Ontario: dubious equitable arguments won’t overcome the Trustee Act limitation period

The decision in Zacharias Estate v. Giannopoulos is an example of futile equitable arguments made to avoid the application of the Trustee Act limitation period.  The plaintiff estate commenced a proceeding to recover money from the defendant more than two years after the death.  The estate relied on the special circumstances doctrine; the court dismissed the argument because special circumstances applies only to the addition of a party to a proceeding:

[42]           Despina submits that the plaintiffs’ claim is barred by the limitations provision contained in s. 38 (3) of the Trustee Act, RSO 1990, c. T. 23 which states:

 “An action under this section shall not be brought after the expiration of two years from the death of the deceased.”

[43]           In other words, the limitation period begins to run at the time of that death, not from the time the estate trustee discovers the claim:  Levesque v Crampton Estate2017 ONCA 4552017 CarswellOnt 8319 at paras. 55-56Giroux Estate v Trillium Health Centre2005 CarswellOnt 241 at para. 28.

 [44]           While the rule may, at first blush, seem harsh, it was a specific policy choice.  At common law, any claim by the deceased would have been extinguished on death.  As a compromise to this draconian rule, the legislature provided a two-year limitation period which is not subject to the discoverability principle:  Giroux at para. 25.
 [45]           George died on February 19, 2015.  The claim was issued on December 29, 2017, 2 years and 10 months after George’s death.
 [46]           The Saccals admit they discovered the transfer to Despina between January and March 2016.  That left them approximately one year to commence an action within the limitation period.
 [47]           The plaintiffs resist the application of a limitation period by relying on doctrine of special circumstances.  That doctrine however, is limited to adding, after the expiry of a limitations period, a party or cause of action to a claim that was commenced within the limitations period.  The doctrine does not allow a party to commence a new proceeding after the expiry of the limitations period:  Graeme Mew, The Law of Limitations, 3d ed. (Toronto: LEXIS-NEXIS, 2016).

The estate also relied on the fraudulent concealment doctrine (because why not?).  The court set out the elements of the doctrine and found that none of them applied. There was no special relationship, there was no unconscionable conduct, and there was no concealment.  One wonders about the strategy that leads to making two limitations arguments plainly bound to fail; it will be interesting to see how the court awards costs.  These are the material fraudulent concealment arguments:

[48]           The plaintiffs also rely on the doctrine of fraudulent concealment to avoid the limitation period.  The doctrine of fraudulent concealment is an equitable principle:

“aimed at preventing a limitation period from ‘operating as an instrument of injustice.’ When applicable, it will ‘take a case out of the effect of the statute of limitation’ and suspend the running of the limitation clock until such time as the injured party can reasonably discover the cause of action”:  Giroux at para 28.

[49]           For the doctrine of fraudulent concealment to apply, the plaintiffs must establish that:

(a)               the defendants and plaintiffs had a special relationship with one another;

(b)               given the special or confidential nature of the relationship, the defendants’ conduct is unconscionable; and

(c)               the defendants concealed the plaintiffs’ right of action actively or the right of action is concealed by the manner of the defendants’ wrongdoing:  Estate of Graham v Southlake Regional Health Centre, 2019 ONSC 392, at para. 88.

[50]           As set out below, none of these elements apply.

(a)               No Special Relationship

[51]           The plaintiffs assert that Despina owes the estate $700,000 and that there is a special relationship between an estate trustee and debtor to the estate.

[52]           If the plaintiffs are correct, then a special relationship would, by definition, be created whenever estate trustees asserted that someone owed the estate money.  That would effectively put an end to the two-year limitation period in the Trustee Act.

[53]           In the alternative, the Saccals submit that Despina created a special relationship, by creating an extended parent-child relationship with them.  To support this extended parent-child relationship, the plaintiffs point to the fact that Despina arranged to let the Saccals know about their father’s condition.  In addition, the plaintiffs point to a number of other allegations to support the parent-child relationship including the following:  George told Despina that he wanted to leave money for his grandchildren.  Despina placed a note on the file at the funeral home not to permit the Saccals access.  Despina attended with the Saccals at George’s office and was present when they searched for the will.  Despina contacted an estates solicitor friend of the Deceased (James Daris) and told the Saccals that the Deceased did not have a will.

