Ontario: Court of Appeal emphasises that discovery is contextual

The Court of Appeal’s decision in Fehr v. Sun Life Assurance Company of Canada is noteworthy for it its emphasis on the contextual nature of the discovery analysis:

[173]   However, when it came to assessing the limitation period defences applicable to the individual plaintiffs, the motions judge did not engage in a detailed examination of these idiosyncrasies. In particular, he did not consider the impact of each plaintiff’s circumstances and experiences on the critical issue of when each plaintiff discovered his or her claim or knew or ought to have known of the requisite facts grounding their claim. He failed to engage in an individualized and contextual analysis, and, instead, applied a broad presumption as to when they ought to have known of certain alleged misrepresentations.

[174]   An individualized and contextual analysis was necessary in this case for the very reason that misrepresentation claims are not generally amenable to class actions: people receive, process, and act upon written and verbal statements in different ways. Their behaviour varies depending upon a variety of factors, including their own particular circumstances, what specific representations and information they received and from whom, how they understood or processed those representations and information, the extent to which they relied upon them, and their own wishes and intentions.

[175]   An individualized and contextual analysis was particularly important in this case because, among other things: (a) there is a relationship of vulnerability between insurer and insured; (b) many of the plaintiffs are unsophisticated with respect to the insurance industry; (c) the insurance policies are complicated and not easily understood; (d) misrepresentations were made to some consumers and not others; (e) some or all of these misrepresentations were made by individuals on whom the plaintiffs might reasonably rely; (f) there is no evidence that the insurer expressly corrected the misrepresentations; and (g) the insurer may have reinforced or made further misrepresentations, to some or all of the plaintiffs, during the life of the policies.

Ontario: Court of Appeal changes (maybe?) the limitation of claims arising from coverage denials

The Court of Appeal in its decision Nasr Hospitality Services Inc. v. Intact Insurance has held that, at least in the circumstances of the case, the limitation period for a coverage action commences presumptively on the date the insured gives notice of its loss to the insurer.  This is a significant departure from the bar’s understanding, and seemingly at odds with the Court’s decision in Kassburg, and problematic enough that Justice Feldman dissented.  Both the issues and the implications of the decision are significant, so I summarise the facts in some detail.

The plaintiff purchased a commercial insurance policy from Intact. On January 31, 2013, a flood occurred on the plaintiff’s premises.  The Plaintiff notified its broker of its loss, and the broker notified Intact.

On February 13, 2014, Intact confirmed coverage, subject to policy terms and conditions, for the business interruption the plaintiff suffered, and issued a cheque to cover the losses.  Intact issued another cheque in May 2013.

The plaintiff disputed Intact’s valuation of the claim.  On May 13, 2014,  Intact wrote to advise that it would not accept the plaintiff’s valuation.  Subsequently, the plaintiff submitted a proof of loss.  On June 25, 2013, Intact rejected the proof of loss as incomplete, and advised that it was not rejecting or denying the plaintiff’s claim.

The plaintiff filed a further proof of loss on June 26, 2013.  On July 22, 2013, Intact rejected the proof of loss and advised the plaintiff that it would deny any further coverage under the policy.  Curiously, the decision suggests that Intact nevertheless provided the plaintiff with a blank proof of loss form and advised that it had two years from the date of loss to finalise its claim.

It appears from the decision that the plaintiff filed a third proof of loss on July 31, 2013, and that on August 15, 2013, Intact returned rejected that proof of loss.

The plaintiff issued its Statement of Claim on April 22, 2015 seeking damages arising from the coverage denial.  Intact moved for summary judgment on the basis of an expired limitation period.  Intact lost the motion, and appealed.

The parties agreed that the plaintiff’s cause of action arose on February 1, 2013 and the Court of Appeal accepted this agreement as “an admission of fact that February 1, 2013 was the day on which [the plaintiff] first knew the matter in ss. 5(1)(a)(i)-(iii)” of the Limitations Act.  The court found this position was consistent with its decisions in Markel and Schmitz.  Once the insured requests indemnification, the insurer is under a legal obligation to satisfy it.

The court rejected the plaintiff’s s. 5(1)(a)(iv) appropriateness argument.  Though the jurisprudence recognizes that some conduct by an insurer after receiving notification of a claim under a policy can impact on the discovery of a claim, but to apply to in this instance would result in a form of promissory-estoppel, and the plaintiff had conceded that a promissory estoppel was unavailable:

[59]      Nasr has not pointed to any cases involving ordinary claims for indemnification under a commercial policy of insurance that have treated the appropriate means element in s. 5(1)(a)(iv) as some form of watered-down promissory estoppel. To treat s. 5(1)(a)(iv) in that manner for ordinary commercial insurance indemnification claims – as the motion judge effectively did – would risk ignoring the caution voiced by Sharpe J.A. in Markel Insurance, at para. 34 – and echoed by Laskin J.A. in 407 ETR, at para. 47 – that:

To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions[Emphasis added.]

[60]      The motion judge did not find that Intact had promised, expressly or impliedly, not to rely on the limitation period. Accordingly, it was not open to the motion judge to recast, for purposes of the appropriate means analysis, the conduct by Intact that Nasr conceded could not support a finding of promissory estoppel that the insurer would not rely on the limitation period.  With respect, the motion judge erred in doing so.

Justice Feldman dissented.

