Ontario: Court of Appeal says death is not a “condition”

In Lee v. Ponte, the Court of Appeal held that death does not trigger the application s. 7 of the Limitations Act.

Section 7 suspends the limitation period when the claimant “is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition”.  The appellant in Lee argued that this provision could extend the limitation period for an estate trustee to bring a claim that the deceased person had before death:

[5]         The appellant urges that s. 7 should be interpreted to apply when the person having the claim dies before commencing proceedings. He argues that a deceased person is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition. He submits that the same policy concerns for allowing additional time for a litigation guardian to be appointed and take over the management of the affairs of the incapable person apply to an estate trustee. He points out that it takes time for an estate trustee to review the affairs of the deceased, and to obtain probate.

The Court rejected this argument:

[6]         We are not persuaded the motion judge erred by dismissing the claim as statute barred. The grammatical and ordinary sense of the words of s. 7 are simply not elastic enough to apply to a deceased person and to construe an estate trustee to be a litigation guardian.

This is a very sensible response to a doubtful argument.  It’s plain that the Legislature didn’t intend that a “physical, mental or psychological condition” should be so broad as to encompass the condition of being dead.  Besides, it’s the Trustee Act that limits the pursuit of a deceased person’s claim.  The appellant didn’t rely on this provision, probably because it wouldn’t have helped, but it should be the starting point when considering the limitation of a deceased’s person claim.

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: Does the limitations act apply to Notices of Objection?

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

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

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

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

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

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

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

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

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

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

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

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

Update!

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

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

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

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

The Court of Appeal upheld the decision:

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

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

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

 

 

 

Ontario: the limitations act applies to claims in notices of objection

The Court of Appeal’s decision in Iaboni Estate v. Iaboni stands for the principle that a claim pursued in a notice of objection filed in an application to pass account is subject to the Limitations Act and capable of being time-barred.

[8]         At the hearing of the motion, Carlo consented to the passing of accounts from the time of the appointment of BNS, but not before. Mullins J. struck the notice of objection on three bases: (1) it was without merit, (2) it was an abuse of process for attempting to relitigate the subject matter of the appellant’s dismissed action; and (3) was time barred under the Limitations Act.

[9]         Carlo appeals the order of Mullins J., striking out the notice of objection.

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

Ontario: claims raised in a Notice of Objection subject to Limitations Act

In Bank of Nova Scotia Trust Company v. Iaboni, Justice Mullins held that claims asserted in a Notice of Objection filed in an application to pass account are statute-barred:

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

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

This is noteworthy because it takes for granted that the Limitations Act applies to claims asserted in a Notice of Objection.   Whether this is so remains the subject of debate.  I’ve argued that the Limitations Act does apply, and so am pleased to see a decision that moves the law in that direction.

Ontario: Appointing a guardian of property doesn’t start the limitation period

 

In Shaw v. Barber, Justice McNamara held that the appointment of the Office of the Public Guardian and Trustee as guardian of property doesn’t cause a limitation period to commence:

[13]           […] Where [the parties] disagree completely is when the six month limitation period for a claim for support under Section 61(1) of the Succession Law Reform Actbegins to run.

[14]           The first point that needs to be made is that under the Limitations Act the six month limitation period under the Succession Law Reform Act is incorporated into the act by Section 19(1) of the Limitations Act. That section provides that any limitation period set out in or under another act applies as long as the provision establishing it is listed in the schedule to the Limitations Act. There is no issue that this particular limitation period is in that schedule.

[15]           It is also common ground that the limitation period in question does not run in the circumstances set forth in Section 7(1) of the Limitations Act.That section provides:

7 (1) the limitation period established by section 4 does not run during any time in which the person with the claim,

(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and

(b) is not represented by a litigation guardian in relation to the claim.  2002, c. 24, Sched. B, s. 7 (1).

[16]           The six month limitation, then, did not run while Ms. Shaw was incapable of commencing a proceeding because of a mental condition and was not represented by a litigation guardian in relation to the claim (emphasis added).