[54]           I cannot see how these additional allegations amount to creating a parent-child relationship between Despina and the Saccals.  The essence of a special relationship is one of closeness, trust or dependence.

[55]           Despina was a stranger to the Saccals.  She had never met them until they appeared at the hospital a couple of days before George died.  The plaintiffs have introduced no evidence to suggest that there was any type of relationship of particular trust or confidence between them and Despina.  If the plaintiffs are correct and they were aware that Despina had left some type of note at the funeral home to restrict the Saccals access, that would belie any type of special relationship.

[56]           Moreover, the Saccals’ own conduct belies any special relationship.  On April 28, 2015 their lawyer wrote to Despina saying:

“… You have taken upon yourself to represent to the public that you are a common-law spouse of the Deceased, our clients strongly dispute and deny that status.  You are hereby forbidden to approach any persons with which the Deceased had any business dealings or other relationships and make any further misleading or inappropriate representations or warranties to the effect that you have any relationship with the Deceased, beyond having had normal social interaction or friendship with the Deceased.  Any communication that you intend to make regarding your relationship to the Deceased or viz the Estate should be made only through this office.”

[57]           “Forbidding” Despina to have any contact with anyone who had any relationship with George and demanding that Despina make any statement about her relationship with George only through counsel to the Saccals would appear to belie any special relationship.  It is noteworthy that the letter was sent at least 8 months before the Saccals became aware of the $700,000 transfer to Despina.

(b)               Defendant’s Conduct Is Not Unconscionable

[58]           The plaintiffs have not established that Despina’s conduct was unconscionable.

[59]           In their factum, the plaintiffs make bald allegations that Despina was deceitful towards them but do not say how.

[60]           They have pointed to no instance in which they asked a question of Despina to which she gave a false or misleading answer.  Their real complaint appears to be that Despina did not volunteer that she had received a $700,000 payment from George.  I do not find Despina’s failure to volunteer that information to be unconscionable.  At the time of the interactions, Despina was clearly grief stricken.  She had no knowledge of George’s financial affairs and no knowledge of whether he had a will, what the terms of the will might be and who the executor might be.  She did not know the Saccals and knew only that George had been estranged from them for over 20 years and did not want to see them.  In those circumstances it cannot be said that the failure to volunteer, out of the blue, that George had given her $700,000 is unconscionable.

[61]           As noted earlier, the plaintiffs merely point to a series of suspicions they have.  In paragraph 26 of their factum, the plaintiffs begin seven successive sentences with the word “suspiciously” followed by a circumstance that the plaintiffs deem to be questionable.  By way of example they state:  “Suspiciously, no power of attorney or will were located.”  It is not particularly suspicious to fail to locate a will if none exists. That people die without a will is not, in itself suspicious.  It is a common occurrence.

[62]           Beginning a series of sentences with the adjective “suspiciously” does not convert mistrust on the plaintiffs’ part into unconscionable conduct on the defendant’s part.

(c)               No Fraudulent Concealment 

[63]           The third element of the doctrine of fraudulent concealment is that the defendant have concealed the plaintiffs’ right of action either actively or by the manner of the defendant’s wrongdoing:  Estate of Graham v Southlake Regional Health Centre2019 ONSC 392, at para. 88.

[64]           There was no active concealment on Despina’s part.  The plaintiffs have pointed to no conduct that made it more difficult for them to discover their alleged cause of action apart from the fact that Despina did not volunteer the receipt of a payment from George.  There was no duty on her to volunteer that information.  As noted above, her lack of disclosure was understandable and acceptable.

[65]           Despina’s uncontradicted evidence is that she had no information about George’s estate, assets, liabilities or general financial matters while alive or after his death.  In those circumstances she could not have hidden anything from the Saccals.

[66]           The plaintiffs have not brought themselves within any exception to s. 38 (3) of the Trustee Act, as a result of which the limitation period contained in s. 38 (3) of that statute applies and the action should be dismissed as statute barred.

