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

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

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

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

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

The law in relation to the commencement of the limitation period for the intentional torts of false arrest and imprisonment … is well-settled. As Chiapetta J. noted in Fournier-McGarry (Litigation Guardian of) v. Ontario2013 ONSC 2581 at para. 16,

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

 [33]           The plaintiff, on the other hand, cites a conflicting Court of Appeal decision, Mackenzie v. Martin1952 CanLII 85 (ON CA), [1952] O.R. 849 (Ont. C.A.), at paras. 6-8, aff’d 1954 CanLII 10 (SCC), [1954] S.C.R. 361 (S.C.C.), which refers to case law dating back to the 18th century, and states that the limitation period for a false imprisonment claim commences upon the date of release. To my knowledge, while the case is dated, Mackenzie v. Martin has never been overturned.

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

[35]           Ferri v. Root2007 ONCA 79, O.J. No. 397, leave to appeal refused, [2007] S.C.C.A. No. 175 (“Ferri”), is another, more recent, case in which the plaintiff was arrested and released on the same day. There, the Court of Appeal, at para. 102, reiterated the finding in Nicely that “the test for these torts is at the date of arrest and imprisonment,” but addressed the limitation period in the same context that it arose in Nicely, which was under s. 7 of the Public Authorities Protection Act, R.S.O. 1990, c. P.38. (“PAPA”). That Act required that an action be “commenced within six months next after the cause of action arose or in case of continuance of injury or damages within six months after the ceasing thereof” (emphasis added). Accordingly, the Court in Ferri, at para. 103, concluded that the injury of false imprisonment ceased when the plaintiff was released.

[36]           There is also the concern that a false arrest and an unlawful imprisonment may not occur at the same time. One may be lawfully arrested but unlawfully detained, or a detention that is lawful at the outset may become unlawful at a subsequent point in time. For example, a lawful immigration detention can become unlawful due to its conditions, its length, procedural fairness, or if it is “no longer reasonably necessary to further the machinery of immigration control:” Chaudhary v. Canada (Minister of Public Safety & Emergency Preparedness), 2015 ONCA 700, 127 O.R. (3d) 401, at paras. 81, 86; Re Charkaoui2007 SCC 9, [2007] 1 S.C.R. 350, at para. 123Scotland v. Canada (Attorney General), 2017 ONSC 4850, 139 O.R. (3d) 191.

[37]           The plaintiff submits that the approach in Mackenzie v. Martin is also consistent with the law in the United States, where time runs from the date of release, not the date of detention: Milliken v. City of South Pasadena, 158 Cal. Rptr. 409, 412 (Cal. Ct. App. 1979); Donaldson v. O’Connor493 F.2d 507, 529 (5th Cir. 1974).

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

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

 [47]           Further, prior to receiving the memorandum in June 2015, Vu was pursuing other, more pressing and appropriate remedies, including detention reviews, the spousal sponsorship application, and attempts to address living arrangements for his infant daughter.  I find, as the Court of Appeal did in Presidential MSH Corporation v. Marr, Foster & Co. LLP2017 ONCA 325135 O.R. (3d) 321 (“Presidential MSH Corporation”)at para. 32that it would have been inappropriate to require the plaintiff to prematurely resort to court proceedings while the statutory alternative process was ongoing, which might make the proceedings unnecessary.” Moreover, a lawsuit would not have achieved Vu’s objective of being released.
 [48]           Had Vu known of the evidence that McNamara’s Statutory Declaration was incorrect when he was in custody, he undoubtedly would have raised that before the ID. Although he did not seek to review the ID’s detention order in the Federal Court, as his counsel explained Vu had good reasons not to do so: he accepted the CBSA’s representations that his removal was “imminent,” and perceived that making an application would have been a waste of time and money and might have delayed his deportation due to the CBSA’s need to defend the claim.  Further, as the Supreme Court of Canada observed recently in Canada (Public Safety and Emergency Preparedness) v. China2019 SCC 29433 D.L.R. (4th) 381, at paras. 61-67, judicial review of an Immigration Division decision is challenging.  The onus is squarely on the applicant to establish the decision is unreasonable, leave is required, and remedies are limited. Instead of releasing an applicant, Karakatsanis J. noted, at para. 65 that even a successful judicial review “will generally result in an order for redetermination, requiring further hearings to obtain release and thereby extending detention” (emphasis added).

