Ontario Act s. 16(1)(a)

Ontario: s. 16(1)(a) applies to a declaration of breach of Charter rights

In Selkirk et al. v. Trillium Gift of Life Network et al., the Superior Court held that an action seeking a declaration that Charter rights have been infringed could shelter within s. 16(1)(a) because it seeks no consequential relief:

[69]           The respondents argue that the relief sought relating to the death of Mr. Selkirk is statute barred. Mr. Selkirk died in 2010 and this application was commenced in 2015. They argue that a two-year limitation period applies to personal relief sought under s. 24(1) of the Charter.

[70]           In Ravndahl v. Saskatchewan, 2009 SCC 7, [2009] 1 S.C.R. 181, the court distinguished between the litigant’s personal remedies, brought by her as an individual, from an in rem remedy flowing from s. 52 of the Constitution Act, 1982. In that case, the appellant’s personal claim was statute barred, but her claim for a declaration of invalidity arising out of s. 52 was allowed to proceed.

[71]           In Alexis v. Darnley, 2009 ONCA 847, 100 O.R. (3d) 232, the Court of Appeal held that limitation periods of general application apply to an action brought by an individual for a personal remedy under s. 24(1) of the Charter. Pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, the relevant limitation period is two years: Alexis, at para. 21.

[72]           Ms. Selkirk argues that the relief sought is not out of time. She relies on s. 16(1)(a) of the Limitations Act, 2002, which provides that there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought. She argues that she seeks a simple declaration that Mr. Selkirk’s rights were infringed, which does not pronounce any sanction against the respondents. She seeks no consequential relief.

[73]           In determining whether the relief sought is purely declaratory, the court asks the question: if it granted the declaration, and the defendant resisted the implementation of the declaration, could the plaintiff leave the court in peace and enjoy the benefits of the declaration without further resort to the judicial process?: Skylark Holdings Limited v. Minhas, 2017 ONSC 4599, at paras. 26, 28-29, Yellowbird v. Samson Cree Nation No. 444, 2008 ABCA 270, 433 A.R. 350, at paras. 45-47.

[74]           I agree with Ms. Selkirk that the personal remedies sought with respect to Mr. Selkirk’s rights are declaratory only. If the declaratory relief is granted, Ms. Selkirk could leave the court in peace and enjoy the benefits of the declaration without further resort to the judicial process.

[75]           This is because the declaration sought would, if granted, serve the purpose of vindicating Mr. Selkirk’s Charter rights, and recognize that public confidence in the Charter may be negatively impacted when state actors violate Charter rights, especially if doing so results in death. On its own, the vindication, if warranted, would have value.

[76]           Ms. Selkirk makes no claim for monetary compensation or any other consequential relief. If the declaratory relief is granted, the court’s role is complete.

[77]           I thus find that these claims are not statute-barred.

Ontario: Court of Appeal holds no limitation period for applications for a declaration on a codicil’s validity

In Piekut v. Romoli, the Court of Appeal held that no limitation period applies to an application for a declaration on the validity of a codicil.

The motion judge held that such an application is a proceeding for a declaration without consequential relief and therefore free from limitation pursuant to s. 16(1)(a) of the Limitations Act.

The court rejected the appellant’s argument that the basic limitation period applied:

[11]      We do not accept this submission. Both Leibel and Birtzu are readily distinguishable from this appeal.

 [12]      In Leibel, Greer J. acknowledged the potential application of s. 16(1)(a) of the Limitations Act, but held that it did not apply because the applicants had clearly sought consequential relief in addition to a determination of the validity of the will. This consequential relief included: an Order revoking the grant of the Certificate of Appointment of Estate Trustees with a Will; an Order removing the Estate Trustees; an Order that the Estate Trustees pass their accounts; an Order appointing an Estate Trustee During Litigation; and an Order for damages in negligence against the drafting solicitor and her law firm. In addition, in Leibel the primary will of the deceased had been probated. Birtzu had a similar fact pattern.
 [13]      In contrast, in this case Helen sought none of this consequential relief. Nor has anyone done anything to propound the will. It sat there for seven years, presumably because the siblings were all trying to work out their disagreements. In these circumstances, Helen was entitled to seek declaratory relief, simply to establish the validity, or lack of validity, of the codicils – to define the rights of the parties in order to avoid future disputes.

