Ontario: s. 5(1)(a)(iv) and the limitation of false arrest and imprisonment claims

Vu v. Attorney General of Canada considers the limitation of a claim arising from false arrest and imprisonment, and in particular the impact of s. 5(1)(a)(iv) of the Limitations Act on the analysis:

[30]           Not surprisingly, the defendant takes the position that the limitation period commenced when Vu was detained, on June 27, 2013.  At that time, they say, he must have known that his arrest and detention were wrongful.  Alternatively, the defendant argues that Vu would certainly have known it was wrongful by July 9, 2013, following the second detention hearing when the ID accepted the evidence contained in McNamara’s Statutory Declaration.

[31]           The plaintiff, on the other hand, asserts that the limitation period runs from the date of his release from detention in Vietnam, on October 8, 2014.  The plaintiff argues that he could not have initiated his claim for false imprisonment when first arrested and the act of wrongful detention was still ongoing. Plaintiff’s counsel analogized this to suing for battery while the knife is still in your arm. Further, the plaintiff claims that the CBSA represented to him many times that his release from immigration detention was “imminent,” yet he remained detained for a total of 15 months, without knowing or being able to know for how long he would remain in custody.

[32]           The defendant relies upon Kolosov v. Lowe’s Companies Inc., 2016 ONCA 973, O.J. No. 6702 (“Kolosov”), in which the Court of Appeal seems to accept that the limitation period commences on the first date of detention, stating at para. 11:

The law in relation to the commencement of the limitation period for the intentional torts of false arrest and imprisonment … is well-settled. As Chiapetta J. noted in Fournier-McGarry (Litigation Guardian of) v. Ontario2013 ONSC 2581 at para. 16,

 A claim for the common law torts of false arrest, false imprisonment and breach of Charter rights arising therefrom crystallizes on the date of arrest (see Nicely v. Waterloo Regional Police Force,  1991 CanLII 7338 (ON SC), [1991] O.J. No. 460 (Ont. Div. Ct.), at para. 14).

 [33]           The plaintiff, on the other hand, cites a conflicting Court of Appeal decision, Mackenzie v. Martin1952 CanLII 85 (ON CA), [1952] O.R. 849 (Ont. C.A.), at paras. 6-8, aff’d 1954 CanLII 10 (SCC), [1954] S.C.R. 361 (S.C.C.), which refers to case law dating back to the 18th century, and states that the limitation period for a false imprisonment claim commences upon the date of release. To my knowledge, while the case is dated, Mackenzie v. Martin has never been overturned.

[34]           The conflict is not easily resolved by the jurisprudence.  In Fournier-McGarry (Litigation Guardian of) v. Ontario, at para. 16, Chiapetta J. relied on Nicely v. Waterloo Regional Police Force (“Nicely”) in making her statement that the Court of Appeal subsequently adopted in Kolosov. However, while the Divisional Court held in Nicely, at para. 15, that the test “is as of the date of arrest and imprisonment,” it was discussing the question of liability and the grounds for arrest when the arrest took place, not the limitation period. This point was not addressed by Chiapetta J. in Fournier-McGarry, or by the Court of Appeal in Kolosov, both of which simply accept the statement as dealing with limitation periods. Elsewhere, the Divisional Court in Nicely suggested, at paras. 8-9, that the time period begins to run when the tort is “complete,” or upon release. In Nicely, however, the arrest, detention and release all occurred on the same day, as was also the case in Fournier-McGarry.

[35]           Ferri v. Root2007 ONCA 79, O.J. No. 397, leave to appeal refused, [2007] S.C.C.A. No. 175 (“Ferri”), is another, more recent, case in which the plaintiff was arrested and released on the same day. There, the Court of Appeal, at para. 102, reiterated the finding in Nicely that “the test for these torts is at the date of arrest and imprisonment,” but addressed the limitation period in the same context that it arose in Nicely, which was under s. 7 of the Public Authorities Protection Act, R.S.O. 1990, c. P.38. (“PAPA”). That Act required that an action be “commenced within six months next after the cause of action arose or in case of continuance of injury or damages within six months after the ceasing thereof” (emphasis added). Accordingly, the Court in Ferri, at para. 103, concluded that the injury of false imprisonment ceased when the plaintiff was released.

[36]           There is also the concern that a false arrest and an unlawful imprisonment may not occur at the same time. One may be lawfully arrested but unlawfully detained, or a detention that is lawful at the outset may become unlawful at a subsequent point in time. For example, a lawful immigration detention can become unlawful due to its conditions, its length, procedural fairness, or if it is “no longer reasonably necessary to further the machinery of immigration control:” Chaudhary v. Canada (Minister of Public Safety & Emergency Preparedness), 2015 ONCA 700, 127 O.R. (3d) 401, at paras. 81, 86; Re Charkaoui2007 SCC 9, [2007] 1 S.C.R. 350, at para. 123Scotland v. Canada (Attorney General), 2017 ONSC 4850, 139 O.R. (3d) 191.

[37]           The plaintiff submits that the approach in Mackenzie v. Martin is also consistent with the law in the United States, where time runs from the date of release, not the date of detention: Milliken v. City of South Pasadena, 158 Cal. Rptr. 409, 412 (Cal. Ct. App. 1979); Donaldson v. O’Connor493 F.2d 507, 529 (5th Cir. 1974).

[38]           While I have concerns with the broad application of Kolosov urged on me by the defendant, I do not need to resolve the conflict in the cases in this matter. This case does not arise under the PAPA, which would cause me to consider a continuing injury. Rather, since section 5(1)(a) of the Limitations Act establishes a four-part test, I regard Kolosov as simply setting up a presumption (which was not rebutted in that case) that the cause of action arose on the date of arrest and detention or, at latest, the date of the second detention hearing, but it does not address all four parts of the test. This means I must still consider when the plaintiff had sufficient facts on which to base an allegation of wrongful arrest and detention, and whether, “[h]aving regard to the nature of the loss or damage, a proceeding would have been an appropriate means to seek to remedy it.”

[46]           In this case, however, the plaintiff did not delay the bringing of his claim for reasons of strategy. Rather, in the absence of the memorandum disclosing that McNamara’s Statutory Declaration was incorrect, he simply had no claim to bring. At the ID hearing on July 9, 2013, Vu tried to persuade the tribunal that he was in compliance with his terms of release and that the CBSA was mistaken, but the tribunal preferred McNamara’s more detailed evidence and made a finding of fact against the plaintiff. The plaintiff was without any evidence to rebut that finding until the disclosure on June 10, 2015. At no point during the hearing on July 9, 2013, or at any subsequent hearing, did McNamara reveal that she had relied on an interpreter; rather, the evidence in her Statutory Declaration (which itself was only disclosed in January 2014) was that the she and the witness had spoken to each other in English.

 [47]           Further, prior to receiving the memorandum in June 2015, Vu was pursuing other, more pressing and appropriate remedies, including detention reviews, the spousal sponsorship application, and attempts to address living arrangements for his infant daughter.  I find, as the Court of Appeal did in Presidential MSH Corporation v. Marr, Foster & Co. LLP2017 ONCA 325135 O.R. (3d) 321 (“Presidential MSH Corporation”)at para. 32that it would have been inappropriate to require the plaintiff to prematurely resort to court proceedings while the statutory alternative process was ongoing, which might make the proceedings unnecessary.” Moreover, a lawsuit would not have achieved Vu’s objective of being released.
 [48]           Had Vu known of the evidence that McNamara’s Statutory Declaration was incorrect when he was in custody, he undoubtedly would have raised that before the ID. Although he did not seek to review the ID’s detention order in the Federal Court, as his counsel explained Vu had good reasons not to do so: he accepted the CBSA’s representations that his removal was “imminent,” and perceived that making an application would have been a waste of time and money and might have delayed his deportation due to the CBSA’s need to defend the claim.  Further, as the Supreme Court of Canada observed recently in Canada (Public Safety and Emergency Preparedness) v. China2019 SCC 29433 D.L.R. (4th) 381, at paras. 61-67, judicial review of an Immigration Division decision is challenging.  The onus is squarely on the applicant to establish the decision is unreasonable, leave is required, and remedies are limited. Instead of releasing an applicant, Karakatsanis J. noted, at para. 65 that even a successful judicial review “will generally result in an order for redetermination, requiring further hearings to obtain release and thereby extending detention” (emphasis added).