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

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

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

Ontario: the dangers of arguing a particular step would have caused discovery

I often see defendants argue that if a plaintiff had undertaken a certain step, discovery would have occurred on an earlier date.  Without evidence that the plaintiff taking this step on a specific date would have resulted in the plaintiff learning on another specific date the facts necessary for discovery, this argument is purely hypothetical and can’t succeed.  The court in Ledoux v. Lee makes the point:

40.              Uber also argued that Mr. Ledoux’s lawyer should have served Co-operators with a formal notice of his claim against Mr. Lee after getting the police report. Mr. Giugaru contended that this is a standard practice because it allows a plaintiff to claim pre-judgement interest from the date of the notice.  Had Mr. Ledoux’s counsel put Co-Operators on formal notice of a potential claim, he argued, the insurer might have advised the plaintiff of the coverage issue and disclosed Mr. Lee’s activity as an Uber driver.

41.              This argument is speculative.  I could not conclude, on the evidence before me, that it is standard practice for plaintiff’s counsel in MVA claims to formally notify the defendant motorist’s insurer of a potential claim. Even if I had been able to, I could not infer that a formal notice letter to Co-Operators would have yielded information about its position on coverage.  Mr. Ledoux’s lawyers were in communication with Co-Operators from September 2017 forward, providing it with a copy of the police report and Mr. Ledoux’s hospital record.  There is no evidence that, in the course of this correspondence, the adjuster ever so much as hinted that it might deny coverage or disclosed that Mr. Lee was participating in the gig economy, even though it notified the insured of its denial of coverage on this basis two weeks after the accident.

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

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

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

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

Nope, held the court.

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

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

[61]      Recently, several cases considering the application of s. 5(1)(a)(iv) have come before this court. The court has emphasized, echoing the words of Laskin J.A. in 407 ETR, that when a proceeding is appropriate will turn on the facts of each case: see, for example, Nelson v. Lavoie2019 ONCA 43147 C.C.P.B. (2d) 1, at para. 25, and Ridel v. Goldberg, 2019 ONCA 636436 D.L.R. (4th) 453, at para. 71.

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

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

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

[75]      While one of the principles recognized in connection with s. 5(1)(a)(iv) is the deterrence of unnecessary litigation, a plaintiff is not entitled in all cases to pursue one route, and to expect the limitation period to be tolled in respect of any other claim it may have in respect of its loss or damage. Said another way, s. 5(1)(a)(iv) does not permit a party to engage in litigation in stages for the same wrong. An example is Lilydale Cooperative Limited v. Meyn Canada Inc.2019 ONCA 761439 D.L.R. (4th) 385, where this court considered the submission that a limitation period in respect of a third party claim in Ontario was suspended while the defendant was seeking to establish that Alberta was the correct forum for the litigation. Feldman J.A. rejected the argument that it was not legally appropriate to commence a legal proceeding while another resolution process that might resolve the matter was ongoing. She held that such an interpretation of “appropriate” was inconsistent with the purpose of the Limitations Act and could extend the limitation period well beyond the two-year threshold in an uncertain and unpredictable manner. There were also no significant savings to be achieved by not commencing the third party claim until the forum challenge was complete.

