdiction that it could be said that proceedings in Ontario were appropriate and thus until the November decision in Alberta, the claim in Ontario had not been discovered.

[91]           This argument, however, does not work because the appropriateness of a proceeding in Ontario is not determined by the inappropriateness of a proceeding somewhere else. If any, the decision in Alberta, confirmed that Ontario was the appropriate forum for proceedings against BP.

 

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

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

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

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

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

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

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

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

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

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

Ontario: An insurer’s denial has to be (really) explicit to trigger discovery

The Divisional Court decision in Western Life Assurance Company v. Penttila demonstrates that if an insurer intends for a denial to commence a limitation period for a coverage proceeding, that denial needs to be as explicit as explicit can be.

The insurer, Western, denied its insured Penttila’s claim for LTD benefits in February 2013, and told her that she could appeal the denial within 60 days by written request.  At the same time, Western stated explicitly that it wasn’t waiving its right to rely on any “time limitations”.

Penttila initiated an appeal within the prescribed time.  Western wrote to Penttila in October 2014 that its position “remained unchanged”.  Pentilla didn’t understand this to mean Western had denied her appeal.  She wrote to Western in May 2015 asking about the decision in her appeal.  Western responded in June 2015 by confirming that benefits remained declined.  Penttila commenced a proceeding in June 2016.  Western defended, pleaded a limitations defence, and moved for judgment on it.  The motion judge held that a trial was necessary to determine the defence.

Penttila’s evidence was that she believed Western continued to consider appeal June 2015.  She didn’t understand Western October 2013 correspondence to be determinative of her appeal.

Western appealed. It argued that the Penttila should have known that a proceeding was an appropriate remedy for her loss once it terminated her LTD benefits.

Penttila’s position was that a proceeding wasn’t appropriate as of that date:

[24]           Ms. Penttila takes the position that it was not appropriate for her to file a claim as of March 7, 2013, as her appeal had not yet been finally determined by Western because:

a)   She was told she had a right to appeal provided she took certain steps which she did.  It was therefore not clear that the process had run its course;

 b)   There was no denial of the appeal or any reason to believe that the matter would not be amicably resolved;

 c)   She was not represented by legal counsel;

 d)   There was no clear reference to the fact that the limitation period was running in the communications from the insurer.  The insurer said only that “the limit”, whatever it was, was not being waived;

 e)   She made concessions and repaid monies paid pursuant to her CPP disability setoff, believing that she was engaging in an attempt at dispute resolution.  This was done at the request of the insurer;

 f)     There was no reason for her to do this except to attempt to resolve the claim instead of litigating; and

 g)   There is no suggestion that the delay was a tactical decision to delay the proceeding.

[25]           Moreover, the courts have recognized that there is a clear policy objective to encourage parties to resolve matters instead of going directly to litigation.  Waiting for the appeal to be determined is consistent with that important policy objective.

The Divisional Court rejected Western’s argument:

[50]           For the reasons set out herein, we find that the motion judge was correct to hold that the triggering event for the commencement of the two-year limitation period was the date upon which it would be legally appropriate to commence legal proceedings to seek payment of long-term disability benefits that the insurer refused to pay.

[51]           We further find that the motion judge made no palpable and overriding error in dismissing the motion for summary judgment on the basis that Western had not established that the claim was statute-barred.  We come to this conclusion for the following reasons:

(i)                 Right of Appeal

[52]           Before March 7, 2013, Ms. Penttila was advised that as of March 7, her benefits would no longer be paid by the insurer but that, “you may appeal this claim decision by sending your written request for review to our office within 60 days from the date of this letter.”

[53]           On April 8, 2013, Ms. Penttila advised that, “I wish to appeal this claim.”

[54]           On November 13, 2013, Western wrote her to advise that: “[u]pon receipt of all the above requested information, we will complete our review of your appeal and advise you of the decision.”

[55]           Ms. Penttila thereby accepted a clear offer to allow her to appeal the denial of her claim for benefits.  A process was established, and her appeal was determined by the insurer.  She was advised by letter dated October 21, 2014, of the decision that her appeal had been rejected.  (Ms. Penttila says she did not receive written confirmation until June 15, 2015.)

[56]           The right to appeal was not simply part of an insurer’s general obligation to accept any material; it was a specific and agreed right of appeal, a clear articulation of the process to be followed, and a specific decision in respect of the appeal.

[57]           A reasonable person in Ms. Penttila’s position would have pursued her right of appeal.  Until that process ran its course, it would be premature to commence legal proceedings against the insurer.