[52]           In this case, however, rather than the contents of the disclosure having a negligible impact on the reasonable and probable grounds for Vu’s arrest and detention, the revelation that McNamara had used an interpreter while interviewing the witness was not merely a finding of helpful evidence – it was a finding that turned the evidence against Vu on its head, as it threw doubt on the veracity of the testimony that was used to justify the arrest and detention. This was evidence upon which the Tribunal clearly relied during the July 9, 2013 hearing and throughout Vu’s fifteen months in detention. As a result, I do not accept the defendant’s submission that the disclosure of the memorandum in June 2015 was simply something that strengthened an already “discovered” claim: see, e.g., Sosnowski, at paras. 19, 27-29. The plaintiff’s affidavit might have invited this argument where he stated that only after the June 13, 2016 disclosure he became “confident that my detention had been unlawful.” However, that date was in fact when the government actually settled the bond litigation, one year after the memorandum was released to him in June 2015. In any event, in my view this statement was simply recognition that he now had a basis for a civil action for damages, something that, it is to be remembered, is not to be embarked upon lightly. As the Supreme Court stated in Novak v. Bond,  1999 CanLII 685 (SCC)[1999] 1 S.C.R. 808 (S.C.C.), at para. 85:

Litigation is never a process to be embarked upon casually and sometimes a plaintiff’s individual circumstances and interests may mean that he or she cannot reasonably bring an action at the time it first materializes. This approach makes good policy sense. To force a plaintiff to sue without having regard to his or her own circumstances may be unfair to the plaintiff and may also disserve the defendant by forcing him or her to meet an action pressed into court prematurely.

[55]           Applying these principles, in my view, a lawsuit for damages over Vu’s arrest and detention was not an “appropriate means” to redress the wrong done to him when he was arrested and held in custody until he obtained the disclosure in June 2015 that the CBSA had misled the ID. This was many months after he had been removed from Canada. Prior to receiving that information, Vu appropriately pursued other avenues to address his detention and removal, relied on the good faith of the CBSA and the ID process, and did not have grounds for suing for damages. A lawsuit would have been premature, and therefore was not an appropriate means under s. 5(1)(a)(iv) until June 2015.

Ontario: Court of Appeal narrows the s. 5(1)(a)(iv) “alternative process” principle

The Court of Appeal decision in Beniuk v. Leamington (Municipality) is an important addition to s. 5(1)(a)(iv) appropriateness jurisprudence.

It has become popular to argue that an alternative dispute resolution process with a clear and identifiable conclusion delays the appropriateness of a civil proceeding as a remedy, and therefore discovery of a claim.  Beniuk holds that this isn’t the law: whether an alternative process impacts on appropriateness is a question of fact that the plaintiff must prove.

The appellant in Beniuk argued that the Court of Appeal’s decision in 407 ETR stands for the principle that when there is an alternative dispute resolution process, an action becomes an appropriate remedy only when the alternative process concludes.  It followed that that the limitation period or the appellant’s action didn’t not run until the OMB confirmed that it did not have jurisdiction over its cause of action: if the OMB assumed jurisdiction, there would have been no need for the action; therefore, the OMB hearing was an alternative process that until concluded rendered an action inappropriate.

Nope, held the court.

A limitation period doesn’t run whenever there is an ongoing alternative process.  Whether an alternative process delays the running of time turns on the particular facts of each case.  Evidence is necessary to explain the basis for pursuing the alternative process rather than commencing a proceeding.

[60]      407 ETR does not stand for a general principle that a limitation period will not begin to run whenever an alternative process that might resolve the matter has not yet run its course. It is a matter of evidence. Indeed, Laskin J.A. noted, at para. 34, that when an action is “appropriate” will depend on the specific factual or statutory setting of each individual case, and that case law applying s. 5(1)(a)(iv) is of limited assistance because each case will turn on its own facts. In 407 ETR, the court considered the evidence on the motion about the statutory scheme and the effectiveness of the administrative process before deciding that it would be reasonable for such a process to run its course before a civil proceeding was appropriate.

[61]      Recently, several cases considering the application of s. 5(1)(a)(iv) have come before this court. The court has emphasized, echoing the words of Laskin J.A. in 407 ETR, that when a proceeding is appropriate will turn on the facts of each case: see, for example, Nelson v. Lavoie2019 ONCA 43147 C.C.P.B. (2d) 1, at para. 25, and Ridel v. Goldberg, 2019 ONCA 636436 D.L.R. (4th) 453, at para. 71.

[62]      This case did not involve an alternative process available under a statutory scheme. It did, however, involve an alternative process that the appellants were pursuing, as in 407 ETR, against the same party.

[63]      The fact that a plaintiff chooses to pursue an alternative process does not in itself suspend the running of the limitation period under s. 5(1)(a)(iv). Whether an alternative process will have this effect will depend on the particular factual circumstances and the evidence before the court in determining the limitations issue. In this case, there was no evidence to explain why the appellants chose to pursue the OMB route rather than commencing both an OMB proceeding and a civil action.

[74]      As I have already observed, 407 ETR does not stand for the general principle that it will always be appropriate to wait until another process has run its course before commencing a civil action in respect of a claim which has otherwise been “discovered” under s. 5(1)(a)(i), (ii) and (iii). It is incumbent on a party asserting that it was reasonable to pursue a claim in another forum to explain why this approach was reasonable. That is what occurred, and was ultimately successful, in the 407 ETR case.

[75]      While one of the principles recognized in connection with s. 5(1)(a)(iv) is the deterrence of unnecessary litigation, a plaintiff is not entitled in all cases to pursue one route, and to expect the limitation period to be tolled in respect of any other claim it may have in respect of its loss or damage. Said another way, s. 5(1)(a)(iv) does not permit a party to engage in litigation in stages for the same wrong. An example is Lilydale Cooperative Limited v. Meyn Canada Inc.2019 ONCA 761439 D.L.R. (4th) 385, where this court considered the submission that a limitation period in respect of a third party claim in Ontario was suspended while the defendant was seeking to establish that Alberta was the correct forum for the litigation. Feldman J.A. rejected the argument that it was not legally appropriate to commence a legal proceeding while another resolution process that might resolve the matter was ongoing. She held that such an interpretation of “appropriate” was inconsistent with the purpose of the Limitations Act and could extend the limitation period well beyond the two-year threshold in an uncertain and unpredictable manner. There were also no significant savings to be achieved by not commencing the third party claim until the forum challenge was complete.