Here, the OMB wasn’t an alternative process, but an alternative forum, and the availability of multiple forums doesn’t impact on discovery because the law deems a party to know the applicable legal principles (that is, which forum is correct):
[70]      While I can appreciate why the appellants may have thought they had a claim for injurious affection, it has always been a principle of limitations law that a plaintiff knows, or could by the exercise of reasonable diligence, determine what legal principles apply. See, for example, Boyce v. Toronto Police Services Board2011 ONSC 53, aff’d: 2012 ONCA 230, leave to appeal refused: [2012] S.C.C.A. No. 265, where Low J. stated, at para. 23:
Section 5(1)(a)(iv) does not import an idiosyncratic limitation period calibrated by the claimant’s familiarity with or ignorance of the law. The test is an objective one. While it is possible to envisage that a new kind of right might arise that has not been hitherto protected, thus making it arguable that a civil proceeding might not be seen objectively as an appropriate means to seek to remedy, a battery causing personal injury is a classic example of the kind of wrong that is appropriate for redress by court action. A citizen is presumed to know the law of the land. [Emphasis added.]

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

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

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

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

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

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

[45]      They rely on the term “messuages”, which refers to a dwelling house, its outbuildings, the area immediately surrounding the dwelling, and the adjacent land appropriate to its use: McConnell v. Huxtable2014 ONCA 86118 O.R. (3d) 561, at para. 14. The appellants also parse out and rely on the phrase “any…right…of…action”. Putting these pieces together, the appellants submit that an “action to recover land” includes an action to recover rights that run with the land, and that a cause of action for nuisance is tied to and arises out of the right to use and enjoy land without substantial interference. Accordingly, the appellants submit that a cause of action for nuisance is an incorporeal or intangible right that runs with the property and is captured by the definition of “land” in the RPLA. They point to a passage in Equitable Trust Co. v. 2062277 Ontario Inc.2012 ONCA 235109 O.R. (3d) 561, where Perell J. (sitting on this court ad hoc) stated that the RPLA is intended to cover actions “affecting” land: Equitable Trust, at para. 28.

 [46]      I do not accept the appellants’ submission. There is no support in the jurisprudence that an action in nuisance or negligence for damages relating to real property is “an action to recover land” for the purposes of the RPLA. That land or real property is involved in an action does not mean that the RPLA applies: Harvey v. Talon International Inc.2017 ONCA 267137 O.R. (3d) 184, at paras. 51-52. Typically, actions to recover land seek to assert property rights. And Perell J.’s remark from Equitable Trust that the RPLA covers actions “affecting” land has been commented on specifically by this court, and later by Perell J. himself, as a statement that should be interpreted narrowly and not out of the context of that case.

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

[41]      The motion judge’s conclusion that s. 4 of the RPLA does not apply to the appellants’ civil action is reviewable on a standard of correctness: Housen v. Nikolaisen2002 SCC 33[2002] 2 S.C.R. 235, at para. 8. For the reasons that follow, I agree with the motion judge’s conclusion on this issue.

[53]      The question of whether a limitation period expired prior to the issuance of a statement of claim is a question of mixed fact and law and subject to review on the standard of palpable and overriding error: Longo v. MacLaren Art Centre Inc.2014 ONCA 526323 O.A.C. 246, at para. 38. However, where there is an extricable error of principle, the standard of review is correctness: Housen, at paras. 8 and 36.

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

Ontario: Court of Appeal reviews appropriateness principles

The Court of Appeal decision Sosnowksi v. MacEwan Petroleum provides a useful summary of s. 5(1)(a)(iv) jurisprudence:

[15]      This court’s jurisprudence has developed certain principles for the interpretation and application of s. 5(1)(a)(iv).

[16]      First, the determination of whether a proceeding is an appropriate means to seek to remedy an injury, loss, or damage depends upon the specific factual and/or statutory setting of each case: Nasr Hospitality Services Inc. v. Intact Insurance2018 ONCA 725142 O.R. (3d) 561, at para. 46.