As I wrote regarding the motion judge’s decision, this is the correct outcome by the wrong reasoning.

No limitation period applied to the proceeding because it didn’t pursue a “claim”.  The Limitations Act applies to “claims” pursued in court proceeding (s. 2).  If there’s no “claim”, no limitation period applies.  “Claims” derive from causes of action.  If there’s no cause of action, there’s no “claim”.

There’s no cause of action asserted in an application for a declaration regarding the validity of a codicil (or a will).  Accordingly, the applicants were not pursuing a “claim” in a court proceeding, and no limitation period applied to it.

Statutory limitation periods have always applied to causes of action, which is why there was no suggestion that they applied to will challenges under the former scheme.  The confusion arises from misapprehending the universality of the basic limitation period.  It is universal in that applies to all causes of action, not because it applies to every proceeding.

Ontario: there’s no limitation period for an application for a declaration of a codicil’s validity

 

In Piekut v. Romoli, the applicant sought a declaration as to whether codicils were valid. The respondent moved to dismiss the application as statute-barred. The court denied the motion on the basis that no limitation period applied pursuant to s. 16(1)(a), which prescribes no limitation period for a proceeding for a declaration if no consequential relief is sought.    The applicant was not seeking consequential relief:

[50]           I find that Helen’s question with respect to the validity of the codicils is restricted to declaratory relief. She is not seeking consequential relief. She is not asking the court to determine the ultimate beneficiary of Dundas St. properties or to vest the properties in any particular beneficiary or beneficiaries.

This is the correct outcome by the wrong reasoning.  No limitation period applied to the proceeding because it didn’t pursue a “claim”.  The Limitations Act applies to “claims” pursued in court proceeding (s. 2).  If there’s no “claim”, there’s no limitation period.  “Claims” derive from causes of action.  If there’s no cause of action, there’s no “claim”.

There’s no cause of action asserted in an application for a declaration regarding the validity of a codicil (or a will).  Accordingly, the applicants were not pursuing a “claim” in a court proceeding, and no limitation period applied to it.

Update! The Court of Appeal upheld this decision.

Ontario: the limitation of claims arising from solicitor’s undertakings

Lofranco v. Azevedo considers the limitation period applicable to claims arising from solicitor’s undertakings.

The plaintiff’s new personal injury lawyer undertook to protect the former lawyer’s reasonable account.  The limitation period for the claim to remedy the breach of the undertaking (that is, the failure to pay out the reasonable account) would commence only when the undertaking was revoked:

[40]           In my view, it is not open to the Estate to argue that the limitation period runs against the applicant.  Given my finding that there was a valid undertaking given on behalf of Mr. Pereira, as recently discussed by Quigley J. in Cozzi, at para. 62, the limitation period stops running once the undertaking is given, unless the undertaking is revoked:

63     First, Mr. Cozzi tries to counter that proposition by noting that Kilian D.J. correctly adopted the law that a personal undertaking from a solicitor is not discharged by notification. I agree. Moreover, I agree with the appellant on the general proposition that a solicitor’s undertaking and a client’s undertaking will continue to be enforceable without the interference of a limitation period: Sokoloff v. Mahoney. The Deputy Judge specifically recognized this in para. 17 when he quoted from para. 15 of Sokoloff as follows:

15 There is also clear case law that a solicitor’s undertaking as well as a client’s undertaking is enforceable, can be relied upon, and stops the clock running for the purpose of a limitation defence unless revoked. In Tembec Industries Inc. v. Lumberman’s Underwriting Alliance, (2001) 2001 CanLII 28252 (ON SC), 52 O.R. (3d) 334, [2001] O.J. No. 72 at paras 21-22, Ground J. held that an undertaking to pay a specified amount in damages gives rise to promissory estoppel where the recipient of the undertaking relied on it. Such reliance is expressly contemplated by a solicitor who gives an undertaking, as Wilton-Siegel J. held in Bogoroch & Associates v. Sternberg, [2005] O.J. No. 2522 at para 38.

The former lawyer also had “a charging lien” under the Solicitor’s Act to which no limitation period applied:

[42]           Another basis on which I would find that the limitation period does not run against the applicant is the nature of its interest in the funds held by the Azevedo Firm.  In Thomas Gold Pettinghill LLP, at paras. 88 and 89. Perell J. explained that, besides charging orders that can be made under the Solicitor’s Act, the Court has inherent jurisdiction “to charge assets recovered or preserved through the instrumentality of a lawyer for a client”.

