Fraudulent Concealment

Ontario: Court of Appeal on s. 38(3) of the Trustee Act

The Court of Appeal’s decision in Beaudoin Estate v. Campbellford Memorial Hospital provides a good summary of Trustee Act limitation period:

 

[16] The respondents rely on the limitation period in s. 38 of the Trustee Act. Section 38(1) of the Trustee Act provides that, except in cases of libel and slander, the executor or administrator of any deceased person may maintain an action “for all torts or injuries to the person or to the property of the deceased”. Section 38(3) provides that no action under s. 38 shall be brought “after the expiration of two years from the death of the deceased”. [page596]

[17] There is no dispute that the following legal principles apply regarding s. 38(3) of the Trustee Act:

(1)   Claims brought by the deceased’s dependents under s. 61 of the Family Law Act are governed by the same limitation period in s. 38(3) of the Trustee Act: Camarata v. Morgan (2009), 94 O.R. (3d) 496, [2009] O.J. No. 621, 2009 ONCA 38, at para. 9; Smith Estate v. College of Physicians and Surgeons of Ontario (1998), 1998 CanLII 1523 (ON CA), 41 O.R. (3d) 481, [1998] O.J. No. 4367 (C.A.), at p. 488 O.R., leave to appeal to S.C.C. refused [1998] S.C.C.A. No. 635.

(2)   Section 38(3) of the Trustee Act prescribes a “hard” or absolute limitation period triggered by a fixed and known event — when the deceased dies — and expires two years later: Levesque v. Crampton Estate (2017), 136 O.R. (3d) 161, [2017] O.J. No. 2866, 2017 ONCA 455, at para. 51; Bikur Cholim Jewish Volunteer Services v. Penna Estate (2009), 94 O.R. (3d) 401, [2009] O.J. No. 841, 2009 ONCA 196, at para. 25.

(3)   The discoverability principles under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B do not apply to toll the limitation period under s. 38(3) of the Trustee Act: Giroux Estate v. Trillium Health Centre (2005), 2005 CanLII 1488 (ON CA), 74 O.R. (3d) 341, [2005] O.J. No. 226 (C.A.), at para. 33; Bikur Cholim, at para. 26; and Levesque, at para. 47. Although this can sometimes be harsh, since a claim under the Trustee Act can be time-barred even before it is discovered, this can be mitigated by common law rules, such as the doctrine of fraudulent concealment: Levesque, at para. 56; Bikur Cholim, at para. 25.

 

It also summarises the principles of fraudulent concealment:

 

[19] The Supreme Court of Canada recently addressed the doctrine of fraudulent concealment in Pioneer Corp. v. Godfrey, [2019] S.C.J. No. 42, 2019 SCC 42, 437 D.L.R. (4th) 383. Justice Brown for the majority described fraudulent concealment as “an equitable doctrine that prevents limitation periods from being used ‘as an instrument of injustice'”: at para. 52, citing M. (K.) v. M. (H.), 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6, [1992] S.C.J. No. 85, at pp. 58-59 S.C.R. He stated that “[w]here the defendant fraudulently conceals the existence of a cause of action, the limitation period is suspended [page597] until the plaintiff discovers the fraud or ought reasonably to have discovered the fraud”, and noted that it is “a form of ‘equitable fraud’ . . . which is not confined to the parameters of the common law action for fraud”: at para. 52. See also M. (K.), at p. 56 S.C.R.; Giroux Estate, at para. 28.

[20] Pioneer was released a few months after the motion judge’s decision here. The motion judge had cited Colin v. Tan, [2016] O.J. No. 810, 2016 ONSC 1187, 81 C.P.C. (7th) 130 (S.C.J.), at para. 45, to suggest that fraudulent concealment has three “constitutive element[s]”:

(1)   the defendant and plaintiff have a special relationship with one another; (2) given the special or confidential nature of the relationship, the defendant’s conduct is unconscionable; and (3) the defendant conceals the plaintiff’s right of action either actively or the right of action is concealed by the manner of the wrongdoing.

[21] In Pioneer, however, Brown J. explained that although fraudulent concealment can apply when there is a special relationship between the parties, a special relationship is not required: at para. 54. Instead, fraudulent concealment can apply whenever “it would be, for any reason, unconscionable for the defendant to rely on the advantage gained by having concealed the existence of a cause of action” (emphasis in original).

 

Given the factual nature of fraudulent concealment, the Court held that it can’t be considered under r. 21.01(1)(a):

 

[29] As I will explain, the motion judge erred in deciding the question of fraudulent concealment as a question of law under rule 21.01(1)(a).