 [17]      Second, this court has observed that two circumstances most often delay the date on which a claim is discovered under this subsection. The first is when the plaintiff relied on the defendant’s superior knowledge and expertise, especially where the defendant took steps to ameliorate the loss. The other situation is where an alternative dispute resolution process offers an adequate remedy, and it has not been completed: Nasr, at para. 50.
 [18]      Third, Sharpe J.A. in Markel Insurance Company of Canada v. ING Insurance Company of Canada2012 ONCA 218109 O.R. (3d) 652, at para. 34, provided the following guidance concerning the meaning of the term “appropriate”:
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 a 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 the 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 in original.]

[19]      In other words, appropriate means whether it is legally appropriate to bring an action. Appropriate does not include an evaluation of whether a civil proceeding will succeed.

It’s also another addition to the jurisprudence considering the impact of a criminal proceeding on the timeliness of a civil proceeding. The outcome of a criminal proceeding may assist in assessing the merits of a civil proceeding, but that’s not a material consideration in the limitations analysis:

[28]      The appellant’s principal submission is that he should have been permitted to wait until the criminal proceedings concluded so that he could evaluate his chances of success in litigation. He argues that litigation is an expensive and risky proposition, and he should not have been forced to commence a civil proceeding until he knew that he had a chance of success. This argument, of course, is precisely what this court in Markel said a plaintiff is not permitted to do.

 [29]      If such an evaluative analysis could effectively stop the running of the limitation period, questions will necessarily follow regarding the nature of that analysis and the factors that could be considered. For example, is it open to a plaintiff to argue that he or she can await the outcome of a related discipline process in a professional negligence claim? May a potential plaintiff commence a claim many years after the events if there is a change in the law that increases his or her chances of success? If a critical witness goes missing and is later discovered, is it open to the plaintiff to assert that he or she did not know whether it was appropriate to bring an action until the witness was found?

 

Ontario: Court of Appeal limits the impact of knowledge of a debtor’s assets on the limitation of foreign judgment proceedings

Endean v. St. Joseph’s General Hospital considers the impact of knowledge of a debtor’s exigible assets in the limitation of foreign judgment recognition proceedings.

The appellant obtained a default judgment against the respondent in a South Carolina court. The appellant commenced an Ontario action more than two years later to recognise and enforce the default judgment.  Twelve days later, the appellant secured an ex parte Mareva injunction against the respondent.  The respondent then obtained an order setting aside the Mareva injunction and holding that the appellant had commenced the Ontario action outside the limitation period.

The Court of Appeal upheld the motion judge’s decision.  It was legally appropriate for the appellant to commence his proceeding after the time to appeal the South Caroling judgment had expired.  The appellant’s subjective knowledge of whether the respondent had exigible assets in Ontario did not impact on the commencement of time.  This is perhaps the most interesting aspect of the Court of Appeal’s decision because it suggests that knowledge of a judgment debtor’s assets in Ontario won’t materially impact on the limitations analysis outside of unusual circumstances:

[55]      Now suppose the plaintiff settled with B before trial. In the Pierringer Order situation, the plaintiff reduces their recovery from A (who did not settle) by the amount it is determined that B is at fault. At trial, A and B are each found to be 50% at fault. The plaintiff reduces their claim against A by the amount of fault attributed to B. A’s net payment is the same 50%.

The Pierringer Order in the Hearsey Action Did Not Authorize Reduction of Recovery Due to Fault of Persons Other Than the Oral Surgeons

[56]      The Pierringer Order in the Hearsey Action is similar to the example above in so far as the hospital and the oral surgeons were concerned. For ease of reference, that Pierringer Order is attached as ‘Schedule A’ to these reasons. The hospital’s cross-claim against the oral surgeons in the Hearsey Action had been made so that the hospital could obtain indemnity from the oral surgeons if it was obliged to pay the plaintiff’s full damages. To the extent fault was attributed to the oral surgeons, the hospital could recover indemnity from them and thus reduce its net out of pocket expenditure. The Pierringer Order dismissed the cross-claim of the hospital against the oral surgeons. It did not prejudice the hospital by doing so, as it required the Hearsey appellants to reduce their claim against the hospital by the amount of fault that would be apportioned at trial to the oral surgeons, and it provided procedures whereby that determination could be made at trial. If that was all the Pierringer Order in the Hearsey Action did, it would meet the objectives generally ascribed to a Pierringer Order discussed above.

