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: when a tax appeal doesn’t render a claim against lawyers inappropriate

In Coveley v. Thorsteinssons LLP, the plaintiffs sued their former lawyers for negligently prosecuting tax appeals.  The defendant lawyers moved for summary judgment dismissing the claim as statute-barred. The court refused to accept the plaintiffs’ s. 5(1)(a)(iv) appropriateness argument that the defendants’ prosecution of the tax appeals operated to delay their discovery of the claim:

[45]           Thorsteinssons relies upon a decision of Mew J. in J.C. v. Farant2018 ONSC 2692 (CanLII). In Farant, Mew J. decided a motion for summary judgment seeking dismissal of an action for professional negligence against lawyers who represented the plaintiff in an historical sexual abuse claim on the ground that it is statute barred. The outcome of the motion turned on s. 5(1)(a)(iv) of the Limitations Act, 2002. Mew J. observed at para. 72 of his decision that the focus of s. 5(1)(a)(iv) of the Limitations Acts, 2002 is on the specific factual or statutory setting of each individual case and, as a result, appellate decisions which have considered and applied the provision are not always easy to reconcile.

[46]           In his review of the jurisprudence under s. 5(1)(a)(iv) of the Limitations Act, 2002, Mew J. cited the decision of the Court of Appeal in Gravelle (CodePro Manufacturing) v. Denis Grigoras Law Office2018 ONCA 396 (CanLII). In Gravelle, the appellant commenced an action alleging that the respondents provided erroneous advice in respect of an agreement of purchase and sale, specifically, as to the enforceability of a binding arbitration agreement the appellant had with the purchaser under North Carolina law. The appellant gave notice of his claim but did not commence his action until over four years later. The appellant argued on appeal that it was appropriate for him to delay bringing his action until the arbitration proceedings involving the purchaser were completed, as it would have avoided unnecessary litigation if he had been successful in those proceedings. The Court of Appeal disagreed, noting that this was not a case in which the appellant was pursuing alternative means of resolving his negligence action against his former solicitors, the respondents. The Court of Appeal held that the appellant’s tactical decision to wait until the arbitration proceedings were completed before bringing his action was his to make, but this decision did not delay the commencement of the limitation period.

[47]           Mew J. cited the Gravelle decision as one that reinforces the principle that “a tactical decision to delay the commencement of proceedings will not, absent other factors – such as the pursuit of alternative means to resolve the very claim that is the subject of the action – delay the running of time”: Farantat para. 87.

[48]           The factual circumstances disclosed by the evidence on the motion before me are unlike those in Presidential in material respects. In Presidential, Pardu J.A. relied upon the fact that the appellant looked to its professional advisors to provide accounting and tax advice, and the appellant relied on the accountant’s advice to retain a tax lawyer to object to CRA’s Notices of Assessment. The accountant who had filed the tax returns late was involved in the strategy that was recommended to the appellant and that it pursued. The accountant continued to be involved in the alternative process that had been recommended by the accountant while this process was running its course.

[49]           The evidence on the motion before me is very different. Thorsteinssons informed Michael and Stella in September and October 2010, respectively, that their tax appeals were weak. Soon after this advice was given, Thorsteinssons, although initially willing to continue to represent the plaintiffs through the trial of their tax appeals (on a pro bono basis with an associate acting as trial counsel), sought and obtained an order, that was not opposed, removing the firm as counsel of record for the plaintiffs on November 12, 2010. Thorsteinssons was not thereafter involved in the litigation strategy that the plaintiffs pursued. The plaintiffs retained new counsel for their tax appeals and they were represented by new counsel through the trial of the tax appeals and an appeal of the trial decision. Thorsteinssons does not agree that incorrect advice was given and, unlike the facts in Presidential, the firm did not provide advice to the plaintiffs about what to do to solve the problem of incorrect advice having been given. The plaintiffs’ decisions to pursue the tax appeals and to wait until after the trial of the tax appeals before starting an action were made after the professional relationship between Thorsteinssons and the plaintiffs had ended, and were not recommended by Thorsteinssons. The fact that Thorsteinssons continued to represent the plaintiffs until November 12, 2010, and that before this date the firm had expressed a willingness to continue to represent the plaintiffs at the trial of their tax appeals, does not affect the plaintiffs’ knowledge by no later than October 27, 2010 that Thorsteinssons’ advice was that both appeals were weak, and that this advice conflicted fundamentally with earlier advice, upon which the plaintiffs maintain they relied, that the appeals were strong and likely to succeed.

