Ontario: Court of Appeal sort of confirms Limitations Act applies to will challenges

The Court of Appeal decision in Shannon v. Hrabovsky is an unfortunate addition to limitations jurisprudence. Arguably, it stands for the principle that the basic limitation period applies to will challenge proceedings. An appellate court has never before considered the issue, and there is much to criticize about the few lower court decisions that Shannon cites in accepting, without consideration, that will challenge are subject to statutory limitation.

The applicant in Shannon successfully challenged the validity of a will. On appeal, the respondents argued that the application judge ought to have found the application statute-barred by the Limitations Act’s basic two-year limitation period. They sought leave to adduce fresh evidence to support their limitations defence. The appeal is really about the entitlement to adduce fresh evidence, not the limitation of will challenges, and so it’s arguable that the limitations analysis is obiter.

I wrote about the application decision here. I criticised its limitations and analysis and later Matthew Furrow and I published a paper arguing that applying statutory limitation periods to will challenges is ahistorical (it was uncontroversial that statutory limitation periods didn’t apply to will challenges from the date of reception until 2004), and requires taking an indefensibly flexible approach to the application of the s. 5 discovery provisions: see Will Challenges and the Limitations Act, 2002: A Reconsideration, 40 Est. Tr. & Pensions J. 190 (2020-2021). I also made the point more succintly in the fourth edition of the Law of Limitations:

The Act applies only to causes of action. A will challenge is not a cause of action; it is a contested proceeding to prove a will in solemn form. Section 2 of the Act limits its application to “claims” pursued in court proceedings.

 

Reformed limitations statutes apply to “claims” instead of causes of action. The “claim” converts every cause of action, for limitations purposes, into a single remedial unit comprised of two elements: actionable conduct and resulting loss. In doing so, it allows for a universal basic and ultimate limitation period with one set of accrual rules. However, as the Supreme Court of Canada observed in Grant Thornton LLP v. New Brunswick, the distinction between the “claim” and the cause of action it derives from can be one without a difference. Simply, reformed limitations statutes continue to apply only to causes of action pursued in court proceedings. As a will challenge is not a cause of action, the current Act — and any other provincial act that applies to “claims” pursued in court proceedings—does not apply to it.

 

A will challenge is the square peg to the Act’s round hole. There are procedural issues. The expiry of a limitation period is an affirmative defence that a defendant/respondent must plead and prove. Yet the party challenging a will may be a plaintiff/applicant or a defendant/respondent depending on which method is used to bring the proceeding to court. There is no procedural mechanism for a plaintiff/applicant to plead a limitations defence.

 

There are discovery issues. Codified discovery is premised on a defendant committing actionable conduct — an “act or omission” — that causes damage to the plaintiff. A will challenge does not arise from actionable conduct. The absence of actionable conduct makes it impossible to identify the presumptive commencement of the basic limitation period and the ultimate limitation period because both run from the date of the actionable conduct. It also makes it impossible to obtain knowledge of three discovery matters: commission of actionable conduct by the person against whom the claim is made causing the plaintiff loss. As the Supreme Court of Canada formulated it in Grant Thornton, discovery requires knowledge of “the material facts upon which a plausible inference of liability on the defendant’s part can be drawn”. A will challenge does not result in a finding of anyone’s liability.

 

Shannon doesn’t address any of these issues. Because the parties agreed that the basic limitation period applies to will challenge (why the applicant conceded that point is mysterious), the Court of Appeal didn’t consider the correctness of this premise. Instead, its reasoning treats the application of the Limitations Act to will challenges as noncontroversial. This is disappointing. You can’t blame the court for not considering arguments the parties didn’t make, but you might hope that in engaging with the application of s. 5 to a will challenge there might have been some consideration given to whether the principles that originate in Leibel make sense, because they don’t.

