Ontario: Court of Appeal says that the Limitations Act applies to claims, not causes of action

Justice Strathy’s decision in Apotex Inc. v. Nordion (Canada) Inc. is one of the most important limitations decisions from the Court of Appeal since the Limitations Act came into force.  It’s the first decision to make explicit that the Limitations Act doesn’t apply to causes of action, but to “claims” (as defined in s. 1 of the Limitations Act).

This distinction is most often missed by Ontario courts., which generally treat the cause of action and the “claim” as interchangeable for limitations purposes.  I have written about this issue extensively (see this, for example), including the problems that result.

Justice Strathy noted one of those problems.  Because damage is always an element of the “claim” but not of any cause of action based on conduct that is actionable per se, they accrue differently.  A breach of contract is the most common example:

[84]   Before the reform of limitations law brought about by the LA 2002, the previous statute, the Limitations ActR.S.O. 1990, c. L.15, looked to when the cause of action arose (an expression not used in the LA 2002) to determine the commencement of the limitation period. The “cause of action” for breach of contract accrued on the date of the breach and the limitation period began to run on that date: see Graeme Mew, Debra Rolph & Daniel Zacks, The Law of Limitations, 3d ed. (Toronto: LexisNexis, 2016) at §9.6; Robert Simpson Co. Ltd. et al v. Foundation Co. of Canada Ltd. et al (1982), 1982 CanLII 1750 (ON CA)36 O.R. (2d) 97 (C.A.), at p. 105Schwebel v. Telekes1967 CanLII 163 (ON CA)[1967] 1 O.R. 541 (C.A.), at p. 544.

[85]   This was the case whether or not damages had yet been incurred. Damages are not an essential element of the cause of action for breach of contract: Mars Canada Inc. v. Bemco Cash & Carry Inc.2018 ONCA 239 (CanLII)140 O.R. (3d) 81, at para. 32.

[86]   Under the LA 2002, the limitation period for breach of contract does not necessarily run from the date of the breach. As I have observed, in contrast to the former statute, the date of the “act or omission” – the breach of contract itself – is not the only factor to be considered in determining when a claim is discovered under the LA 2002. Instead, the date on which the plaintiff knew of the occurrence of the act or omission is only one factor to be determined. In addition to that factor, the person with the claim must also know that the “injury, loss or damage had occurred” (s. 5(1)(a)(i)), that it was caused or contributed to by the act or omission (the breach of contract) (s. 5(i)(a)(ii)), and that the act or omission was that of the defendant (s. 5(1)(a)(iii)).

[87]   As a result of the presumption under s. 5(2), the limitation period begins to run on the date of the breach (being the date of the “act or omission”), unless it is proven that the person with the claim did not know of one or more of the matters set out in s. 5(1)(a), and that a reasonable person would not have known of those matters.

[88]   A plaintiff with a claim for breach of contract may displace the presumption in s. 5(2) if, for example, they establish that they did not know that “the injury, loss or damage” had occurred or, if it had occurred, they did not know that it was caused by an act or omission of the defendant – the breach of contract. But it is well-settled that the person need not know the extent of the injury, loss or damage to trigger the commencement of the limitation period. It is enough that they know that some damage has occurred. In Hamilton (City) v. Metcalfe & Mansfield Capital Corp.2012 ONCA 156 (CanLII)290 O.A.C. 42, at paras. 59-61, this court adopted the common law rule expressed in Peixeiro v. Haberman1997 CanLII 325 (SCC)[1997] 3 S.C.R. 549, at para. 18, that “some damage” is sufficient to start the running of the limitation period.

Justice Strathy set out the impact this has on a limitations analysis for a breach of contract: 91-92

[91]   First, to determine when a claim is discovered in a breach of contract case, it is necessary to examine the terms of the contract and the nature of the alleged breach (the “act or omission”) on which the claim is based: see Mew, Rolph & Zacks, at §9.5, citing to NFC Acquisition L.P. v. Centennial 2000 Inc., 2010 ONSC 733, 67 B.L.R. 218, at paras. 29-30, affirmed in 2011 ONCA 43 (CanLII)78 B.L.R. (4th) 11Hopkins v. Stockman2013 SKCA 118 (CanLII)427 Sask. R. 4, at para. 10. As van Rensburg J.A. noted in Morrison v. Barzo, at paras. 33, 49, the application of the test in s. 5(1)(a) requires the identification or definition of the claims at issue. This is a necessary starting point.

[92]   Second, in many cases, the act or omission, causation, and the injury, loss or damage will occur simultaneously, and will be discovered simultaneously. But this will not always be the case. In some cases, discovery of the “act or omission” will not start the limitation period running unless injury, loss or damage has occurred and has been discovered (s. 5(1)(a)(i)).