[17]           The Estate argues that after its appointment as Ms. Shaw’s statutory guardian of property the OPGT had the authority to act as litigation guardian and were then under an obligation to advance a claim within a six month period of their appointment.

[18]           That argument, in my view, is flawed.

[19]           There is no mechanism in the Limitations Act for the self-appointment of a litigation guardian. To do that, regard must be had to the Rules of Civil Procedure. A number of provisions are relevant.

[20]           First is Rule 7.01(1) which provides as follows:

7.01  (1)  Unless the court orders or a statute provides otherwise, a proceeding shall be commenced, continued or defended on behalf of a party under disability by a litigation guardian.  O. Reg. 69/95, s. 2.

A proceeding, then, which includes an application, must be commenced on behalf of a party under a disability by a litigation guardian.

[21]           Next Rules 7.02(1) and 1.1(a) which provide:

7.02 (1) Any person who is not under disability may act, without being appointed by the court, as litigation guardian for a plaintiff or applicant who is under disability, subject to subrule (1.1).  O. Reg. 69/95, s. 3 (1).

 

 

Mentally Incapable Person or Absentee

 

(1.1)  unless the court orders otherwise, where a plaintiff or applicant,

(a) is mentally incapable and has a guardian with authority to act as litigation guardian in the proceeding, the guardian shall act as litigation guardian;

[22]           It is important to note that while the above section directs that the guardian shall act as litigation guardian, it does not dictate when that authority is to be exercised. That, in my view, occurs once the guardian of property has determined there is a basis for exercising their authority as litigation guardian.

[23]           Surely that is appropriate. As the affidavit of counsel at the Office of the Public Guardian and Trustee discloses, once they are appointed statutory guardian of property in a factual situation such as existed here, they begin an investigation into the entire matter. That can be, as the affidavit discloses, a time consuming process because there are usually information gaps because of the client’s incapacity which require the OPGT to be reliant on third party information with a need to be verified. The initial investigation is done by a client representative and if the situation warrants it, the matter is then referred to counsel in the OPGT’s office which in this case occurred in October of 2015. According to the evidence, further investigation continued under counsel’s direction exploring options available. Outside counsel was formally retained by the OPGT on May 6, 2016. The application was brought in August.

[24]           Moving carefully and cautiously prior to commencing litigation at public expense would require a thorough investigation of the facts and legal options available. As counsel in his affidavit points out, the client they act for has little capacity to properly advise them of her circumstances, so they have to rely on third party information which may support or not support or be neutral towards the incapable person’s position. I agree with counsel that imposing a limitation period commencing as of the OPGT’s appointment as guardian of property is not only contrary the wording of the Limitations Act, but would also create impossible timelines thus creating the potential for injustice being done to vulnerable individuals.

Ontario: Limitations Act doesn’t apply to applications for attorney compensation

In April, I reported that in Armitage v. The Salvation Army, Justice Ray held wrongly that the limitation period for claiming compensation as a property attorney commences on the death of the person who granted the power of attorney.  I wrote that the Limitations Act doesn’t apply to such an application.  In December, the Court of Appeal agreed.

Armitage brought applications to pass her accounts as attorney for property and as estate trustee.  The Salvation Army filed notices of objection in both proceeding raising a limitations defence.  Justice Ray held that the death of the person who granted the power of attorney terminated the continuing power of attorney and was the commencement of the applicable limitation period.  The applications were accordingly timely.

Not so, I wrote.  While there may be sound policy reasons for limiting a claim for attorney’s compensation after the death of the grantor, no limitation period applies to such an application.  The application is not a “claim” within the meaning of the Limitations Act because it doesn’t seek to remedy loss resulting from an act or omission.  If it’s not a “claim”, the basic and ultimate limitation periods can’t apply.  In fairness to Justice Ray, we noted that neither party raised this point.