[30] This court has underscored that a motion under rule 21.01(1)(a) is not the proper procedural vehicle for weighing evidence or making findings of fact: see, e.g., McIlvenna v. 1887401 Ontario Ltd., [page599] [2015] O.J. No. 6312, 2015 ONCA 830, 344 O.A.C. 5, at paras. 19-20; Andersen Consulting v. Canada (Attorney General), 2001 CanLII 8587 (ON CA), [2001] O.J. No. 3576, 150 O.A.C. 177 (C.A.), at para. 35.

[31] This court has applied this general principle in a long line of cases in which it has discouraged using rule 21.01(1) (a) to determine limitation period issues except in very narrow circumstances where pleadings are closed and the facts relevant to the limitation period are undisputed: Kaynes v. BP, P.L.C., [2012] O.J. No. 266, 2021 ONCA 36, at para. 74; Beardsley v. Ontario (2001), 2001 CanLII 8621 (ON CA), 57 O.R. (3d) 1, [2001] O.J. No. 4574 (C.A.), at para. 21; Tran v. University of Western Ontario, [2016] O.J. No. 6645, 2016 ONCA 978, 410 D.L.R. (4th) 527, at paras. 18-21; and Golden Oaks Enterprises Inc. (Trustee of) v. Lalonde (2017), 137 O.R. (3d) 750, [2017] O.J. No. 3188, 2017 ONCA 515, at paras. 42-45.

[32] The rationale for this position was recently explained by Feldman J.A. in Kaynes, at para. 81. She noted that discoverability issues are factual and it is unfair to the plaintiff for a motion judge to make such factual findings on a motion to determine a question of law under rule 21.01(1)(a), because that rule prohibits evidence on the motion except with leave of the court or on consent:

In establishing the main rule that a claim should not normally be struck out as statute-barred using r. 21.01(1) (a), the courts have noted that discoverability issues are factual and that the rule is intended for legal issues only where the facts are undisputed. It would therefore be unfair to a plaintiff where the facts are not admitted, to use this rule, which does not allow evidence to be filed except with leave or on consent. But where a plaintiff’s pleadings establish when the plaintiff discovered the claim, so that the issue is undisputed, then the courts have allowed r. 21.01(1)(a) to be used as an efficient method of striking out claims that have no chance of success, in accordance with the principle approved in Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 19.

[33] Thus, a factual dispute about the discovery date of a cause of action precludes the use of rule 21.01(1)(a) to determine whether a limitation period subject to discoverability has expired, because this rule is limited to determining questions of law raised by a pleading. If the parties have joined issue on disputed facts on the limitations issue, the preferable procedure might be a motion for summary judgment under Rule 20, which provides the court with certain fact-finding powers: Kaynes, at para. 80; Brozmanova v. Tarshis, [2018] O.J. No. 3097, 2018 ONCA 523, 81 C.C.L.I. (5th) 1, at paras. 21, 23 and 35; and rule 20.04(2.1).

[34] These principles about the limited scope for using rule 21.01(1)(a) to address discoverability under the Limitations Act, 2002 also apply to fraudulent concealment. Just as factual issues should not be decided in relation [page600] to discoverability on a motion under rule 21.01(1)(a), they should also not be decided in relation to fraudulent concealment. To do so would be unfair to a plaintiff when no evidence is admissible on such a motion except with leave of the court or on consent.

[39] However, the respondent doctors assert in their factum that the April 2017 claim “provides definitive evidence that the [page601] [a]ppellants had knowledge of their cause of action as of April 27, 2017”. They note that courts have considered prior pleadings in motions under rule 21.01(1)(a), citing Metropolitan Toronto Condominium Corp. No. 1352 v. Newport Beach Development Inc. (2012), 113 O.R. (3d) 673, [2012] O.J. No. 5682, 2012 ONCA 850, at paras. 111-113 and Torgerson v. Nijem, [2019] O.J. No. 2930, 2019 ONSC 3320 (S.C.J.). But neither of those cases purports to authorize a court to make a factual finding on a disputed point on a motion under rule 21.01(1)(a). The appellants assert that issuing a statement of claim is not necessarily determinative of their “knowledge” of a cause of action, and that the April 2017 claim simply reflected their “suspicion” that a cause of action may have existed. The case law requires knowledge of the cause of action, not mere suspicion. For example, in Pioneer, at para. 53, Brown J. cited approvingly P. (T.) v. P. (A.), [1988] A.J. No. 1055, 1988 ABCA 352, 92 A.R. 122, though on a different point, in which the Alberta Court of Appeal discussed fraudulent concealment and stated that “[s]uspicion is not knowledge”: at para. 15. See also Zeppa v. Woodbridge Heating & Air-Conditioning Ltd. (2019), 144 O.R. (3d) 385, [2019] O.J. No. 610, 2019 ONCA 47, at para. 41, leave to appeal to S.C.C. refused [2019] S.C.C.A. No. 91; Lawless v. Anderson, [2011] O.J. No. 519, 2011 ONCA 102, 276 O.A.C. 75, at paras. 21-28; and Kaynes, at para. 56. Because this is a fact-based analysis and both parties’ positions depend on evidence, this factual dispute cannot be decided on a motion under rule 21.01(1)(a).