Ontario: the timing of amendments, and some words on laches

The Superior Court in Barker v. Barker is perhaps the most extreme example of an eleventh-hour motion to amend to plead discoverability.  The plaintiffs moved in the third week of trial to amend their Statement of Claim to plead reliance on ss. 5 and 16 of the Limitations Act in response to the defendants’ limitations defence (the decision is silent on why the plaintiffs chose to amend their Statement of Claim rather than file a Reply).  Justice Morgan didn’t find that the delay was fatal to the motion:

[8]               Whether or not the motion to amend would have been better brought before trial began rather than in its third week, what is clear is that the limitations issues, including as the Court of Appeal says, the application of section 16(1)(h.2) and the doctrine of discoverability, come as no surprise to the Defendants. They knew these issues were raised by the Plaintiffs in the 2017 motion before Perell J. Plaintiffs’ counsel has reproduced in their motion record copies of the factums from the 2017 motion, where these issues were argued for many paragraphs by both sides. As indicated above, the Defendants all knew that the 2018 judgment of the Court of Appeal had specifically reserved these issues for a later date, mentioning the trial itself as the likely time for canvassing section 16(1)(h.2) and discoverability.

[9]               Although mid-trial pleadings amendments are not encouraged as a matter of case management, Rule 26.02(c) provides that a pleading may be amended at any time, without limitation, with leave of the court. Moreover, the amendment rule is written in mandatory language. Rule 26.01 provides that, “On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.” Accordingly, a party seeking to prevent a pleading from being amended “must establish a link between the non-compensable prejudice and the amendment. It must show that the prejudice arises from the amendment”: Iroquois Falls Power Corp. v Jacobs Canada Inc.2009 ONCA 517 (CanLII), at para 20.

The decision is also noteworthy for its consideration of the role of discoverability in a laches analysis.  It is impossible to assess the impact of delay in suing without knowing when the plaintiff first ought to have known of the claim:

[25]           Embedded in this argument is the idea that different questions would be asked in an equitable laches case than in a statutory limitation case. More specifically, it assumes that discoverability, which is an integral part of a limitation period analysis both at common law and under statute, is not at issue in a laches analysis. That sounds somewhat plausible at first blush – after all, the equitable doctrine of laches is, like all doctrines of equity, related to but different in nuance from limitation periods as its nearest relative at law. Limitation periods are hard numerical rules while laches is a principle that requires a weighing of the competing equities: Manitoba Metis Federation Inc. v Canada (Attorney General)2013 SCC 14 (CanLII)[2013] 1 SCR 623, at paras 145-6. That difference, however, is not always as substantive as it may appear.

[26]           Almost a century ago, English legal scholar John Brunyate stated, “since delay by a plaintiff who has been ignorant of his right of action will not amount to laches, we should expect that…time will not run until the plaintiff is aware of his right of action.” Limitation of Actions in Equity (London: Stevens & Sons, 1932), c. 2, cited approvingly in M(K) v M(H)1992 CanLII 31 (SCC)[1992] 3 SCR 6. We need not delve into legal history to see that that logic makes sense. It would be impossible to evaluate the equities of a delay in bringing an action without knowing when the Plaintiff first realized he or she had been wronged.

[27]           In fact, the weighing of equities in a laches analysis specifically involves asking whether the claimant has acquiesced in the delay, which in turn involves evidence of the claimant’s state of mind and level of knowledge of the facts on which the cause of action is premised: Manitoba Metis Federation, at para 147. One can’t acquiesce in something one hasn’t discovered. It is little surprise, therefore, that the Supreme Court of Canada has indicated that the equitable doctrine of laches essentially mirrors the common law doctrine of discoverability: “It is not enough that the plaintiff knows of the facts that support a claim in equity; she must also know that the facts give rise to that claim”: M(K)supra, citing Re Howlett[1949] Ch. 767.

[28]           The Supreme Court in M(K) has specifically confirmed with respect to discoverability and laches that “both doctrines share the common requirement of knowledge on the part of the plaintiff.” The indicia of that knowledge – what did the Plaintiff know with respect to the alleged wrongs and his legal rights and when did he know it – will be the subject of discovery under both rules. It defies logic and the nature of the two very similar legal principles to say that a Defendant knew full well he had to discover on the issue of laches, but that he is greatly disadvantaged to now learn that he also had to discover on the issue of discoverability. The information sought and the questions asked will be virtually the same.