[57]      However, the effect the hospital argues for goes much further. According to the hospital, the effect of the Pierringer Order was to also reduce the Hearsey appellants’ recovery from the hospital by the amount of fault the trial judge might attribute to the manufacturer and the distributor. These were entities against whom the hospital had not claimed indemnity under the Negligence Act, and from whom the hospital had no practical ability to recover indemnity even if claimed. The Pierringer Order, if so interpreted, would do more than maintain a level playing field for the hospital compared to its pre-Order position. The effect of the interpretation the hospital seeks is to put the hospital in a better position than it was in before the Pierringer Order. Before the Pierringer Order, the hospital was at risk, if found at fault to any degree, to pay all of the Hearsey appellants’ damages without the ability to obtain indemnity from the manufacturer and distributor. This risk was on the hospital, regardless of the degrees of fault of the concurrent tortfeasors. As interpreted by the hospital, the Pierringer Order would free the hospital of that risk. The hospital would be placed in as good a position as it would have been had it claimed indemnity from the manufacturer and distributor and had the manufacturer and distributor been creditworthy and able to pay indemnity, rather than being bankrupt. No reason why this should be the case was suggested.

[58]      The Pierringer Order’s language, including that incorporated into the amended statement of claim, does not, taken as a whole, support this broader interpretation. Paragraph 5 of the Pierringer Order provides that the “Plaintiffs will only claim from the Defendant Hospital those damages, if any, arising from the actions or omissions of the Defendant Hospital”, and refers to the “Defendant Hospital’s several liability, or proportionate share of joint liability, as may be proven against it at trial”. But that must be read in light of the context and the other provisions of the Pierringer Order, which demonstrate that this was only intended to ensure the Hearsey appellants’ claim and recovery from the hospital did not include anything for the fault that may be attributed to the oral surgeons.

[59]      The Pierringer Order was made in the context of an action that included the oral surgeons and the hospital as defendants — no one else. It was made in the context of a settlement by the appellants with the oral surgeons against whom the hospital had cross-claimed. It dismissed the hospital’s cross-claim against the oral surgeons. It expressly provided that the court at trial may apportion fault among “all Defendants named in the Statement of Claim (emphasis added), which meant only the hospital and the oral surgeons. It did not refer to apportionment of fault to anyone else. And it provided procedures, including for the obtaining and use of evidence from and about the oral surgeons, clearly aimed at assisting the parties to present their cases on what fault should be apportioned to the oral surgeons. It provided no similar procedures regarding the fault of any other entities.

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

 

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

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

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

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

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

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

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

[15]      This court has repeatedly held that consideration of when a proceeding was an appropriate means to remedy a claim is an essential element in the discoverability analysis and that failure to consider s. 5(1)(a)(iv) is an error of law: Gillham v. Lake of Bays (Township)2018 ONCA 667 (CanLII)425 D.L.R. (4th) 178, at paras. 33-34Kudwah v. Centennial Apartments2012 ONCA 777(CanLII), at paras. 1-2Har Jo Management Services Canada Ltd. v. York (Regional Municipality)2018 ONCA 469 (CanLII)91 R.P.R. (5th) 1, at paras. 21 and 35.