Here, the OMB wasn’t an alternative process, but an alternative forum, and the availability of multiple forums doesn’t impact on discovery because the law deems a party to know the applicable legal principles (that is, which forum is correct):
[70]      While I can appreciate why the appellants may have thought they had a claim for injurious affection, it has always been a principle of limitations law that a plaintiff knows, or could by the exercise of reasonable diligence, determine what legal principles apply. See, for example, Boyce v. Toronto Police Services Board2011 ONSC 53, aff’d: 2012 ONCA 230, leave to appeal refused: [2012] S.C.C.A. No. 265, where Low J. stated, at para. 23:
Section 5(1)(a)(iv) does not import an idiosyncratic limitation period calibrated by the claimant’s familiarity with or ignorance of the law. The test is an objective one. While it is possible to envisage that a new kind of right might arise that has not been hitherto protected, thus making it arguable that a civil proceeding might not be seen objectively as an appropriate means to seek to remedy, a battery causing personal injury is a classic example of the kind of wrong that is appropriate for redress by court action. A citizen is presumed to know the law of the land. [Emphasis added.]

This strikes me as a material and reasonable narrowing of the s. 5(1)(a)(iv) “alternative dispute resolution process” principle.  Whether an alternative process impacts on discovery is a question of fact, and the plaintiff will need to establish that it was reasonable in the circumstances to allow the process to complete before commencing a proceeding.  This should discourage some of the more creative alternative process arguments, of which I see many.

Also noteworthy is the confirmation that an action in nuisance or negligence for damages relating to real property is “an action to recover land” for the purpose of RPLA and subject to its ten-year limitation period:

[42]      Subsection 2(1)(a) of the Limitations Act provides that the Limitations Act does not apply to proceedings to which the RPLA applies. Section 4 of the RPLA provides for a ten-year limitation period for an action to recover land:

 No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it.

[43]      When the elements that do not apply to this case are removed, s. 4 provides that “no person shall bring an action to recover any land, but within ten years after the time at which the right to bring any such action first accrued to the person bringing it.” The issue here is whether the appellants’ claim is an “action to recover land” within the meaning of the RPLA.

 [44]      The appellants point to the definition of “land” in s. 1 of the RPLA:
 “land” includes messuages and all other hereditaments, whether corporeal or incorporeal, chattels and other personal property transmissible to heirs, money to be laid out in the purchase of land, and any share of the same hereditaments and properties or any of them, any estate of inheritance, or estate for any life or lives, or other estate transmissible to heirs, any possibility, right or title of entry or action, and any other interest capable of being inherited, whether the same estates, possibilities, rights, titles and interest or any of them, are in possession, reversion, remainder or contingency; [Emphasis added.]

[45]      They rely on the term “messuages”, which refers to a dwelling house, its outbuildings, the area immediately surrounding the dwelling, and the adjacent land appropriate to its use: McConnell v. Huxtable2014 ONCA 86118 O.R. (3d) 561, at para. 14. The appellants also parse out and rely on the phrase “any…right…of…action”. Putting these pieces together, the appellants submit that an “action to recover land” includes an action to recover rights that run with the land, and that a cause of action for nuisance is tied to and arises out of the right to use and enjoy land without substantial interference. Accordingly, the appellants submit that a cause of action for nuisance is an incorporeal or intangible right that runs with the property and is captured by the definition of “land” in the RPLA. They point to a passage in Equitable Trust Co. v. 2062277 Ontario Inc.2012 ONCA 235109 O.R. (3d) 561, where Perell J. (sitting on this court ad hoc) stated that the RPLA is intended to cover actions “affecting” land: Equitable Trust, at para. 28.

 [46]      I do not accept the appellants’ submission. There is no support in the jurisprudence that an action in nuisance or negligence for damages relating to real property is “an action to recover land” for the purposes of the RPLA. That land or real property is involved in an action does not mean that the RPLA applies: Harvey v. Talon International Inc.2017 ONCA 267137 O.R. (3d) 184, at paras. 51-52. Typically, actions to recover land seek to assert property rights. And Perell J.’s remark from Equitable Trust that the RPLA covers actions “affecting” land has been commented on specifically by this court, and later by Perell J. himself, as a statement that should be interpreted narrowly and not out of the context of that case.

Lastly, I note that the court stated the standard of review with respect to each limitations issue.  For whatever reason, the court frequently omits an explicit standard of review analysis when considering limitations issues.  This approach is helpful and I hope to see more of it.

[41]      The motion judge’s conclusion that s. 4 of the RPLA does not apply to the appellants’ civil action is reviewable on a standard of correctness: Housen v. Nikolaisen2002 SCC 33[2002] 2 S.C.R. 235, at para. 8. For the reasons that follow, I agree with the motion judge’s conclusion on this issue.

[53]      The question of whether a limitation period expired prior to the issuance of a statement of claim is a question of mixed fact and law and subject to review on the standard of palpable and overriding error: Longo v. MacLaren Art Centre Inc.2014 ONCA 526323 O.A.C. 246, at para. 38. However, where there is an extricable error of principle, the standard of review is correctness: Housen, at paras. 8 and 36.

[79]      The appellants contend that the motion judge made a palpable and overriding error when he concluded that their claim was statute-barred even on the basis of what he described as a “rolling limitation period”. A “palpable and overriding error” is “an obvious error that is sufficiently significant to vitiate the challenged finding of fact”: Longo, at para. 39.

Ontario: a limitations defence appropriate for r. 21(1)(a)

The decision in Kaynes v. BP, PLC is a rare example of a limitation defence appropriately determined on a r. 21(1)(a) motion:

[68]           In my opinion, as explained below, there are no material facts that could be pleaded or any discoverability issues that could or would postpone the running of the limitation period for the fraudulent misrepresentation cause of action. It is plain and obvious that all of the possible claims arising from the Deepwater Horizon disaster were discovered by June 1, 2012. In my opinion, as explained below, the case at bar is one of those cases where pursuant to rule 21.01 (1)(a), the court can and should strike a claim as statute barred.

The defendants had also moved for judgment based on admissions in the Statement of Claim pursuant to r. 51.06(2).  Plainly, they had heeded the Court of Appeal’s direction in Brozmanova v. Tarshis to move under this rule where the allegations in the Statement of Claim entitle the defendant to judgment on a limitations defence.  Having allowed the motion to strike, the court didn’t consider r. 51.06(2) relief, which from a limitations law perspective is unfortunate because to my knowledge it would have been the first instance of a r. 51.06(2) limitations analyses.

The decision also provides an excellent overview of the distinction between the cause of action and the claim in the limitations scheme:

[73]           Before the enactment of the current Limitations Act, 2002a limitation period commenced when a cause of action accrued and when the cause of action was discovered.

[74]           There are over a hundred causes of action and there were rules for when a cause of action accrued and rules about when an accrued cause of action was discovered. Prior to the enactment of s. 5(1)(a)(iv) of the current Limitations Act, 2002the judge-made discoverability principle governed the commencement of a limitation period. The discoverability principle stipulated that a limitation period begins to run only after the plaintiff has the knowledge, or the means of acquiring the knowledge, of the existence of the material facts that would support a claim for relief; i.e. knowledge of the factual constituent elements of a cause of action.[24] The discoverability principle conforms with the idea of a cause of action being the fact or facts which give a person a right to judicial redress or relief against another.[25]

[75]           A cause of action is a set of facts that entitles a person to obtain a judgment in his or her favour from a court exercising its common law, equitable or statutory jurisdiction.[26] In Ivany v. Financiere Telco Inc.,[27] and 1309489 Ontario Inc. v. BMO Bank of Montreal,[28] Justice Lauwers observed that the idea of cause of action is used in two related senses: (1) it identifies a factual matrix from which claims or complaints arise; and (2) it identifies the legal nature of those claims, which is the nominal or technical meaning of cause of action.

