Ontario: is limitations law procedural in Ontario? (probably)

Lo Faso and Ferracuti contains the following statement on the substantive nature of limitation periods:

[17]          The defendants argue that the prejudice caused by the expiry of the limitation period makes the amendments untenable. The Supreme Court of Canada has held limitation periods are fundamentally substantive, and not procedural in nature. In para. 35 of Castillo v. Castillo2005 SCC 83 (CanLII)[2005] 3 S.C.R. 870, Justice Bastarache, in a separate yet concurring decision with the majority, held that “limitation periods have the effect of cancelling the substantive rights of plaintiffs, and of vesting a right in defendants not be sued in such cases…” Justice Bastarache referred also to the decision of Justice La Forest in Tolofson v. Jensen, [1994] 3 S.C.R. 1002 (SCC), where he stated that limitation periods are, by the very nature, substantive as they determine the rights of both of the parties in a cause of action. As Justice La Forest explained, “they destroy the right of the plaintiff to bring suit and vest a right in the defendant to be free from suit”.

I don’t think this is correct law in Ontario.  At common law, limitation periods are procedural so that the expiry of a limitation period is a procedural bar to asserting a cause of action, but doesn’t extinguish the cause of action.  The Limitations Act arguably recognises this implicitly:

Conflict of laws

23 For the purpose of applying the rules regarding conflict of laws, the limitations law of Ontario or any other jurisdiction is substantive law.

This provision is only necessary if the limitations law of Ontario is otherwise procedural.

To be fair, all of this is largely academic outside of conflicts .  I’ve been involved in just one case in the last five years where the impact of an expired limitation period mattered.

Ontario: Court of Appeal continues to disagree about limitations analyses (and clarifies that fraudulent concealment doesn’t apply to s. 5)

 

It’s not often that the Court of Appeal disagrees on a limitations issues (or at least until recently when there have been a number of dissents in limitations decisions), and it’s especially rare that the Court disagrees about whether there have been errors of fact.  That’s what make Zeppa v. Woodbridge Heating & Air-Conditioning Ltd. interesting.  Justice Brown, with Justice Strathy concurring, disagreed with Justice Feldman about what facts were necessary for the plaintiff to know that the defendant HVAC installer had caused or contributed to a faulty HVAC system.   

The motion judge found that problems with the HVAC system were necessarily the result of the defendants’ act or omissions because the defendant installed it:

It is crystal clear from these reports, as well as Christopher’s Examination, that the Plaintiffs knew long before February 2010 that the HVAC system was not functioning properly. Woodbridge was clearly responsible since they had installed the system

Justice Brown did not find any error with this reasoning:

[46]      Unlike my colleague, I see no error in the factual findings that would justify appellate intervention. The motion judge did not misapprehend the evidence. His findings were solidly grounded in the record before him. Accordingly, I would not give effect to this ground of appeal.

However, Justice Feldman didn’t agree that it necessarily followed from the fact of the HVAC problems that the defendant had caused or contributed to them:

[92]      The motion judge found, at para. 33, that “it was not necessary for Christopher to have knowledge of the fact that the Quietside boilers were installed improperly in order for the limitation period to commence running. What was needed was knowledge, actual or imputed, that he had a “claim” against Woodbridge.” This was a legal error.

[93]      In the circumstances of this case, knowledge of the improper installation was an essential element of discoverability of the appellants’ claims for negligence and breach of contract.

[95]      Until Woodbridge’s improper installation was revealed, the Zeppas knew that the system had many problems, but they did not know that the problems were caused by the act of improper installation by the respondent. They did not know of any act or omission by Woodbridge or the day it occurred.

[96]      In fact, when the Zeppas first came to Woodbridge with complaints, Woodbridge informed them that the problems with the system were due to lack of maintenance. There were no problems with the HVAC system itself and no suggestion that the problem was caused by improper installation. On the basis of Woodbridge’s assurances, the Zeppas entered into a two-year maintenance agreement. This cost them approximately $4600.

[97]      However, Woodbridge knew that maintenance would never fix the HVAC system. Woodbridge concealed the fact that its faulty installation of the boilers was the central cause of the Zeppas’ problems. Until Quietside revealed that fact to the Zeppas, Woodbridge’s fraudulent concealment prevented the Zeppas from knowing whom to hold responsible for the damage to their family home and why.

[99]      If the action had been pleaded as a breach of an implied warranty, or if Woodbridge had provided an explicit warranty, the Zeppas’ knowledge that the HVAC system was not working properly may have been sufficient to trigger the running of the limitation period. But that is not the claim here.

[100]   Problems that can be resolved through maintenance are not necessarily caused by the acts or omissions of the installer. The motion judge’s finding that the Zeppas’ problems were clearly caused by Woodbridge’s acts or omissions was not based on any evidence other than the fact that there were ongoing problems with the HVAC system. He treated the cause of action as if it were for breach of warranty and not for negligence or breach of contract in the installation of the system.