This analysis came in the context of a rather astonishing (and unsuccessful) argument by the Crown.  It denied having notice that discoverability was in issue despite having asked questions about discoverability on examination for discovery.  The Crown explained this contradiction by throwing a junior under the bus: apparently, the junior went rogue and asked the discoverability questions without instructions:

[19]           Turning to the discoverability doctrine, Defendants’ counsel contend that they have not had an opportunity to examine the Plaintiffs for discovery on the discoverability issue. They submit that at this late date, with the trial already underway, the motion to amend must either be dismissed outright or granted together with an adjournment of the trial so that further discovery can be conducted. Otherwise, they say, they are made to essentially defend a trial by ambush.

[20]           Counsel for the Plaintiffs responds with some incredulity. Plaintiffs’ motion record contains over a thousand pages of discovery transcripts in which the discoverability issue was explored with various Plaintiffs by Defendants’ counsel. Plaintiffs’ counsel point out that Defendants’ counsel canvassed everything from the dates that the Plaintiffs first contacted their present counsel, to previous complaints and law suits brought by any number of Plaintiffs, to the Plaintiffs’ awareness of and access to duty counsel while at Oak Ridge in the 1970s, to the letter writing campaigns engaged in by several of the Plaintiffs over the decades seeking to put a stop to the kind of acts in issue in this litigation. In addition, in the affidavits sworn by each of the Plaintiffs for the 2017 motion, and which by agreement of the parties now form part of the trial record, the Plaintiffs each provide information on the dawn of this case and how and when they personally became involved or realized that they could engage in a legal action.

[21]           Counsel for the government of Ontario at discoveries asked a number of the Plaintiffs for undertakings with respect to these issues, and followed up on those requests by sending Plaintiffs’ counsel an undertakings chart listing and describing each of the outstanding answers. The chart divided the outstanding undertakings into three categories, listing each of the undertakings as going to either “Liability”, “Damages”, or “Discoverability”. The label of this third category was not a Freudian slip; a perusal of the undertakings falling under this heading reveals precisely the kind of questions one would ask in order to unearth the opposing side’s discoverability position. Various Plaintiffs responded by indicating when in the past they learned about, and with whom and when in the past they had spoken about, the prospect of a law suit relating to their Oak Ridge experiences.

[22]           It is not surprising that Defendants’ counsel asked these questions. Discoverability, as Perell J. and the Court of Appeal pointed out, has long been an issue to be addressed in the case.

[23]           Defendants’ counsel responds by conceding that all of those questions were indeed asked, but says that they were for the most part meant to address the issue of laches as it pertains to the equitable claim of breach of fiduciary duties. It is the Defendants’ position that discoverability under the Act or at common law is a response to a defense which places an onus on the Plaintiff, and so it did not have to be canvassed at discoveries (or addressed at trial) if the Plaintiff did not specifically plead it.

[24]           At the same time, it is the Defendants’ position that with respect to the claim of breach of fiduciary duties the doctrine of discoverability does not apply either at common law or under the pre-Act limitations statutes in force in Ontario, but that the equitable doctrine of laches applies. Defendants’ counsel concedes that the onus is on the Defendant to establish the unfair delay on which the laches principle is premised. Accordingly, counsel for the Defendants explains that in their view, discoverability does not have to be explored in pre-trial examinations if the Plaintiff has not bothered to plead it, but laches has to be explored because it is clearly relevant and the Plaintiff need not plead it.

[29]           Interestingly, counsel for the Defendants conceded in argument that examinations on the issue of discoverability were in fact conducted with respect to 7 of the 28 Plaintiffs. Defendants’ counsel’s explanation for this is that, apparently, a very diligent young lawyer for the government of Ontario conducted the discoveries on those individual Plaintiffs, and was foresightful enough to pose questions exploring the discoverability issue. As for the rest of the individual Plaintiffs, other lawyers on the Defendants’ counsel team conducted those discoveries and the discoverability questions were not asked. Accordingly, the Defendants are not seeking to eliminate the doctrine of discoverability from the analysis of the limitation period with respect to 7 of the 28 Plaintiffs, but are seeking to eliminate it with respect to the remaining 21 Plaintiffs.

[30]            With respect, this position is not tenable. In the first place, counsel for Ontario asked for undertakings regarding discoverability from 13 of the Plaintiffs. If only 7 Plaintiffs were questioned about discoverability, how is it that undertakings were extracted from 6 more of them? Perhaps others on the Defendants’ counsel team were more foresightful and diligent than they have been given credit for.

