Ontario Act s. 13

Ontario: the principles of s. 13 acknowledgment

University Plumbing v. Solstice Two Limited contains a reasonably uncommon discussion of s. 13 acknowledgment principles:

[15]           The last payment made by Solstice to the Plaintiff was on September 5, 2012. There is written acknowledgment of the debt in the form of email correspondence by Mr. Chalmers to representatives of the Plaintiff on June 20, 2013, October 9, 2013, April 25, 2014, and August 8, 2014. Mr. Chalmers admits that he sent these communications and that they contained his electronic signature.

 [16]           According to ss. 13(1), (10), and (11) of the Limitations Act, 2002, SO 2002, c. 24, Sched. B, these part payments and written acknowledgements bring the debt within two years of the commencement of the action. Under s. 13(8) these acknowledgments apply even though they may not contain specific promises to pay (although some of these communications do, in fact, contain such promises to pay the liquidated amount). The Court of Appeal has also confirmed that the acknowledgments do not have to specifically state the amount of the debt owing: Middleton v Aboutown Enterprises Inc., 2009, ONCA 466, at para 1; see also Back v Gilroy, 1977 CanLII 1548, at para 10 (Sask Dist Ct).
 [17]           This is especially the case where, like here, the actual amount is not a contentious issue: Phillips v Rogers, 1945 CanLII 500 (AB QB), [1945] 2 WWR 53, at para 26, citing Spencer v Hemmerde, [1922] 2 AC 507, 518. As stated by the Saskatchewan Court of Queen’s Bench in I.D.H. Diamonds NV v Embee Diamond Technologies Inc., 2017 SKQB 79, at para 21, “the court will look at the circumstances in which it was written, and will construe it in the way in which the writer intended it to be construed by the person to whom it is addressed.”
 [18]           The Defendants make an issue of the fact that the written acknowledgements were digitally transmitted and were not signed by hand. Counsel for the Defendants points out that s. 13(10) of the Limitations Act states that signed written acknowledgments are what is required. However, the case law establishes that the issue in every case will be one of fact: Lev v Serebrennikov, 2016 ONSC 2093, at para 24.
 [19]           The communications here are virtually identical to those described in Fleisher Ridout Partnership Inc. v Tai Foong International Ltd., 2012] OJ No 4229, at para 16:
 I am of the view that the Emails are something more than a mere acknowledgment of the debt. Firstly, the defendant expresses regret and surprise that the invoices have not been already paid. In fact, not only does he not object or deny payment but he clearly and reservedly indicates that the invoices should have been paid already. Secondly, he agrees to take ‘action’ to pay them.

[20]           As in Lev, at para 24, the “email[s] can satisfy the requirements of s. 13 of the [Litmitations] Act concerning acknowledgment.” Context is everything in these situations. Counsel for the Defendants submits that if a limitation period is to be waived, formality is important to ensure that it was intended by the sender of the communication. Here, however, that is not a particularly contentious issue since the communications are repeated and fully acknowledged. The emails sent by Mr. Chalmers and Mr. Smith all contain digital signatures. Under different circumstances those might not amount to conscious acknowledgment of the debt, but here the two individuals who sent them specifically concede that they were intended to be unequivocal acknowledgments of the debt.

 [21]           Mr. Chalmers and Mr. Smith have admitted in discovery that Solstice repeatedly confirmed liability for the full balance owing. In an email dated September 18, 2015, Mr. Smith specifically stated that the debts remained owing and again reiterated an intent to pay. As already indicated, it is the Defendants’ position that Chalmers and Smith were speaking strictly in their capacities as directors and officers of Solstice, and not of DSD or personally. However, under s. 13(6) of the Limitations Act, an acknowledgment by one trustee (i.e. Solstice) is an acknowledgment by any other person who is a trustee or later becomes a trustee (i.e. DSD, Chalmers, and Smith). “[D]irectors [who] had knowingly participated in a fraudulent and dishonest breach of trust…were therefore personally liable as constructive trustees”: St Mary’s, at 620.

Ontario: the impact of partial payment on the limitation of debt claims

Hamilton and Son Roofing Inc. v. Markham (City) provides an example of a partial payment operating to restart the limitation period for a debt:

[51]           In any event, the Notice of Action was not issued until June 14, 2016, more than two years after the June 10, 2014 email was received.