She rejected that the limitation period should commence on the date of the loss, rather than the breach of the insurance contract:

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

The insurance policy itself would determine when the obligation to pay arose, and therefore the date on which Intact failed to perform that obligation in breach of the policy.  Because neither party put the policy into evidence, the moving party couldn’t prove when the breach occurred, and therefore when the limitation period commenced:

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

Further, an agreement between the parties as to when a cause of action arose cannot bind the court:

[72]      However, on appeal, the insurer again asks the court to reject the respondent’s argument, overturn the decision of the motion judge, and grant summary judgment. To grant summary judgment this court must then decide when the cause of action against the insurer for breach of the insurance contract arose, in order to determine when the limitation period commenced to run.

[73]      That is a question of mixed fact and law. The legal part requires the court to determine when the insurer became legally obligated to pay under the policy. The factual part is the determination of when the insurer did not pay in accordance with that obligation. Parties cannot bind the court on legal issues by agreement or concession. For example, in OECTA v. Toronto Catholic District School Board (2007), 2007 CanLII 6454 (ON SCDC)222 O.A.C. 23 (Div. Ct.), Lane J. stated at para. 13:

The fourth difficulty is that the agreement asserted is an agreement not as to the facts, but as to the law. Whether the doctrine of culminating event applies only where the alleged culminating act is culpable is a question of law. Parties cannot agree on the law so as to bind a court or tribunal to their view; the law is the law and it is always open to the tribunal to determine what it is.

Justice Feldman rejected the support the majority found in Markel and Schmitz.  In those cases, the legal obligations of the insurers arose from statute:

[78]      Markel Insurance involved a transfer claim for indemnification by a first party insurer against a second party insurer in the motor vehicle accident context. The claim was governed by the Insurance Act, R.S.O. 1990, c. I.8, its regulations, and procedures set out by the Financial Services Commission of Ontario. The court had all the information before it that it required to determine when the second insurer’s obligation to indemnify arose and was breached.

[79]      Similarly, in Schmitz, the claim for indemnity at issue was brought within and was governed by the underinsured motorist coverage provided by the OPCF 44R, an optional endorsement to Ontario’s standard form automobile insurance policy.

There are many things that are problematic with this decision, which is perhaps why it is one of the very few limitations decisions to have a dissent. Let’s go through the list:

  1. The foremost flaw is the majority’s ratio that the cause of the action accrued on February 1, 2013 based on the parties’ agreement. Curiously, neither the majority nor the motion judge set out what occurred on February 1, 2013.  Because the majority presumes that the limitation period commenced presumptively on the date of notice of the loss, I assume February 1, 2013 was the date the insured through its broker gave notice of the loss to the insurer.  Markel and Schmitz are only relevant to the majority’s decision if this is so.
  2. It’s hard to understand why the plaintiff would agreed on this point, or why both parties had the misapprehension that cause of action accrual was determinative of the commencement of the limitation period. My guess is that the policy (which mysteriously wasn’t part of the record) contained a provision that the insured had two years from the loss to sue, which is reasonably common.  However, this kind of term has nothing to do with cause of action accrual, it just operates to vary the basic limitation period by making it run in all circumstances from a fixed date.
  3. This decision could have wonky implications. Insurers will undoubtedly rely on it as standing for the principle that the limitation period for a coverage action, certainly when coverage is under a CGL policy but probably also under other policies as well, commences presumptively on the date the insured gives notice of its loss.  This is certainly not the bar’s current understanding as it’s seemingly entirely at odds with the decision in Kassburg. 
  4. Fortunately, it will be possible to distinguish Nasr on the grounds that the limitations analysis flowed from the parties’ agreement as to cause of action accrual, and that such an agreement can have no precedential value. I think this argument will generally prevail, given both Kassburg and the decision’s ambiguity about what happened on February 1, 2013 that resulted in accrual.  However, the right limitations argument very often doesn’t prevail, and I see the potential for a body of dubious caselaw until the CA revisits the issue and, one hopes, distinguishes Nasr into irrelevance.  It’s not helpful that the Nasr court said that Markel and Schmitz supported the parties’ accrual analysis.  It’s easy to imagine a lower court considering that conclusive of the issue.
  5. Lastly, one quibble with the dissent’s statement about cause of action accrual:

[66]      As the moving party on the motion for summary judgment, the insurer had the onus to prove all of the elements that found the basis for its limitation claim, including the date when the cause of action arose, i.e. the date when the act or omission by the insurer caused the injury to the insured: see the definition of “claim” in s. 1 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and ss. 4 and 5.

The moving party did not bear the onus of establishing when the cause of action arose, but when the Claim arose.  The Limitations Act doesn’t tie the commencement of time to cause of action accrual, and the language “cause of action” doesn’t appear in the Limitations Act.  The cause of action was breach of contract.  A breach of contract is actionable per se and the cause of action doesn’t require damage to accrue.  The Limitations Act, pursuant to s. 2, applies to claims pursued in court proceedings.  Until there is a claim, the Limitations Act won’t apply.  A claim requires both wrongful conduct and resulting damage.  Until there is damage, there is no claim, and without a claim the Limitations Act doesn’t apply.  The limitation period commences presumptively from the date of the act or omission pursuant to s. 5(2), but the precondition to the application of s. 5(2) is the application of the Limitations Act itself, and therefore the occurrence of damage.  Here the point is likely practically of little consequence, as the breach and damage occurred contemporaneously (denial of coverage resulting immediately in the plaintiff being without indemnification for its loss), but conceptually it matters very much.