(ii)               No Need to Review the Tone and Tenor of Discussions

[58]           The court was not required to assess the “tone and tenor” of communications between the parties as there was a clear beginning and end to the process.  Western told Ms. Penttila that she had a right to appeal and that a decision would be rendered, and it was.

(iii)            No Litigation Counsel Engaged

[59]           Ms. Penttila did not retain counsel while the appeal was ongoing. This fact does not “[belie] any suggestion of a lack of awareness of the appropriateness of commencing a lawsuit at that point in time”: Pepper, at para. 1.

[60]           The words “in offering to review additional evidence we are not waiving our right to rely on any statutory or policy provisions including any time limitations”, in this factual context, were not sufficiently clear to demonstrate to Ms. Penttila that the insurer intended to rely on the fact that the limitation period was running before the appeal had been decided.

(iv)            Ms. Penttila’s Evidence as to Her Belief

[61]           On the contrary, Ms. Penttila’s uncontradicted sworn evidence was that she at all times believed that, from the time the initial benefits were denied (in the letter dated February 19, 2013), to the time she received the final decision on appeal, Western was considering her appeal.

[62]           This belief is supported by the fact that, on November 13, 2013, Western advised that: “[u]pon receipt of all the above requested information, we will complete our review of your appeal and advise you of the decision.”  There was no statement in respect of time limitations.

[63]           Lastly, unlike Nasr, Ms. Penttila never conceded that the insurer never told her that it would not be relying on a limitations defence.

(v)               No Tactical Delay

[64]           Ms. Penttila made good faith efforts to avoid unnecessary litigation believing Western was considering her appeal. There is no suggestion that Ms. Penttila engaged in a tactical delay of the proceeding.

(vi)            Meets the Policy Objectives

[65]           The motion judge’s decision is consistent with the policy objective of avoiding unnecessary litigation and discouraging parties from rushing to litigation, provided there is no tactical delay.

The court also provided a good summary of the principles for assessing the appropriateness of a proceeding against an insurer:

[35]           In assessing when it is legally “appropriate” to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act, 2002, the courts have articulated the following guidelines:

a)      The determination of whether legal action is “legally appropriate” takes into account what a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known: Presidential, at para. 18.

b)      Parties should be discouraged from rushing to litigation or arbitration.  Rather, they should be encouraged to resolve claims as courts take a dim view of unnecessary litigation: Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218 (CanLII), 109 O.R. (3d) 652, at para. 34; and 407 ETR, at para. 48.

c)      It is premature for a party to bring a court proceeding to seek a remedy if a statutory dispute resolution process offers an adequate alternative remedy and that process has not fully run its course or been exhaustive: Volochay v. College of Massage Therapists of Ontario, 2012 ONCA 541 (CanLII), 111 O.R. (3d) 561, at paras. 61-70.

d)      However, where the insurer has been clear that it intends to rely on the limitation period, and the claim has “ripened”, the court should be wary of getting involved in assessing the “tone and tenor of communications” to determine where and when there was a denial of the claim by the insurer as this would inject an undesirable element of uncertainty into the law of limitation of actions: Markel, at para. 34.

e)      The courts should also be wary of allowing a party to delay the commencement of proceedings simply for tactical reasons: 407ETR, at para. 47; and Markel, at para. 34.

f)        It is appropriate for the court to consider what was communicated to the insured and whether the claim was clearly and unequivocally denied: Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922 (CanLII), 124 O.R. (3d) 171, at para. 42.

g)      The courts have specifically recognized two circumstances in which the issue of “appropriate means” may delay the date on which a claim was discovered.

•         First, where the insured relies on the superior knowledge and expertise of the insurer, especially where the insurer made efforts to ameliorate the loss.

•         Second, where other proceedings remain ongoing (such as criminal proceedings or arbitration): Presidential, at paras. 28-48.

h)      Where an insured seeks to preclude an insurer from relying on a limitations defence on the basis of promissory estoppel, the insurer’s conduct must amount to a promise on which the insured acted to its detriment: Maracle v. Travellers Indemnity Co. of Canada, 1991 CanLII 58 (SCC), [1991] 2 S.C.R. 50; and Marchischuk v. Dominion Industrial Supplies Ltd., 1991 CanLII 59 (SCC), [1991] 2 S.C.R. 61.

 

Ontario: A defendant’s expertise can impact on discovery even when the defendant isn’t a professional

 

The Court of Appeal’s decision in Presley v. Van Dusen is a reminder that a s. 5 analysis requires making findings with respect to each s. 5(1) discovery matter, and reliance on a defendant’s expertise may delay the appropriateness of a proceeding even when the defendant is not a professional.