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 Estate, 2017 ONCA 455, 2017 CarswellOnt 8319 at paras. 55-56; Giroux Estate v Trillium Health Centre, 2005 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 Centre, 2019 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.

The Supreme Court on the application of common law discovery

In Pioneer v. Godfrey, the Supreme Court considered the application of common law discovery to statutory limitation periods.  It is now the leading case on the subject.

The Court held that the common law discovery rule applies only when a limitation period runs from the accrual of a cause of action, or “some other event that can occur only when the plaintiff has knowledge of his or her injury”.

It doesn’t apply when a statutory limitation period runs from an event unrelated to the accrual of the cause of action.  This is because legislature displaces the discovery rule when linking the limitation period to an event unrelated to the plaintiff’s cause of action.

In determining whether a limitation period runs from the accrual of a cause of action, substance prevails.  Even where a statute doesn’t explicitly state that a limitation period runs from accrual, the discovery rule applies if the limitation period in substance commences on accrual .

Thus s. 36(4) of the Competition Act, which the appeal concerned, is subject to discoverability:

[44]                          The text of s. 36(4)(a)(i) provides that no action may be brought under s. 36(1)(a) after two years from a day on which conduct contrary to Part VI occurred. From this, it is clear that the event triggering this particular limitation period is an element of the underlying cause of action. That is, the limitation period in s. 36(4)(a)(i) is triggered by the occurrence of an element of the underlying cause of action — specifically, conduct contrary to Part VI of the Competition Act. Therefore, it is subject to discoverability (Fanshawe College of Applied Arts and Technology v. AU Optronics Corp., 2016 ONCA 621 (CanLII), 132 O.R. (3d) 81, at para. 18).

Justice Côté dissented.  When a limitation period commences on the occurrence of an element of a cause of action rather than the cause of action’s accrual, it does not necessarily follow that the discovery rule applies.  This is because the occurrence of the an element may not depend on the plaintiff’s knowledge:

[151]                     Conversely, “the occurrence of an element of the underlying cause of action” (Brown J.’s reasons, at para. 44) will not always fit within either category outlined above at para. 149. It may be that the occurrence of such an event does in fact depend on the state of the plaintiff’s knowledge, but unlike the accrual of a cause of action, this does not invariably follow as a matter of logical necessity. In Peixeiro, for example, this Court held that the point at which damages are sustained — a constituent element of (among other things) the tort of negligence — depends on when the plaintiff actually has knowledge of his or her injury. Knowledge will not form part of every element of the cause of action in negligence, however. A breach of a standard of care, for example, may occur years or even decades before the plaintiff first learns about it. Although such a breach is a prerequisite to a successful claim in negligence, it is also something that takes place without any regard to the plaintiff’s state of mind.

[153]                     With this in mind, I am respectfully of the view that my colleague’s approach is undermined by the well-settled principle that the discoverability rule is fundamentally a rule of statutory interpretation. The fact that a limitation period begins running upon the occurrence of anelement (and not upon the accrual or arising) of the plaintiff’s cause of action is not, on its own, indicative of any legislative intent regarding the applicability of the discoverability rule. As I have already indicated, my colleague’s conclusion is the same as the one reached by the Court of Appeal in this case and by the Ontario Court of Appeal in Fanshawe: in such circumstances, according to him, discoverability applies automatically. This, however, creates an arbitrary distinction between triggering events that are related to the cause of action and those that are not, despite the fact that both may occur independently of the plaintiff’s state of mind. How can it fairly be said that the legislature intended the discoverability rule to apply to one and not the other? Although knowledge is necessary for a cause of action to fully accrue to the plaintiff, it does not follow that an element of the cause of action also occurs only when the plaintiff has knowledge thereof.

