Claims not causes of action

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: 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: 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: the limitation of will challenges

The decision in Shannon v. Hrabovsky follows Leibel for the principle that the Limitations Act applies to will challenges:

[63]           As I understand the analysis in Leibel v. Leibel, because a will is effective as of the date of death, section 5(2) creates a presumption that an applicant has knowledge of the contents of the will on such date. Given this presumption, an applicant with knowledge at the date of death of a will, and its contents, together with all other facts upon which a claim for lack of testamentary capacity would be based would therefore be fixed with all necessary knowledge as of that date.  In such circumstances, the date on which such a claim would have been discovered for the purposes of section 5(1)(a) would be the date of death. The same principle would appear to operate with respect to any claim for undue influence.

I’ve given this issue quite a lot of consideration in the course of drafting a paper on the limitation of will challenges.  In short, I don’t think that it does.  Statutory limitation periods have always applied to causes of action.  A will challenge is not a cause of action.  The Limitations Act applies to “claims”, not causes of action, but a “claim” is just a universalized cause of action that functions to simplify the accrual analysis and allow for a general basic and ultimate limitation period.  If there’s no cause of action, there’s no “claim”.  If there’s no “claim”, the Limitations Act doesn’t apply.  Let me if know you’d like a copy of the draft paper; I’m happy to provide it.

The quotation above illustrates the problem.  Section 5(2) creates a presumption that discovery occurs on the date of the “act or omission” giving rise to the claim.  No act or omission necessarily occurs on the date of death.  Indeed, there isn’t necessarily any act or omission at all in a will challenge.

The fundamental flaw in Leibel, and the jurisprudence that follows it, is to understand the Limitations Act as having expanded the scope of the statutory limitations scheme to include all court proceedings.  This is wrong: the Limitations Act only expanded the scope of the limitations scheme to include all causes of action (the old Act applied to a closed list of causes of action, excluding some, like certain equitable causes of action, that were limited only by equity).

 

Ontario: Court of Appeal changes (maybe?) the limitation of claims arising from coverage denials

The Court of Appeal in its decision Nasr Hospitality Services Inc. v. Intact Insurance has held that, at least in the circumstances of the case, the limitation period for a coverage action commences presumptively on the date the insured gives notice of its loss to the insurer.  This is a significant departure from the bar’s understanding, and seemingly at odds with the Court’s decision in Kassburg, and problematic enough that Justice Feldman dissented.  Both the issues and the implications of the decision are significant, so I summarise the facts in some detail.

The plaintiff purchased a commercial insurance policy from Intact. On January 31, 2013, a flood occurred on the plaintiff’s premises.  The Plaintiff notified its broker of its loss, and the broker notified Intact.

On February 13, 2014, Intact confirmed coverage, subject to policy terms and conditions, for the business interruption the plaintiff suffered, and issued a cheque to cover the losses.  Intact issued another cheque in May 2013.

The plaintiff disputed Intact’s valuation of the claim.  On May 13, 2014,  Intact wrote to advise that it would not accept the plaintiff’s valuation.  Subsequently, the plaintiff submitted a proof of loss.  On June 25, 2013, Intact rejected the proof of loss as incomplete, and advised that it was not rejecting or denying the plaintiff’s claim.

The plaintiff filed a further proof of loss on June 26, 2013.  On July 22, 2013, Intact rejected the proof of loss and advised the plaintiff that it would deny any further coverage under the policy.  Curiously, the decision suggests that Intact nevertheless provided the plaintiff with a blank proof of loss form and advised that it had two years from the date of loss to finalise its claim.

It appears from the decision that the plaintiff filed a third proof of loss on July 31, 2013, and that on August 15, 2013, Intact returned rejected that proof of loss.

The plaintiff issued its Statement of Claim on April 22, 2015 seeking damages arising from the coverage denial.  Intact moved for summary judgment on the basis of an expired limitation period.  Intact lost the motion, and appealed.

The parties agreed that the plaintiff’s cause of action arose on February 1, 2013 and the Court of Appeal accepted this agreement as “an admission of fact that February 1, 2013 was the day on which [the plaintiff] first knew the matter in ss. 5(1)(a)(i)-(iii)” of the Limitations Act.  The court found this position was consistent with its decisions in Markel and Schmitz.  Once the insured requests indemnification, the insurer is under a legal obligation to satisfy it.