Armitage raised the point on appeal, and Justice Hourigan accepted it:

[19]      While I agree with the result reached by the application judge, I disagree with his conclusion that the Limitations Act, 2002had any application in the circumstances of this case. As I will discuss below, in my view, the Limitations Act, 2002 does not apply because compensation for an attorney for property through the passing of accounts process does not constitute a “claim” within the meaning of the Limitations Act, 2002.

[20]      It is useful to briefly consider the nature of compensation for attorneys for property and how the passing of accounts process works. An attorney for property is a fiduciary and has an obligation under s. 32(6) and 38(1) of the SDA to, among other things, keep accounts of all transactions involving the property.

[21]      The attorney for property may bring an application to the Superior Court to have his or her accounts approved. Through that process, the attorney for property may also seek court approval of compensation for his or her services. The responding parties to the application have an opportunity to file a notice of objection to the accounts, and to object to the compensation that the attorney for property proposes to take or has taken.

[22]      Where the attorney for property has not commenced an application for the passing of accounts, an interested party may bring an application under s. 42(1) of the SDA to compel the passing of accounts.

[23]      As noted by Matthew Furrow and Daniel Zacks in their very recent article “The Limitation of Applications to Pass Accounts” (2016) 46 Adv. Q. 2, historically in Ontario there was no statutory limitation period for the passing of accounts. The only bars were the equitable defences of laches and acquiescence. The question becomes whether the enactment of the Limitations Act, 2002changed the law and imposed the general two-year limitation period on claims for compensation for attorney for property.

[24]      At first blush it would appear that such claims might be captured by the general limitation period. The Limitations Act, 2002 was designed to comprehensively deal with all manner of civil claims, whether grounded in equity, law, or statute. There are specific carve outs in the legislation for claims that are not subject to the Act. It is arguable, therefore, that if compensation for attorneys for property was intended to be exempted from the general limitation period it would have been specifically exempted under the Limitations Act, 2002.

[25]      The difficulty with that argument is that the Limitations Act, 2002 applies only to the assertion of a “claim”, and a claim is defined in the Act as follows: “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.”

[26]      The appellant submits that the right under the SDA to seek compensation is a new statutory right and, as with all rights, where there is a right there must be a remedy. Further, the appellant argues that the respondent’s claim for compensation fits within the statutory definition of a claim. Counsel for the appellant submits that in seeking compensation at this time the respondent has suffered a loss because she chose not to seek self-help and take her compensation earlier. He goes on to argue that this loss is the result of the respondent’s omission in failing to claim compensation earlier.

[27]      I am unable to accede to this rather circular argument. The fact is that in seeking court approval of the passing of accounts, an attorney for property is not seeking redress for any loss, injury, or damage. Rather, he or she is seeking approval from the court of his or her actions in managing the property, including approval for compensation previously taken or now sought. A passing of accounts application is the opposite of remedial; it is a process that seeks a court order that no remedy is necessary with respect to the accounts: see Furrow and Zacks, at pp. 9-10. Thus, the passing of accounts does not fit within the first part of theLimitations Act, 2002 definition of claim.

[28]      An application for the passing of accounts also does not fit within the second part of the statutory definition of claim. Where the definition speaks of an act or omission, it must surely refer to an action taken or not taken by a third party that has the effect of causing loss, injury, or damage. It would be a strange result if a limitation period could not be triggered until the party asserting the claim took an action or omitted to do something.

[29]      The result, in my view, is that a passing of accounts under the SDA is not subject to the two-year general limitation period found in the Limitations Act, 2002.[1] The common law in that regard was not changed with the enactment of that legislation. Consequently, the only defences available are the equitable defences of laches and acquiescence, neither of which were asserted in the present case.

Obviously, I think this is sound reasoning (based as it is on a paper I wrote with my colleague Matthew Furrow).