[154]                     A preferable approach is instead one that considers each statutory limitation clause on its own terms, recognizing that a triggering event that relates to a cause of action can, but need not, be dependent upon the plaintiff’s state of mind. This approach is faithful to this Court’s jurisprudence, and respectful of the notion of discoverability as an interpretative tool and not a general rule that allows clear statutory wording to be disregarded. For my part, I would reaffirm the approach laid out in Fehr without any modification.

Thus discoverability doesn’t apply to the s. 36(4) limitation period:

[157]                     The wording of the limitation period set out in s. 36(4)(a)(i) provides ample support for the proposition that the two-year period commences independently of when the plaintiff first learns of the wrongdoing. Rather than having the limitation period commence upon the accrual of the cause of action (as was the case in Central Trust and M. (K.)), Parliament decided that it would instead commence on “a day on which the conduct was engaged in” — which, contrary to the position taken by my colleague, is not “wording to [the same] effect” as “accrual of the cause of action” (paras. 37 and 41). There is simply no link between this triggering event and the plaintiff’s state of mind; it is, in short, an “event which clearly occurs without regard to the injured party’s knowledge”. The Certification Judge’s reading of this provision led him to the same conclusion (para. 54 (CanLII)). It was the existence of conflicting jurisprudence on this point that caused him “not [to be] satisfied that it is plain and obvious that the discoverability principle can never apply to the limitation period in s. 36(4)” (para. 58).

[158]                     I acknowledge that the “discoverability rule has been applied by this Court even to statutes of limitation in which plain construction of the language used would appear to exclude the operation of the rule” (Peixeiro, at para. 38). However, a consideration of the context surrounding s. 36(4)(a)(i) lends further support to the conclusion that the discoverability rule does not apply.

[159]                     First, the cause of action in s. 36(1)(a) is based on two essential elements: (i) the defendant engaging in conduct contrary to any provision of Part VI, and (ii) the plaintiff suffering loss or damage as a result of such conduct. It is only upon the occurrence of both events that the plaintiff can commence proceedings on the basis of this statutory cause of action. Cognizant of this, and of the fact that conspiracies of this nature take place in secret, Parliament decided that the limitation period would not begin when the plaintiff actually sustained loss or damage, but rather when the defendant engaged in the prohibited conduct. It is important to keep in mind that the point at which the conduct is engaged in necessarily precedes the point at which a claimant will suffer loss or damage as a result of such conduct. I would also note that the offence under s. 45 is complete as soon as an unlawful agreement is made, meaning that the “conduct” is “engaged in” even if the agreement is not actually implemented or prices do not actually increase. It follows as a direct consequence of this legislative choice that the limitation period can in fact expire before the plaintiff is in a position to commence proceedings under s. 36(1)(a).

[160]                     Second, s. 36(4)(a)(ii) provides a mechanism for the plaintiff to advance a claim that may be barred by s. 36(4)(a)(i): even if two years have expired from the day on which the prohibited conduct was engaged in, the limitation period will restart on the day on which criminal proceedings relating to the impugned conduct are finally disposed of. While s. 36(4)(a)(ii) applies only where the alleged conduct contrary to Part VI is the subject of criminal prosecution, it nevertheless provides an indication that Parliament was aware of the strictness of s. 36(4)(a)(i) and chose to enact this provision as the only means of relieving against it.

[161]                     Third, and unlike claims subject to the general limitation period in British Columbia’s Limitation Act, S.B.C. 2012, c. 13, s. 21, Parliament has not subjected claims under s. 36(1)(a) to any ultimate limitation period. Interpreting s. 36(4)(a)(i) as commencing only when the underlying conduct becomes discoverable will therefore have the effect of leaving defendants at risk of lawsuit indefinitely. As Paul-Erik Veel helpfully observes, the result would be that “companies could face claims decades later, well after the employees involved in the alleged conspiracy may have left and documents lost, without any ability to defend themselves” (Waiting forever for the axe to drop? Discoverability and the limitation period for Competition Act claims, Lenczner Slaght, August 12, 2016 (online)). This runs contrary to the certainty and evidentiary rationales that underlie the law of limitations.

[162]                     Fourth, the two-year limitation period was enacted by Parliament at a time when limitation periods were comparatively much longer. For example, the provincial limitations statutes that were in force at the time in Ontario and British Columbia set out a general limitation period of six years (The Limitations Act, R.S.O. 1970, c. 246, s. 45(1); Statute of Limitations, R.S.B.C. 1960, c. 370, s. 3). The relatively short limitation period at issue here, which commences even before the cause of action fully crystalizes, provides a further indication of the premium that Parliament placed on granting repose to defendants and encouraging diligence by potential plaintiffs.