Let’s take a look at the application judge’s analysis:

[20]      The application judge concluded:

In the present circumstances, Gayle had all the facts necessary to commence her application, on the grounds of both a lack of testamentary capacity and undue influence, before the Testator’s death, with the exception of knowledge of the existence and contents of the 2007 Will. While she had suspicions that a will had been executed in 2007, she was never able to confirm its existence nor was she made aware of its contents until January 2015, after the date of death. Accordingly, Gayle has established that, on the date of the Testator’s death, when the act on which the claim is based occurred, being the effectiveness of the 2007 Will, she did not have knowledge of the existence and contents of the 2007 Will which are essential elements of her application. Gayle has therefore rebutted the presumption in section 5(2) that she had knowledge of the matters referred to in section 5(1)(a) on the day on which the act or omission on which her claim is based occurred. Gayle did not discover the claim in this application until sometime in January 2015, with the result that the two-year limitation period under the Act did not begin to run until that time. [Emphasis added.]

Just like in Leibel, this reasoning only works at the most superficial level. If the testator’s death is the act on which the applicant’s claim is based, it means that to discover the claim, the applicant required knowledge “that the act or omission was that of the person against whom the claim is made”–in other words that the respondents committed the act of the testator’s death. That’s absurd. At risk of belabouring the point, this a symptom of the fundamental problem: a will challenge isn’t based on any actionable conduct and it doesn’t seek an in personem remedy against an individual. It has never been subject to statutory limitation (and, I’d argue, equitable limitation) because it is not a creature of the common law or equity, but canon law.

In sum, please hire me to argue this point.

Ontario: Court of Appeal on the knowledge required to plausibly infer liability

The Court of Appeal decision in Di Filippo v. Bank of Nova Scotia explains the degree of knowledge required to know the s. 5(1)(a) discovery matters. This includes a clarification that the knowledge necessary to plausibly infer liability is not actual knowledge of the discovery matters. Actual knowledge requires knowledge of the material facts upon which to plausibly infer liability.

Perhaps like me you’ll find this distinction somewhat obtuse. What’s the difference between plausibly inferring liability per se and plausibly inferring liability based on material facts? Practically speaking, I think the point the court is making is that if you plausibly infer liability per se you have a suspicion of liability, but if you make that inference based on material facts, you have more than a suspicion. And so it’s just a different way of formulating the “more than a suspicion, less than certainty” standard that the court applied prior to Grant Thornton.

Here are the relevant paragraphs:

[54]      The court explained how to assess the plaintiff’s knowledge at para. 44:

In assessing the plaintiff’s state of knowledge, both direct and circumstantial evidence can be used. Moreover, a plaintiff will have constructive knowledge when the evidence shows that the plaintiff ought to have discovered the material facts by exercising reasonable diligence. Suspicion may trigger that exercise. (Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 42).

[55]      This court explained in Crombie that suspicion may trigger the due diligence obligation, but suspicion does not constitute actual knowledge. The full paragraph clearly explains the difference:

That the motion judge equated Crombie’s knowledge of possible contamination with knowledge of actual contamination is apparent from her statement that “[a]ll the testing that followed simply confirmed [Crombie’s] suspicions about what had already been reported on” (at para. 31). It was not sufficient that Crombie had suspicions or that there was possible contamination. The issue under s. 5(1)(a) of the Limitations Act, 2002 for when a claim is discovered, is the plaintiff’s “actual” knowledge. The suspicion of certain facts or knowledge of a potential claim may be enough to put a plaintiff on inquiry and trigger a due diligence obligation, in which case the issue is whether a reasonable person with the abilities and in the circumstances of the plaintiff ought reasonably to have discovered the claim, under s. 5(1)(b). Here, while the suspicion of contamination was sufficient to give rise to a duty of inquiry, it was not sufficient to meet the requirement for actual knowledge. The subsurface testing, while confirmatory of the appellant’s suspicions, was the mechanism by which the appellant acquired actual knowledge of the contamination.

[56]      Similarly, in Kaynes v. BP p.l.c., this court held that knowledge of allegations in pleadings does not, without more, constitute actual knowledge of one’s claim. […]

 

[59]      These examples draw out an important distinction from Grant Thornton: actual knowledge does not materialize when a party can make a “plausible inference of liability.” Rather, actual knowledge materializes when a party has “the material facts upon which a plausible inference of liability on the defendant’s part can be drawn” [emphasis added]. While class counsel may have had reason to suspect that Bank of America, Merrill Lynch and Morgan Stanley were part of the conspiracy, that suspicion was not actual knowledge. The motion judge erred in law by finding actual knowledge.