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

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

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

[22]      Moreover, reliance on superior knowledge and expertise sufficient to delay commencing proceedings is not restricted to strictly professional relationships: Presidential, at para. 26. I acknowledge that the previous cases where this court has made a finding that it was reasonable for the plaintiff to rely on the defendant’s superior knowledge and expertise have concerned defendants belonging to traditional expert professions. For instance, Brown v. Baum2016 ONCA 325 (CanLII)397 D.L.R. (4th) 161, involved a physician, Chelli-Greco v. Rizk2016 ONCA 489 (CanLII), involved a dentist, and Presidential MSH involved an accountant. However, recent Superior Court decisions have applied the superior knowledge and expertise prong of Presidential MSH to persons who are members of non-traditional professions or who are not professionals at all. For instance, in YESCO Franchising LLC v. 2261116 Ontario Inc.2017 ONSC 4273 (CanLII), the court found that s. 5(1)(a)(iv) applied in a franchisor-franchisee relationship where the franchisees relied on the franchisor’s superior knowledge and expertise, even though the franchisor was not a member of an expert profession. Similarly, in Barrs v. Trapeze Capital Corp., 2017 ONSC 5466 (CanLII), aff’d 2019 ONSC 67 (Div. Ct.) (CanLII), the Superior Court and the Divisional Court found that s. 5(1)(a)(iv) applied to investors who relied on the superior knowledge and expertise of their investment portfolio managers.

 

Ontario: an alternative resolution process that didn’t impact on the limitation period

Soleimani v. Rolland Levesque provides an example of an alternative resolution process that doesn’t render a proceeding an inappropriate remedy pursuant to s. 5(1)(a)(iv) of the Limitations Act.

Th action involved claims between neighbouring property owners arising out of alleged contamination of the plaintiffs’ property by hydrocarbons flowing from the defendant’s property.  Following the discovery of the contamination, the plaintiffs notified the Ministry of the Environment (MOE), which  became involved in addressing the contamination.

In response to the defendant’s limitations defence, the plaintiffs argued that the MOE’s involvement was a reasonable means to attempt to remediate the damage, and a claim wasn’t an appropriate remedy for that damage until eight years later when expert investigation directed by the MOE (and funded by the defendant) determined the source of the contamination.

The court rejected this argument.  The MOE’s involvement was not part of a dispute resolution process or mechanism: the MOE acts at its own discretion, it has no power to award damages, and the there could be no certainty as to when its involvement would come to an end:

[45]           In considering whether the MOE’s interventions in this case constitute a legally appropriate means to remedy the plaintiffs’ damages it is necessary to recognize that the provisions of the EPA do not provide a dispute resolution process or mechanism.  The steps the MOE chooses to take are in the MOE’s discretion.  The MOE has no power to award damages or compensation to the plaintiffs.  Neither the previsions of the EPA nor the facts of this case allow the court to say with any certainty when the MOE’s involvement would come to an end so as to determine when the limitation period might commence.

[46]           Moreover the MOE intervention cannot result in a declaration of responsibility for the contamination nor can it award damages for stigma nor the full recovery of legal, engineering and other costs and expenses nor damages for other economic losses, all as claimed in the plaintiffs’ statement of claim.

[47]           On the other hand, I recognize that the MOE has substantial powers in the exercise of their discretion to require the defendants to investigate the cause of and remediate contamination on both the defendants’ and the plaintiffs’ lands and to direct that this be done at the defendants’ cost.

[48]           The EPA broadly empowers the MOE to make orders to clean up contamination and prevent the discharge of contaminants into the environment.  For instance, pursuant to section 17 of the EPA, the Director has the power to issue “remedial orders” where a person has caused or permitted a contaminant to be discharged into the natural environmental.  This section empowers the Director to order that person to repair the injury or damage:

Where any person causes or permits the discharge of a contaminant into the natural environment, so that land, water, property, animal life, plant life, or human health or safety is injured, damaged or endangered, the Director may order the person to,

a)            Repair the injury or damage;

b)           Prevent the injury or damage; or

c)            Where the discharge has damaged or endangered or is likely to damage or endanger existing water supplies, provide temporary or permanent alternate water supplies.