[50]           I regard these factual circumstances to be more like those in Gravelle. In Gravelle, the appellant knew of the claim against his former solicitors for allegedly improper advice. The solicitors were not involved in the appellant’s decision to pursue arbitration against the purchaser or the appellant’s decision to wait until the conclusion of the arbitration before starting an action against the solicitors for professional negligence. As I have noted, the Court of Appeal concluded that the appellant’s decision not to bring his action until the arbitration proceedings were completed did not delay the commencement of the limitation period. The same reasoning applies to the facts on the motion before me.

[51]           In addition, I regard as significant that Stella and Michael did not state in their affidavits that they decided to delay commencing a claim against Thorsteinssons while they were pursuing the tax appeals because, if they were successful, the losses resulting from their claims against Thorsteinssons would have been substantially or entirely eliminated. If this was the reason for delaying commencement of the action, I would expect evidence of this fact to have been provided.

[52]           I also regard as significant that the plaintiffs did not wait for the trial decision in their tax appeals before commencing an action against Thorsteinssons. The trial of the tax appeals was held in October 2012 and the Tax Court of Canada released the judgment dismissing the tax appeals more than one year later, on December 20, 2013. The action against Thorsteinssons was commenced on November 2, 2012, soon after the trial of the tax appeals and before the release of the Tax Court of Canada’s decision. This evidence is inconsistent with the position advanced by the plaintiffs that a legal proceeding against Thorsteinssons was not an appropriate means to seek to remedy the loss caused by incorrect legal advice given by Thorsteinssons until the alternative process upon which the plaintiffs rely, the tax appeals, had run its course.

[53]           The pursuit of tax appeals that, according to the plaintiffs’ evidence, they regarded as weak and unlikely to succeed, does not amount to an alternative process that had the reasonable potential to resolve the dispute between the parties and eliminate the plaintiffs’ loss. The plaintiffs’ pursuit of the tax appeals does not postpone the time when they first knew or reasonably ought to have known that, having regard to the nature of the injury, loss or damage that they claim was caused by their reliance on Thorsteinssons’ advice, an action would be an appropriate means to seek to remedy their claim.

[54]           For these reasons, I conclude that by no later than October 27, 2010, the plaintiffs first knew or reasonably ought to have known that an action against Thorsteinssons would be an appropriate means to seek to remedy their claim against Thorsteinssons for giving incorrect advice about the merits of the tax appeals. The plaintiffs’ claim was discovered by no later than October 27, 2010. The action was commenced more than two years later. There is no genuine issue requiring a trial in relation to whether the action is statute barred.

Ontario: an appropriateness analysis in a professional negligence claim

 

Nelson v. Lavoie is a recent example of a s. 5(1)(a)(iv) appropriateness analysis in a claim against a financial planner.  The plaintiff alleged that the defendant planner gave negligent advice regarding an Individual Pension Plan, which the CRA found did not meet the qualifications for registration.

The defendant argued that the plaintiff discovered her claim by the time she had seriously considered suing the defendant:

[22]           On those facts, Ms. Nelson knew or ought to have known by August 2009 that she had a cause of action against the defendants. By then, she was aware that the monthly benefits were not what the defendants suggested. Further, her bookkeeper, two other accountants and one financial advisor informed her that the viability of the IPP was questionable. She had consulted with counsel. Her counsel had obtained an expert’s report that opined: “the IPP created for Ms. Nelson does not appear to meet the requirements for registration and is very likely to have its registration revoked by CRA.”

[23]           Ms. Nelson admitted during discoveries that they seriously considered a lawsuit by August 23, 2009. She stated, “I’m not sure if it was already in the work, but we knew, yeah, we were going to have to, yeah.” Yet, she waited until June 20, 2012, to institute an action claiming some $3,000,000 in damages sustained because of negligent financial advice and misrepresentation.