All of that said, the decision does have a good summary of s. 5(1)(a)(iv) principles:

[46]      In commencing his analysis under s. 5(1)(a)(iv) of the Act, the motion judge properly noted the general proposition that the determination of when an action is an appropriate means to seek to remedy an injury, loss or damage depends upon the specific factual or statutory setting of each individual case: 407 ETR Concession Company Limited v. Day2016 ONCA 709 (CanLII)133 O.R. (3d) 762, leave to appeal refused, [2016] S.C.C.A. No. 509, at para. 34; Winmill v. Woodstock (Police Services Board)2017 ONCA 962 (CanLII)138 O.R. (3d) 641, leave to appeal to SCC requested, at para. 23.

[47]      However, as this court has observed, that general proposition is not an unbounded one.

[48]      First, in Markel Insurance this court confined the meaning of “appropriate” to “legally appropriate”. Writing for the court, Sharpe J.A. stated, at para. 34:

This brings me to the question of when it would be “appropriate” to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5(1)(a)(iv) states that a claim is “discovered” only when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, the word “appropriate” must mean legally appropriateTo give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions. [Italics in original; underlining added.]

[49]      Second, in 407 ETR, Laskin J.A. noted, at para. 47, that the use of the phrase “legally appropriate” in Markel Insurance, “signified that a plaintiff could not claim it was appropriate to delay the start of the limitation period for tactical reasons, or in circumstances that would later require the court to decide when settlement discussions had become fruitless” (emphasis added).

[50]      Finally, in Presidential MSH Corporation v. Marr Foster & Co. LLP2017 ONCA 325 (CanLII)135 O.R. (3d) 321, Pardu J.A. observed that the jurisprudence discloses two circumstances in which the issue of appropriate means most often delays the date on which a claim was discovered. First, resorting to legal action might be inappropriate in cases where the plaintiff relied on the superior knowledge and expertise of the defendant, especially where the defendant undertook efforts to ameliorate the loss: at para. 26. Second, a legal action might not be appropriate if an alternative dispute resolution process “offers an adequate alternative remedy and that process has not fully run its course”: at para. 29. See also paras. 28-48; and Har Jo Management Services Canada Ltd. v. York (Regional Municipality)2018 ONCA 469 (CanLII), at paras. 21 and 34-35. In this regard, in Winmillthis court held that resort to a civil proceeding for a remedy in respect of damage flowing from an incident might not be an appropriate means while criminal proceedings in respect of the incident remain outstanding: at para. 28.

[51]      Although Presidential MSH does not purport to offer an exhaustive list of circumstances in which a proceeding might not be an appropriate means, I would observe that neither circumstance identified in Presidential MSH is present in this case. Some other factor would have to displace the s. 5(2) presumption that Nasr knew a proceeding was an appropriate means on February 1, 2013.

Ontario: Court of Appeal affirms that discovery of a cause of action isn’t discovery of a claim

The Court of Appeal decision in Gillham v. Lake of Bays (Township) is noteworthy for two  reasons.

First, it uses the concept of the “claim” (which is the language of the Limitations Act) rather than the concept of the “cause of action” (which is not the language of the Limitations Act) for its limitations analysis.  See for example para. 20:

[20]      The overarching question in the discoverability analysis under s. 5 of the Act is whether the claimant knew or reasonably should have known, exercising reasonable diligence, the material facts stipulated under s. 5(1)(a) that give rise to a claim: Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors2012 ONCA 851 (CanLII), 113 O.R. (3d) 401, at para. 32. Section 1 of the Act defines a claim as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. Section 2(1) provides that the Act “applies to claims pursued in court proceedings” (with certain enumerated exceptions that do not apply here).

(A slight quibble: the s. 5(1)(a) matters do not give rise to a claim.  Only two facts—an act or omission resulting in injury, loss, or damage—give rise to a claim pursuant to its definition in s. 1.  Knowledge of the s. 5(1)(a) matter results in discovery of the claim.)

It even puts “cause of action” in quotation marks–presumably to distinguish it from a claim–in the context of stating that knowledge of the material facts of a cause of action is not discovery of a claim:

[33]      The motion judge erred in failing to undertake an analysis of the criterion under s. 5(1)(a)(iv) of the Act. That the appellants might have a “cause of action” against the defendants, as the motion judge found, is not the end of the analysis under s. 5(1) of the Act. As this court said in Kudwah v. Centennial Apartments2012 ONCA 777 (CanLII), 223 A.C.W.S. (3d) 225, at para. 2:

It is important when considering a limitation period claim to appreciate that the terms of the 2002 Act must govern. A court considering the limitation claim must address the specific requirements of s. 5 of the Act, particularly on the facts of this case, the requirement of s. 5(1)(a)(iv).

 

Second, it acknowledges the accrual of a claim as the starting point of the limitations analysis, and that discovery of the claim requires knowledge that a proceeding is an appropriate remedy for the loss:

[34]      Therefore, the motion judge had to consider whether the appellants had a claim as defined under the Act. In considering whether the appellants knew or should have known that they had a claim, the motion judge had to go on to consider whether, having regard to the nature of the injury, loss or damage, the appellants knew or should have known that a proceeding would be an appropriate means to seek to remedy it. This omission by the motion judge is an error of law: Har Jo Management Services Canada Ltd. v. York (Regional Municipality)2018 ONCA 469 (CanLII), at paras. 21 and 35.

