“claim”

Ontario: No limitation period applies to a request to fix costs

In Craven v. Osidacz, the plaintiff asked the court to fix costs for a motion heard in 2010.  The defendant objected based on an expired limitation period.  The Superior Court held that no limitation period applies to a request to fix costs pursuant to s. 16(1)(b) of the Limitations Act because the plaintiff was seeking to enforce a court order, and because the request was not a “claim” as defined by s. 1.

The court held that “it is not clear that the plaintiff’s request for costs constitutes a ‘claim’”.  This is correct; indeed, it’s beyond argument, and a little more certainty in the court’s statement would have been warranted.  As Kaynes and Grant Thorton hold, the “claim” derives from a cause of action, and is sometimes functionally the same.  A litigant doesn’t assert a cause of action when asking the court to fix costs, it asks the court to enforce an order.  Costs themselves aren’t a cause of action, but the exercise of judicial discretion pursuant s. 131 of the Court of Justice Act.

The court’s consideration of the meaning “claim” at paras. 36-38 is extensive and well-reasoned, but it would have been sufficient to refer to the principles set out in Kaynes regarding the meaning and function of “claim”.

The court’s discussion of s. 16(1)(b) was unnecessary, but will be useful to anyone considering its application:

[30]          The Limitations Act does not apply to the costs of the two motions because, as provided for in s. 16(1)(b) of the Act, there is “no limitation period in respect of a proceeding to enforce an order of a court, or any other order that may be enforced in the same way as an order of the court.”

[31]         Because both Lofchik J. and Harper J. ordered that the costs of the two motions be reserved for the trial judge, it is arguable that the plaintiff is in essence seeking to enforce an order of the court and is not bound by the limitation periods provided for in the Act.

[32]         There is little case-law citing s. 16(1)(b), but one case supports this interpretation, Pet Valu Canada Inc. v. Rodger, 2018 ONSC 3353. In that case, Pet Valu Canada Inc. (“Pet Valu”) and 1250264 Ontario Inc. (“125”) were embroiled in a class action proceeding that resulted in Pet Valu being awarded over $1.7 million in costs against 125, the representative plaintiff. 125 did not pay any of the costs and Pet Valu brought an action against 125’s sole shareholder, Mr. Rodger, for payment of the cost orders. Mr. Rodger argued that Pet Valu’s claims were statute barred, but the court unequivocally dismissed this argument because (1) as per s. 16(1)(b) there is no limitation in respect of a proceeding to enforce an order of a court, and (2) the action against Mr. Rodger (as opposed to 125) fell within the requisite time-frame. Of course, Pet Valu Canada Inc. is more straightforward because the costs were determined and Pet Valu was simply seeking to have payment enforced, unlike the present case. That being said, both Lofchik J. and Harper J. ordered that the costs were to be reserved, and this order was ultimately not dealt with nor enforced.

Ontario: different limitation periods apply to different claims

Kinectrics Inc. v. FCL Fisker Custome & Logistics Inc. contains the clearest statement of the principle that different claims are subject to different limitations analyses even when they arise out of similar circumstances:

[78]           […] Different causes of action can attract a different limitations analysis even where the claims arose out of common circumstances: Winmill v. Woodstock (Police Services Board), 2017 ONCA 962, 138 O.R. (3d) 641, at paras. 17, 43, citing West v. Ontario, 2015 ONCA 147, at paras. 2-3; Fantl v. Transamerica Life Canada, 2013 ONSC 2298, 21 C.C.L.I. (5th) 175, at paras. 180-181, varied on other grounds, 2015 ONSC 1367, 125 O.R. (3d) 230 (Div. Ct.), 2016 ONCA 633, 133 O.R. (3d) 422. Even if the cargo claim does not involve a discoverability analysis as contended by Anderson Haulage, the negligence and contract claims that have been pleaded do give rise to an assessment of discoverability.

To my knowledge, that principle isn’t stated elsewhere so succinctly. The appellate decisions cited aren’t quite as explicit about the point as you’d like.

 

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 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 Act, R.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. 105; Schwebel v. Telekes, 1967 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. Haberman, 1997 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) 11; Hopkins v. Stockman, 2013 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: Court of Appeal affirms that discovery of a cause of action isn’t discovery of a claim

The Court of Appeal decision in Gillham v. Lake of Bays (Township) is noteworthy for two  reasons.

First, it uses the concept of the “claim” (which is the language of the Limitations Act) rather than the concept of the “cause of action” (which is not the language of the Limitations Act) for its limitations analysis.  See for example para. 20:

[20]      The overarching question in the discoverability analysis under s. 5 of the Act is whether the claimant knew or reasonably should have known, exercising reasonable diligence, the material facts stipulated under s. 5(1)(a) that give rise to a claim: Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851 (CanLII), 113 O.R. (3d) 401, at para. 32. Section 1 of the Act defines a claim as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. Section 2(1) provides that the Act “applies to claims pursued in court proceedings” (with certain enumerated exceptions that do not apply here).