I find Justice Côté’s reasoning more persuasive.  I say that with the qualification that I am not as conversant with common law discovery jurisprudence as I am with codified discovery jurisprudence.

That said, I am sufficiently conversant to recognise a curious fiction that underlies the court’s competing arguments.  For the most part, courts apply common law discovery to limitation periods that predate the rule.

Take for example the limitation period in s. 38(3) of the Trustee Act, which commences on death.  It predates the 1997 Supreme Court decision in Peixeiro which determined that discoverability was of general application.  Thus in 2000, the Court of Appeal in Waschkowski noted that “Until the later decision of the Supreme Court of Canada in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, 151 D.L.R. (4th) 429, it was not clear whether the discoverability rule applied to all limitation provisions, or whether its application depended on the actual wording of the statutory limitation”

Section 38(3) dates from 1990.  It’s possible, but doubtful, that the legislature drafted s. 38(3) as a response to, say, the early SCC discoverability decisions like 1986’s Central Trust.  However, it’s beyond doubt that the Legislature did not draft the limitation periods in the former Limitations Act mindful of the discoverability rule.  Some of those limitation periods were centuries old before discoverability was even a glimmer in the Legislature’s eye.

Similarly, it’s not clear to me how Parliament could have intended discoverability to apply to s. 36 of the Competition Act when that provision appears to have been enacted in 1985, a year before Central Trust.

So, the court really isn’t arguing about what Parliament intended subjectively, because Parliament didn’t know that discoverability was going to be a rule of general application.  Instead, the court is trying to rationalise common law discovery with limitation periods drafted before the rule existed.  I think Justice Côté’s approach is the soundest conceptually.

In that regard, I note another problem with the majority’s analysis.  If a limitation period commences on the occurrence of an event that forms part of a cause of action, and if discoverability applies, it would be possible to discover the event before the cause of action accrues.  The limitation period would commence before there is a legal basis for an action.  This wouldn’t happen with s. 36(4), but insofar as the majority is setting out a rule, it’s one with problematic implications.

There are two other noteworthy aspects of the decision:

First, the decision includes what is now the leading consideration of fraudulent concealment.  Importantly, the court clarifies that the doctrine does not require a “special relationship between the parties” as its conventional formulation suggests:

[53]                          While it is therefore clear that equitable fraud can be established in cases where a special relationship subsists between the parties, Lord Evershed, M.R. did not limit its establishment to such circumstances, nor did he purport to define exhaustively the circumstances in which it would or would not apply (see T.P. v. A.P., 1988 ABCA 352 (CanLII), 92 A.R. 122, at para. 10). Indeed, he expressly refused to do so: “[w]hat is covered by equitable fraud is a matter which Lord Hardwicke did not attempt to define two hundred years ago, and I certainly shall not attempt to do so now” (Kitchen, at p. 249, emphasis added).

[54]                          When, then, does fraudulent concealment arise so as to delay the running of a limitation period? Recalling that it is a form of equitable fraud, it becomes readily apparent that what matters is not whether there is a special relationship between the parties, but whether it would be, for any reason, unconscionable for the defendant to rely on the advantage gained by having concealed the existence of a cause of action. This was the Court’s point in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19 (CanLII), [2002] S.C.R. 678, at para. 39:

[Equitable fraud] “… refers to transactions falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained” (p. 37). Fraud in the “wider sense” of a ground for equitable relief “is so infinite in its varieties that the Courts have not attempted to define it”, but “all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken” [Emphasis added.]

It follows that the concern which drives the application of the doctrine of equitable fraud is not limited to the unconscionability of taking advantage of a special relationship with the plaintiff. Nor is the doctrine’s application limited, as my colleague suggests, to cases where there is something “tantamount to or commensurate with” a special relationship between the plaintiff and the defendant (paras. 171 and 173-74). While a special relationship is a means by which a defendant might conceal the existence of a cause of action, equitable fraud may also be established by pointing to other forms of unconscionable behaviour, such as (for example) “some abuse of a confidential position, some intentional imposition, or some deliberate concealment of facts” (M. (K.), at p. 57, citing Halsbury’s Laws of England (4th ed. 1979), vol. 28, para. 919). In short, the inquiry is not into the relationship within which the conduct occurred, but into the unconscionability of the conduct itself.