[43]           Perell J. also noted, at para. 101, that, in circumstances where the Court is satisfied that the preconditions are met for a charging lien, the limitation periods in the Limitations Act, 2002, do not apply:

For present purposes, the three points to note from Justice Henry’s decision in Re Tots and Teens Sault Ste. Marie about a charging lien made under the court’s inherent jurisdiction are: first, the charging lien creates the proprietary interest of a secured creditor; second, subject to being declared, the charging lien is an inchoate interest that pre-dates the court’s declaration; and third, the charging lien is intrinsically declaratory in nature. The last point supports Cassel Brock’s argument that a charging lien comes within s. 16 (1) (a) of the Limitations Act, 2002 and is not subject to any limitation period.

[44]           I am satisfied that the applicant is entitled to a charging lien.  In Thomas Gold Pettinghill LLP, at para. 88, Perell J. explained that the preconditions for a charging lien are that “(a) the fund, or property, is in existence at the time the order is granted; (b) the property was recovered or preserved through the instrumentality of the lawyer; and (c) there must be some evidence that the client cannot or will not pay the lawyer’s fees”.

[45]           In this case:

(a)   the funds held in trust by the Azevedo constitute the fund;

(b)   the Lofranco Firm did some work on Mr. Pereira’s file.  While there is a dispute about the extent of the work done, there is no dispute that the firm was involved in moving the matter forward; and

(c)   It is evident from the position taken by the Estate on this application that it will not agree to pay the fees claimed by the Lofranco Firm.

[46]           Looking at the matter from a different perspective, both the Solicitor’s Act and the common law provide special protection to lawyers in recovering their fees in circumstances in which a plaintiff is successful, either through a settlement or by obtaining judgment. The undertaking Mr. Azevedo gave on Mr. Pereira’s behalf and the fact that Mr. Pereira consented to the money being held in trust by the Azevedo Firm once settlement was reached, in my view, constitute an acknowledgement by Mr. Pereira that he understood the Lofranco Firm’s proprietary interest in the funds. However, as discussed below, given that the undertaking was subject to the fees being reasonable and Mr. Pereira’s ability to assess the account, the issue remains whether the applicant is entitled to payment of its full account or whether the Estate is entitled to assess the account.

I’m not familiar with the jurisprudence cited for this conclusion.  A charging lien may well be declaratory, but surely here it would result in the consequential relief of the former lawyer being entitled to the disputed funds?

A declaration that results in consequential relief doesn’t fall within s. 16(1)(a).

 

Ontario: the limitation of claims for unidentified motorist coverage

The decision in Sukhu v. Bascombe holds that the limitation period for a claim for the unidentified motorist coverage in OPCF 44R does not run until the responding insurer refuses to satisfy a demand to indemnify.

[17]      In Schmitz v. Lombard General Insurance Company of Canada, 2014 ONCA 88 (CanLII); leave to appeal refused, [2014] SCCA No. 143, the Court of Appeal was dealing with the question of when the limitation period began to run for an indemnity claim under the underinsured motorist coverage provided by OPCF 44R optional endorsement to the standard form automobile insurance policy in Ontario. The Court of Appeal applied the reasoning in Markel and concluded that the limitation period does not begin to run until a demand to indemnify has been made and the responding insurer has failed to satisfy the claim. See Schmitz at paragraphs 22 to 26.

[18]      The reasoning behind Markel and Schmitz was applied in the decision of Justice Lofchik in Chahine v. Grybas, 2014 ONSC 4698 (CanLII). Justice Lofchik was faced with a motion involving facts very similar to the facts before the court on this motion. The plaintiff was involved in an accident and sued the other driver. After the claim was issued, the defendant’s lawyer advised the plaintiff’s lawyer that there was an unidentified motorist involved who may have been responsible for the accident. The plaintiff later confirmed this by obtaining a complete copy of the police report.

[19]      The plaintiff then brought a motion to add his own insurer pursuant to the unidentified motorist coverage in OPCF 44R of his policy. Justice Lofchik considered the provisions of the Limitations Act and the decisions of the Court of Appeal in Markel and Schmitz. He concluded that the same reasoning applied to unidentified motorist coverage. The limitation period for unidentified motorist coverage does not begin to run until a demand to indemnify has been made and the responding insurer has failed to satisfy the claim. See Chahine at paragraphs 36 to 39.