(A slight quibble: the s. 5(1)(a) matters do not give rise to a claim.  Only two facts—an act or omission resulting in injury, loss, or damage—give rise to a claim pursuant to its definition in s. 1.  Knowledge of the s. 5(1)(a) matter results in discovery of the claim.)

It even puts “cause of action” in quotation marks–presumably to distinguish it from a claim–in the context of stating that knowledge of the material facts of a cause of action is not discovery of a claim:

[33]      The motion judge erred in failing to undertake an analysis of the criterion under s. 5(1)(a)(iv) of the Act. That the appellants might have a “cause of action” against the defendants, as the motion judge found, is not the end of the analysis under s. 5(1) of the Act. As this court said in Kudwah v. Centennial Apartments, 2012 ONCA 777 (CanLII), 223 A.C.W.S. (3d) 225, at para. 2:

It is important when considering a limitation period claim to appreciate that the terms of the 2002 Act must govern. A court considering the limitation claim must address the specific requirements of s. 5 of the Act, particularly on the facts of this case, the requirement of s. 5(1)(a)(iv).

 

Second, it acknowledges the accrual of a claim as the starting point of the limitations analysis, and that discovery of the claim requires knowledge that a proceeding is an appropriate remedy for the loss:

[34]      Therefore, the motion judge had to consider whether the appellants had a claim as defined under the Act. In considering whether the appellants knew or should have known that they had a claim, the motion judge had to go on to consider whether, having regard to the nature of the injury, loss or damage, the appellants knew or should have known that a proceeding would be an appropriate means to seek to remedy it. This omission by the motion judge is an error of law: Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469 (CanLII), at paras. 21 and 35.

[35]      Section 5(1)(a)(iv) represents a legislative addition to the other factors under the discoverability analysis. As Laskin J.A. explained in 407 ETR Concession Company Limited v. Day, 2016 ONCA 709 (CanLII), 133 O.R. (3d) 762, leave to appeal to SCC refused, [2016] S.C.C.A. No. 509, at paras. 33-34:

The appropriateness of bringing an action was not an element of the former limitations statute or the common law discoverability rule. This added element can have the effect – as it does in this case – of postponing the start date of the two-year limitation period beyond the date when a plaintiff knows it has incurred a loss because of the defendant’s actions.

Also, when an action is “appropriate” depends on the specific factual or statutory setting of each individual case: see Brown v. Baum, 2016 ONCA 325 (CanLII), 397 D.L.R. (4th) 161, at para. 21. Case law applying s. 5(1)(a)(iv) of the Limitations Act, 2002 is of limited assistance because each case will turn on its own facts.

This is a very welcome statement from the Court of Appeal.  It’s a step away from the misapplication of common law discovery principles to limitations analyses that has caused a great deal of confusion and uncertainty.

Lastly, the decision finds that it was appropriate for the plaintiffs to “wait and see” in the context of a construction dispute before commencing a proceeding.  I often see it argued that Presidential stands for the principle that there are only two circumstances in which a proceeding will be an inappropriate remedy—where the defendant undertakes good faith ameliorative efforts or there is an alternative dispute resolution process. This is a misapprehension of the law, as this decision demonstrates.  Here’s the key analysis:

[37]      Here, the motion judge failed to consider “the specific factual or statutory setting” of the case before him and determine whether it was reasonable for the appellants not to immediately commence litigation but to “wait and see” if the 1 ¼ inch sinking of the deck pier observed in 2009 would worsen over time or if the issue would resolve once the stone retaining wall had settled, as had been suggested to the appellants by Mr. MacKay. Neither Royal Homes nor Mr. MacKay believed the problem was serious, or due to the manner of construction. This evidence does not support the conclusion that the appellants knew or ought to have known in 2009 that their loss was not trivial and initiating legal proceedings was the appropriate means to remedy their loss.

 

Ontario: Does the limitations act apply to Notices of Objection?

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

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

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

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

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

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

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

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

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

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

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

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

Update!

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

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

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

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

The Court of Appeal upheld the decision:

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

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

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

 

 

 

Ontario: 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. Huxtable, 2014 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 knowledge required for discovery

This is a post purely to indulge my pedantry.  In Reece v. Toronto (Police Services Board), the Court of Appeal said this about discovery:

[5]         The motion judge correctly found that discoverability for the purpose of limitations is based upon knowledge of the facts necessary to support a claim and does not require knowledge of the law that supports the claim.