Importantly, Justice Hourigan explicitly not does hold that the Limitations Act has no applicability to the passing of accounts process under the SDA:

[1] I do not mean to categorically provide that the Limitations Act, 2002 has no applicability to the passing of accounts process under the SDA. In particular, it may be that the filing by a beneficiary of a notice of objection after an attorney has sought a passing of accounts is a claim within the meaning of the Limitations Act, 2002. However, I leave this determination to another case where it arises directly on the facts.

In our paper, Matthew and I argue a notice of objection that asserts a claim within the meaning of the Limitations Act is subject to its limitation periods.  Send me a note if you’d like a copy.

Ontario: statutory limitation periods apply to will challenges

Justice DiTomaso’s decision in Taylor-Reid v. Taylor is another that cites Leibel for the principle that will challenges are subject to the basic limitation period.  The issue is gradually becoming settled.  These are the relevant paragraphs:

[106]      Even if Andrea could demonstrate a genuine issue for trial based on evidence of actual “physical damage” and/or that services were actually performed pursuant to an actual agreement, Andrea is statute barred from commencing a claim against the Estate pursuant to s. 4 of the Limitations Act, 2002 and the case of Leibel v. Leibel.

[107]      In the case of Leibel v. Leibel, the court determined that, in a Will challenge, the limitation period commences on the date of death, being September 22, 2011.  This, however, is subject to the discoverability rule outlined in s. 5 of theLimitations Act, 2002.  In Leibel v. Leibel, the Plaintiff (Will challenger) was found to have discovered the claim within 60 days of the date of death and, since the claim was commenced outside of the two year limitation period, it was statute barred.

Ontario: the limitation of claims for attorney compensation

In Armitage v. The Salvation Army, Justice Ray held (incorrectly) that the limitation period for claiming compensation as a property attorney commences on the death of the person who granted the power of attorney.

[10] The principal issue is the limitation period applicable to the applicant’s claim for attorney compensation. The applicant’s position is that any claim must be commenced within two years of the death of the individual who granted the power of attorney, unless otherwise waived by those who are interested parties. She contends that the Substitute Decisions Act creates the right to compensation, is silent on any limitation period, and uses the permissive “may” in reference to when the claim could be made. The respondent agrees that the right to compensation was created by the statute but that the language of the statute in using “may” gives the attorney an option to claim compensation “each year”, which if not taken up by the commencement of proceedings within the following two years is to be treated as abandoned. He argues that a claimant must commence proceedings every three years in order avoid the limitation period. In other words, one is to infer from the statute that the end of each year triggers the beginning of the two year limitation period.

Justice Ray disagreed.

[15] I do not take the language of the Act or of the continuing powers of attorney to require the attorney to take their compensation annually such that it should be taken to trigger a limitation period if the compensation is not taken. […] [The death of the person who granted the power of attorney] terminated the continuing power of attorney. I conclude that it is at that point that the limitation period commenced. It was the triggering event. The applicant had two years within his date of death to commence proceedings, if that was to become necessary, to make her claim for compensation as an attorney.

As my colleague Matthew Furrow obliged to me to recognise, this decision is wrong.  While there may be sound policy reasons for limiting a claim for attorney’s compensation after the death of the grantor, no limitation period applies to such an application.  The application is not a “claim” within the meaning of the Limitations Act because it doesn’t seek to remedy loss resulting from an act or omission.  If it’s not a “claim”, the basic and ultimate limitation periods can’t apply.  In fairness to Justice Ray, neither party raised this point.

Ontario: the limitations jurisprudence of 2014 in review

This post is a paper I wrote for LawPro on the year’s limitations jurisprudence.  It may be of interest to Under the Limit readers; if you’d like a PDF version , just ask.