[101]   Mr. Zeppa first contacted Quietside because he had heard that its boilers were terrible and that was why Quietside was no longer operating in Canada, i.e. the boilers had a possible manufacturing defect or were inherently faulty. When he asked the manufacturer for assistance, Quietside responded to his inquiries with the letter that revealed Woodbridge’s faulty installation of the boilers and Woodbridge’s knowledge that its faulty installation was the cause of the problems.

[103]   Mr. Zeppa’s evidence demonstrates why knowledge that the HVAC system was not working properly was not enough to trigger the basic limitation period. In the face of Woodbridge’s assurances, Mr. Zeppa reasonably suspected that the boiler manufacturer may have been responsible for the HVAC problems. Woodbridge’s false assurances continued until late 2010.

I find Justice Feldman’s reasoning significantly more persuasive.  It’s not evident to me why the court considered it “crystal clear” that if the HVAC wasn’t working it was the installer’s fault.  Knowledge that the installation was faulty is not “the how it happened” that Justice Brown refers to (at para. 43) of his reasons, but prima facie knowledge of actionable conduct.  In the absence of prima facie knowledge that defendant at contributed to the loss, I don’t see how the plaintiff could have discovered the claim.  Perhaps there’s something in the record that explains this, but not on the face of the decision.

Two other aspects of the decision are noteworthy.

First, it reiterates that the principle of fraudulent concealment is not a consideration in a s. 5 analysis, a point on which the majority and the dissent agree.  This is because s. 5 achieves the same result:

[71]      The decisions in Dhaliwal and Kim, together with the plain language of ss. 4 and 5 of the Act, support the conclusion that there is no independent work for the principle of fraudulent concealment to perform in assessing whether a plaintiff has commenced a proceeding within the basic two-year limitation period. That is because the elements of the discoverability test set out in ss. 5(1)(a) and (b) address the situation where a defendant has concealed its wrong-doing. If a defendant conceals that an injury has occurred, or was caused by or contributed to by its act or omission, or that a proceeding would be an appropriate means to seek to remedy it, then it will be difficult for the defendant to argue that the plaintiff had actual knowledge of those facts until the concealed facts are revealed. Whether the plaintiff ought to have known of those matters, given their concealment, is a matter for inquiry under s. 5(1)(b).

[72]      If the defendant’s concealment of facts results in a lack of actual or objective knowledge by the plaintiff of the elements set out in s. 5(1)(a) of the Act, then the plaintiff does not discover his or her claim until the date the concealed facts are revealed to or known by the plaintiff, at which point time begins to run. That is to say, the analysis required by s. 5(1) of the Act captures the effect of a defendant’s concealment of facts material to the discovery of a claim.

Also note that this is now the leading description of the principle, as demonstrated by the Court’s reference to it in Endean.

Second, it contains a disappointing reference to Lawless:

[42]      As this court observed in Lawless, at para. 23, the question to be posed in determining whether a person has discovered a claim is whether the prospective plaintiff knows enough facts on which to base a legal allegation against the defendant. In support of that proposition, Lawless cited the decision of this court in McSween v. Louis (2000), 2000 CanLII 5744 (ON CA)132 O.R. (3d) 304 (C.A.), where Feldman J.A., writing for the majority, stated, at para. 51:

The question to be posed when assessing discovery is when the plaintiff had knowledge of the discovery matters, not knowledge of the facts necessary for a legal allegation (which is the question required by common law discovery).  Nevertheless, the Court’s point regarding the amount of knowledge necessary to satisfy the discovery matters—prime facie knowledge—remains valid without reverting to common law discovery principles to describe discovery under s. 5.

Ontario: the codification of the discovery rule is not semantics (blog pedantry)

The decision in Loy-English v. Fournier requires some gentle criticism for its description of the limitations scheme:

[40]           Before turning to the evidence, I will just mention that counsel for the intervenor provided me with a useful review and critique of much recent jurisprudence. I have not found it necessary to address the argument that there is a difference between the time when a cause of action accrues at common law and the day when a claim is discovered under the Act.  I need not seek to resolve what counsel identifies as inconsistency in the jurisprudence and failure of courts to recognize the extent to which the Act has changed the common law.

[41]           I will just observe that in the seminal decision of Peixiero v. Haberman, the Supreme Court of Canada endorsing the principle of discoverability in connection with Ontario’s motor vehicle regime uses language suggesting a cause of action under Ontario law only “accrues” when it is possible to determine that the injuries exceed the threshold.[18]  In Lawless v. Anderson our Court of Appeal declared that “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.” The court went on to define “cause of action” as “the fact or facts which give a person a right to judicial redress or relief against another.”[19]  Arguably, the effect of the Act is to identify discoverability as a constituent component of a cause of action in Ontario but this is largely a question of semantics.