The plaintiff didn’t dispute these facts, but argued that a proceeding wouldn’t be an appropriate remedy until the CRA’s final determination regarding the pension plan:

[28]           Although she may have had suspicions on the validity of her IPP, she submits her claim did not materialize until the CRA deregistered her plan by notice dated September 28, 2011. Since the Statement of Claim was issued on June 20, 2012, it is well within the time prescribed by the Limitations Act, 2002. She submits it was not until that time that the essential elements of s. 5 of the Limitations Act, 2002, were met. At that point, she was aware that she would have to indemnify the CRA for back taxes, interest and any associated penalties.

After reviewing the s. 5(1)(a)(iv) jurisprudence, the court rejected the defendant’s argument:

[54]           When applying these principles to this factual situation, it is clear that Ms. Nelson had some suspicions by the August of 2009 regarding the conformity of the IPP. The advice that she received from the accountants and financial planners she consulted was concerning. The defendants submit that these facts satisfy the test at s. 5(1)(a) of the Act. However, I am unable to accept this argument because it fails to satisfy the requirement of s. 5(1)(a)(i) and s. 5(1)(a)(iv).

[55]           Firstly, the defendants’ reassurance prevented the plaintiff from discovering that loss or damage has occurred. The defendants, her financial advisors, insisted that the plan was not only acceptable to the CRA but it would be beneficial to her in the long-term. On at least two subsequent occasions, the defendants reassured her that the IPP complied with the Income Tax Act. This repeated advice casted doubts over the inadequacy of the IPP. In this light, Ms. Nelson could not conclude if damage had occurred.

[56]           Secondly, I cannot accept the defendants’ position concerning the right time for the institution of appropriate proceedings. It would not have been appropriate for Ms. Nelson to institute an action without a final determination from the CRA. Her counsel started a review process by notifying the CRA that something may be amiss. The CRA did not make a final decision until September 2011. Until then, the IPP’s compliance with the regulation remained uncertain. Ms. Nelson could not know that the advice she received from the defendants was in fact wrong. On September 28, 2011, the CRA made the decision to deregister the plan. Her suspicions and doubts about the plan crystallized with that notice. There was no doubt, at that point, that she would be responsible for tax arrears and additional penalties. It is only at that time that it was appropriate to institute an action. Had Ms. Nelson instituted an action in the fall of 2009, she would have very likely faced a summary judgment application dismissing her claim.

This seems to very good limitations analysis, and worth reviewing when considering the limitation of professional negligence claims.

Ontario: the defendant’s inability to satisfy a debt doesn’t make a proceeding inappropriate

 

Davies v. Davies Smith Developments Partnership is another decision from the Court of Appeal that delineates when a proceeding will be an appropriate remedy for a plaintiff’s loss.  The defendant’s lack of funds to satisfy its debt to the plaintiff did not prevent a claim from being an appropriate remedy for the debt.  The decision also reiterates the distinction between damage and damages:

[11]      In asserting that the limitation period had not expired, the appellant submits that: (a) the amount owing to the appellant was in dispute; (b) the profits could not be ascertained until the partnership’s projects had been completed; (c) an action was not an “appropriate” means to remedy the appellant’s loss because he knew the partnership did not have funds; and (d) there had been forbearance or novation, making it inappropriate to commence an action. The appellant submits that the claim was not discovered until 2011, when he realized that the respondent had made improper charges to his capital account.

[12]      We agree with the respondent that the first two submissions confuse “damage” with “damages”. The appellant knew by the end of June 2008 that he had suffered damage, even though the amount of his damages was a matter of dispute and had not been quantified: see Hamilton (City) v. Metcalfe & Mansfield Capital Corporation2012 ONCA 156 (CanLII)347 D.L.R. (4th) 657, at paras. 54 and 58.

[13]      The third submission that the respondent did not have the funds to pay, while perhaps explaining the appellant’s conduct, did not stop the limitation period from running. The appellant’s claim was “fully ripened” by July 2008. The word “appropriate”, as it appears in s. 5 of the Limitations Act, means “legally appropriate”. The appellant cannot rely on his own tactical reasons for delaying the commencement of legal proceedings: see Markel Insurance Company of Canada v. ING Insurance Company of Canada2012 ONCA 218 (CanLII)348 D.L.R. (4th) 744, at para. 34.