[20]      The plaintiffs also rely on the decision of Justice Leitch in Platero v. Pollock, 2015 ONSC 2922 (CanLII) which followed the decision in Chahine and also relied on the analysis of the Court of Appeal in Markel and Schmitz. See Platero at paragraphs 33 to 35.

[21]      TTC Insurance relies primarily on four decisions of the Court of Appeal. Those decisions are July v. Neal, 1986 CanLII 149 (ON CA), [1986] OJ No. 1101 (CA); Johnson v. Wunderlich, 1986 CanLII 2618 (ON CA), [1986] OJ No. 1251 (CA); Hier v. Allstate Insurance Co. of Canada, 1988 CanLII 4741 (ON CA), [1988] OJ No. 657 (CA) and Chambo v. Musseau, 1993 CanLII 8680 (ON CA), [1993] OJ No. 2140 (CA). Those decisions stand for the proposition that the limitation period for a claim under the unidentified motorist coverage of a policy of insurance begins to run when a plaintiff knew or ought to have discovered the accident involved the negligence of an unidentified motorist. TTC Insurance argues that these cases are binding authority and have represented the law of Ontario for decades.

[22]      The difficulty I have with the argument of TTC Insurance is that all of the Court of Appeal cases it relies upon were decided prior to the enactment of the current Limitations Act. They were also obviously decided before the decisions of the Court of Appeal in Markel and Schmitz.

[23]      The decisions in Chahine and Platero considered specific provisions and language of the current Limitations Act within the context of the Markel and Schmitz decisions. Both judges came to the conclusion that the limitation period for unidentified motorist coverage indemnity claims does not begin to run until a demand to indemnify has been made and the responding insurer has failed to satisfy the claim. I am unable to distinguish those decisions from the case before the court on this motion. They appear to be binding on this court.

[24]      TTC Insurance cited the contrary decision of Justice Sosna in Wilkinson v. Braithwaite, 2011 ONSC 2356 (CanLII) which held that the limitation period began to run when the plaintiff knew or ought to have discovered that the accident involved the negligence of an unidentified motorist. Although that decision involved the application of the current Limitations Act, it was decided before the Court of Appeal made its decisions in Markel and Schmitz. For this reason, the decisions in Chahine and Platero are to be preferred.

[25]      TTC Insurance also relies on the decision of Master McAfee in Bhatt v. Doe, 2018 ONSC 950 (CanLII), 2018 ONSC 950 (Master) in which she applied the July decision. The decisions in Chahine and Platero are not mentioned by Master McAfee and nor are the Markel and Schmitz Court of Appeal rulings. I do not know whether those cases were considered by her. In any event, the decision of another master is of persuasive value only. I am not bound to follow it, especially in the face of contrary decisions of a judge.

[26]      Counsel for TTC Insurance also suggested that the Chahine and Platero decisions were simply incorrect. TTC Insurance submits that the judges hearing those motions did not have the benefit of the earlier Court of Appeal decisions cited by TTC Insurance on this motion. If they had those decisions, those cases might have been decided differently. That may or may not be the case. I do not know. However, it is not the role of this court to question those decisions or the basis on which they were decided. Justices Lofchik and Leitch decided precisely the same issue as the one before me, having regard to specific provisions of the current Limitations Act and within the context of Markel and Schmitz. Decisions of a judge are binding on a master. In my view, I am bound to follow the decisions of Justices Lofchik and Leitch.

The decision also underscores the futility of relying on s. 16(1)(a) to avoid a limitations defence.  This is not an especially clever argument, has been made many times, and I’m pretty sure never succesfully:

 [12]           I do not accept the plaintiffs’ first argument involving section 16 of the Limitations Act. Section 16(1)(a) states that there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought. This is not the situation on this motion. The proposed pleading states that TTC Insurance must pay Ms. Sukhu’s damages in the event they are found to have been caused by the negligence of the unidentified motorist. This is obviously consequential relief, namely the payment of damages. See Tapak v. Non-Marine Underwriters, Lloyd’s of London, 2018 ONCA 168 (CanLII) at paragraph 14. The Court of Appeal has also emphasized that declaratory relief must be read narrowly so that section 16(1)(a) is not used as a means to circumvent a limitation period. See Alguire v. Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202 (CanLII) at paragraph 28.