Second, the majority formulates discoverability as applying when “a limitation period runs from the accrual of cause of action or knowledge of the injury”.   The language “knowledge of the injury” comes from Peixero, which takes it from the MB CA decision in Fehr, where it appears without any explanation.  I don’t know what it means.  Is it a reference to a circumstance where a wrong isn’t actionable unless it causes an injury that rises above a threshold?  I struggle to think of other scenarios where knowledge of an injury causes time to run, but knowledge of the cause of action wouldn’t.

It’s odd to me that the majority thought this would be so self-evident that no explanation was required.  At risk of a little (inexcusable) immodesty, the majority and the dissent cite the my text book: this is good indication that if I don’t know what it means, I’m not sure the court could reasonably assume it’s common knowledge.

 

 

Ontario: Court of Appeal continues to disagree about limitations analyses (and clarifies that fraudulent concealment doesn’t apply to s. 5)

 

It’s not often that the Court of Appeal disagrees on a limitations issues (or at least until recently when there have been a number of dissents in limitations decisions), and it’s especially rare that the Court disagrees about whether there have been errors of fact.  That’s what make Zeppa v. Woodbridge Heating & Air-Conditioning Ltd. interesting.  Justice Brown, with Justice Strathy concurring, disagreed with Justice Feldman about what facts were necessary for the plaintiff to know that the defendant HVAC installer had caused or contributed to a faulty HVAC system.   

The motion judge found that problems with the HVAC system were necessarily the result of the defendants’ act or omissions because the defendant installed it:

It is crystal clear from these reports, as well as Christopher’s Examination, that the Plaintiffs knew long before February 2010 that the HVAC system was not functioning properly. Woodbridge was clearly responsible since they had installed the system…

Justice Brown did not find any error with this reasoning:

[46]      Unlike my colleague, I see no error in the factual findings that would justify appellate intervention. The motion judge did not misapprehend the evidence. His findings were solidly grounded in the record before him. Accordingly, I would not give effect to this ground of appeal.

However, Justice Feldman didn’t agree that it necessarily followed from the fact of the HVAC problems that the defendant had caused or contributed to them:

[92]      The motion judge found, at para. 33, that “it was not necessary for Christopher to have knowledge of the fact that the Quietside boilers were installed improperly in order for the limitation period to commence running. What was needed was knowledge, actual or imputed, that he had a “claim” against Woodbridge.” This was a legal error.

[93]      In the circumstances of this case, knowledge of the improper installation was an essential element of discoverability of the appellants’ claims for negligence and breach of contract.

[95]      Until Woodbridge’s improper installation was revealed, the Zeppas knew that the system had many problems, but they did not know that the problems were caused by the act of improper installation by the respondent. They did not know of any act or omission by Woodbridge or the day it occurred.

[96]      In fact, when the Zeppas first came to Woodbridge with complaints, Woodbridge informed them that the problems with the system were due to lack of maintenance. There were no problems with the HVAC system itself and no suggestion that the problem was caused by improper installation. On the basis of Woodbridge’s assurances, the Zeppas entered into a two-year maintenance agreement. This cost them approximately $4600.

[97]      However, Woodbridge knew that maintenance would never fix the HVAC system. Woodbridge concealed the fact that its faulty installation of the boilers was the central cause of the Zeppas’ problems. Until Quietside revealed that fact to the Zeppas, Woodbridge’s fraudulent concealment prevented the Zeppas from knowing whom to hold responsible for the damage to their family home and why.

[99]      If the action had been pleaded as a breach of an implied warranty, or if Woodbridge had provided an explicit warranty, the Zeppas’ knowledge that the HVAC system was not working properly may have been sufficient to trigger the running of the limitation period. But that is not the claim here.

[100]   Problems that can be resolved through maintenance are not necessarily caused by the acts or omissions of the installer. The motion judge’s finding that the Zeppas’ problems were clearly caused by Woodbridge’s acts or omissions was not based on any evidence other than the fact that there were ongoing problems with the HVAC system. He treated the cause of action as if it were for breach of warranty and not for negligence or breach of contract in the installation of the system.

[101]   Mr. Zeppa first contacted Quietside because he had heard that its boilers were terrible and that was why Quietside was no longer operating in Canada, i.e. the boilers had a possible manufacturing defect or were inherently faulty. When he asked the manufacturer for assistance, Quietside responded to his inquiries with the letter that revealed Woodbridge’s faulty installation of the boilers and Woodbridge’s knowledge that its faulty installation was the cause of the problems.

[103]   Mr. Zeppa’s evidence demonstrates why knowledge that the HVAC system was not working properly was not enough to trigger the basic limitation period. In the face of Woodbridge’s assurances, Mr. Zeppa reasonably suspected that the boiler manufacturer may have been responsible for the HVAC problems. Woodbridge’s false assurances continued until late 2010.