This was an appeal from an appeal from a Small Claims Court trial decision.  The trial judge found that he could determine the commencement of the limitation period without considering s. 5(1)(a)(iv):

[9]         The trial judge did not consider the s. 5(1)(a)(iv) criterion as to when the appellants did know or should have known that a proceeding would be an appropriate means to remedy their claim. He gave the following reason for not considering s. 5(1)(a)(iv): “It is not necessary for me to make any determination under that subsection and I do not do so as I only have to find the earliest date and I have no difficulty, as I have said, in finding that that date was the spring of 2013.”

This is plainly an error of law; you can’t determine discovery without considering all four discovery matters.

The Divisional Court nevertheless upheld the trial judge’s decision.  Having determined when a reasonable person ought to have known of the discovery matters pursuant to s. 5(1)(b), it found that there was no requirement for the trial judge to make an explicit finding as to when the plaintiff ought to have known the matter in s. 5(1)(a)(iv).

The Court of Appeal overturned the Divisional Court’s order.  It was an error for the trial judge not to consider s. 5(1)(a)(iv).  The law required the trial judge to consider all four discovery matters:

[14]      The analysis of both the trial judge and the Divisional Court judge of ss. 5(1)(a)(iv), 5(1)(b) and s. 5(2) of the Limitations Act is flawed. The trial judge explicitly stated that he was not considering s. 5(1)(a)(iv). A determination under s. 5(1)(b) as to the date a reasonable person would have discovered the claim requires consideration of all four “matters referred to in clause (a)”. Similarly, the finding that there was insufficient evidence to rebut the presumption under s. 5(2) that the plaintiff knew all the matters referred to in s. 5(1)(a) cannot stand as there was no consideration of s. 5(1)(a)(iv).

[15]      This court has repeatedly held that consideration of when a proceeding was an appropriate means to remedy a claim is an essential element in the discoverability analysis and that failure to consider s. 5(1)(a)(iv) is an error of law: Gillham v. Lake of Bays (Township), 2018 ONCA 667 (CanLII), 425 D.L.R. (4th) 178, at paras. 33-34; Kudwah v. Centennial Apartments, 2012 ONCA 777(CanLII), at paras. 1-2; Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469 (CanLII), 91 R.P.R. (5th) 1, at paras. 21 and 35.

It’s common for the court to making a determination under s. 5(1)(b) without making explicit findings as to the plaintiff’s knowledge of the discovery matters (though I think everyone benefits from explicit findings).  What makes this case unusual, and something of an outlier, is that the trial judge made this s. 5(1)(b) determination while finding that it was unnecessary to consider one of the discovery matters.  That’s the kind of error that seems especially prevalent in the Small Claims Court.

The Court of Appeal undertook its own s. 5(1)(a)(iv) analysis, which is noteworthy for emphasising that the superior knowledge and expertise that might engage s. 5(1)(a)(iv) is not restricted to strictly professional relationships.  Accordingly, the plaintiffs could reasonably rely on the expertise of a person licensed to install septic systems:

[21]      These principles are applicable to the facts of this case. Van Dusen is licenced to install septic systems. The appellants contracted with him because of his special training and expertise. While the respondents argue he may not qualify as “an expert professional”, there can be no question he did have expertise upon which the appellants reasonably relied.

[22]      Moreover, reliance on superior knowledge and expertise sufficient to delay commencing proceedings is not restricted to strictly professional relationships: Presidential, at para. 26. I acknowledge that the previous cases where this court has made a finding that it was reasonable for the plaintiff to rely on the defendant’s superior knowledge and expertise have concerned defendants belonging to traditional expert professions. For instance, Brown v. Baum, 2016 ONCA 325 (CanLII), 397 D.L.R. (4th) 161, involved a physician, Chelli-Greco v. Rizk, 2016 ONCA 489 (CanLII), involved a dentist, and Presidential MSH involved an accountant. However, recent Superior Court decisions have applied the superior knowledge and expertise prong of Presidential MSH to persons who are members of non-traditional professions or who are not professionals at all. For instance, in YESCO Franchising LLC v. 2261116 Ontario Inc., 2017 ONSC 4273 (CanLII), the court found that s. 5(1)(a)(iv) applied in a franchisor-franchisee relationship where the franchisees relied on the franchisor’s superior knowledge and expertise, even though the franchisor was not a member of an expert profession. Similarly, in Barrs v. Trapeze Capital Corp., 2017 ONSC 5466 (CanLII), aff’d 2019 ONSC 67 (Div. Ct.) (CanLII), the Superior Court and the Divisional Court found that s. 5(1)(a)(iv) applied to investors who relied on the superior knowledge and expertise of their investment portfolio managers.