[42]           The important point is the rationale underlying the discoverability principle. A limitation statute should not be construed to run before the plaintiff could reasonably know that she had a viable cause of action.  It is this rationale that is codified in s. 5 of the Act.  Whether the cause of action can be said to have arisen at an earlier date, knowledge that there is a cause of action and a legal proceeding is an appropriate avenue for relief is a component of discoverability.  All four statutory components are necessary to trigger the running of the limitation period.

  1. It’s not arguable that the Limitations Act makes discoverability a constituent element of a cause of action, nor is the argument one of semantics.  At common law, the discoverability rule relates to the accrual of a cause of action, not the elements of a cause of action.  The rule provides that a cause of action accrues when the plaintiff discovers its material elements.  Section 5 of Limitations Act contains a codified discoverability rule that applies to “claims”, a defined term, not causes of action.  It also doesn’t make discoverability an element of a cause of action or “claim”, but determinative of when discovery occurs.  This isn’t at all an issue of semantics.  “Claims” and causes of action are not interchangeable, a point made recently by the Court of Appeal.
  2. It is not so that the Limitations Act prevents time from running before a plaintiff can reasonably know that she has a viable cause of action.  Knowledge of the elements of a cause of action will not result in discovery of a “claim” under the Limitations Act.  This is because the s. 5(1)(a)(iv) discovery matter—the appropriateness of a proceeding as a remedy—is not an element of any cause of action, and also because discovery requires knowledge of damage, and damage is not an element of any cause of action based on conduct that is actionable per se (like breach of contract).

Ontario: simple contracts haven’t been material to the limitations scheme for…nearly 15 years

It’s time for some limitations pedantry!

In Corona Steel Industry Private Ltd. V. Integrity Worldwide Inc., the court held that “an action for recognition and enforcement of a foreign judgment is treated as an action upon a simple contract for purposes of determining the limitation period.”

This was so until 2004 when the current Limitations Act came into force. The Limitations Act does not distinguish between categories of contracts, or causes of action.  The Limitations Act asks when the plaintiff discovered a “claim” (as defined by s. 1).  The Court of Appeal made the point explicit in addressed the issue squarely in Independence Plaza.

I think perhaps counsel had relied on a previous version of the Law of Limitations, or some obsolete jurisprudence.

Ontario: rectification is a “claim”

The Court of Appeal’s decision in Alguire v. The Manufacturers Life Insurance Company is noteworthy for the following points:

It affirms that a request for rectification is a “claim” within the meaning of the Limitations Act:

[26]      In my view, Manulife’s request for rectification is a claim. It is more than just a denial of Mr. Alguire’s claim; it is an independent claim. Even if Mr. Alguire had not brought this proceeding, Manulife would have been entitled to bring an application seeking rectification of the Policy. Consequently, Manulife’s request goes beyond a mere defence and qualifies as a claim for rectification, which is equitable relief: Fairmont, at para.12. The Limitations Act applies to equitable claims: McConnell v. Huxtable2014 ONCA 86 (CanLII)118 O.R. (3d) 561, at paras. 48-49.

This may be the correct result, but the court didn’t arrive at it by asking the correct question (at least not explicitly).  Section 1 of the Limitations Act defines “claim”: a claim to remedy damage resulting from wrongful conduct.  Accordingly, whether there is a claim is a matter of whether there is wrongful conduct and resulting damage.  It does not necessarily follow from a party seeking an order or declaration that there is a claim.  There are circumstances where a party asks the court to do something—for example to order the passing of accounts—without there having been wrongful conduct.

There’s another instance of confusion about the nature of the “claim”:

[34]      […] A claim, however, requires an act or omission of the person against whom it is made: Limitations Act, s. 5(1)(a)(iii). In this case, it is Mr. Alguire’s resiling from the parties’ intended agreement that grounds the rectification claim. Even though Manulife discovered the error in the paid-up values in the Policy in 2007, it did not know, and could not reasonably ought to have known, that Mr. Alguire would seek to resile from the parties’ intended agreement at some point in the future. Manulife therefore cannot be faulted for failing to act with due diligence.

It’s because of the s. 1 definition of “claim” that it requires wrongful conduct, not because s. 5(1)(iii) makes knowledge of the wrongful conduct the precondition of discovering a claim.

The Court follows Albertan authorities for the principle that s. 16(1)(a) should be narrowly construed:

[27]      The next issue is whether Manulife can rely on s. 16(1)(a) of the Limitations Act, which provides that there is no limitation period in respect of “a proceeding for a declaration if no consequential relief is sought.”