[49]           Pursuant to section 157.1 of the EPA, a provincial officer can also order a person who owns or who has management or control or property to take “preventive measures” to:

(a)           Prevent or reduce the risk of a discharge of a contaminant into the natural environment;

(b)         Prevent, decrease or eliminate an adverse affect that may result from:

(i)            The discharge of a contaminant from the undertaking, or

(ii)           The presence or discharge of a contaminant in, on or under the property.

[50]           In determining whether a court action is an appropriate remedy pursuant to s. 5(1)(a)(iv) of the Act, Laskin J.A. in ETR Concession instructed that the court should consider (a) the nature of the plaintiffs’ loss; (b) the circumstances of the plaintiffs, and (c) efficiency of the court.

[51]           This is an environmental claim.  The major dispute between the parties has been, at least until very recently, whether the pollutants are emanating from the defendants’ land onto the plaintiffs’ land or, as the defendants claim, from the plaintiffs’ land onto the defendants’ land.  On the facts of this case, there can be no doubt that the MOE’s interventions have provided a means to determine the source of the contamination and remedial orders have been made.

[52]           The plaintiffs submit that given their particular situation, the MOE interventions may substantially reduce the plaintiffs’ damages and therefore it would be inappropriate to require the plaintiffs to prematurely resort to court proceedings while the regulatory process under the EPA is ongoing.

[53]           In my view the principal difficulty with the plaintiffs’ position is that there is no reasonable basis to ascertain when the MOE’s involvement will end.  To date, it has gone on in excess of eight years with no end point in site.  I agree with the defendants’ submission that the EPA does not in any sense establish an alternative adjudication or dispute resolution process for contamination claims.  While the MOE has significant remedial powers to direct the investigation and remediation of ground water contamination, these powers are outside the land owners’ control and are discretionary in nature.  These powers do not include any right to award economic damages or to grant declaratory orders, which is a significant component of the relief sought in this action.

[54]           The plaintiffs have argued that the limitation period should not run until the causation question was resolved (within the last two years) concerning the direction of flow of the contaminants.  They suggest that prior to resolving that issue it would have been unreasonable to commence court proceedings.

[55]           The plaintiffs emphasize the benefits they have achieved by allowing the MOE to deal with the contamination.  Thanks to the MOE exercising its statutory powers to direct the investigation and remediation of the groundwater contamination, the plaintiffs have avoided the considerable engineering costs of investigating the problem, of obtaining experts’ reports and of soil removal and other remedial measures.  They have also avoided or lessened the litigation risk of a possible determination that the contamination emanated from their own property, rather than the defendants’ property.

[56]           In effect, the plaintiffs can be said, in retrospect, to have made a wise economic choice in leaving the contamination issue in the hands of the MOE.  However this was manifestly a tactical decision made by the plaintiffs to avoid the costs and litigation risks of investigating their claim and establishing their case on liability and damages.  They chose to stand back for some four years prior to commencing this action to allow the MOE to move matters forward.  The case law is clear that tactical decisions will not toll the limitation period, see Markel and Presidential MSR.  As Mew J. observed in J.C. v. Farant at para 87:

Another recent decision, Gravelle (CodePro Manufacturing) v. Denis Grigoras Law Office2018 ONCA 396 (CanLII), reinforced the principle that a tactical decision to delay the commencement of proceedings will not, absent other factors – such as the pursuit of alternative means to resolve the very claim that I the subject matter of the action – delay the running of time.  At para. 6, the Court of Appeal stated:

 The appellant decided for tactical reasons not to bring his action against the respondents until the arbitration proceedings were completed.  He was entitled to make this choice, but he must live with the consequences of it.

[59]           In my view this position is untenable and inconsistent with the appellate case law binding on this court.  The circumstances triggering the running of the limitation cannot be a moving target incapable of being ascertained with the level of reasonable certainty required.  This would create a situation in which the plaintiffs essentially determine when the limitation period commences.