[35]      Section 5(1)(a)(iv) represents a legislative addition to the other factors under the discoverability analysis. As Laskin J.A. explained in 407 ETR Concession Company Limited v. Day2016 ONCA 709 (CanLII), 133 O.R. (3d) 762, leave to appeal to SCC refused, [2016] S.C.C.A. No. 509, at paras. 33-34:

The appropriateness of bringing an action was not an element of the former limitations statute or the common law discoverability rule. This added element can have the effect – as it does in this case – of postponing the start date of the two-year limitation period beyond the date when a plaintiff knows it has incurred a loss because of the defendant’s actions.

Also, when an action is “appropriate” depends on the specific factual or statutory setting of each individual case: see Brown v. Baum2016 ONCA 325 (CanLII), 397 D.L.R. (4th) 161, at para. 21. Case law applying s. 5(1)(a)(iv) of the Limitations Act, 2002 is of limited assistance because each case will turn on its own facts.

This is a very welcome statement from the Court of Appeal.  It’s a step away from the misapplication of common law discovery principles to limitations analyses that has caused a great deal of confusion and uncertainty.

Lastly, the decision finds that it was appropriate for the plaintiffs to “wait and see” in the context of a construction dispute before commencing a proceeding.  I often see it argued that Presidential stands for the principle that there are only two circumstances in which a proceeding will be an inappropriate remedy—where the defendant undertakes good faith ameliorative efforts or there is an alternative dispute resolution process. This is a misapprehension of the law, as this decision demonstrates.  Here’s the key analysis:

[37]      Here, the motion judge failed to consider “the specific factual or statutory setting” of the case before him and determine whether it was reasonable for the appellants not to immediately commence litigation but to “wait and see” if the 1 ¼ inch sinking of the deck pier observed in 2009 would worsen over time or if the issue would resolve once the stone retaining wall had settled, as had been suggested to the appellants by Mr. MacKay. Neither Royal Homes nor Mr. MacKay believed the problem was serious, or due to the manner of construction. This evidence does not support the conclusion that the appellants knew or ought to have known in 2009 that their loss was not trivial and initiating legal proceedings was the appropriate means to remedy their loss.

 

Ontario: the discovery provisions apply to contribution and indemnity claims

In Mega International Commercial Bank (Canada) v. Yung, the Court of Appeal held that the discovery provisions of the Limitations Act determine the commencement of the limitation period for contribution and indemnity claims.  This is an excellent, sensible decision that resolves one of the last significant (and somewhat inexplicable) uncertainties about the Ontario limitations scheme.

A refresher: Section 4 provides the basic two-year limitation period that commences on when the plaintiff discovers the claim.  Section 5(1) defines when discovery occurs.  Section 5(2) provides a rebuttable presumption that it occurs on the date of the act or omission that gives rise to the claim.  Section 15 provides that the ultimate 15-year limitation period commences on the date of that act or omission.   Section 18 provides that for the purposes of s. 5(2) and s. 15, the date when a plaintiff serves a statement of claim on a defendant is the date of the act omission that gives rise to the defendant’s contribution and indemnity claim against another alleged wrongdoer.

There were two competing constructions of s. 18.  One line of jurisprudence originating from Miaskowski (Litigation Guardian of) v. Persaud held that s. 18 prescribes an absolute two-year limitation period that commences always on the date of service of the statement of claim.  Another line of jurisprudence originating from Demide v. Attorney General of Canada et al.  held that s. 18 merely identifies the presumptive trigger date for the limitation period for contribution and indemnity claims, subject to the s. 5 discovery provisions.

I’ve long argued that Miakowski was plainly wrong, and its continued application was hard to understand.  I noted with some satisfaction the trend toward preferring the Demide construction.

The Court in Mega International essentially adopted the reasoning in Demide.  It applied the principles of statutory interpretation: the words in s .18 interpreted in their grammatical and ordinary sense do not establish an absolute limitation period.  Rather, s. 18 works “hand in glove” with the provisions of s. 5(2) and s. 15 to identify the presumptive limitation period that applies in contribution and indemnity claims.  It is not an exception to the basic limitation period in s. 4, but part of the integrated scheme established by s. 4 and s. 5.

The Court acknowledged the injustice in constructing s. 18 as imposing an absolute limitation period.  It would allow for the possibility of claims becoming statute-barred before they are discoverable.  The Court also noted the absence of any basis for recalibrating the balance between plaintiff and defendant rights the Act strikes for this particular category of claims only.

Ontario: The knowledge required for discovery

This is a post purely to indulge my pedantry.  In Reece v. Toronto (Police Services Board), the Court of Appeal said this about discovery:

[5]         The motion judge correctly found that discoverability for the purpose of limitations is based upon knowledge of the facts necessary to support a claim and does not require knowledge of the law that supports the claim.

This isn’t quite right.  Discoverability for the purpose of limitations–what other purpose to does the principle have?–is codified in s. 5 of the Limitations Act and requires knowledge of the four discovery matters.  The facts necessary to support a claim are, pursuant to the definition in the s. 1 of the Limitations Act, but only two: wrongful conduct and resulting loss.  The existence of a claim and the discovery of a claim are different issues.