The limitations jurisprudence of 2014 in review

Dan Zacks[1]

January 1, 2014 marked ten years since the Limitations Act, 2002 came into force. Now many aspects of the old limitations regime are forgotten, or will be soon. Consider for instance the classification of actions. Once a key step in the limitations analysis, it is barely remembered, and rarely fondly.[2]

Meanwhile, the courts have developed an extensive body of jurisprudence interpreting and applying the new Act. To be sure, this jurisprudence remains in development. Many of 2014’s leading decisions consider fundamental limitations issues arising from the Limitations Act for the first time. For example, in 2014 we learned from the Court of Appeal how a plaintiff should plead a discoverability argument (by reply), and that there is no legislative gap that would prevent the Limitations Act from applying to claims for unjust enrichment (Collins v. Cortez and McConnell v. Huxtable respectively, both discussed below). The Superior Court also delivered decisions of consequence, in particular by confirming that the Limitations Act applies to will challenges (Leibel v. Leibel, also discussed below).

While it is difficult to identify definite trends in the year’s limitations jurisprudence, several lower court decisions point toward an increasing receptiveness to boundary-pushing discovery analyses. In one case, the “no, I won’t pay my 407 toll” decision, the Court found that proportionality can be a factor when determining whether a plaintiff has discovered that a proceeding is an appropriate means to seek a remedy.[3] In another somewhat eccentric case, the Court found that, pursuant to “cultural dimension theory”, being Slovenian can determine when a plaintiff discovers her claim.[4] It will be interesting to see whether courts follow either of these decisions, and more generally, whether they remain open to creative discovery arguments.

What follows is a summary of the more consequential Ontario limitations decisions from 2014. For mostly up-to-date reporting on this year’s limitations jurisprudence, you are welcome to visit limitations.ca.

McConnell v. Huxtable: In which the Court of Appeal says yes, a claim for unjust enrichment is subject to the Limitations Act[5]

McConnell is a family law decision involving an unmarried couple. The applicant made a constructive trust claim for an ownership interest in the respondent’s house and, in the alternative, for compensation in money. The respondent sought the dismissal of the claim on the basis that it was barred by the expiry of the limitation period.

The motion judge’s 2013 decision[6] was sensational, at least in the rather staid world of limitations. In thorough and persuasive reasons, Justice Perkins held that the discovery provisions of the Limitations Act cannot apply to a remedial constructive trust based on a claim of unjust enrichment. Taken to its logical conclusion, this meant that in a great many circumstances, only the equitable doctrine of laches and acquiescence would limit a claim for unjust enrichment.

A limitation period commences when the injured party discovers the claim within the meaning of section 5 of the Limitations Act. Justice Perkins concluded that a claim for constructive trust is not in all circumstances discoverable as contemplated by this section. If a claim is not discoverable, the limitation period will never commence. If the limitation period never commences, there is no limitation period. This is how he described the problem:

I think that section 5(1)(a) makes it impossible to know when if ever the limitation [period] would start running because the claimant may never (reasonably) know of a “loss, damage or injury” and because there is no act or omission of the respondent that the claimant is required to or is even able to point to in order to “discover” a claim for a constructive trust. Claims to recover land aside, the Limitations Act, 2002 may have been meant to but does not manage to encompass constructive trust claims. I am unable to give effect to the precise and detailed wording of sections 4 and 5 so as to make them apply to constructive trusts in family law cases.[7]

Not surprisingly, Justice Rosenberg, writing for the Court of Appeal, disagreed, and held that there is no legislative gap:

I do not agree with the motion judge that a remedial constructive trust claim does not require any act or omission by the person against whom the claim is brought. Generally speaking, a claim of unjust enrichment requires that the defendant retain a benefit without juristic reason in circumstances where the claimant suffers a corresponding deprivation. In other words, the relevant act of the defendant is simply the act of keeping the enrichment (or the omission to pay it back) once the elements of the unjust enrichment claim have crystallized. In the family law context, this may typically occur on the date of separation, when shared assets, including real property, are divided and the possibility therefore arises of one party holding onto more than a fair share.[8]

Justice Rosenberg acknowledged that in some cases it may be difficult to apply section 5 to a claim for unjust enrichment, but it applies nonetheless. Even if the difficulty means the claim is never discovered, the ultimate limitation period will still limit it. This is sound reasoning, but terribly disappointing to the plaintiffs’ bar, who had begun to think very hard about how to make every old claim one for unjust enrichment.