Ontario: No, s. 16(1)(a) is not a secret loophole

Since the early days of the Limitations Act, plaintiffs have ventured the not especially clever argument that by seeking only a declaration they can engage the exception in s. 16(1)(a) of the Limitations Act for a proceeding for a declaration if no consequential relief is sought.

As two recent decisions remind us, this strategy is transparent and ineffective.

In Skylark Holdings Limited v. Minhas, the defendants moved to dismiss the plaintiffs’ proceeding as statute-barred.  In response, the plaintiffs moved to amend the statement of claim to limit the relief claimed to a declaratory judgment of legal and beneficial ownership of shares. In this way, the plaintiffs intended to engage s. 16(1)(a).  The motion judge agreed with the plaintiffs and found that the court could make declare ownership without consequential relief.

The Divisional Court granted the defendants’ appeal.  It followed the Court of Appeal’s recent decision in Alguire, delivered after the motion judge’s decision, and assessed the essential nature of the plaintiffs’ relief.  It concluded that the plaintiffs were attempting an “end run” around the limitation period:

 

[8]                This case was only decided after the motions judge made his decision and it is therefore not surprising that the motions judge did not conduct his analysis in accordance with the directions set out in the Court of Appeal’s decision.  This was an error of law.  To decide whether s. 16 (1)(a) is being used to circumvent an application limitation period, the motions judge was required to assess the essential nature of what the respondent is seeking.  In this case, the respondent claims to be entitled to a five per cent interest in 2012111 Ontario Inc. as a result of the fulfillment of the 2002 agreement.  Any entitlement that it has today flows from a contract – the meaning and enforceability of which is in dispute – but any cause of action that the respondent may have in respect of the 2002 contract is statute barred.

[9]               To overcome this difficulty, the respondent seeks to use the device of a declaration to do an end run around the applicable limitation period.

[10]           Moreover, were the respondent to obtain the declaration, the circumstances are akin to those found by Madam Justice Harvison Young in para. 16 of Bailey v. Canada (Attorney General), 2008 CanLII 53128 (ON SC).  It is readily apparent from the record that the declaration sought will be ineffective without further mandatory relief directed to the corporation or a shareholder to implement the shareholding interest if possible.  A determination that the respondent is entitled to a five per cent interest does not say from whom and by what means the shareholding interest is to be implemented.  Therefore, a declaration of entitlement alone is of no avail without further consequential relief which brings it outside s. 16 (1)(a) of the Limitations Act 2002.

Similarly, in Van Halteren v. De Boer Tool Inc., the Superior Court looked at the pith and substance of relief sought in regards of shares and determined that it was consequential:

[6]               Section 16.1 (1) of the Limitations Act, 2002 provides that there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought. The present claim, however, does not fall under that exception. The pith and substance of the claim is damages or a property interest in shares to compensate for $500,000 advanced to the defendant. No shares actually exist. It would be impossible for the court to make a declaration of rights with respect to shares that cannot be identified. The only meaningful remedy for the plaintiff would be in the nature of consequential relief. Accordingly the applicable prescription is the general limitation of two years after the cause of action is discovered or discoverable.

As an aside, the curious thing about s. 16(1)(a) is that it’s arguably unnecessary.  The Limitations Act applies to “claims” pursued in court proceedings, which are defined in s.1 as remedying loss resulting from wrongful conduct.  If a plaintiff doesn’t seek consequential relief, like damages, then the plaintiff isn’t pursuing a claim, and if there is no claim the Limitations Act doesn’t apply.

Ontario: rectification is a “claim”

The Court of Appeal’s decision in Alguire v. The Manufacturers Life Insurance Company is noteworthy for the following points:

It affirms that a request for rectification is a “claim” within the meaning of the Limitations Act:

[26]      In my view, Manulife’s request for rectification is a claim. It is more than just a denial of Mr. Alguire’s claim; it is an independent claim. Even if Mr. Alguire had not brought this proceeding, Manulife would have been entitled to bring an application seeking rectification of the Policy. Consequently, Manulife’s request goes beyond a mere defence and qualifies as a claim for rectification, which is equitable relief: Fairmont, at para.12. The Limitations Act applies to equitable claims: McConnell v. Huxtable, 2014 ONCA 86 (CanLII), 118 O.R. (3d) 561, at paras. 48-49.