Ontario: Appealing s. 5 analyses

Nicholson v. McDougall is a reminder that the omission of a s. 5 analysis isn’t necessarily a ground for appeal:

[31]           There is no reference to s. 5 at all, or any of its detailed requirements, in the Reasons for Decision.  I agree with the respondent that this omission from the Reasons for Decision is not sufficient to grant this appeal.  The Deputy Judge could have implicitly applied s. 5, including the presumption in s. 5(2), without expressly referring to it.  To assess whether the Deputy Judge did so and therefore complied with the Limitations Act requirements, I begin with the law regarding s. 5(2) and then I will move to how it applies in this case.

Ontario: More on adding defendants (and some pedantry)

Bhatt v. Doe has a good analysis of adding a defendant to proceeding after the presumptive expiry of the limitation period.  If you want to cite a recent decision, this is a good option.

In the spirit of pedantry I have two quibbles.  First, this:

[11]           The passing of a limitation period is fatal to a motion to add a party (Limitations Act2002, s. 21(1)). The doctrine of special circumstances is no longer applicable (Joseph v. Paramount Canada’s Wonderland(2008), 2008 ONCA 469 (CanLII)90 O.R. (3d) 401 at paras. 27 and 28 as cited in Parent v. Janandee Management Inc.[2009] O.J. No. 3763 (Master) at para. 29).

It’s now ten years since the Court of Appeal held that the special circumstances doctrine is no longer generally available.  Why do bar and bench feel compelled to make this point?   Who still argues special circumstances?

Second, this:

[12]           With respect to claims pursuant to the provisions of unidentified automobile coverage, discoverability is triggered when the insured knew or ought to have known about the material facts on which the claim is based. As stated by Justice Mackinnon in July v. Neal1986 CanLII 149 (ON CA)[1986] O.J. No. 1101 (C.A.) at para. 16:

…I have concluded that the time begins to run under such circumstances as the instant case, when the material facts on which the claim is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence: Central Trust Co. v. Rafuse et al. [reported 1986 CanLII 29 (SCC)31 D.L.R. (4th) 481], Supreme Court of Canada, released October 9 1986 – Le Dain J. (for the court) at p. 99 [p.535 D.L.R.].

See also July at para. 32, Hier v. Allstate Insurance Co. of Canada1988 CanLII 4741 (ON CA)[1988] O.J. No. 657 (C.A.) at para 35Galego v. State Farm Mutual Automobile Insurance Co.2005 CanLII 32932 (ON SCDC)[2005] O.J. No. 3866 (Div.Ct.) at paras. 8 and 9Wilkinson v. Braithwaite[2011] O.J. No. 1714 (S.C.J.) at paras. 31-35.

With respect to any claim, s. 5 of the Limitations Act determines discovery.  There is no “trigger” beyond knowledge of the discovery matters.  Cases decided under the former limitations scheme, and applying the common law discovery rule, are not helpful because, as here, they cause the court to frame the issue incorrectly.

Ontario: the CA on the impact of related criminal proceedings on the limitation of intentional torts

In Winmill v. Woodstock (Police Services Board), the Court of Appeal considered the appropriateness of a proceeding as a remedy to battery.  The decision is generally noteworthy for the quality of its s. 5(1)(a)(iv) analysis, but also of its application of s. 5 to the interaction between claims arising from intentional torts and related to criminal proceedings.  As the court’s dissent notes, the limitation of these claims is usually determined by the misapplication of common law principles, not s. 5.

The plaintiff sued the Woodstock police for negligent investigation and battery.  The police obtained summary judgment dismissing the claim arising from the battery as statute-barred, but not the claim arising from negligent investigation.  The plaintiff appealed successfully.

Justice MacPherson and Feldman undertook a refreshingly comprehensive and sound s. 5 analysis:

[18]      Turning to s. 5(1)(a) of the LA, in this case there is no issue with respect to the first three of the four factors set out in this clause. The appellant knew that he had been injured on June 1, 2014, that the injury was caused by physical blows to his body, and that at least some of the respondents administered those blows.

[19]      The crucial issue is the fourth factor: did the appellant know on June 1, 2016 that a legal proceeding would be an appropriate means to seek to remedy the injuries caused by the alleged battery committed against him?

The court summarised the principles of applicable to s. 5(1)(a)(iv) analyses:

[22]      First, the word “appropriate” means “legally appropriate”.

[…]

[23]      Second, this does not mean that determining whether a limitation period applies involves pulling two simple levers – date of injury and date of initiation of legal proceeding – and seeing whether the result is inside or outside the limitation period prescribed by the relevant statute. On the contrary, other important factors can come into play in the analysis.

[…]

[24]      Third, within the rubric of “the specific factual or statutory setting of each individual case”, s. 5(1)(b) of the LA requires that attention be paid to the abilities and circumstances of the person with the claim […]

Those principles applied to the plaintiff’s claim meant it was timely:

[25]      Against this background of general principles, I turn to the motion judge’s conclusion that the appellant’s battery claim was outside (by one day) the two year limitation period prescribed by s. 4 of the LA. With respect, I think that the motion judge erred, essentially for three reasons.

[26]      First, the appellant’s negligent investigation claim is proceeding. The parties agree that the discoverability date for this claim is February 17, 2016, the day the appellant was acquitted on the criminal charges against him. Factually, the negligent investigation claim covers almost precisely the same parties and events as the battery claim. There was virtually no investigation in this case. The police were called, they arrived and immediately entered the appellant’s home, and some kind of altercation quickly unfolded.