I find Justice Feldman’s reasoning significantly more persuasive.  It’s not evident to me why the court considered it “crystal clear” that if the HVAC wasn’t working it was the installer’s fault.  Knowledge that the installation was faulty is not “the how it happened” that Justice Brown refers to (at para. 43) of his reasons, but prima facie knowledge of actionable conduct.  In the absence of prima facie knowledge that defendant at contributed to the loss, I don’t see how the plaintiff could have discovered the claim.  Perhaps there’s something in the record that explains this, but not on the face of the decision.

Two other aspects of the decision are noteworthy.

First, it reiterates that the principle of fraudulent concealment is not a consideration in a s. 5 analysis, a point on which the majority and the dissent agree.  This is because s. 5 achieves the same result:

[71]      The decisions in Dhaliwal and Kim, together with the plain language of ss. 4 and 5 of the Act, support the conclusion that there is no independent work for the principle of fraudulent concealment to perform in assessing whether a plaintiff has commenced a proceeding within the basic two-year limitation period. That is because the elements of the discoverability test set out in ss. 5(1)(a) and (b) address the situation where a defendant has concealed its wrong-doing. If a defendant conceals that an injury has occurred, or was caused by or contributed to by its act or omission, or that a proceeding would be an appropriate means to seek to remedy it, then it will be difficult for the defendant to argue that the plaintiff had actual knowledge of those facts until the concealed facts are revealed. Whether the plaintiff ought to have known of those matters, given their concealment, is a matter for inquiry under s. 5(1)(b).

[72]      If the defendant’s concealment of facts results in a lack of actual or objective knowledge by the plaintiff of the elements set out in s. 5(1)(a) of the Act, then the plaintiff does not discover his or her claim until the date the concealed facts are revealed to or known by the plaintiff, at which point time begins to run. That is to say, the analysis required by s. 5(1) of the Act captures the effect of a defendant’s concealment of facts material to the discovery of a claim.

Also note that this is now the leading description of the principle, as demonstrated by the Court’s reference to it in Endean.

Second, it contains a disappointing reference to Lawless:

[42]      As this court observed in Lawless, at para. 23, the question to be posed in determining whether a person has discovered a claim is whether the prospective plaintiff knows enough facts on which to base a legal allegation against the defendant. In support of that proposition, Lawless cited the decision of this court in McSween v. Louis (2000), 2000 CanLII 5744 (ON CA), 132 O.R. (3d) 304 (C.A.), where Feldman J.A., writing for the majority, stated, at para. 51:

The question to be posed when assessing discovery is when the plaintiff had knowledge of the discovery matters, not knowledge of the facts necessary for a legal allegation (which is the question required by common law discovery).  Nevertheless, the Court’s point regarding the amount of knowledge necessary to satisfy the discovery matters—prime facie knowledge—remains valid without reverting to common law discovery principles to describe discovery under s. 5.

Alberta: Be wary of the ultimate limitation period

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The Court of Appeal’s decision in W.P. v. Alberta is a reminder of the finality of Alberta’s ultimate limitation period. It runs from of date of injury even when the claimant is unaware of the injury or incapable of discovering it. It pauses only in narrow circumstances.  It’s harsh.

The appellants were formerly resident students at the Alberta School for the Deaf. They alleged physical, sexual, and emotional abuse by their teachers, staff, and other students. They alleged that the abuse occurred at varying times between the early 1960s until 1991.

When the appellants applied for certification of the action as a class proceeding, Alberta cross-applied for summary judgment. Alberta submitted that the appellants commenced their action after the expiry of the ultimate limitation period in section 3(1)(b) of the Limitations Act (which I don’t quote here because it’s very long, but the link takes you right to it). The chambers judge agreed and dismissed the action.

Section (3)(1)(b) provides that if a claimant doesn’t seek a remedial order within ten years after the claim arose, the defendant is entitled to immunity from liability in respect of the claim. Time begins to run from the date of the negligent or wrongful act.  Because time runs from a fixed date, the discoverability principle doesn’t apply:

[29]           […] the ultimate limitation period tolls without regard to when the alleged harm occurred, or when the fact of its occurrence was discovered or even discoverable. Rather, it begins to run merely upon the occurrence of the breach of the duty – in this case, upon the occurrence of the alleged abuse. This is not only the plain effect of the statutory language, but was its anticipated and intended effect: Limitations, Alberta Law Reform Institute Report No 2007 ABCA 347 (CanLII), 55, December 1989 at 70-71, 425 AR 123

The act does provide for the suspension of the ultimate limitation period in two circumstances. Section 4 of the act suspends time while the defendant fraudulently conceals the occurrence of the injury:

4(1)  The operation of the limitation period provided by section 3(1)(b) is suspended during any period of time that the defendant fraudulently conceals the fact that the injury for which a remedial order is sought has occurred.