This may be the correct result, but the court didn’t arrive at it by asking the correct question (at least not explicitly).  Section 1 of the Limitations Act defines “claim”: a claim to remedy damage resulting from wrongful conduct.  Accordingly, whether there is a claim is a matter of whether there is wrongful conduct and resulting damage.  It does not necessarily follow from a party seeking an order or declaration that there is a claim.  There are circumstances where a party asks the court to do something—for example to order the passing of accounts—without there having been wrongful conduct.

There’s another instance of confusion about the nature of the “claim”:

[34]      […] A claim, however, requires an act or omission of the person against whom it is made: Limitations Act, s. 5(1)(a)(iii). In this case, it is Mr. Alguire’s resiling from the parties’ intended agreement that grounds the rectification claim. Even though Manulife discovered the error in the paid-up values in the Policy in 2007, it did not know, and could not reasonably ought to have known, that Mr. Alguire would seek to resile from the parties’ intended agreement at some point in the future. Manulife therefore cannot be faulted for failing to act with due diligence.

It’s because of the s. 1 definition of “claim” that it requires wrongful conduct, not because s. 5(1)(iii) makes knowledge of the wrongful conduct the precondition of discovering a claim.

The Court follows Albertan authorities for the principle that s. 16(1)(a) should be narrowly construed:

[27]      The next issue is whether Manulife can rely on s. 16(1)(a) of the Limitations Act, which provides that there is no limitation period in respect of “a proceeding for a declaration if no consequential relief is sought.”

[28]      In the context of a limitation period analysis, declaratory relief should be narrowly construed so as to ensure that s. 16(1)(a) is not used as a means to circumvent applicable limitation periods: Joarcam, LLC v. Plains Midstream Canada ULC,2013 ABCA 118 (CanLII), 90 Alta. L.R. (5th) 208, at para. 7.

[29]       I conclude that this subsection is unavailable to Manulife in the circumstances of this case, as it is seeking consequential relief.  The remedy of rectification sought in this case has significant consequences for the parties and goes beyond clarifying the nature of a particular obligation. Mr. Alguire stands to receive significantly less money as a result of the rectification compared to what he argued he was entitled to on the Policy’s face.

The Court held that policy considerations cannot drive the results:

[33]      Finally, Mr. Alguire raises policy considerations in support of his submission that the claim for rectification is statute-barred.  Those considerations cannot, in the circumstances of this case, drive the result.  The Limitations Act was designed to promote certainty in the analysis of when claims are statute-barred.  The task of a reviewing court is to determine the applicable limitation period having regard to the legislation. A limitation period analysis is not a laches analysis where the court’s investigation is driven by the equities of the situation.

This prompts the obvious question: are there circumstances where policy considerations could inform a limitations analysis? I wouldn’t think so, and it seems like the real policy concern is avoiding the introduction of a new factor in the limitations analysis.  It’s easy to see how litigants might seize on this obiter as standing for the principle that there are circumstances where, in addition to the matters in s. 5(1), a court must consider the impact of policy on the commencement of time.

 

 

 

Ontario: the impact of an appeal on the appropriateness of a proceeding

When the success of an appeal in a related but separate proceeding (involving the same defendants) will eliminate damage, is a proceeding to remedy that damage inappropriate until the appeal’s determination?  No, held the Court of Appeal in Tapak v. Non-Marine Underwriters, Lloyd’s of London:

[13]      The second is to submit that the appeal against the other defendants, if successful, might have eliminated their losses and thus the appellants did not know that this action was “an appropriate means” to seek to remedy its losses until the appeal was dismissed, relying on s. 5(1)(a)(iv) of the Limitations Act, 2002 and Presidential MSH Corp. v. Marr, Foster & Co. LLP (2017), 135 O.R. (3d) 321, 2017 ONCA 325 (CanLII). In our view, s. 5(1)(a)(iv) is not intended to be used to parse claims as between different defendants and thus permit one defendant to be pursued before turning to another defendant. Rather, it is intended to address the situation where there may be an avenue of relief outside of a court proceeding that a party can use to remedy their “injury, loss or damage” – see, for example, 407 ETR Concession Co. v. Day, 2016 ONCA 709 (CanLII), 133 O.R. (3d) 762.