McConnell also brings clarity to the application of the Real Property Limitations Act. The fact that the respondent sought a monetary award in the alternative to an interest in land did not mean that the claim wasn’t for a share of property, and subject to section 4 of the Real Property Limitations Act with its plaintiff-friendly ten year limitation period.[9]

Longo v. McLaren Art Centre: The Plaintiff must not delay, not even for Rodin[10]

This Court of Appeal decision written by Justice Hourigan quickly became a leading authority on the duty imposed by the Limitations Act on plaintiffs to investigate potential claims. It is already much-cited by defendants when arguing that a plaintiff was dilatory in discovering their claim and, more specifically, when envoking section 5(1)(b) of the Act.

Justice Hourigan’s reasoning is not especially novel; rather, he adopts a line of discoverability jurisprudence developed under the previous Act exemplified by Soper v. Southcott (1998)[11]. In essence, a plaintiff must take reasonable action to investigate the matters described in section 5(1)(a) of the Act. What is reasonable depends on the plaintiff’s circumstances and the nature of the potential claim. However, it is never necessary for the plaintiff to investigate to the point where she knows with certainty that a potential defendant is responsible for the impugned acts or omissions. It is enough that she has prima facie grounds to infer that the potential defendant caused the acts or omissions. Establishing these grounds may require an expert report.[12]

Longo has almost glamorous facts.   At issue was the appellants’ discovery of damage to their sculpture Walking Man, possibly the work of Rodin. The sculpture was harmed while in the respondents’ care and the appellants claimed for damages. The court dismissed the claim on motion for summary judgment on the basis that it was commenced out of time.

Justice Hourigan set aside the decision of the motion judge and held that there was a genuine issue requiring a trial. Determining whether a reasonable person with the abilities and in the circumstances of the appellants ought to have discovered the claim required a full trial record. Justice Hourigan nevertheless shared his view on what was appropriate in the circumstances. On learning of concerns about the condition of Walking Man, a reasonable person would arrange for an inspection of the sculpture.

 

Collins v. Cortez: Respond with a reply[13]

This decision is a primer on how pleadings should address a limitations defence, which is often a point of confusion for counsel.

Cortez moved to dismiss Collins’s personal injury claim on the basis that it was commenced two years after her accident and statute-barred by the expiry of the limitations period. Justice Gordon granted the motion. He gave effect to the presumption in section 5(2) of the Limitation Act that the limitation period commenced on the date of the accident. He held that because Collins did not plead discoverability facts in her Statement of Claim, she could not make out a section 5(1) discoverability argument.

Not so, held the Court of Appeal. In the normal course, if a limitations defence is raised in a Statement of Defence, and the plaintiff relies on the discoverability principle, the plaintiff should plead the material facts relevant to discoverability in reply, not the Statement of Claim. The expiry of a limitation period is a defence to an action that must be pleaded in a Statement of Defence. As such, a plaintiff needn’t anticipate discoverability and address it in her Statement of Claim.

Leibel v. Leibel: Two year to challenge a will[14]

Since the Limitations Act came into force, the estates bar has speculated as to whether a limitation period applies to will challenges. Many thought that it would not, based in part on an influential article by Anne Werker on limitation periods in estate actions:

It has been suggested that the 15-year absolute limitation period applies to will challenges. I do not agree. Section 16(1)(a) of the new Act expressly states that there is no limitation period in respect of “a proceeding for a declaration if no consequential relief is sought”. [15]

The courts have tended increasingly toward asserting the application of the Limitations Act, and it came to seem likely a court would apply the Act to a will challenge. This is what Justice Greer did in Leibel.

The case involved two wills. The testatrix’s son Blake applied for a declaration that the wills were invalid, and another son and other respondents moved for an order dismissing the application on the basis that it was statute-barred by the expiry of the limitation period.