[52]           The final issue is whether the payment of the deficiency holdback on May 6, 2015, was an acknowledgment of the debt through part payment under the contract, within the meaning of s. 13(11) of the Act.

[53]           The effect of s. 13(11) of the Act was summarized by Perell J. in Montcap Financial Corporation v. Schyven, 2011 ONSC 4030 (CanLII), at para. 26:

With each payment, a debtor acknowledges or re-acknowledges his or her liability; partial payment acts as an acknowledgment that will restart the running of the two-year limitation period: ABC Lumber Ltd. v. Bodrenok, 2010 ONSC 769 (CanLII), 2010 ONSC 769 (S.C.J.) at para. 39; Emmott v. Edmonds 2010 ONSC 4185 (CanLII), 2010 ONSC 4185 (S.C.J.); Bank of Nova Scotia v. Christie, 2008 CanLII 37609 (ON SC), [2008] O.J. No. 2971 (S.C.J.) at paras. 58-59; Montreal Trust Co. of Canada v. Vanness Estate, [2005] O.J. No. 594 (C.|A.) at para. 2; Markham School for Human Development v. Ghods (2002), 2002 CanLII 62432 (ON SCDC), 60 O.R. (3d) 624 (Div. Ct.).

[54]           In my view, Markham’s payment of the deficiency holdback on May 6, 2015, was a part payment under s. 13(11) of the Act and had the effect of restarting the limitation period.

[55]           The three invoices delivered by Hamilton Roofing on April 7, 2014 all related to the same contract: Markham Purchase Order # PD13334. These invoices represented the total contract price of $151,035.80. Markham held back part of the purchase price – $9,000 plus HST – for deficiencies. When Markham paid this amount on May 6, 2015, it was not making a payment that was unrelated to the invoice at issue; it was making a “part payment” of the amount originally claimed by Hamilton Roofing. This was not the payment of a different or additional contract. It related to the original contract and invoices, even though payment was made in response to a new invoice for the deficiency hold back amount.

[56]           As this part payment occurred within two years of May 28, 2014, it had “the same effect as the acknowledgment” in s. 13(1) of the Act, and restarted the running of the two year limitation period as of May 6, 2015. Since the Notice of Action was issued on June 14, 2016, and the Statement of Claim issued on July 13, 2016, the action is not time barred.

Ontario: Acknowledgments of liability must be clear, unequivocal

Section 13(1) of the Limitations Act applies to acknowledgments of liability:

Acknowledgments

13. (1) If a person acknowledges liability in respect of a claim for payment of a liquidated sum, the recovery of personal property, the enforcement of a charge on personal property or relief from enforcement of a charge on personal property, the act or omission on which the claim is based shall be deemed to have taken place on the day on which the acknowledgment was made.  2002, c. 24, Sched. B, s. 13 (1).

What type of acknowledgement will engage this provision? One that is clear and unequivocal.  A mere proposal for a settlement plan that doesn’t acknowledge an amount owing won’t suffice.  The Court of Appeal decision in 1702108 Ontario Inc. v. 328331 Canada Inc. reiterates the principle:

[5]         The language of the statute sets out the applicable test: s. 13(1) is engaged when a person acknowledges liability in respect of a claim for payment of a liquidated amount. In Middleton v. Aboutown Enterprises Inc., 2009 ONCA 466 (CanLII), this court held, at para. 1, that s. 13(1) requires a “clear and unequivocal acknowledgement of the debt claimed.” In that case, the court upheld the motion judge’s finding that a mere offer to settle a claim, without acknowledging that any amount remained owing, did not amount to an acknowledgement of liability for the purposes of s. 13(1).

[6]         In the present case, Mr. Durrani’s March 14 email did not acknowledge liability for the liquidated sum of $296,700 demanded by the appellant in its March 14 correspondence. At most, the respondent’s March 14 email proposed negotiating a settlement plan, without acknowledging that any amount remained owing. When the appellant subsequently pressed for an acknowledgement of liability for the liquidated sum, the respondent refused to give one. Accordingly, we see no basis to interfere with the motion judge’s conclusion that the March 14, 2013 email was not an acknowledgement. We would not give effect to this ground of appeal.