(2)  Under this section, the claimant has the burden of proving that the operation of the limitation period provided by section 3(1)(b) was suspended

Section 5 suspends time when the claimant is a “person under disability”, which, pursuant to the definition in section 1(h) is either a represented adult as defined in the Adult Guardianship and Trusteeship Act, a person for whom a certificate of incapacity is in effect under the Public Trustee Act, or an adult who is unable to make reasonable judgments in respect of the claim:

5(1)  The operation of the limitation periods provided by this Act is suspended during any period of time that the claimant is a person under disability.

(2)  The claimant has the burden of proving that the operation of the limitation periods provided by this Act was suspended under this section.

The appellants relied on both sections 4 and 5. They argued that the teachers and staff of the school concealed the injuries by instructing students to tell no one about the abuse and by providing inadequate education so that the students couldn’t communicate it.

The Court of Appeal laid out the three part test for establishing fraudulent concealment:

[34] […] to demonstrate fraudulent concealment, as alleged here, which suspends the running of the ultimate limitation period, the appellants must show (1) that Alberta (or its agents or servants) perpetrated some kind of fraud; (2) that the fraud concealed the fact of their injury; and (3) that the appellants each exercised reasonable diligence to discover the fraud.

The Court of Appeal found that the appellants couldn’t satisfy the test. Though the injuries caused by abuse of children often manifest slowly and imperceptibility so that “only the passage of time and maturity allows the victim to realize the magnitude of the harms suffered, and their cause”, this has no bearing on whether the injuries have been concealed.   The appellants had no evidence that they were laboring under a misapprehension of the fact of having suffered an injury:

[36] […] While they might not have known until later that they could sue, that is not the same thing as having the fact of the wrongful conduct and its effects deliberately concealed from them. Nor does being told at the time not to discuss the abuse support an allegation of fraudulent concealment of the fact of the injury. While the evidence here strongly suggests that each of the appellants were aware of the wrongfulness of the alleged acts well before the expiry of the ultimate limitation period, we need not decide that here. It suffices to conclude that the issue of fraudulent concealment is insufficiently meritorious to require a trial.

The Court of Appeal also rejected the appellants’ reliance on section 5:

The appellants do not say that they were represented adults under the Adult Guardianship and Trusteeship Act or persons subject to a certificate of incapacity under the Public Trustee Act. And, while each of them has encountered difficulties in life, they do not show how such difficulties rendered them unable to make reasonable judgments in respect of their claims. Even the facts alleged by EP with respect to her time spent in psychiatric hospital care, which might form part of an account of a disability which suspends the operation of the ultimate limitation period, is on its own insufficient to show that the issue has merit. We are not told, for example, what that care entailed, when she was in that care, or for how long.

The Court of Appeal concluded its analysis with a warning about the high bar for invoking sections 4 or 5:

It is difficult – and [the Legislature] intended that it be difficult – for plaintiffs to persuade a court that the ultimate limitation period should not run for a period of time. It will be a rare case where deliberate concealment of the fact of an injury, or a condition which disables a claimant from making reasonable judgments, can be established within the meaning of sections 4 and 5 of the Act.

I also note the Court of Appeal’s warning that a class proceeding has no special status that allows it to survive where it would otherwise be statute-barred:

[21]           Simply put, a class proceeding is just one procedural mode of advancing a claim. The mere fact that a claim is advanced by way of a class proceeding does not endow it with special status allowing it to survive where the same claim would otherwise be doomed. More particularly, it remains subject to all the tools furnished by Part 7 of the Rules of Court for resolving claims without a full trial, including summary judgment […].

 

[22]           The foregoing applies with equal force where the summary judgment application is based upon the expiry of a limitation period relative to the claim of a proposed representative plaintiff. Where a proposed representative plaintiff’s claim is shown to be time-barred, there is no good reason for permitting the issue of certification to continue consuming judicial and litigants’ resources. Indeed, there is good reason for not doing so, since the representative plaintiff must be a member of the class. Allowing a representative plaintiff’s clearly time-barred claim to proceed further would defy the Legislature’s intent that the class proceeding be brought only by someone with a personal stake in the outcome [internal citations omitted].