To understand the significance of this decision, compare it to the Court’s description of discovery in Lawless:

[22]         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”:Aguonie v. Galion Solid Waste Material Inc. (1998), 1998 CanLII 954 (ON CA), 38 O.R. (3d) 161 (C.A.), at p. 170.

Here the Court describes discovery in terms of knowledge of the material facts of the cause of action, which is a statement of common law discovery, not discovery as codified in s. 5 of the Limitations Act.  Apotex, together with recent decision in Gillham, suggests that the Court is moving away from the misconception that underlies reliance on Lawless.   

Two other points:

  1. Justice Strathy’s decision begins with s. 2 of the Limitations Act.  Because this is the provision that determines the application of the Limitations Act, this is the correct starting point for any limitations analysis.  However, you rarely see courts considering it.
  2. It would have been helpful for the Court to include a paragraph explaining why the cause of action does not feature in the Limitations Act.  It was a deliberate decision.  The Legislature sought to resolve the enormous problems inherent in cause of action accrual by converting all causes of action into one unit, the claim.  This also allowed for universal limitation periods, rather than limitation periods for different categories of causes of action.

 

Ontario: the limitation of new causes of action

In David v. Easte Side Mario’s Barrie, the Court of Appeal quotes from The Law of Civil Procedure in Ontario for the principle that an alternative claim for relief arising out of the same facts is not a new cause of action for limitations purposes:

[32]      And, quoting from Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3d ed. (Toronto: LexisNexis Canada, 2017), at p. 186:

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

See also 1100997 Ontario Limited, at para. 20.

Ultimately, the Court applied the “fundamentally different claim” test to conclude that the plaintiff wasn’t entitled to the amendment.

As I discussed when the Court of Appeal last addressed this issue, the “fundamentally different claim” test makes a lot of sense.

My complaint, which I recognise verges on pedantry, is that a cause of action analysis, and the casual use of the word “claim”, is problematic in the limitations context.  The Limitations Act has nothing to do with causes of action, and, as I often note, does not appear in the Act.  This is because the Act uses the language of “claim”, which reflects an intentional break with cause of action accrual as determinative of the commencement of time.  Claims are not causes of action, and causes of action have very little do with the operation of the current limitations scheme.  It’s unhelpful when the Court fails to account for this.

Ontario: the Court of Appeal can’t let go of the cause of action

The Court of Appeal’s endorsement in Kolosov v. Lowe’s Companies Inc. reads as if it were delivered 15 years ago when the former Limitations Act was still in force.

The Court of Appeal states the following about the law of the limitation of the intentional torts of false arrest and false imprisonment:

[11]      The law in relation to the commencement of the limitation period for the intentional torts of false arrest and false imprisonment, and associated Charter breaches, is well settled. As Chiappetta J. noted in Fournier-McGarry (Litigation Guardian of) v. Ontario, 2013 ONSC 2581 (CanLII), at para. 16:

A claim for the common law torts of false arrest, false imprisonment and breach of Charter rights arising there-from 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.), para. 14; Fern v. Root, 2007 ONCA 79 (CanLII),[2007] O.J. No. 397 (Ont. C.A.), para. 102).

In other words, the Court is stating that the limitation period commences when the cause of action accrues, the cause of action in question accrued on the date of the arrest, and so this is when the limitation period commenced, and no fact (such as when full police disclosure occurred), could alter this analysis.

This is plainly wrong.  Where to begin? Let’s try first principles:

  1. The Limitations Act applies to all claims pursued in court proceedings.
  2. The Limitations Act applies to claims, not causes of action. The language “cause of action” does not appear in the Limitations Act.  The accrual of a cause of action hasn’t determined the commencement of limitation period since 2004 when the Limitations Act came into force.
  3. Section 5 determines the commencement of the limitation period. It’s a factual analysis.  A fact such as when full police disclosure occurs may well have an impact on the discovery analysis.

This kind of anachronistic analysis does the law no favours.  The limitations scheme is confusing enough ; wonky outlier decisions like this aren’t helpful.

Ontario: Is it really a new cause of action?

You can’t amend a claim to assert a new cause of action if the cause of action is statute-barred.  The question is, when’s an amendment a new cause of action?

In Beauchamp v. Gervais, Justice Dunphy sets out the following test:

[23]           The preceding authorities establish that in order to qualify as something other than a new cause of action the proposed amendments must, in substance, be: (i) an alternative claim for relief, or a statement of different legal conclusions based on no new facts or not going beyond the factual matrix from which the original claim arose; (ii) better particulars of the claims already made; (iii) a correction of errors in the original pleading; or (iv) the assertion of a new head of damage arising from the same facts. If the amendments cannot be characterized in one of these ways, the amendments should not be permitted, in order to not deny a defendant the right to rely upon a limitations statute.

This paragraph follows a lengthy summary of the relevant jurisprudence that’s worth reading if you’re considering the issue.