[76]            With the enactment of the Limitations Act, 2002a limitation period commences when a “claim” is discovered”. The words “cause of action” do not appear in the Act, and the goal of the legislators was that for the purpose of determining when a limitation period began to run, “claim” and “claim” discovery would replace cause of action accrual and cause of action discovery. [29] This goal, however, was not achieved and the case law continues to use the idea of a cause of action in association with the idea of a “claim” under the Act. Under the Act, a claim is discovered on the earlier of two dates: the day on which a plaintiff either knew or ought to have known the constitutive elements of the claim and that a proceeding in Superior Court would be an appropriate means to seek a remedy.[30]

[77]           This continued connection between the ideas of claims as defined by the Limitations Act, 2002 and causes of action as understood under statutes and in law and equity is understandable, because civil procedure requires a plaintiff to plead the material facts of a viable cause of action and just pleading that the defendant’s conduct harmed the plaintiff does not provide the plaintiff with a remedy for his or her legal grievance or give the defendant notice of the cause of action that he or she must defend.

[78]           Section 1 of the Limitations Act, 2002 defines “claim” to mean: “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. A claim is a function of cause of action, which is the fact or facts which give a person a right to judicial redress or relief against another.[31] In Lawless v. Anderson,[32] the Court of Appeal stated at paras. 22-23:

  1. The principle of discoverability provides that “a cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence. This principle conforms with the generally accepted definition of the term “cause of action” — the fact or facts which give a person a right to judicial redress or relief against another”….
  2. Determining whether a person has discovered a claim is a fact-based analysis. The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant. If the plaintiff does, then the claim has been “discovered”, and the limitation period begins to run: seeSoper v. Southcott(1998), 1998 CanLII 5359 (ON CA), 39 OR (3d) 737 (C.A.) and McSween v. Louis (2000), 2000 CanLII 5744 (ON CA), 132 OAC 304 (C.A.).

[79]           Although functionally closely related to causes of action, a claim as defined under the Limitations Act, 2002 is somewhat different from a cause of action. A cause of action has discrete constituent elements. For example, as noted above, negligent misrepresentation has five specific constituent elements, but a claim under the Limitations Act, 2002 has just two generic elements; namely: (1) and act or omission of misconduct; and (2) injury, loss or damage caused by the misconduct. Strictly speaking, the application of the Limitations Act, 2002 does not require identifying the cause of action, it requires only determining whether the plaintiff has discovered wrongful conduct and harm for which a lawsuit would be appropriate to remedy the harm. Another  difference between claims and causes of action is that all claims have the element of damages, but some causes of action are actionable without damages having occurred. The cause of action for contract, for instance, requires a contract and a breach of the contract; damages, which typically do occur when a contract is breached, are, however, not a constituent element of the cause of action for breach of contract. Another difference is that no causes of action have appropriateness of a lawsuit as a constituent element, which is a factor in what counts for a discovered claim under the Limitations Act, 2002. A subtle deviation between claim and cause of action is that discovery of a claim under the Limitations Act, 2002 requires the plaintiff to have knowledge of an occurrence of injury caused by the defendant’s misconduct for which a law suit would be an appropriate means to seek a remedy, but discovery of a cause of action under the common law requires the plaintiff to have knowledge that the defendant’s conduct occasioned the material facts of the constituent elements of a particular cause of action.

[80]           All of the above reveals that the relationship between claim and cause of action is subtle and sometimes confusing. When a proceeding would be an appropriate means to seek to remedy, it is not enough for the plaintiff to just plead a claim as defined under the Limitations Act, 2002, he or she must still plead a reasonable cause of action. To assert a cause of action so as to interrupt a limitation period, the pleading must allege the facts necessary to identify the constituent elements of the cause of action.[33]

[81]           With some statutory adjustment, the discoverability principle continues to operate for claims, and the principle has been codified by the Limitations Act, 2002 Discoverability has been adjusted by s. 5(1)(a)(iv), and thus subject to s. 5(1)(a)(iv), a limitation period commences at its earliest when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence, but because of s. 5(1)(a)(iv), discoverability may be postponed.

[82]           Under the Limitations Act, 2002the discoverability of a claim for relief involves the identification of the wrongdoer, and also, the discovery of his or her acts or omissions that constitute liability.[34] It is not enough that the plaintiff has suffered a loss and has knowledge that someone might be responsible; the identity and culpable acts of the wrongdoer must be known or knowable with reasonable diligence.[35]

[83]           For the limitation period to begin to run, it is not necessary that the plaintiff know the full extent or quantification of his or her damages; rather, the period begins to run with the plaintiff’s subjective or objective appreciation of being damaged, i.e., of being worse off than before the defendant’s conduct.[36]

[84]           Section 5(1)(a)(iv) of the Limitations Act, 2002 adjusts the operation of the discoverability principle, and s. 5(1)(a)(iv) can have the effect of delaying the commencement of the running of limitation period. Where a person knows that he or she has suffered harm; i.e., when the plaintiff knows the elements of ss. 5(1)(a)(i),(ii), and (iii), the delay lasts until the day when a proceeding would be an “appropriate” means to remedy the harm having regard to the nature of the injury, loss or damage.

[85]           The appropriateness factor of 5(1)(a)(iv) introduces some uncertainty in the operation of the Limitations Act, 2002 but it also introduces some flexibility and fairness in the application of the discovery principle, which presumptively operates against the claimant as soon as a cause of action becomes objectively apparent.[37] In Markel Insurance Co. of Canada v. ING Insurance Co. of Canada,[38] the Court of Appeal held that for s. 5(1)(a)(iv) to have a delaying effect, there must be a juridical reason for the person to wait; i.e., there must be an explanation rooted in law as to why commencing a proceeding was not yet appropriate. Appropriateness must be assessed on the facts of each particular case, including taking into account the particular interests and circumstances of the plaintiff.[39]

[86]           Subject to the adjustment made by s. 5(1)(a)(iv), with respect to the basic limitation period of two years under the Limitations Act, 2002, a claim is “discovered” on the earlier of the date the claimant knew – a subjective criterion – or ought to have known – an objective criterion – about the claim.[40] Pursuant to s. 5(2) of the Act, the discovery of a claim presumptively occurs for the plaintiff on the date of the act or omission, but the plaintiff may rebut the presumption by demonstrating that he or she could only have reasonably discovered the underlying material facts after the date of the act or omission.

This is the impact of the distinction:

[88]           Applying these principles to the circumstances of the immediate case, pursuant to the Limitations Act, 2002 around June 1, 2010, presumptively and also subjectively and objectively factually, Mr. Kaynes discovered he had a “claim” against BP. He subjectively knew that BPs misconduct had caused him harm and he knew that court proceedings would be appropriate. For the purpose of the commencement of limitation periods, it was not necessary for Mr. Kaynes to put a cause of action name to his “claim”. Whatever way the statement of claim was later framed to name a cause of action, the “claim” to which the cause of action was connected had been discovered in 2010 and the limitation period clock was running.

[89]           In other words, having discovered a “claim” in 2010, Mr. Kaynes had two years to plead the misconduct connected to the claim by pleading the material facts of negligence, negligent misrepresentation, fraudulent, misrepresentation, an oppression remedy, nuisance, or whatever. For the purpose of commencing a proceeding, however he might label his claim as a cause of action in a statement of claim, the limitation period for the “claim” was running by June 1, 2010. As it happened, albeit late, in November 2012, Mr. Kaynes pleaded a cause of action for negligent misrepresentation in Ontario, and he gave his claim a cause of action name, but regardless of its name in accordance with the principles of the Limitations Act, 2002, the negligent misrepresentation claim was already statute barred. A fraudulent misrepresentation claim had it been pleaded in November 2012 in Ontario would also have been statute barred.