The court rejected the plaintiff’s s. 5(1)(a)(iv) appropriateness argument.  Though the jurisprudence recognizes that some conduct by an insurer after receiving notification of a claim under a policy can impact on the discovery of a claim, but to apply to in this instance would result in a form of promissory-estoppel, and the plaintiff had conceded that a promissory estoppel was unavailable:

[59]      Nasr has not pointed to any cases involving ordinary claims for indemnification under a commercial policy of insurance that have treated the appropriate means element in s. 5(1)(a)(iv) as some form of watered-down promissory estoppel. To treat s. 5(1)(a)(iv) in that manner for ordinary commercial insurance indemnification claims – as the motion judge effectively did – would risk ignoring the caution voiced by Sharpe J.A. in Markel Insurance, at para. 34 – and echoed by Laskin J.A. in 407 ETR, at para. 47 – that:

To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions. [Emphasis added.]

[60]      The motion judge did not find that Intact had promised, expressly or impliedly, not to rely on the limitation period. Accordingly, it was not open to the motion judge to recast, for purposes of the appropriate means analysis, the conduct by Intact that Nasr conceded could not support a finding of promissory estoppel that the insurer would not rely on the limitation period.  With respect, the motion judge erred in doing so.

Justice Feldman dissented.

She rejected that the limitation period should commence on the date of the loss, rather than the breach of the insurance contract:

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

The insurance policy itself would determine when the obligation to pay arose, and therefore the date on which Intact failed to perform that obligation in breach of the policy.  Because neither party put the policy into evidence, the moving party couldn’t prove when the breach occurred, and therefore when the limitation period commenced:

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

Further, an agreement between the parties as to when a cause of action arose cannot bind the court:

[72]      However, on appeal, the insurer again asks the court to reject the respondent’s argument, overturn the decision of the motion judge, and grant summary judgment. To grant summary judgment this court must then decide when the cause of action against the insurer for breach of the insurance contract arose, in order to determine when the limitation period commenced to run.

[73]      That is a question of mixed fact and law. The legal part requires the court to determine when the insurer became legally obligated to pay under the policy. The factual part is the determination of when the insurer did not pay in accordance with that obligation. Parties cannot bind the court on legal issues by agreement or concession. For example, in OECTA v. Toronto Catholic District School Board (2007), 2007 CanLII 6454 (ON SCDC), 222 O.A.C. 23 (Div. Ct.), Lane J. stated at para. 13:

The fourth difficulty is that the agreement asserted is an agreement not as to the facts, but as to the law. Whether the doctrine of culminating event applies only where the alleged culminating act is culpable is a question of law. Parties cannot agree on the law so as to bind a court or tribunal to their view; the law is the law and it is always open to the tribunal to determine what it is.

Justice Feldman rejected the support the majority found in Markel and Schmitz.  In those cases, the legal obligations of the insurers arose from statute:

[78]      Markel Insurance involved a transfer claim for indemnification by a first party insurer against a second party insurer in the motor vehicle accident context. The claim was governed by the Insurance Act, R.S.O. 1990, c. I.8, its regulations, and procedures set out by the Financial Services Commission of Ontario. The court had all the information before it that it required to determine when the second insurer’s obligation to indemnify arose and was breached.

[79]      Similarly, in Schmitz, the claim for indemnity at issue was brought within and was governed by the underinsured motorist coverage provided by the OPCF 44R, an optional endorsement to Ontario’s standard form automobile insurance policy.

There are many things that are problematic with this decision, which is perhaps why it is one of the very few limitations decisions to have a dissent. Let’s go through the list:

  1. The foremost flaw is the majority’s ratio that the cause of the action accrued on February 1, 2013 based on the parties’ agreement. Curiously, neither the majority nor the motion judge set out what occurred on February 1, 2013.  Because the majority presumes that the limitation period commenced presumptively on the date of notice of the loss, I assume February 1, 2013 was the date the insured through its broker gave notice of the loss to the insurer.  Markel and Schmitz are only relevant to the majority’s decision if this is so.
  2. It’s hard to understand why the plaintiff would agreed on this point, or why both parties had the misapprehension that cause of action accrual was determinative of the commencement of the limitation period. My guess is that the policy (which mysteriously wasn’t part of the record) contained a provision that the insured had two years from the loss to sue, which is reasonably common.  However, this kind of term has nothing to do with cause of action accrual, it just operates to vary the basic limitation period by making it run in all circumstances from a fixed date.
  3. This decision could have wonky implications. Insurers will undoubtedly rely on it as standing for the principle that the limitation period for a coverage action, certainly when coverage is under a CGL policy but probably also under other policies as well, commences presumptively on the date the insured gives notice of its loss.  This is certainly not the bar’s current understanding as it’s seemingly entirely at odds with the decision in Kassburg. 
  4. Fortunately, it will be possible to distinguish Nasr on the grounds that the limitations analysis flowed from the parties’ agreement as to cause of action accrual, and that such an agreement can have no precedential value. I think this argument will generally prevail, given both Kassburg and the decision’s ambiguity about what happened on February 1, 2013 that resulted in accrual.  However, the right limitations argument very often doesn’t prevail, and I see the potential for a body of dubious caselaw until the CA revisits the issue and, one hopes, distinguishes Nasr into irrelevance.  It’s not helpful that the Nasr court said that Markel and Schmitz supported the parties’ accrual analysis.  It’s easy to imagine a lower court considering that conclusive of the issue.
  5. Lastly, one quibble with the dissent’s statement about cause of action accrual:

[66]      As the moving party on the motion for summary judgment, the insurer had the onus to prove all of the elements that found the basis for its limitation claim, including the date when the cause of action arose, i.e. the date when the act or omission by the insurer caused the injury to the insured: see the definition of “claim” in s. 1 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and ss. 4 and 5.

The moving party did not bear the onus of establishing when the cause of action arose, but when the Claim arose.  The Limitations Act doesn’t tie the commencement of time to cause of action accrual, and the language “cause of action” doesn’t appear in the Limitations Act.  The cause of action was breach of contract.  A breach of contract is actionable per se and the cause of action doesn’t require damage to accrue.  The Limitations Act, pursuant to s. 2, applies to claims pursued in court proceedings.  Until there is a claim, the Limitations Act won’t apply.  A claim requires both wrongful conduct and resulting damage.  Until there is damage, there is no claim, and without a claim the Limitations Act doesn’t apply.  The limitation period commences presumptively from the date of the act or omission pursuant to s. 5(2), but the precondition to the application of s. 5(2) is the application of the Limitations Act itself, and therefore the occurrence of damage.  Here the point is likely practically of little consequence, as the breach and damage occurred contemporaneously (denial of coverage resulting immediately in the plaintiff being without indemnification for its loss), but conceptually it matters very much.

All of that said, the decision does have a good summary of s. 5(1)(a)(iv) principles:

[46]      In commencing his analysis under s. 5(1)(a)(iv) of the Act, the motion judge properly noted the general proposition that the determination of when an action is an appropriate means to seek to remedy an injury, loss or damage depends upon the specific factual or statutory setting of each individual case: 407 ETR Concession Company Limited v. Day, 2016 ONCA 709 (CanLII), 133 O.R. (3d) 762, leave to appeal refused, [2016] S.C.C.A. No. 509, at para. 34; Winmill v. Woodstock (Police Services Board), 2017 ONCA 962 (CanLII), 138 O.R. (3d) 641, leave to appeal to SCC requested, at para. 23.

[47]      However, as this court has observed, that general proposition is not an unbounded one.

[48]      First, in Markel Insurance this court confined the meaning of “appropriate” to “legally appropriate”. Writing for the court, Sharpe J.A. stated, at para. 34:

This brings me to the question of when it would be “appropriate” to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5(1)(a)(iv) states that a claim is “discovered” only when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions. [Italics in original; underlining added.]

[49]      Second, in 407 ETR, Laskin J.A. noted, at para. 47, that the use of the phrase “legally appropriate” in Markel Insurance, “signified that a plaintiff could not claim it was appropriate to delay the start of the limitation period for tactical reasons, or in circumstances that would later require the court to decide when settlement discussions had become fruitless” (emphasis added).

[50]      Finally, in Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325 (CanLII), 135 O.R. (3d) 321, Pardu J.A. observed that the jurisprudence discloses two circumstances in which the issue of appropriate means most often delays the date on which a claim was discovered. First, resorting to legal action might be inappropriate in cases where the plaintiff relied on the superior knowledge and expertise of the defendant, especially where the defendant undertook efforts to ameliorate the loss: at para. 26. Second, a legal action might not be appropriate if an alternative dispute resolution process “offers an adequate alternative remedy and that process has not fully run its course”: at para. 29. See also paras. 28-48; and Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469 (CanLII), at paras. 21 and 34-35. In this regard, in Winmillthis court held that resort to a civil proceeding for a remedy in respect of damage flowing from an incident might not be an appropriate means while criminal proceedings in respect of the incident remain outstanding: at para. 28.

[51]      Although Presidential MSH does not purport to offer an exhaustive list of circumstances in which a proceeding might not be an appropriate means, I would observe that neither circumstance identified in Presidential MSH is present in this case. Some other factor would have to displace the s. 5(2) presumption that Nasr knew a proceeding was an appropriate means on February 1, 2013.

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: 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.