Ontario: s. 5(1)(a)(iv) and doctor-patient relationships

The decision in Kram v. Oestreicher is an example of a circumstance where a proceeding did not become an appropriate remedy while a doctor was attempting to remedy his error:

[125]      In my view, the circumstances here are analogous to those before the Court of Appeal in both Presidential MSH Corporation and Brown v. Baum. Assuming that I had concluded that Oestreicher was civilly liable for the manner in which the June 15, 2009 surgery was carried out, he was engaged in good faith efforts to remedy any damage caused for at least the next 14 months. This was reflected in the three subsequent surgeries he performed, the last of which occurred on August 17, 2010. Moreover, it is clear that Kram was relying on Oestreicher’s superior knowledge and expertise throughout this time period.

[126]      In my view, it would have been premature, and therefore inappropriate, for Kram to have commenced a legal action while Oestreicher’s good-faith efforts to remedy any negative effects from the June 15, 2009 surgery were ongoing. I conclude that the two-year limitation period in respect of her claims began to run, at the earliest, on August 17, 2010. She commenced this proceeding within two years of that date. Accordingly, Kram’s claims are not barred by the operation of the Act.

 

Ontario: Court of Appeal reminds us that arbitration doesn’t suspend the limitation period

 

In Gravelle (CodePro Manufacturing) v. Denis Grigoras Law Office, the Court of Appeal held that a party who writes a letter with the subject line “Notice of Pending Legal Malpractice Action”, and advises that “a statement of claim is currently being drafted against yourself […] such as to avoid the expiration of the applicable statute of limitation periods”, has discovered his claim.

If the party subsequently pursues arbitration in lieu of an action, that will not have the effect of suspending the commencement of the limitation period:

[6]         This is not a case in which the appellant was pursuing alternative means of resolving his negligence allegations against his former solicitors, the respondents. The appellant decided for tactical reasons not to bring his action against the respondents until the arbitration proceedings were completed. He was entitled to make this choice, but he must live with the consequences of it. The motion judge made no error in concluding that the appellant discovered his claim by November 23, 2009. The fact that a notice of possible claim has been delivered “may be considered by a court in determining when the limitation period in respect of the person’s claim began to run”: Limitations Act, 2002, s. 14(3).

This is a useful s. 5(1)(a)(iv) decision because it provides an example of the kind of tactical consideration that does not prevent a proceeding from being an appropriate remedy.

It’s also an interesting counterpoint to this decision.

Ontario: Rebutting presumptive discovery is the plaintiff’s burden

The Court of Appeal decision in O’Brien-Glabb v. National Bank of Canada states the principle that the plaintiff bears the onus of establishing the inappropriateness of a proceeding as part of a discovery argument:

[13]      We agree with the appellant that it was the respondent who bore the onus of leading evidence to establish on a balance of probabilities that a proceeding was not appropriate in 2010 (see: Miaskowski (Litigation guardian of) v. Persaud2015 ONCA 758(CanLII) at para 27Fennell v. Deol2016 ONCA 249 (CanLII) at para16; and Galota v. Festival Hall Developments Ltd.2016 ONCA 585 (CanLII) at para 15).

Even a vague familiarity with the operation of s. 5 of the Limitations Act means this principle is self-evident, but it’s nevertheless helpful to have it stated explicitly.

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) 3212017 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. Day2016 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: 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: Briefly, the principles of s. 5(1)(a)(iv)

In Velgakis v. Servinis, the Court of Appeal conveniently reduced the s. 5(1)(a)(iv) discovery principles in Presidential to two points:

[6]         In Presidential MSH, at paras. 17-20, this court clarified certain principles governing cases such as the one before us on the issue of discoverability:

1.      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.

2.       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. The plaintiff and defendant must have engaged in good faith efforts to right the wrong it caused.

Furthering the interested of brevity, in Tracy v. Iran (Information and Security),  the Court reduced the purpose of that provision to a sentence 2017 ONCA 549:

[79]      The purpose of the appropriateness criterion in s. 5(1)(iv) of the Limitations Act, 2002 is to deter needless litigation: Presidential MSH Corp. v. Marr, Foster & Co. LLP2017 ONCA 325 (CanLII), at para. 17. Given that a stay of the respondents’ proceedings on the U.S. judgments would be inevitable if they were brought at common law, it would have been fruitless to commence them before 2012 when the JVTA and SIA carved out an exception to Iran’s immunity. They were therefore not appropriate or discoverable before 2012.