Ontario: an overview of s. 13 jurisprudence

In Deloitte & Touche LLP v. Kuiper, Justice Hood provides a helpful summary of the jurisprudence considering section 13 of the Limitations Act.

Section 13 deems the date of an acknowledgement of liability in respect of certain types of claims to be the date from which the presumptive limitation period begins to run:

Acknowledgments

13. (1) If a person acknowledges liability in respect of a claim for payment of a liquidated sum, the recovery of personal property, the enforcement of a charge on personal property or relief from enforcement of a charge on personal property, the act or omission on which the claim is based shall be deemed to have taken place on the day on which the acknowledgment was made.

This is the summary:

[14]           In Middleton v. Aboutown Enterprises Inc., [2008] O.J. No. 3608 (S.C.J.) there was a promisory note that had $412,500 outstanding on it.  Prior to any claim being made, the defendants sent a letter and an unsigned release to the plaintiff purporting to offer $50,000 in exchange for an executed release. Justice Lederer stated at para. 11 of Middleton that in order to be an acknowledgment for the purposes of the Act, the acknowledgment must, at a minimum, have to demonstrate and confirm the amount of the debt that remained owing.  Justice Lederer’s decision has been followed in a number of other decisions.

[15]           In Montcap Financial Corp. v. Schyven, 2011 ONSC 4030 (CanLII) at para. 27, and in Skuy v. GreennoughCorporation, 2012 ONSC 6998 (CanLII) at para. 56, Justice Perell in both instances referred to Middleton and stated that an acknowledgment for the purposes of the Act of an indebtedness for a liquidated sum “must, at a minimum, confirm and concede the amount that remains owing”.  In West York International Inc. v. Importanne Marketing Inc., 2012 ONSC 6476 (CanLII), Justice DiTomaso at paragraph 92 referenced Middleton and Montcap, and repeated Justice Perell’s wording that the acknowledgment “must, at a minimum, confirm and concede the amount that remains owing”.

[16]           Justice Lederer’s decision in Middleton was appealed.  While the appeal was dismissed in a four paragraph endorsement, see:  Middleton v. Aboutown Enterprises Inc., 2009 ONCA 466 (CanLII), the Court stated in its endorsement that it did not accept the statement that to stand as an acknowledgment, the letter and Release would, at a minimum, have to demonstrate and confirm the amount of the debt that remained owing.  It would seem that the appeal decision was not drawn to the attention of either Justices Perell or DiTomaso based upon their adoption of Justice Lederer’s wording in their decisions.

[17]           Unfortunately, the Court of Appeal does not say what part of Justice Lederer’s statement it did not accept.  However, the Court went on to say at para. 1 that with respect to the alleged acknowledgment documentation, it “did not constitute a clear and unequivocal acknowledgment of the debt claimed, with a proposal to satisfy it, as opposed to a mere offer to settle a claim, without acknowledging that $412,500, or indeed any amount, remained owing in respect of the promissory note”.

[18]           Using the wording of the Court of Appeal, I cannot find that the letter herein of October 24, 2011, was a clear and unequivocal acknowledgment of the debt claimed.  Nor does the letter contain a proposal to satisfy the debt.  There is no acknowledgment of $143,620.84, or any amount owing in respect of the invoices.  If anything, it was a letter of complaint addressed to the plaintiff complaining that the invoices were not in accordance with the initial estimate and that they lacked detail.  The defendants also raised some tax issues which they said were not drawn to their attention by the plaintiff.  Accordingly, I am unable to find that the defendants acknowledged the debt within the meaning of s. 13 of the Act, thereby extending the commencement of the limitation period.

If you’ll excuse a little pedantry, there’s one issue with the decision that bears noting.  Justice Hood states that “Section 13 of the Act overrides s. 4 of the Act“.  Not so. Section 4 provides that “a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered”.  Section 13 has no impact on section 4.  Rather, section 13 relates to section 5(2), which contains the presumption that a person discovers her claim on the day the act or omission on which the claim is based took place.  Section 13 deems this day to be day the acknowledgement of liability was made.