This isn’t quite right.  Discoverability for the purpose of limitations–what other purpose to does the principle have?–is codified in s. 5 of the Limitations Act and requires knowledge of the four discovery matters.  The facts necessary to support a claim are, pursuant to the definition in the s. 1 of the Limitations Act, but only two: wrongful conduct and resulting loss.  The existence of a claim and the discovery of a claim are different issues.

Ontario: no limitation period without a claim

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

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

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

[53]           The prospect of injury, loss or damage at some future date is not sufficient to commence a limitation running. A claim does not arise only because a person recognizes or is concerned that they may suffer that injury, loss or damage at some point in the future. Justice Belobaba explained it this way in IPEX v. Lubrizol, 2012 ONSC 2717 (CanLII), at para. 22:

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

Ontario: Court of Appeal redefines the s. 5(1)(a)(iv) discovery criterion

In Clarke v. Faust, the Court of Appeal has held that the section 5(1)(a)(iv) discovery criterion requires the claimant to have “good reason to believe he or she has a legal claim for damages”.

Clarke is a solicitor’s negligence action.  The plaintiffs were injured in a motor vehicle accident.  They retained the defendant lawyer to represent them on their accident benefits and tort claim.  He issued a statement of claim on their behalf nine weeks after the second anniversary of the accident.

The plaintiffs then retained a new lawyer.  He told the plaintiffs that their claim was issued after the expiry of the presumptive limitation period, but this wasn’t necessarily fatal to their claim because of discoverability.

The new lawyer passed away and another lawyer took over.  This third lawyer also was also unconcerned by the potential limitations issue.  He took the position that until the plaintiffs obtained medical documentation they couldn’t know whether their injuries met the statutory threshold.  Defence counsel apparently agreed, and the defendants didn’t plead a limitations defence.

Subsequently, the defendants changed their mind and amended their defence to plead a missed limitation period.

The plaintiffs then sued their first lawyer for negligence.  He pleaded a limitations defence and moved for summary judgment.  He argued that the plaintiffs should be presumed to have known of their claim two years after the date of the motor vehicle accident, or in the alternative on the date when their second lawyer put him on notice of the limitations issue.   The plaintiffs argued that they suffered no damage until the defendants in the underlying action pleaded a limitations defence.

The motion judge accepted the defendant’s first argument in a muddled decision that Justice Juriansz criticised fairly, but harshly.  In fairness to the motion judge, all of the theories put forward by the parties were wrong.  I expect that she didn’t have much to work with.

Justice Juriansz found that the case turned on the application of section 5(1)(a)(iv) (“that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”.  When the defendants in the underlying action delivered their defence, the plaintiffs knew that three lawyers were of the opinion that discoverability applied to their claim and that the defendants had not pleaded a missed limitation period.  Only when the defendants in the underlying action pleaded a missed limitation period did the defendants have any reason to know that commencing a legal proceeding was appropriate.  The claim was accordingly timely.

Here’s what makes this decision noteworthy:

  1. The court defines the knowledge required by section 5(1)(a)(iv): “That provision requires, in my view, a person to have good reason to believe he or she has a legal claim for damages before knowing that commencing a proceeding would be an appropriate means to seek to remedy the injury, loss or damage.”   Justice Juriansz doesn’t cite any authority for this conclusion, and on first consideration it’s seems a significant departure from the Court’s previous statement in Markel that this criterion requires only knowledge that a proceeding is “legally appropriate”.  There’s a material difference between knowing that a claim is legally appropriate and having good reason to believe there is a legal claim.  How does the need for the claimant to believe she has a legal claim sit with the long-settled principle that a claimant’s failure to appreciate the legal significance of a fact will not postpone the commencement of the limitation period (see for example Holley v. The Northern Trust Company, Canada or more recently Gatti v. Avramidis at para. 123)? It will be interesting to see how courts apply this new definition.
  2. The court didn’t compromise its section 5(1)(a) analysis by applying common law discovery jurisprudence (see for example the decision in Lawless). This is rare.
  3. The court acknowledged that the plaintiffs’ action may have been premature because there can be no limitations issue until there is a “claim” as defined by the Limitations Act, and a “claim” requires damage, which almost certainly cannot arise merely be virtue of pleading. Justice Juriansz suggests, correctly I think, that discovery of the claim against the defendant lawyer may not occur until there is a judgment in the underlying action (e.g., dismissing the action on the basis of a limitations defence and causing the plaintiffs damage).The plaintiffs did plead that they suffered damage when the defendants first asserted the limitations defence in the underlying action on the theory that it changed their bargaining position.  Justice Juriansz acknowledged the doubtfulness of this position.  If the lawyer didn’t miss the limitation period in the underlying action, he would not be liable for any damages, and whether he missed the limitation period is unknown until a court determines the issue.