Laches

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ontario: reviewing laches and acquiescence

The Superior Court decision in Tsui-Wong v. Xiao contains a good summary of the principles of laches and acquiescence:

The Test for the Doctrine of Laches

[222]      I adopt the comments of Penny, J. in Indcondo v. Sloan, 2014 ONSC 4018 (CanLII), 121 O.R. (3d) 160, at paras. 157-159 as a succinct and current formulation for the defence of laches:

Laches is an equitable doctrine, akin to estoppel, founded on the principle that one is obliged to assert legal rights in a timely way or risk losing them. Laches is a form of equitable limitation period. Two factors dominate the consideration of this doctrine:

(1)     delay and its circumstances; and

(2)     prejudice resulting from that delay.

In Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221 (Ontario P.C.), at 239 -240 the principle was stated as follows:

…[it] is not an arbitrary or technical doctrine… Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.

[223]      The Supreme Court of Canada discussed these critical factors in M. (K.) v. M. (H.), 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6 (S.C.C.), at pp. 77-78:

What is immediately obvious from all of the authorities is that mere delay is insufficient to trigger laches… Rather, the doctrine considers whether the delay of the plaintiff constitutes acquiescence or results in circumstances that make the prosecution of the action unreasonable. Ultimately, laches must be resolved as a matter of justice as between the parties, as is the case with any equitable doctrine.

[224]      The doctrine of laches can be used to defend a claim under the Fraudulent Conveyances Act, R.S.O. 1990, c. F. 29.[5]

[225]      As confirmed in M.(K.), laches must be resolved as a matter of justice between the parties, as in any equitable doctrine.

Acquiescence

[226]      The Defendants argue first, that the Plaintiff has acquiesced to the claim being dismissed.

[227]      There is a lengthy consideration by Spence, J. in 392278 Ont. Ltd. v. Miletich Estate (2001), 38 R.P.R. (3d) 239, at para. 71, as to the meaning of laches, and acquiescence). The case law confirms that acquiescence must be equivalent of waiver, and is more than simply the passage of time: in that case 43 years.

[228]      Spence, J. cited with approval a decision of the British Columbia Court of Appeal in Irvine v. Irvine, [1977] 3 W.W.R. 37 (B.C.C.A), at para. 13,adopting Halsbury’s formulation :

The nature of laches. The legislature, in enacting a statute of limitation, specifies fixed periods after which claims are barred; equity does not fix a specific limit, but considers the circumstances of each case: Smith v. Clay (1767), 3 Bro. C.C. 639, 27 E.R. 419. In determining whether there has been such delay as to amount to laches the chief points to be considered are (1) acquiescence on the plaintiff’s part, and (2) any change of position that has occurred on the defendant’s part. Acquiescence in this sense does not mean standing by while the violation of a right is in progress, but assent after the violation has been completed and the plaintiff has become aware of it. It is unjust to give the plaintiff a remedy where he has by his conduct done that which might fairly be regarded as equivalent to a waiver of it; or where by his conduct and neglect he has, though not waiving the remedy, put the other party in a position in which it would not be reasonable to place him if the remedy were afterwards to be asserted. In such cases lapse of time and delay are most material. Upon these conditions rests the doctrine of laches: Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221 at 239, per Lord Selborne.

[229]      The Court in 392278 Ont. Ltd. concluded that the defendant remained in residence throughout the 43-year period. There was no evidence that she passed up opportunities or changed her position over the years. The delay was long, but did not constitute acquiescence. There was no evidence that the plaintiff had waived her rights.

[230]      The trial judge’s findings were upheld by the Court of Appeal in 392278 Ont. Ltd. v. Miletich Estate, [2002] O.J. No. 3795.

[231]      I find that the Defendants cannot rely upon the Plaintiff’s acquiescence. Admittedly, there is a significant delay of nine years of inactivity. Had the Plaintiff searched in 2005, she would have found out that June was residing in Ontario. Even after locating the Defendants, and in particular June, the Plaintiff did not commence the second Fraudulent Conveyance Action for almost two years after she located June.

[232]      The Plaintiff testified that she was always hopeful that Daniel would surface, and that she could pursue her judgment against him. The Plaintiff was litigation weary and for a period of time was ill and preoccupied by her children pursuing their studies. I accept that the Plaintiff always intended to pursue the Defendants once she was able to locate them, and once she determined that there may be assets to realize upon.

Ontario: Laches can’t trump the Limitations Act

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

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

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

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

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

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

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

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

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