[28]      In the context of a limitation period analysis, declaratory relief should be narrowly construed so as to ensure that s. 16(1)(a) is not used as a means to circumvent applicable limitation periods: Joarcam, LLC v. Plains Midstream Canada ULC,2013 ABCA 118 (CanLII)90 Alta. L.R. (5th) 208, at para. 7.

[29]       I conclude that this subsection is unavailable to Manulife in the circumstances of this case, as it is seeking consequential relief.  The remedy of rectification sought in this case has significant consequences for the parties and goes beyond clarifying the nature of a particular obligation. Mr. Alguire stands to receive significantly less money as a result of the rectification compared to what he argued he was entitled to on the Policy’s face.

The Court held that policy considerations cannot drive the results:

[33]      Finally, Mr. Alguire raises policy considerations in support of his submission that the claim for rectification is statute-barred.  Those considerations cannot, in the circumstances of this case, drive the result.  The Limitations Act was designed to promote certainty in the analysis of when claims are statute-barred.  The task of a reviewing court is to determine the applicable limitation period having regard to the legislation. A limitation period analysis is not a laches analysis where the court’s investigation is driven by the equities of the situation.

This prompts the obvious question: are there circumstances where policy considerations could inform a limitations analysis? I wouldn’t think so, and it seems like the real policy concern is avoiding the introduction of a new factor in the limitations analysis.  It’s easy to see how litigants might seize on this obiter as standing for the principle that there are circumstances where, in addition to the matters in s. 5(1), a court must consider the impact of policy on the commencement of time.

 

 

 

Ontario: the Court of Appeal on the limitation of unpaid invoice claims

In Collins Barrow Toronto LLP v. August Industries Inc., the Court of Appeal has held that the limitation period for a claim arising from an unpaid invoice does not run until a reasonable period of time has expired for payment of the invoice:

[5]         The other two invoices in dispute are dated April 9, 2014 and April 11, 2014.  The application judge pointed out that the engagement letters expressly provided that invoices only became delinquent once 45 days had expired from their delivery.  The application judge concluded that the limitation period for these two invoices did not commence until 45 days after they were delivered.  We agree with her conclusion in that regard.  It is consistent with the express wording of the engagement letters and also with existing case law that provides that the limitation period on an invoice does not begin to run until a reasonable period of time has expired for payment of the invoice:  see, for example, G.J. White Construction Ltd. v. Palermo[1999] O.J. No. 5563 (S.C.J.).

The decision cited by the Court was decided under the former Limitations Act, in which the accrual of the cause of action determined the commencement of time.  In contrast, time commences under the Limitations Act on discovery of the claim.  It would have been more helpful had the Court explained what impact the passage of a reasonable amount of time has on the plaintiff’s discovery of the claim, and framed the analysis in the language of Limitations Act.  In the absence of such a s. 5 analysis, I assume the principle is that a plaintiff cannot really know that she has suffered a loss until a period of time expires after payment became due.

 

Ontario: damage occurs when there is a change in position

 

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

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

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

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

Ontario: interaction of the Insurance Act and Limitations Act

Justice Akhtar’s decision in Sorita v. TTC provides a helpful summary of the interaction between the Limitations Act and the statutory threshold in s. 267.5 of the Insurance Act:

[26]      As noted earlier, Ontario’s restriction on motor vehicle accident claims is contained in s. 267.5 of the Insurance Act, which provides:

(5) Despite any other Act and subject to subsection (6), the owner of an automobile, the occupants of an automobile and any person present at the incident are not liable in an action in Ontario for damages for non-pecuniary loss, including damages for non-pecuniary loss under clause 61(2)(e) of the Family Law Act, from bodily injury or death arising directly or indirectly from the use or operation of the automobile, unless as a result of the use or operation of the automobile the injured person has died or has sustained,

(a) permanent serious disfigurement; or

(b) permanent serious impairment of an important physical, mental or psychological function.

 [27]      Ontario’s no-fault insurance scheme means that, in the Insurance Act context, the limitation clock begins to run when the plaintiff becomes aware that their injuries constitute “permanent serious impairment”. To otherwise commence an action is futile, as no evidence would have been available of a qualifying injury: Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 32. Additionally, the plaintiff in a motor vehicle claim is not required to commence an action before they know that they have a “substantial chance” of success: Everding v. Skrijel, 2010 ONCA 437 (CanLII), 100 O.R. (3d) 641, at para. 11. The inquiry to be undertaken is “whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant”: Lawless v. Anderson, 2011 ONCA 102 (CanLII), at para. 23.

Readers of Under The Limit will know not to rely on Lawless v. Anderson when considering the commencement of the limitation period.  Contrary to the above, the inquiry is not when the claimant knows enough facts on which to base an allegation of negligence, but when the claimant ought to have knowledge of the section 5 discovery criteria, including that a proceeding is an appropriate remedy.  It always bears repeating: the words “cause of action” do not appear in the Limitations Act.