[27]      In my view, the appellant’s Amended Statement of Claim shows how inextricably intertwined are the two alleged torts:

14 e.  The Defendant officers were present and knew or ought to have known that the Plaintiff did not commit an assault against any police officer. There was no reasonable cause for the Defendant officers to arrest or charge the Plaintiff with assault of a police officer.

14 f.   As the Plaintiff stood motionless, he was pushed violently in the chest by the Defendant Dopf. He was then thrown to the floor. Knee strikes and punches were then delivered by both the Defendants Dopf and Campbell. He was handcuffed, removed from the house and taken to the police station.

[28]      Second, I agree with the appellant that, in the specific factual setting of this case (407 ETR), and bearing in mind the circumstances of the person with the claim (Novak), it made sense for him to postpose deciding whether to make a battery claim against the respondents until his criminal charges for assault and resisting arrest were resolved. The criminal charges of assault and resisting arrest against the appellant and his tort claim of battery against the respondents are, in reality, two sides of the same coin or mirror images of each other.

[…]

[31]      In a similar vein, it strikes me as obvious that the verdict in the appellant’s criminal trial, especially on the assault charge, would be a crucial, bordering on determinative, factor in the appellant’s calculation of whether to proceed with a civil action grounded in a battery claim against the respondents.

[32]      Third, and overlapping with the second reason, there is a case almost directly on point suggesting that the appellant was justified in waiting for the verdict in his criminal trial before commencing a civil claim against the respondents. In Chimienti v. Windsor (City)2011 ONCA 16 (CanLII), the plaintiff was charged with assault following a tavern brawl. The charge was dropped. The plaintiff commenced a civil action with claims of negligent and malicious investigation. The motion judge dismissed the action on the basis of the relevant statutory limitation period. This court, although dismissing the appeal on other grounds, disagreed with the motion judge’s analysis of the discoverability issue. In doing so, the court said, at para. 15:

[T]here is something of a logical inconsistency in asking a civil court to rule on the propriety of a criminal prosecution before the criminal court has had the opportunity to assess the merits of the underlying charge.

[33]      In my view, this passage is particularly applicable to this appeal. As I said earlier, the criminal charges of assault and resisting arrest against the appellant and his tort claim of battery against the respondents are very close to being two sides of the same coin or mirror images of each other. Accordingly, it made sense for the appellant to focus on his criminal charges and deal with those before making a final decision about a civil action against the respondents.

Justice Hourigan dissented:

[40]      In my view, the decision of this court in Markel Insurance Company of Canada v. ING Insurance Company2012 ONCA 218(CanLII)109 O.R. (3d) 652, is key to the correct outcome in this case. In that case, Sharpe J.A. explained that “appropriate” under s. 5(1)(a)(iv) of the Act must mean “legally appropriate”, and, at para. 34, admonished against giving the term a broad meaning:

To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened … would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.

[41]      My colleague acknowledges the authority of Markel, but in my view undermines it by emphasizing the need to attend to the factual circumstances of individual cases, drawing on this court’s subsequent decisions in 407 ETR Concession Co. v. Day2016 ONCA 709 (CanLII)133 O.R. (3d) 762, and Brown v. Baum2016 ONCA 325 (CanLII)397 D.L.R. (4th) 161. But both of these cases are clearly distinguishable. An action in 407 ETR was not “appropriate” at the time of the injury because an alternative administrative means of settling the dispute had not been completed. An action in Brown was not “appropriate” at the time of the injury because the defendant surgeon was providing further treatment in an attempt to rectify the harm he was alleged to have caused in the initial surgery.

[42]      There was no alternative means of resolving the appellant’s allegations in this case, nor were the defendants in a position to rectify the harm they were alleged to have caused. My colleague considers it obvious that the appellant should await the outcome of the criminal proceedings against him, relying on dicta from Chimienti v. Windsor (City)2011 ONCA 16 (CanLII)330 D.L.R. (4th) 148. But that case, too, is distinguishable, among other reasons because it concerned claims of negligent and malicious investigation – claims that depended on the completion of the relevant criminal proceedings on which they were based.

[…]

[44]      Nor can a claimant delay the start of a limitation period for an intentional tort in order to await the outcome of related criminal proceedings. This approach has been followed by Ontario trial courts in many cases. For example, in Brown v. Becks2017 ONSC 4218 (CanLII), the court held that a limitation period involving various claims against police including battery during an arrest ran from the date of the plaintiff’s arrest, not the date of his acquittal on criminal charges; in Boyce v. Toronto (City) Police Services Board2011 ONSC 54 (CanLII), aff’d 2012 ONCA 230 (CanLII), the limitation period in a civil action against police ran from the date of the battery rather than the officers’ conviction on assault charges. See also EBF v. HMQ in Right of Ontario, et. al2013 ONSC 2581 (CanLII), and Wong v. Toronto Police Services Board2009 CanLII 66385 (ON SC)2009 CarswellOnt 7412 (Ont. S.C.). Similarly, in Kolosov v. Lowe’s Companies Inc.2016 ONCA 973 (CanLII)34 C.C.L.T. (4th) 177, this court affirmed the trial judge’s decision that a limitation period involving intentional tortious conduct alleged to have occurred on arrest ran from the date of the arrest rather than the date of the withdrawal of the criminal charges. See also Roda v. Toronto Police Services Board2016 ONSC 743 (CanLII), aff’d 2017 ONCA 768 (CanLII). My colleague offers no reason to depart from this body of law.