[31]           But that is only part of the point. If the Defendants’ position is to be taken seriously, the young lawyer who supposedly on his or her own asked about facts going to the discoverability issue would have been fishing for information that, in the Defendants’ view, he or she had no right to ask about. Not surprisingly, Plaintiffs’ counsel did not object to this line of questioning and provided answers that now satisfy the Defendants such that they are not discounting the discoverability doctrine with respect to those 7 deponents. What was wrongful from the Defendants’ point of view when it was done has suddenly become rightful now that it helps explain some of the discoverability questions which the Defendants did in fact explore with the Plaintiffs.

[32]           Furthermore, if one lawyer on the Defendants’ team knew about the discoverability doctrine, they all knew about the discoverability doctrine. In order to put an opponent on notice in litigation, one conveys the notice to opposing counsel – any number of them or any one of them will do. If one member of a law firm of record has notice, or one member of the Ministry of the Attorney General is aware of an issue in the action, they all are presumed to have notice and be aware of the issue. The young lawyer who asked discoverability questions is not being presented as a rogue acting beyond his retainer; quite the opposite. He is being presented as a perhaps more thorough or diligent version of all the other Defendants’ lawyers.

Ontario: Laches can’t trump the Limitations Act

In Intact Insurance Company v. Lombard General Insurance, the Court of Appeal held that laches can’t defeat an otherwise timely claim.

The court reviewed the legislative history of the Limitations Act and concluded that the removal of the laches-saving provision was intentional, and the absence of this provision overrules any suggestion that laches might bar the commencement of a proceeding to pursue an unexpired legal claim.  The court’s review of the legislative history is the most thorough since its decision in York Condominium Corporation No. 382 v. Jay-M Holdings Limited, and will be helpful whenever a consideration of the act’s legislative history is appropriate.

The comprehensiveness of the limitations scheme also informed the court’s decision:

[54]      As I note above, the old Limitations Act applied only to a closed list of enumerated causes of action and not to civil actions in general. Equitable causes of action, with few exceptions, were outside of its scope. The Limitations Act, 2002 “represents a revised, comprehensive approach to the limitation of actions”: Joseph v. Paramount Canada’s Wonderland, 2008 ONCA 469 (CanLII), 90 O.R. (3d) 401, at para. 8. In Joseph, this court concluded that the common law doctrine of special circumstances had no application under the new, comprehensive Limitations Act, 2002. That doctrine had allowed a court to add or substitute a party or to add a cause of action after the expiry of a limitation period where special circumstances existed, unless the change would cause prejudice that could not be compensated for with either costs or an adjournment. Permitting a defendant to invoke the equitable doctrine of laches because a legal claim has an “equitable flavour” would be inconsistent with the comprehensive approach to the limitation of actions represented by the Limitations Act, 2002.

[55]      Permitting a defendant to rely on the defence of laches where the claim is a legal claim and subject to and within the basic limitation period prescribed under the Limitations Act, 2002 would also be counter to the purpose of that Act of promoting certainty and clarity in the law of limitation periods: msi Spergel Inc. v. I.F. Propco Holdings (Ontario) 36 Ltd., 2013 ONCA 550, 117 O.R. (3d) 81, at para. 61.

The court was explicit in limiting the scope of its decision:

[57]      I wish to make clear that this decision does not address the availability of equitable defences (such as waiver, estoppel and acquiescence) to the extent not founded solely on a plaintiff’s delay in initiating its claim. Nor do I suggest that delay in seeking equitable relief such as an injunction could not be a relevant factor in deciding whether such equitable relief should be granted. This decision considers whether a defendant seeking legal relief within the basic limitation period prescribed under the Limitations Act, 2002 can rely on the delay-based defence of laches.

This isn’t an especially surprising decision given the trend toward emphasising the comprehensive nature of the limitations regime.  The alternative would have been a reversion to a classification of actions approach to limitation periods, where ascertaining the applicable limitation period would require first classifying the claim as equitable or legal, and then determining whether the limitation period in equity is shorter than in law.

I also note the decision’s helpful summary of laches jurisprudence at paragraphs eight through twelve.