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

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].