I disagree with this reasoning particularly in regards of the jurisprudence holding that the limitation period commence always on a certain date, like the date of an arrest.  That jurisprudence misapplies common law principles of cause of action accrual to the Limitations Act’s discovery provisions.  As I have discussed many times [cite], it is not the case under the Limitations Act that all plaintiffs will discover a claim always on the happening of a particular event, like an arrest.

Lastly, I noted that the court cited its decision in West for the principle different limitation periods may apply to different torts:

[17]      I begin with a structural point. In a single case where a plaintiff alleges different torts, it is possible and permissible for different limitation periods to apply to the different torts: see West v. Ontario2015 ONCA 147 (CanLII), at paras. 2-3.

It’s not clear to me how there could be any uncertainty about this point.  The Limitations Act applies to “claims” pursued in court proceedings, that is, claims to remedy damage resulting from an act or omission.  There can only be one act or omission in a claim.  Discrete acts or omissions give rise to discrete claims.  A court may define an act expansively, so that, for example, one act of deceit is comprised of multiple unlawful acts, but an act could never be the actionable conduct in deceit and, say, negligent misrepresentation.  This applies equally to claims where the actionable conduct doesn’t sound in tort.

Ontario: challenging discovery analyses on appeal

In Frederick v. Van Dusen, the Divisional Court reminds us that the court (in this case, a deputy judge of the Small Claims Court) need not make explicit findings with respect to the discovery matters:

[12]           Subsection 5(1) provides that a claim is discovered on the earlier of the day on which the plaintiff first knew of the matters set out in subsection 5(1)(a) and the day on which a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known of the matters referred to in subsection 5(1)(a).  The Deputy Judge found that the date on which the reasonable person with the abilities and in the circumstances of Mr. Frederick ought to have known of the matters set out in subsection 5(1)(a) was the spring of 2013.  Having made this determination under subsection 5(1)(b) of the Act, there was no requirement for the Deputy Judge to make an explicit finding as to what Mr. Frederick and Ms. Presley actually knew in relation to subsection 5(1)(a)(iv).

Ontario: undertaking alternative remedial processes can delay discovery

Presidential MSH Corporation v. Marr Foster & Co. LLP is another excellent decision from the Court of Appeal applying s. 5(1)(a)(iv) of the Limitations Act.  Where the plaintiff relies on an alternative process that would substantially eliminate its loss so that court proceedings would be unnecessary to remedy it, and the date the alternative process runs its course is reasonably ascertainable, a proceeding will not be an appropriate remedy until that alternative process concludes.

While this decision doesn’t break new ground, it clarifies the impact remedial measures can have on discovery of a claim.  This is of particular consequence in professional negligence claims, which was the case in Presidential.

The respondents filed the appellant’s corporate tax returns after their due date. As a result, the CRA denied tax credits that would have been available had the returns been filed on time.

The appellant received the CRA’s Notices of Assessment disallowing each of the claimed credits on April 12, 2010. When the appellant received the notices, he immediately asked the respodnents what to do and how to fix the problem.

The motion judge inferred that the respondents advised the appellant to retain a tax lawyer to determine how to solve the tax problem but didn’t advise him to obtain legal advice about a professional negligence claim against the respondents.

The appellant did retain a tax lawyer on April 15, 2010, but there was no discussion of a possible action against the respondents. The tax lawyer filed a Notice of Objection to the CRA assessments, as well as an application for discretionary relief. The respondent helped the appellant prepare its appeals to the CRA by drafting the application for relief and helping the appellant and its lawyer with whatever else they needed, until at least November 2011.

By letter dated May 16, 2011, the CRA responded to the Notice of Objection advising that it intended to confirm the assessments. It did in fact confirm them on July 7, 2011.

The motion judge found that, as late as July 2011, there was still a reasonable chance that the application for discretionary relief would mitigate some or all of the appellant’s loss.

On August 1, 2012, the appellant issued its statement of claim against the respondents. This was more than two years after the initial denial by CRA of the credits, but within two years of CRA’s refusal to alter the assessments in response to the Notice of Objection.

The motion judge held that the appellants claim would have been appropriate while the CRA appeal was still ongoing because the appeal would not have fully eliminated the appellant’s claim against the respondents.  In particular, it would not have eliminated the appellant’s claim for the costs of retaining a tax lawyer to prosecute it.

Justice Pardu rejected this reasoning.  She summarised the applicable principles:

[20]      First, the cases suggest that a legal proceeding against an expert professional may not be appropriate if the claim arose out of the professional’s alleged wrongdoing but may be resolved by the professional himself or herself without recourse to the courts, rendering the proceeding unnecessary.

[…]

[26]      Resort to legal action may be “inappropriate” in cases where the plaintiff is relying on the superior knowledge and expertise of the defendant, which often, although not exclusively, occurs in a professional relationship. Conversely, the mere existence of such a relationship may not be enough to render legal proceedings inappropriate, particularly where the defendant, to the knowledge of the plaintiff, is not engaged in good faith efforts to right the wrong it caused. The defendant’s ameliorative efforts and the plaintiff’s reasonable reliance on such efforts to remedy its loss are what may render the proceeding premature.