The court also found that uncertainty as regards forum does not impact on appropriateness (consistent with Lilydale Cooperative Limited v. Meyn Canada Inc., which held similarly but isn’t cited in the decision):

[90]           In a creative argument, Mr. Kaynes, however, argues that his April 2012 action in Alberta was a timely claim in Alberta, with which I would agree, and until the Alberta court declined to take jurisdiction with respect to that claim, which did not occur until November 2012, it could not be said that a claim in Ontario had been discovered until November 2012. In this regard, he submits that under s. 5 (1)(a)(iv) of Ontario’s Limitation Act, 2002, it was only after Alberta declined to take jurisdiction that it could be said that proceedings in Ontario were appropriate and thus until the November decision in Alberta, the claim in Ontario had not been discovered.

[91]           This argument, however, does not work because the appropriateness of a proceeding in Ontario is not determined by the inappropriateness of a proceeding somewhere else. If any, the decision in Alberta, confirmed that Ontario was the appropriate forum for proceedings against BP.

 

Ontario: Court of Appeal on the impact of a forum dispute on a third party claim

Will a third party claim become an appropriate remedy within the meaning of s. 5(1)(a)(iv) only once the court has determined the forum for the main action?  No, held the Court of Appeal in Lilydale Cooperative Limited v. Meyn Canada Inc.  The issues arising from a contested forum, in particular the risk of attornment, are tactical and do not impact on when the claimant discovers the claim.  The court’s analysis is well-reasoned:

[49]      Meyn’s position is that it was not legally appropriate under s. 5(1)(a)(iv) of the Limitations Act to bring the third party proceedings until the forum issue was finally decided in February 2008 and that the two years ran from that time. Its submission is based on what occurred in the main action where Lilydale took the position by letter dated March 10, 2006 that it would only be proceeding in one jurisdiction, Alberta or Ontario. Meyn did not defend or take any steps in the Ontario action. In its submissions on this appeal, Meyn explained that the reason for this was because it believed that doing so had the potential to undermine its position in support of the stay of the Ontario action.

 [50]      Meyn’s argument regarding discoverability has two prongs. First, it could not deliver any third party claim in the Ontario action to ensure that it did not attorn and thereby jeopardize the forum argument. Second, if it had been successful in establishing that Alberta was the correct forum, then the Ontario action would have been discontinued and there would have been no need for any third party proceedings. Therefore, the principle applies from 407 ETR Concession Co. v. Day2016 ONCA 709133 O.R. (3d) 762, and Presidential MSH Corp. v. Marr, Foster & Co. LLP2017 ONCA 325135 O.R. (3d) 321, that it would not be legally appropriate to commence a legal proceeding while another resolution process that may resolve the matter is ongoing.

[55]      While a finding that serving a third party claim amounted to attornment could be prejudicial, or even fatal to a party’s forum challenge, the strategic decision of how to deal with this risk of prejudice is the type of tactical consideration that does not affect the “legally appropriate” calculus in s. 5(1)(a)(iv) of the Limitations Act. The issue of whether serving a third party claim solely to protect a limitation period will amount to voluntary attornment is for the forum judge to decide. It does not affect the discoverability of the third party claim and therefore the commencement of the limitation period.

 [56]      I also note that a party such as Meyn, facing the expiry of a limitation period, had a number of procedural avenues to take to avoid that consequence rather than allow a limitation period to expire or be found to have expired on the application of discoverability principles.
 [57]      First, Meyn could have alerted Weishaupt that the third party claim was coming and sought its agreement under s. 22(3) of the Limitations Act to a stand-still pending the determination of the forum issue. I can see no reason for the third party not to agree. However, if there were one, then judicial authorization on the attornment issue could be sought. That is what occurred in Joyce v. MtGox Inc.2016 ONSC 581, where Perell J., on a case management conference in advance of the expiry of the limitation period, involving a party in Meyn’s position, ruled that issuing the third party claim would not amount to attornment.
 [58]      Second, Meyn could have served the third party claim, with an express reservation of its rights, and then argued at its forum motion that it did so only to preserve the limitation period and therefore has not attorned to Ontario’s jurisdiction. Meyn brought a forum non conveniens motion. It was understood by all the existing parties that Meyn was not acknowledging the convenience of Ontario as the forum for the action by bringing the motion. While that motion was outstanding, it would be anomalous indeed if Meyn’s service of a third party claim to preserve a limitation period in Ontario would be found to amount to such an acknowledgement.
 [59]      To conclude, while risk of attornment was a potentially legitimate concern for Meyn, that concern related to its position on the forum issue and did not affect the discoverability of its third party claim and the need to take the steps necessary to preserve the claim within the limitation period.

The appellant also argued that the forum dispute had the potential to resolve the third party claim, and was therefore an alternative resolution process that could render the third party proceeding inappropriate until its conclusion.  The court rejected this submission.  The forum dispute couldn’t resolve the third party claim, it would only move it to another jurisdiction.

[63]      The forum challenge is conceptually similar to settlement discussions, which may resolve the entire claim so that no court proceeding need be commenced, but nonetheless do not postpone the running of the limitation period: see Presley v. Van Dusen2019 ONCA 66432 D.L.R. (4th) 712, at para. 25; and Markel at para. 34.

[64]      As in RidelTapak v. Non-Marine UnderwritersLloyd’s of London2018 ONCA 16876 C.C.L.I. (5th) 197, leave to appeal refused, [2018] S.C.C.A. No. 157, and Gravelle, in this case, there was no alternative resolution process to which Weishaupt was a party that could have resolved the issue between it and Meyn. Rather, Meyn was attempting to have the whole Ontario action dismissed, obviating the need for the third party claim.

[65]      To allow parties to wait, at their discretion, for other court or arbitral proceedings to conclude, where the result could obviate the need to bring a claim that they know exists, is inconsistent with the purpose of the Limitations Act for two reasons. First, this approach could extend the limitation period well beyond the two year original threshold in an uncertain and unpredictable manner. Second, there were no significant savings to be achieved by not commencing the third party claim until the forum challenge was complete. Procedurally, a stand-still or tolling agreement could be sought until the forum issue had been finalized by the court so that the third party would not be required to plead in response. However, it would be on notice that if the Ontario action proceeds, it is a named party, required to preserve its documents, and respond to the action as advised.
[66]      In my view, these factors drive the conclusion that the day Meyn was served with the statement of claim by Lilydale, it knew that a third party claim against Weishaupt was the appropriate means to seek a remedy from Weishaupt. It was therefore not “legally appropriate” for Meyn to wait until the forum issue had been decided before the commencing third party claim.

Ontario: Court of Appeal reviews appropriateness principles

The Court of Appeal decision Sosnowksi v. MacEwan Petroleum provides a useful summary of s. 5(1)(a)(iv) jurisprudence:

[15]      This court’s jurisprudence has developed certain principles for the interpretation and application of s. 5(1)(a)(iv).

[16]      First, the determination of whether a proceeding is an appropriate means to seek to remedy an injury, loss, or damage depends upon the specific factual and/or statutory setting of each case: Nasr Hospitality Services Inc. v. Intact Insurance2018 ONCA 725142 O.R. (3d) 561, at para. 46.

 [17]      Second, this court has observed that two circumstances most often delay the date on which a claim is discovered under this subsection. The first is when the plaintiff relied on the defendant’s superior knowledge and expertise, especially where the defendant took steps to ameliorate the loss. The other situation is where an alternative dispute resolution process offers an adequate remedy, and it has not been completed: Nasr, at para. 50.
 [18]      Third, Sharpe J.A. in Markel Insurance Company of Canada v. ING Insurance Company of Canada2012 ONCA 218109 O.R. (3d) 652, at para. 34, provided the following guidance concerning the meaning of the term “appropriate”:
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 a 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 appropriate. 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 the 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 in original.]