[64]      The effect of s. 5(1)(b) is to impose an obligation of due diligence on those who have reason to suspect that they may have a claim, but who do not yet have actual knowledge of the material facts giving rise to that claim: Crombie, at para. 42. Where potential plaintiffs sit idle or fail to exercise due diligence, the limitation period will commence on the date that the claim would have been discoverable had reasonable investigatory steps been taken. In other words, it is the date when the potential plaintiffs have constructive, as opposed to actual knowledge of their claim: Grant Thornton, at para. 44.

[65]      A court determining this issue will require evidence of how the material facts could reasonably have been obtained more than two years before the motion to add was brought: Mancinelli, at paras. 28, 31; Morrison v. Barzo, 2018 ONCA 979, at paras. 61-62.

 

The decision also includes an interesting if somewhat esoteric addition to s. 5(1)(a)(iv) appropriateness jurisprudence. A proceeding can be an appropriate remedy only if the circumstances give rise to a legally recognised cause of action on which to base the proceeding:

 

[37]      With respect to criterion (iv)[6], a proceeding would only be appropriate if the circumstances give rise to one or more legally recognized causes of action on which to base the proceeding. The wrong must have a legally recognized remedy. It is only in this sense – that legal recourse must be appropriate to address a loss caused by the proposed defendant’s act or omission – that the term “claim” has any legal specificity.

I expect the court assumed this to be self-evident, and perhaps it is. But it has a curious implication. Because a novel cause of action is, by definition, not legally recognised, it follows that a claim based on a novel cause of action is never discoverable. If a claim isn’t discoverable, the basic limitation period will never begin. Accordingly, only the ultimate limitation period could bar an action based on a novel claim.

Lastly, the decision contains a comprehensive statement of the law of amending a pleading to advance a new claim after the expiry of the limitation period.

 

[40]      These cases make it clear that it is the pleading of the facts that is key. If a statement of claim pleads all the necessary facts to ground a claim on more than one legal basis, and the original statement of claim only asserts one of the legal bases – that is, one cause of action based on those facts – the statement of claim can be amended more than two years after the claim was discovered to assert another legal basis for a remedy arising out of the same facts – that is, another cause of action. This is because it is only the discovery of the claim, as defined in the Limitations Act and the case law, that is time barred under s. 4, not the discovery of any particular legal basis for the proceeding.

[41]      In the textbook The Law of Civil Procedure in Ontario, Paul M. Perell & John W. Morden 4th ed. (Toronto: LexisNexis Canada, 2020), at pp. 220-21, the authors explain when an amendment will be allowed in the following passage:

A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon which the original right of action is based… Thus, where a limitation period has run its course, allowing or disallowing the amendment depends upon whether the allegations of the proposed amendment arise out of the already pleaded facts, in which case the amendment will be allowed, but if they do not the amendment will be refused. An amendment of a statement of claim to assert an alternative theory of liability or an additional remedy based on facts that have already been pleaded in the statement of claim does not assert a new claim for the purposes of s. 4 of the Limitations Act. [Citations omitted.]

[42]      In Klassen v. Beausoleil, 2019 ONCA 407 at para. 30, this court instructed that the application of this test should not be stringent or overly technical:

In the course of this exercise, it is important to bear in mind the general principle that, on this type of pleadings motion, it is necessary to read the original Statement of Claim generously and with some allowance for drafting deficiencies.