The Court also included a reminder that seeking a declaration in addition to consequential relief will not avoid a limitations defence by engaging s. 16(1)(a) of the Limitations Act:

[14]      The third is the argument that the appellants only sought declaratory relief and therefore, under s. 16(1)(a) of the Limitations Act, 2002, the two year limitation period does not apply. That argument cannot succeed because the claim in this action was not limited to declaratory relief. The claim also sought consequential relief, namely damages, so s. 16(1)(a) does not apply.

Ontario: limiting fraudulent conveyance actions

 

In Conde v. Ripley et al., Justice Dunphy held that the limitation period applicable to a claim under section 2 of the Fraudulent Conveyances Act depends on whether the claim is to recover land, in which case the ten year limitation period in the Real Property Limitations Act applies, or for personal property, in which case the general two year limitation in the Limitations Act, 2002 applies.

Section 2 of the FLA entitles a person to commence an action against a transferee of real or personal property to declare the transfer to be void as against “creditors or others” where there was fraudulent intent.

The defendants in Conde argued that such an action is subject to the Limitations Act alone.  In a well-reasoned and correct decision, Justice Dunphy rejected this position.

Section 2(1)(a) of the Limitations Act provides that the Act doesn’t apply to proceedings subject to the RPLA.  Section 4 of the RPLA applies to “an action to recover any land”.  If the two year limitation period in the Limitations Act applied to an FCA action seeking to invalidate a  transfer of an interest in land while the claim to the land itself is subject to the ten year RPLA limitation period, it would be “inconsistent in the extreme”; the action to set aside the  transfer would be barred before the action to claim the interest.  This result, Justice Dunphy noted, “appears contrary to common sense”. (I wonder whether it is the two year limitation period that would apply to the FCA claim under the Limitations Act; section 16(1)(a) provides that no limitation period applies to claims that seek only a declaration–ie, that a transfer of land is void).

The problem with the defendants’ position was their confusion between standing to bring a claim under the FCA and  the nature of the FCA claim itself:

[40]           In arguing for a two year limitation period, the moving parties have confused standing to bring a claim under the FCA with the nature of the FCAclaim itself.  Standing – which is granted by s. 2 of the FCA to “creditors or others” – is to be distinguished from the nature of the action itself.  As I have explained at some length, standing to bring FCA claims is granted to “creditors or others” whereas a claim, once brought by a creditor with standing, has many of the characteristics of a class proceeding.  For limitations purposes, in my view, it is necessary to consider the nature of the FCA claim and not the standing of the individual claimant.

[41]           An FCA claim, if successful, does no more or less than invalidate the impugned transfer as against “creditors or others” of whom the plaintiff is obviously an exemplar.  Where the conveyance attacked is of real property, such an action is thus quite literally an “action to recover land” since the outcome of the action, if successful, is to “recover” the land to the estate of the transferor (in this case Mr. Ripley) so that – once so recovered – it can respond to the claims of creditors or others as if it had never been transferred.  The outcome of the plaintiff’s claim against the transferor may well be a money judgment – the outcome of the claim against the transferee under the FCA is an order “to recover land” which is then available to satisfy that claim.

[42]           Importantly, even if the underlying claim of the “creditor or others” is a money claim, the outcome of an FCA action is not a money judgment ordering the transferee to pay that claim.  The transferee may well pay the judgment to free the property of the claim – if they so choose.  That, however, is a consequence of choice and not of the order made.

Justice Dunphy found nothing regrettable about the two separate limitation periods applying to FCA actions:

[44]           This might seem somewhat inelegant or even regrettable.  In my view, it is neither.  It is simply the by-product of the FCA being a descendent of a very old statute going back literally hundreds of years upon which has been overlaid a more comprehensive and newly-elaborated system of limitation periods than formerly applied.  FCA actions were once considered to be actions for which no limitation period specifically applied.  The Legislature has seen fit to change that, and in so doing, to differentiate between actions involving recovery of land and other types of actions.  The result, when applied to this old statute, is what I have described.

It’s also worth noting Justice Dunphy’s rather pithy reminder that for the purposes of the limitation period, the law will impute a solicitor’s knowledge on her client:

[67]           The limitation period commences when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence:  Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., 2013 ONSC 80 (CanLII) at para. 56.  The plaintiff here had the facts but chose to disbelieve them due to a search conducted without due care and accepted without sufficient examination.  As between the two, it may well be that the solicitor should have found what her client failed to, but I must attribute the knowledge of one to the other.