Justice Greer held that the limitation period began running in June 2011, the date of the testatrix’s death, because a will speaks from death. However, Blake discovered his claim within the meaning of the Limitation Act about a month later in July 2011 (for reasons that don’t bear mentioning here, but are at paragraph 39 of the decision). This meant that he commenced his application out of time.

In particular, Justice Greer rejected Blake’s argument that no limitation period applied to his will challenge pursuant to section 16(1)(a). She held that the legislature did not intend for section 16(1)(a) to exclude will challenges from the two-year limitation period:

To say that every next-of-kin has an innate right to bring on a will challenge at any time as long as there are assets still undistributed or those that can be traced, would put all Estate Trustees in peril of being sued at any time. There is a reason why the Legislature replaced the six-year limitation in favour of a two-year limitation.[16]

Kassburg v. Sun Life Assurance Company of Canada: In business agreements, the party isn’t literal[17]

Kassburg demonstrates the Court’s commitment to protecting individuals from contracts that impose shortened limitation periods. It deals with section 22(5) of the Limitations Act, which permits contracting out of the statutory limitation period through “business agreements” unless one of the parties to the contract is an individual. Rather than limiting the word “parties” in this section to its literal meaning, the Court of Appeal instructs us to adopt a meaning consistent with the objective of protecting individuals from unexpectedly or unfairly abridged limitation periods.

Kassburg was an insured under a group policy issued by the appellant Sun Life to the North Bay Police Association. The respondent submitted a claim for long-term disability benefits that Sun Life denied.

She commenced an action claiming entitlement to the benefits. Sun Life moved for summary judgment on the basis that her claim was out of time. Among other things, Sun Life relied on a one-year limitation period contained in the insurance contract. It argued that this was a limitation period subject to section 22(5).

The motion judge held that the insurance policy fit within the business agreement exception. Because the parties to the insurance contract were the Police Association and the appellant, the contract was not entered into by an individual.

Justice van Rensburg rejected this reasoning. The word “parties” in section 22(5) must be given a broad, purposive reading. The literal reading of “parties” is inconsistent with the objective of section 22, which is to restrict the circumstances in which a contract can alter the statutory limitation periods in the Limitations Act. Although the group insurance contract under which Kassburg made her claim was between the Police Association and Sun Life, Justice van Rensburg deemed Kassburg to be a party for the purpose of asserting her claim, and for Sun Life’s limitations defence.[18]

Green v. Canadian Imperial Bank of Commerce: Plaintiffs must fully control whether they commence an action in time[19]

In Green, the Court of Appeal overturned its decision in Sharma v. Timminco (2012)[20], thus restoring peace and order to the limitation scheme under the Securities Act. [21]

Timminco created a distinctively perverse phenomenon in limitations jurisprudence: a limitation period that did not allow plaintiffs to control whether they commenced an action in time. As Justice Feldman noted in her decision for the Court of Appeal, this was unprecedented and entirely foreign to the concept of limitations.

At issue in both cases was the statutory cause of action in section 138.3 of the Securities Act. This section creates a cause of action for misrepresentations regarding shares trading in the secondary market. A plaintiff, most often a representative plaintiff in a class proceeding, can only commence a section 138.3 claim with leave. Pursuant to section 138, a plaintiff has three years from the date of the misrepresentation to obtain leave and commence the action. [22]

The Timminco Court held that a claim for damages under section 138.3 is statute-barred if the plaintiff does not obtain leave to commence it within the three-year limitation period, and that section 28 of the Class Proceedings Act[23], which suspends limitation periods in favour of class members once a claim is asserted in a class proceeding, will not operate in respect of a 138.3 claim until leave is obtained.

The Timminco Court reasoned that a section 138.3 claim is “asserted” within the meaning of section 28 of the Class Proceedings Act only when leave is granted because leave is a component of the cause of action. Given the dictionary definitions before the Court of “assert”, this conclusion was sound, at least in theory.