[19]      In other words, appropriate means whether it is legally appropriate to bring an action. Appropriate does not include an evaluation of whether a civil proceeding will succeed.

It’s also another addition to the jurisprudence considering the impact of a criminal proceeding on the timeliness of a civil proceeding. The outcome of a criminal proceeding may assist in assessing the merits of a civil proceeding, but that’s not a material consideration in the limitations analysis:

[28]      The appellant’s principal submission is that he should have been permitted to wait until the criminal proceedings concluded so that he could evaluate his chances of success in litigation. He argues that litigation is an expensive and risky proposition, and he should not have been forced to commence a civil proceeding until he knew that he had a chance of success. This argument, of course, is precisely what this court in Markel said a plaintiff is not permitted to do.

 [29]      If such an evaluative analysis could effectively stop the running of the limitation period, questions will necessarily follow regarding the nature of that analysis and the factors that could be considered. For example, is it open to a plaintiff to argue that he or she can await the outcome of a related discipline process in a professional negligence claim? May a potential plaintiff commence a claim many years after the events if there is a change in the law that increases his or her chances of success? If a critical witness goes missing and is later discovered, is it open to the plaintiff to assert that he or she did not know whether it was appropriate to bring an action until the witness was found?

 

Ontario: Court of Appeal on the interaction of s. 5(1)(a)(iv) and s. 18 of the Limitations Act

Two aspects of the Court of Appeal’s decision in Ridel v. Goldberg are noteworthy.

First, the court held that a contribution and indemnity proceeding does not become an appropriate remedy for a loss only when the main action resolves.  Section 5(1)(a)(iv) will not suspend the limitation period as against a second defendant where a plaintiff has commenced a legal proceeding against another defendant for the same wrong:

[70]      The appellants rely on s. 5(1)(a)(iv) of the Limitations Act to argue that the appeal of the 2013 Judgment postponed the running of the limitation period against e3m. They say that, because the appeal may have eliminated e3m’s liability to the Ridels and hence e3m’s claim against Goldberg, they would not reasonably have known that an action was “an appropriate means” to seek to remedy e3m’s losses until the appeal was dismissed.

[72]      The appellants rely on this court’s decision in Independence Plaza 1 Associates, L.L.C. v. Figliolini2017 ONCA 44136 O.R. (3d) 202, a case involving an action in Ontario to enforce a foreign judgment, in support of their argument that it was not legally appropriate to commence a claim against Goldberg until the appeal of the 2013 Judgment was determined. In Figliolini, this court held, at para. 77:

 In the usual case, it will not be legally appropriate to commence a legal proceeding on a foreign judgment in Ontario until the time to appeal the judgment in the foreign jurisdiction has expired or all appeal remedies have been exhausted. The foreign appeal process has the potential to resolve the dispute between the parties. If the judgment is overturned, the debt obligation underlying the judgment creditor’s proceeding on the foreign judgment disappears.

[73]      The appellants say that, just as this court held that the basic limitation period for an action to enforce a foreign judgment in Ontario runs from the date of exhaustion of all appeals (subject to discoverability principles), the same should apply to a claim that, as here, is based on a domestic judgment. In either case, the debt obligation underlying the claimant’s proceeding would disappear if the judgment were overturned.

 [74]      In my view, Figliolini does not apply by analogy or otherwise. The main issue in Figliolini was whether s. 16(1)(b) of the Limitations Act (which provides that there is no limitation period in respect of, among other things, “a proceeding to enforce an order of a court, or any other order that may be enforced in the same way as an order of a court”) would apply to an action to enforce a foreign judgment. The court rejected that argument, and then went on to determine when the basic two-year limitation period for an action to enforce a foreign judgment would begin to run.
 [75]      Figliolini dealt only with actions to enforce foreign judgments. Strathy C.J.O. noted that “a judgment creditor who brings an Ontario proceeding on a foreign judgment must show that the foreign court had jurisdiction and that the judgment is final and for the payment of money”: at para. 51. An action to enforce a domestic judgment is, by s. 16(1)(b) of the Limitations Act, not subject to any limitation period. And, importantly, actions such as the present action – which are not to enforce a judgment, but to claim indemnity – are governed by their own provisions in the Limitations Act that would be entirely undermined if the appellants’ argument were given effectThis is the fatal flaw in the appellants’ reliance on Figliolini.
 [76]      Unlike proceedings to enforce a foreign judgment, which require finality, there is no requirement that in order to effectively claim contribution and indemnity there must be a final judgment against the claimant. To the contrary, the two-year limitation period runs from the date the claim is made against the first wrongdoer, subject to the discoverability rules in s. 5(1)(a): Mega International, at para. 74. In Canaccord, this court noted that s. 18 of the Limitations Act specifically departs from the previous law for contribution claims between tortfeasors, where the limitation period ran against the party claiming indemnity from the date of judgment: at para. 20.
 [77]      While not determinative, this court’s decision in Tapak v. Non-Marine Underwriters, Lloyd’s of London2018 ONCA 16876 C.C.L.I. (5th) 197, leave to appeal refused, [2018] S.C.C.A. No. 157, is instructive. In that case, the appellants relied on s. 5(1)(a)(iv) to argue that an appeal against other parties, if successful, might have eliminated their losses and that they therefore did not know that their action for contribution and indemnity was “an appropriate means” to seek to remedy their losses until the appeal was dismissed. At para. 13, the court rejected this argument, stating:
 [Section] 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’….

I agree with the latter observation that s. 5(1)(a)(iv) is not intended to operate in the manner proposed by the appellants.

[78]      In the present appeal, the appellants assert that it was legally appropriate for e3m to delay an action against Goldberg until the Prior Action was finally disposed of on appeal. This is precisely the sort of litigation in stages which will not delay the commencement of a limitation period for purposes of s. 5(1)(a)(iv). In the usual case, s. 5(1)(a)(iv) will not suspend the limitation period as against a second defendant where a plaintiff has commenced a legal proceeding against another defendant for the same wrong: Presley, at para. 31. This general principle is buttressed by the specific and certain rules for the commencement of claims for contribution and indemnity ushered in by s. 18 of the Limitations Act. Sharpe J.A., in Canaccord, carefully described the legislative history in concluding that s. 18 provided a “marked departure from” and “significant reforms to” the previous regime governing limitation periods for claims for contribution and indemnity: at para. 27. Under the previous law, a tort claimant seeking contribution and indemnity could wait for judgment in the main action before commencing a claim for indemnification. In contrast, “s. 18 significantly shortens the limitation period governing contribution and indemnity claims to two years from the date the first alleged wrongdoer was served with the underlying claim, thereby encouraging resolution of all claims arising from the wrong at the same time”: Canaccord, at para. 20.

This is the first time the court has confronted the tension between s. 18 and its recent appropriateness jurisprudence.  It is settled that an alternative process with the potential to eliminate the plaintiff’s loss can suspend the discovery of a claim.  In a claim for contribution and indemnity, if the main action results in the dismissal of the claim, the defendant will have no loss for which to claim contribution and indemnity.  The main action will have eliminated the plaintiff’s loss.

However, this is clearly at odds with the intent of s. 18, which the court notes.  I think the court resolved this problem as best it could: the main action is not an alternative process, but the same litigation.

Secondly, the court reiterated that s. 12 of the Limitations Act applies to claims asserted by a creditor who has taken an assignment of a claim of a bankrupt under s. 38 of the BIA. The applicable date of discovery is the earlier of the predecessor’s discovery of the claim, or the person claiming through the predecessor’s discovery of the claim.  The assignment does not restart the limitation period.