[68]           To hold otherwise would be, in my view, to provide a solicitor’s negligence exception to the Limitations Act, 2002.  While such a development would, I have no doubt, warm the hearts of lawyer insurance providers everywhere, I can find no support for it in the statute.  Section 5(1)(b) requires the application of an objective test to a consideration of the subjective capacities of the plaintiff.

Ontario: Will challenges subject to the two-year limitation period

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The Superior Court has ruled on the application of the Limitations Act, 2002 to will challenges. The general two-year limitation period in section 4 of the act applies, subject to the section 5 discovery provisions.

Leibel v. Leibel involved two wills. The wills left a specific asset to the testatrix’s son Blake, and divided the remaining assets equally between Blake and her other son Cody. Blake applied for a declaration that the wills were invalid, and Cody and other respondents moved for an order dismissing the application on the basis that it was statute-barred by the expiry of the limitation period.

Justice Greer held that limitation period began running in June 2011, the date of the testatrix’s death , because a will speaks from death (see paras. 36 and 50). However, Just Greer found that Blake discovered his claim within the meaning of section 5 about a month later in July 2011:

In applying the “discoverability principle,” Blake had the knowledge to commence a will challenge on or before July 31, 2011. By that date he knew the following facts:

(a)   Prior to Eleanor’s death Blake knew that Eleanor [the testatrix] had recovered from lung cancer but now had brain cancer.

(b)   He knew Eleanor had changed her previous Wills.

(c)   He knew the date of Eleanor’s death, as Lorne had called him and Cody on that date.

(d)   He received copies of the Wills prior to July 31, 2011, and he knew who the Estate Trustees were under the Wills.

(e)   He knew what Eleanor’s assets were. He had at least a sense of her income, as she had been sending him monthly cheques before the date of her death and had a sense of the value of her assets.

(f)   He signed corporate documents for a company now owned by her Estate prior to July 31, 2011.

(g)   He had communicated with Ms. Rintoul [a lawyer] about his concerns and she gave him the names of three estates counsel to consider, as independent legal advisors.

Blake, therefore, had all of the information needed to begin a will challenge. He chose, instead, to take many of his benefits under the Wills before he commenced his Application (see para. 39).

By the time Blake brought his application in September 2013, the limitation period had expired.

Justice Greer rejected Blake’s argument that no limitation period applied to his will challenge pursuant to section 16(1)(a) of the act because his challenge did not seek consequential relief. This is noteworthy. Prior to this decision, it was widely considered that this section would apply to a will challenge. Consider a passage from Anne Werker’s influential 2008 article on limitation periods in estate actions:

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

In particular, it was thought that where a distribution had not been undertaken before the will challenge, no consequential relief would be necessary and so no limitation period would apply. (See Anne Werker, “Limitation Periods in Ontario and Claims by Beneficiaries”, (2008) 34:1 Advocates’ Q at 24-28).

Justice Greer held that the legislature did not intend for section 16(1)(a) to exclude will challenges from the two-year limitation period:

To say that every next-of-kin has an innate right to bring on a will challenge at any time as long as there are assets still undistributed or those that can be traced, would put all Estate Trustees in peril of being sued at any time. There is a reason why the Legislature replaced the six-year limitation in favour of a two-year limitation. (See para. 52).

In any event, Justice Greer found that the order Blake sought did ask for consequential relief:

Although subsection 16 (1) (a) of the Act says there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought, Blake’s will challenge claims consequential relief in that it asks for an Order revoking the grant of the Certificate of Appointment of Estate Trustees with a Will issued to Roslyn and Lorne, asks for an Order removing them as Estate Trustees, asks for an Order that they pass their accounts as Estate Trustees, and for an Order appointing an Estate Trustee During Litigation.  In addition, Blake asks for declarations relating to the revocation of Eleanor’s December 12, 2008 Wills and for an Order in damages in negligence against Ms. Rintoul and her law firm, and for Orders disclosing Eleanor’s medical records and her legal records.  Consequential relief is clearly sought by Blake (see para. 28).

This decision should have a significant impact on how the estates bar approaches will challenges, and it will be interesting to see whether there is an appeal. Meanwhile, it’s likely that it will influence estates jurisprudence in other jurisdictions with limitations provisions equivalent to section 16(1)(a), for example section 2(1)(d) of the BC Limitation Act.