[27]      Finally, I note that cases in which a defendant who is an expert professional attempts to remedy a loss that a plaintiff has discovered and alleges was caused by the defendant (engaging the potential application of s. 5(1)(a)(iv)) are distinct from  cases in which courts have held that  a client has not discovered a potential claim for solicitor’s negligence until being advised by another legal professional about the claim: see Ferrara, at para. 70; and Lauesen v. Silverman, 2016 ONCA 327 (CanLII), 130 O.R. (3d) 665, at paras. 25-31. In the latter category of cases, the issue is whether the plaintiff knew or ought reasonably to have knowninjury, loss or damage had occurred (under s. 5(1)(a)(i)) that was caused by or contributed to by an act or omission of the defendant (under ss. 5(1)(a)(ii) and (iii)). Section 5(1)(a)(iv) comes into focus where the plaintiff knew or ought reasonably to have known of his or her loss and the defendant’s causal act or omission, but the plaintiff contends the limitation period was suspended because a proceeding would be premature. Although discoverability under more than one subsection of s. 5(1)(a) may be engaged in a single case, it is important not to collapse the analysis of discoverability of loss or damage and the defendant’s negligence or other wrong with the determination whether legal action is appropriate although other proceedings to deal with the loss may be relevant to both questions.

(3)         The effect of other processes which may eliminate the loss

[28]      A second line of cases interpreting and applying s. 5(1)(a)(iv) of the Act involves a plaintiff’s pursuit of other processes having the potential to resolve the dispute between the parties and eliminate the plaintiff’s loss.

[29]      This approach to discoverability is consistent with  the rule in administrative law that it is premature for a party to bring a court proceeding to seek a remedy if a statutory dispute resolution process offers an adequate alternative remedy and that process has not fully run its course or been exhausted: see Volochay v. College of Massage Therapists of Ontario, 2012 ONCA 541 (CanLII), 111 O.R. (3d) 561, at paras. 61-70.

[…]

[39]      Non-administrative, alternative processes have also been seen in other cases as having the potential to resolve a dispute, thus rendering a court proceeding inappropriate or unnecessary.

[…]

[45]      Many of the cases dealing with the effect of alternative processes on the appropriateness of a court proceeding have applied the concept of a proceeding being “legally appropriate” articulated by this court in Markel. Markel involved a dispute between sophisticated insurers claiming indemnity under statutory loss transfer rules. The limitations issue that arose concerned whether a legal proceeding was “inappropriate” while settlement discussions between the parties were ongoing and thus, whether a claim was not discovered until these negotiations broke down.

[46]      Recall that, in Markel, the court held that the term “appropriate” in s. 5(1)(a)(iv) means “legally appropriate”. This interpretation avoided entangling courts in the task of having to “assess [the] tone and tenor of communications in search of a clear denial” that would indicate the breakdown of negotiations between the parties. That would permit a plaintiff to delay the discoverability of a claim for “some tactical or other reason” and “inject an unacceptable element of uncertainty into the law of limitation of actions” (at para. 34).

[47]      Similarly, in 407 ETR Concession Company, at para. 47, Laskin J.A. stated that the use of the term “legally appropriate” inMarkel “signified that a plaintiff could not claim it was appropriate to delay the start of the limitation period for tactical reasons, or in circumstances that would later require the court to decide when settlement discussions had become fruitless” (emphasis added).

[48]      These cases instruct that if a plaintiff relies on the exhaustion of some alternative process, such as an administrative or other process, as suspending the discovery of  its claim, the date on which that alternative process has run its course or is exhausted must be reasonably certain or ascertainable by a court.

Accordingly, the motion judge erred in holding that the appellant knew or ought to have known that its proceeding was appropriate as early as April 2010, when it received the CRA’s Notices of Assessment disallowing its tax credits. The proceeding was not appropriate, and the appellant’s underlying claim was not discovered, until May 2011, when the CRA responded to the appellant’s Notice of Objection and advised that it intended to confirm its initial assessments. The motion judge erred by equating knowledge that the respondents had caused a loss with a conclusion that a proceeding would be an appropriate means to seek a remedy for the loss.

Had the respondents together with the tax lawyer prosecuted the CRA appeal successfully, the appellant’s loss would have been substantially eliminated, and it would have been unnecessary to resort to court proceedings to remedy it. The fact that the appellant would have been unable to recover the fees it paid the tax lawyer, except through litigation, was inconsequential. It is the claim that is discoverable, not the full extent of damages the plaintiff may be able to recover. It would not have been appropriate under s. 5(1)(a)(iv) of the Act for the appellant to commence a proceeding until the respondents ameliorative efforts concluded.

The CRA appeal process had the potential to eliminate the appellant’s loss. As an alternative process to court proceedings, it could have resolved the dispute between the appellant and the respondents. These results would have made a proceeding unnecessary. It would not have been appropriate for the appellant to commence a proceeding until the CRA appeal process was exhausted in May 2011.

The court’s decision in Markel, as interpreted in 407 ETR Concession Company, about the meaning of the concept of a proceeding being “legally appropriate” under s. 5(1)(a)(iv) of the Act supported the appellant’s position. It was not a case where the appellant sought to toll the operation of the limitation period by relying on the continuation of an alternative process whose end date was uncertain or not reasonably ascertainable. It was clear that the end date of the CRA appeal was when the CRA responded to the appellant’s Notice of Objection advising that it intended to confirm the assessments. Thus the motion judge erred in invoking Markel to dismiss the appellant’s claim as time barred.

A last note: the Court of Appeal seems to still be ignoring its decision in Clarke where it held that  the section 5(1)(a)(iv) discovery criterion requires the claimant to have “good reason to believe he or she has a legal claim for damages”.  I don’t think any decision has followed this construction of the provision.