The court’s analysis is well-reasoned and instructive:

[44]      In this case, by contrast, the appellants are pursuing a claim that initially belonged to e3m and that vested in the trustee on e3m’s bankruptcy. The claim for breach of Goldberg’s fiduciary and other duties to e3m is not one that the appellants could have pursued before e3m’s bankruptcy. Indcondo did not address the question of when the limitation period under s. 12 would run in respect of a creditor who may well have known of the potential claim by the bankrupt, but had no way to enforce it until the bankruptcy.

 [45]      The appellants characterize the motions judge’s error here as a failure to consider s. 5(1)(a)(iv) of the Limitations Act in relation to the claim against Goldberg. Whether a proceeding was an appropriate means to remedy a claim is an essential element in the discoverability analysis and the failure to consider s. 5(1)(a)(iv) is an error of law: Presley, at para. 15.
 [46]      I agree with the appellants that, because they lacked capacity to bring a claim in the name of e3m against Goldberg, any personal knowledge they might have had before e3m’s bankruptcy respecting a claim did not cause the limitation period to run against them pursuant to s. 12(1). In my view, however, this result does not flow from the application of s. 5(1)(a)(iv).
 [47]      In determining when the limitation period began to run in respect of the appellants’ claim, the question is when they, as “claimants” – that is, as persons who reasonably had the claim in question – knew or ought to have known of the matters referred to in s. 5(1)(a). The application of the test in s. 5(1)(a) requires first that the claims at issue be defined or identified: Morrison, at paras. 33, 49.
 [48]      In this case, the claim advanced in the appellants’ action is not a claim by them personally, or one that they could have advanced personally (as was the case in Indcondo), but a claim they are asserting on behalf of the bankrupt, e3m, against its former principal, Goldberg. Section 5(1) applies to “the person with the claim”. When they were litigating against e3m in the Prior Action, the appellants may well have known of the various matters under s. 5(1)(a) in the general sense, but because they were not and could not have been “the persons with the claim” at that stage, any such knowledge was immaterial.
 [49]      Until e3m was bankrupt, any claim against Goldberg for breach of his duties as a director could only be pursued by e3m. The appellants had no right, title or interest in the claim. They had no ability to bring the claim while the claim continued to belong to e3m.

[51]      Similarly, in this case, the appellants could not have asserted a claim against Goldberg for wrongs done to e3m until they obtained the s. 38 order. In other words, until they obtained the s. 38 order, they had no standing to claim for e3m’s losses. Any knowledge of Goldberg’s wrongdoing in relation to e3m, whether by virtue of what they themselves had pleaded in the Prior Action, or when they received Pepall J.’s reasons in the 2013 Judgment, was not sufficient for them to be able to act.

 [52]      The motions judge’s conclusion that, because of their personal knowledge of the material facts in relation to e3m’s claim against Goldberg, the limitation period began to run against the appellants as early as July 2006 and as late as April 2013, was therefore in error. Their knowledge of those matters did not become relevant until they had or ought reasonably to have had the authority to pursue the claim, which was, at the very earliest, upon the bankruptcy of e3m in January 2015.
 [53]      Under this analysis, s. 5(1)(a)(iv) is not engaged. The question is not whether the appellants knew or ought to have known that a proceeding by the company would be an appropriate remedy for Goldberg’s alleged wrongs. Until they had control over the claim, or the means to obtain such control (by moving promptly in e3m’s bankruptcy), they were not “claimants” for the purpose of s. 5(1)(a) and therefore their knowledge was not the knowledge of claimants under the section.

Ontario: A defendant’s expertise can impact on discovery even when the defendant isn’t a professional

 

The Court of Appeal’s decision in Presley v. Van Dusen is a reminder that a s. 5 analysis requires making findings with respect to each s. 5(1) discovery matter, and reliance on a defendant’s expertise may delay the appropriateness of a proceeding even when the defendant is not a professional.

This was an appeal from an appeal from a Small Claims Court trial decision.  The trial judge found that he could determine the commencement of the limitation period without considering s. 5(1)(a)(iv):

[9]         The trial judge did not consider the s. 5(1)(a)(iv) criterion as to when the appellants did know or should have known that a proceeding would be an appropriate means to remedy their claim. He gave the following reason for not considering s. 5(1)(a)(iv): “It is not necessary for me to make any determination under that subsection and I do not do so as I only have to find the earliest date and I have no difficulty, as I have said, in finding that that date was the spring of 2013.”

This is plainly an error of law; you can’t determine discovery without considering all four discovery matters.

The Divisional Court nevertheless upheld the trial judge’s decision.  Having determined when a reasonable person ought to have known of the discovery matters pursuant to s. 5(1)(b), it found that there was no requirement for the trial judge to make an explicit finding as to when the plaintiff ought to have known the matter in s. 5(1)(a)(iv).

The Court of Appeal overturned the Divisional Court’s order.  It was an error for the trial judge not to consider s. 5(1)(a)(iv).  The law required the trial judge to consider all four discovery matters:

[14]      The analysis of both the trial judge and the Divisional Court judge of ss. 5(1)(a)(iv), 5(1)(b) and s. 5(2) of the Limitations Act is flawed. The trial judge explicitly stated that he was not considering s. 5(1)(a)(iv). A determination under s. 5(1)(b) as to the date a reasonable person would have discovered the claim requires consideration of all four “matters referred to in clause (a)”. Similarly, the finding that there was insufficient evidence to rebut the presumption under s. 5(2) that the plaintiff knew all the matters referred to in s. 5(1)(a) cannot stand as there was no consideration of s. 5(1)(a)(iv).

[15]      This court has repeatedly held that consideration of when a proceeding was an appropriate means to remedy a claim is an essential element in the discoverability analysis and that failure to consider s. 5(1)(a)(iv) is an error of law: Gillham v. Lake of Bays (Township)2018 ONCA 667 (CanLII)425 D.L.R. (4th) 178, at paras. 33-34Kudwah v. Centennial Apartments2012 ONCA 777(CanLII), at paras. 1-2Har Jo Management Services Canada Ltd. v. York (Regional Municipality)2018 ONCA 469 (CanLII)91 R.P.R. (5th) 1, at paras. 21 and 35.

It’s common for the court to making a determination under s. 5(1)(b) without making explicit findings as to the plaintiff’s knowledge of the discovery matters (though I think everyone benefits from explicit findings).  What makes this case unusual, and something of an outlier, is that the trial judge made this s. 5(1)(b) determination while finding that it was unnecessary to consider one of the discovery matters.  That’s the kind of error that seems especially prevalent in the Small Claims Court.

The Court of Appeal undertook its own s. 5(1)(a)(iv) analysis, which is noteworthy for emphasising that the superior knowledge and expertise that might engage s. 5(1)(a)(iv) is not restricted to strictly professional relationships.  Accordingly, the plaintiffs could reasonably rely on the expertise of a person licensed to install septic systems:

[21]      These principles are applicable to the facts of this case. Van Dusen is licenced to install septic systems. The appellants contracted with him because of his special training and expertise. While the respondents argue he may not qualify as “an expert professional”, there can be no question he did have expertise upon which the appellants reasonably relied.