In practice, it was problematic. Its effect was to require representative plaintiffs to move for and obtain leave to commence a section 138.3 claim within three years, but the plaintiffs could not control the timeliness. Obtaining leave within three years was challenging, if not impossible.

This limitation period is not subject to the discoverability provisions of the Limitations Act because it commences on the date of the misrepresentation. The longer it takes to discover the misrepresentation, the shorter the time for obtaining leave and commencing the action. Even if a plaintiff brought the motion in good time, the defendant could initiate procedural steps resulting in delay, and court availability could affect the timing of the hearing and the rendering of the decision.

And so the Court reversed itself. Justice Feldman set aside the Timminco Court’s interpretation of the Class Proceedings Act, holding instead that when a representative plaintiff brings a section 138.3 claim within the limitation period, pleads section 138.3 together with the facts that found the claim, and pleads an intent to seek leave to commence, the claim has been “asserted” for the purposes of the Class Proceedings Act, and the limitation period is thereby suspended for all class members.

This decision is obviously of great significance to the securities bar, but beyond that, it preserves the fundamental principle of limitations that a plaintiff must have unilateral control over whether it misses a limitation period.

 

And for the insurance bar…

Lastly, several insurance decisions bear noting.

From Sagan v. Dominion of Canada General Insurance Company, we learned that time begins to run for a claim for denied accident benefits on the date of the denial.  A party can’t stop the commencement of the limitation period by sneakily (or inadvertently) omitting certain documents from the accident benefits application.[24]

In Sietzema v. Economical Mutual Insurance Company,[25] the Court of Appeal held that the limitation period begins to run for a claim for statutory accident benefits when the insurer denies the application for those benefits.

In Schmitz v. Lombard General Insurance Company of Canada[26], the court determined when the limitation period commences for a claim for indemnity under OPCF 44R, an optional endorsement for underinsured motorist coverage to the standard form automobile insurance policy. The limitation period does not start to run when the demand for indemnity is made because default must first occur. The limitation period begins to run the day after the demand for indemnity is made.

[1] Dan is a contributor to the upcoming fourth edition of The Law of Limitations and a lawyer at Clyde & Co. His practice focuses on commercial litigation and lawyers’ professional negligence. He also publishes Under the Limit, a blog about developments in the always riveting world of limitations jurisprudence.

[2] This is subject to the occasional exception. See for example Economical Mutual Insurance Company v. Zurich Insurance Company, 2014 ONSC 4763, in which the Court undertakes a classification of actions analysis, presumably out of nostalgia.

[3] See 407 ETR Concession Company v. Ira J. Day, 2014 ONSC 6409.

[4] See Miletic v. Jaksic, 2014 ONSC 5043 and the related post on Under the Limit, <http://limitations.ca/?p=19>.

[5] 2014 ONCA 86.

[6] 2013 ONSC 948.

[7] 2013 ONSC 948 at para. 143.

[8] 2014 ONCA 86 at para. 51.

[9] Conversely, the mere fact that a claim affects real property will not exclude the application of the Limitations Act. See Zabanah v. Capital Direct Lending, 2014 ONCA 872.

[10] 2014 ONCA 526 (“Longo”).

[11] 1998 CanLII 5359 (Ont. C.A.).

[12] See Longo, supra note 1, at paras. 41-44.

[13] 2014 ONCA 685.

[14] 2014 ONSC 4516.

[15] Anne Werker, “Limitation Periods in Ontario and Claims by Beneficiaries”, (2008) 34:1 Advocates’ Q at 24-28.

[16] 2014 ONSC 4516 at para. 52.

[17] 2014 ONCA 922.

[18] 2014 ONCA 922 at paras. 58-61.

[19] 2014 ONCA 90.

[20] 2012 ONCA 107.

[21] R.S.O. 1990, C. S.5.

[22] See also section 19 of the Limitations Act, 2002.

[23] S.O. 1992, C. 6.

[24]2014 ONCA 720.

[25] 2014 ONCA 111.

[26] 2014 ONCA 88.