[61]           In my opinion the approach advocated by the plaintiffs and the intervenors ignores the requirement that the appropriate means exception in sub-section 5(1)(a)(iv) of the Act be restricted to factual situations in which the alternate avenue of redress is legally appropriate in the sense that the courts must not be required to interpret the parties’ communications or negotiations or, be required to analyze the significance of the technical findings of ongoing engineering studies and importantly, there needs to be a fixed end point.

Reconsidering mistakes of law and discoverability

Samuel Beswick, a Harvard legal scholar, studies the impact a mistake of law has on the discovery of a claim.  In Under the Limit‘s first guest post, he makes a compelling argument for reconsidering how Canadian limitations law might alter its approach to mistakes of law in the discovery analysis.

Mistake of law as a basis for extending the limitation period?

Common law countries have long determined that discoverability governs limitation on actions “grounded on” mistake (as the former Alberta statute put it) or that seek “relief from the consequences of” mistake (as the English Limitation Act provides). Back when the law of unjust enrichment was thought to allow restitution only for mistakes of fact, discoverability provisions had not much to do with mistakes of law. Now that the mistake-of-law bar has been abandoned, it is apt to ask: when can a mistake of law be discovered?

In England, this problem has driven multi-billion-pound-sterling unjust enrichment litigation, spurring private law scholars and confounding courts. The answer that the English courts have given, succinctly put in FII Test Claimants v HMRC, is that:

[372] … [I]n the case of a point of law which is being actively disputed in current litigation the true position is only discoverable … when the point has been authoritatively resolved by a final court.

I have recently sought to show that England’s answer to the discoverability of mistakes of law is arbitrary, jurisprudentially strained, internally inconsistent, and effects bad policy.

What’s remarkable (albeit it hasn’t to date been remarked on) is that this doctrine is also totally contradictory to Canadian precedent on this issue. The position in Canada, summarized in Hill v Alberta, is that:

[9] … Discoverability refers to facts, not law. Error or ignorance of the law, or uncertainty of the law, does not postpone any limitation period.

In Canada, time runs on mistake-of-law claims whether or not a claimant has discovered their mistake. This causes other problems, which I have endeavoured to draw out in a recent paper.

There is, however, a middle ground between England’s “authoritative judgment” understanding of limitation on mistakes of law and Canada’s “exception” to the discoverability principle, a full account of which will be appearing in the LQR. The short answer, though, is this: mistakes as to the law should be considered discoverable once a claimant is in a position to plead them in a statement of claim. Discoverability is not about finding out one’s legal position from a court. It is about having adequate time to be able to plead one’s case to a court.

 

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: another good “abilities and circumstances” analysis

 

The decision in Service Mold + Aerospace Inc. v. Khalaf is another good example of the court’s assessment of a plaintiff’s abilities and circumstances for a limitations analysis.  The fact that the plaintiff had no background or education in bookkeeping, accounting, or finances informed the court’s analysis of when the plaintiff could reasonably discover a fraud committed by his bookkeeper.

It’s also a noteworthy decision for the dubious (and unsuccessful) position taken by the defendant:

[21]           TD Bank acknowledges that the plaintiffs did not actually discover the fraud until early 2015 and relies on s. 5(1)(b).  The position of TD Bank is as follows:

1.         The plaintiffs ought to have discovered the claim at least by 2009 or 2010.  TD Bank takes the position that bookkeeper fraud is a well-known risk and a prudent businessman would have measures in place to control it.  Mr. Schuurman, in effect, turned a blind eye to the risk. TD Bank therefore invites me to dismiss the action.

To discover a claim, the plaintiff must know that the defendant has caused or contributed to his loss (and there is no “claim” as defined by the Limitations Act until loss occurs).  Whether the plaintiff was blind or not to a risk that ultimately resulted in his loss, until the loss occurred, the claim was not discoverable.  This position might support a contributory negligence argument, but it’s immaterial to a limitations defence.