[22]      Moreover, reliance on superior knowledge and expertise sufficient to delay commencing proceedings is not restricted to strictly professional relationships: Presidential, at para. 26. I acknowledge that the previous cases where this court has made a finding that it was reasonable for the plaintiff to rely on the defendant’s superior knowledge and expertise have concerned defendants belonging to traditional expert professions. For instance, Brown v. Baum2016 ONCA 325 (CanLII)397 D.L.R. (4th) 161, involved a physician, Chelli-Greco v. Rizk2016 ONCA 489 (CanLII), involved a dentist, and Presidential MSH involved an accountant. However, recent Superior Court decisions have applied the superior knowledge and expertise prong of Presidential MSH to persons who are members of non-traditional professions or who are not professionals at all. For instance, in YESCO Franchising LLC v. 2261116 Ontario Inc.2017 ONSC 4273 (CanLII), the court found that s. 5(1)(a)(iv) applied in a franchisor-franchisee relationship where the franchisees relied on the franchisor’s superior knowledge and expertise, even though the franchisor was not a member of an expert profession. Similarly, in Barrs v. Trapeze Capital Corp., 2017 ONSC 5466 (CanLII), aff’d 2019 ONSC 67 (Div. Ct.) (CanLII), the Superior Court and the Divisional Court found that s. 5(1)(a)(iv) applied to investors who relied on the superior knowledge and expertise of their investment portfolio managers.

 

Ontario: an alternative resolution process that didn’t impact on the limitation period

Soleimani v. Rolland Levesque provides an example of an alternative resolution process that doesn’t render a proceeding an inappropriate remedy pursuant to s. 5(1)(a)(iv) of the Limitations Act.

Th action involved claims between neighbouring property owners arising out of alleged contamination of the plaintiffs’ property by hydrocarbons flowing from the defendant’s property.  Following the discovery of the contamination, the plaintiffs notified the Ministry of the Environment (MOE), which  became involved in addressing the contamination.

In response to the defendant’s limitations defence, the plaintiffs argued that the MOE’s involvement was a reasonable means to attempt to remediate the damage, and a claim wasn’t an appropriate remedy for that damage until eight years later when expert investigation directed by the MOE (and funded by the defendant) determined the source of the contamination.

The court rejected this argument.  The MOE’s involvement was not part of a dispute resolution process or mechanism: the MOE acts at its own discretion, it has no power to award damages, and the there could be no certainty as to when its involvement would come to an end:

[45]           In considering whether the MOE’s interventions in this case constitute a legally appropriate means to remedy the plaintiffs’ damages it is necessary to recognize that the provisions of the EPA do not provide a dispute resolution process or mechanism.  The steps the MOE chooses to take are in the MOE’s discretion.  The MOE has no power to award damages or compensation to the plaintiffs.  Neither the previsions of the EPA nor the facts of this case allow the court to say with any certainty when the MOE’s involvement would come to an end so as to determine when the limitation period might commence.

[46]           Moreover the MOE intervention cannot result in a declaration of responsibility for the contamination nor can it award damages for stigma nor the full recovery of legal, engineering and other costs and expenses nor damages for other economic losses, all as claimed in the plaintiffs’ statement of claim.

[47]           On the other hand, I recognize that the MOE has substantial powers in the exercise of their discretion to require the defendants to investigate the cause of and remediate contamination on both the defendants’ and the plaintiffs’ lands and to direct that this be done at the defendants’ cost.

[48]           The EPA broadly empowers the MOE to make orders to clean up contamination and prevent the discharge of contaminants into the environment.  For instance, pursuant to section 17 of the EPA, the Director has the power to issue “remedial orders” where a person has caused or permitted a contaminant to be discharged into the natural environmental.  This section empowers the Director to order that person to repair the injury or damage:

Where any person causes or permits the discharge of a contaminant into the natural environment, so that land, water, property, animal life, plant life, or human health or safety is injured, damaged or endangered, the Director may order the person to,

a)            Repair the injury or damage;

b)           Prevent the injury or damage; or

c)            Where the discharge has damaged or endangered or is likely to damage or endanger existing water supplies, provide temporary or permanent alternate water supplies.

[49]           Pursuant to section 157.1 of the EPA, a provincial officer can also order a person who owns or who has management or control or property to take “preventive measures” to:

(a)           Prevent or reduce the risk of a discharge of a contaminant into the natural environment;

(b)         Prevent, decrease or eliminate an adverse affect that may result from:

(i)            The discharge of a contaminant from the undertaking, or

(ii)           The presence or discharge of a contaminant in, on or under the property.

[50]           In determining whether a court action is an appropriate remedy pursuant to s. 5(1)(a)(iv) of the Act, Laskin J.A. in ETR Concession instructed that the court should consider (a) the nature of the plaintiffs’ loss; (b) the circumstances of the plaintiffs, and (c) efficiency of the court.

[51]           This is an environmental claim.  The major dispute between the parties has been, at least until very recently, whether the pollutants are emanating from the defendants’ land onto the plaintiffs’ land or, as the defendants claim, from the plaintiffs’ land onto the defendants’ land.  On the facts of this case, there can be no doubt that the MOE’s interventions have provided a means to determine the source of the contamination and remedial orders have been made.

[52]           The plaintiffs submit that given their particular situation, the MOE interventions may substantially reduce the plaintiffs’ damages and therefore it would be inappropriate to require the plaintiffs to prematurely resort to court proceedings while the regulatory process under the EPA is ongoing.

[53]           In my view the principal difficulty with the plaintiffs’ position is that there is no reasonable basis to ascertain when the MOE’s involvement will end.  To date, it has gone on in excess of eight years with no end point in site.  I agree with the defendants’ submission that the EPA does not in any sense establish an alternative adjudication or dispute resolution process for contamination claims.  While the MOE has significant remedial powers to direct the investigation and remediation of ground water contamination, these powers are outside the land owners’ control and are discretionary in nature.  These powers do not include any right to award economic damages or to grant declaratory orders, which is a significant component of the relief sought in this action.

[54]           The plaintiffs have argued that the limitation period should not run until the causation question was resolved (within the last two years) concerning the direction of flow of the contaminants.  They suggest that prior to resolving that issue it would have been unreasonable to commence court proceedings.

[55]           The plaintiffs emphasize the benefits they have achieved by allowing the MOE to deal with the contamination.  Thanks to the MOE exercising its statutory powers to direct the investigation and remediation of the groundwater contamination, the plaintiffs have avoided the considerable engineering costs of investigating the problem, of obtaining experts’ reports and of soil removal and other remedial measures.  They have also avoided or lessened the litigation risk of a possible determination that the contamination emanated from their own property, rather than the defendants’ property.

[56]           In effect, the plaintiffs can be said, in retrospect, to have made a wise economic choice in leaving the contamination issue in the hands of the MOE.  However this was manifestly a tactical decision made by the plaintiffs to avoid the costs and litigation risks of investigating their claim and establishing their case on liability and damages.  They chose to stand back for some four years prior to commencing this action to allow the MOE to move matters forward.  The case law is clear that tactical decisions will not toll the limitation period, see Markel and Presidential MSR.  As Mew J. observed in J.C. v. Farant at para 87:

Another recent decision, Gravelle (CodePro Manufacturing) v. Denis Grigoras Law Office2018 ONCA 396 (CanLII), reinforced 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 I the subject matter of the action – delay the running of time.  At para. 6, the Court of Appeal stated:

 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.

[59]           In my view this position is untenable and inconsistent with the appellate case law binding on this court.  The circumstances triggering the running of the limitation cannot be a moving target incapable of being ascertained with the level of reasonable certainty required.  This would create a situation in which the plaintiffs essentially determine when the limitation period commences.

[61]           In my opinion the approach advocated by the plaintiffs and the intervenors ignores the requirement that the appropriate means exception in sub-section 5(1)(a)(iv) of the Act be restricted to factual situations in which the alternate avenue of redress is legally appropriate in the sense that the courts must not be required to interpret the parties’ communications or negotiations or, be required to analyze the significance of the technical findings of ongoing engineering studies and importantly, there needs to be a fixed end point.

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.