Ontario: Court of Appeal on amending to add a new cause of action

In Polla v. Croatian (Toronto) Credit Union Limited, the Court of Appeal summarised the principles of amending to add a cause of action after the presumptive expiry of the limitation period:

[31]      The trial judge’s conclusion that the proposed amendment made a new claim is a legal determination, which is subject to the “correctness” standard of review on appeal: see Blueberry River First Nation v. Laird2020 BCCA 76, 32 B.C.L.R. (6th) 287, at paras. 20-21Strathan Corporation v. Khan2019 ONCA 418, at paras. 7-8. Her conclusion that the limitation period had expired is a determination of mixed fact and law, that was based in this case on a finding of fact as to when the appellant ought to have known about the new misrepresentation, and reviewable on a standard of “palpable and overriding error”: see Longo v. MacLaren Art Centre2014 ONCA 526, 323 O.A.C. 246, at para. 38. The same deferential standard of review applies to the refusal of an amendment based on an assessment of prejudice: Tuffnail v. Meekes2020 ONCA 340, 449 D.L.R. (4th) 478, at para. 120, leave to appeal refused, [2020] S.C.C.A. No. 269.

[32]      The general rule respecting the amendment of pleadings is that an amendment shall be granted at any stage of a proceeding on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment: Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 26.01. The expiry of a limitation period in respect of a proposed new claim is a form of non-compensable prejudice, where leave to amend to assert the new claim will be refused: Klassen v. Beausoleil2019 ONCA 407, 34 C.P.C. (8th) 180, at para. 26.

[33]      There is no real dispute between the parties about the applicable test. In 1100997 Ontario Limited v. North Elgin Centre Inc.2016 ONCA 848, 409 D.L.R. (4th) 382, this court observed that an amendment to a statement of claim will be refused if it seeks to assert a “new cause of action” after the expiry of the applicable limitation period. As this court explained, at para. 19, in this context, a “cause of action” is “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person” (as opposed to the other sense in which the term “cause of action” is used – as the form of action or legal label attached to a claim: see the discussion in Ivany v. Financiere Telco Inc.2011 ONSC 2785, at paras. 28-33).

[34]      The relevant principles are summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 4th ed. (Toronto: LexisNexis Canada, 2020), at pp. 220-21, as follows:

A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon [which] the original right of action is based.

This passage has been cited with approval by this court. See 1100997 Ontario Limited, at para. 20Davis v. East Side Mario’s Barrie2018 ONCA 410, at para. 32, and Klassen, at para. 29.

[38]      In conducting this assessment, the court must read the pleadings generously in favour of the proposed amendment: Klassen, at para. 30Rabb Construction Ltd. v. MacEwen Petroleum Inc.2018 ONCA 170, 29 C.P.C. (8th) 146, at para. 8. The existing pleadings, together with the proposed amendment, must be considered in a functional way – that is, keeping in mind that the role of pleadings is to give notice of the lis between the parties. As such, the question in this case is whether the respondents would reasonably have understood, from the Amended Statement of Claim and the particulars provided on discovery, that the appellant was pursuing a claim in respect of the matter addressed by the proposed amendment.

Ontario: Court of Appeal on s. 38(3) of the Trustee Act

The Court of Appeal’s decision in Beaudoin Estate v. Campbellford Memorial Hospital provides a good summary of Trustee Act limitation period:

 

[16] The respondents rely on the limitation period in s. 38 of the Trustee ActSection 38(1) of the Trustee Act provides that, except in cases of libel and slander, the executor or administrator of any deceased person may maintain an action “for all torts or injuries to the person or to the property of the deceased”. Section 38(3) provides that no action under s. 38 shall be brought “after the expiration of two years from the death of the deceased”. [page596]

[17] There is no dispute that the following legal principles apply regarding s. 38(3) of the Trustee Act:

(1)   Claims brought by the deceased’s dependents under s. 61 of the Family Law Act are governed by the same limitation period in s. 38(3) of the Trustee ActCamarata v. Morgan (2009), 94 O.R. (3d) 496, [2009] O.J. No. 621, 2009 ONCA 38, at para. 9Smith Estate v. College of Physicians and Surgeons of Ontario (1998), 1998 CanLII 1523 (ON CA), 41 O.R. (3d) 481, [1998] O.J. No. 4367 (C.A.), at p. 488 O.R., leave to appeal to S.C.C. refused [1998] S.C.C.A. No. 635.

(2)   Section 38(3) of the Trustee Act prescribes a “hard” or absolute limitation period triggered by a fixed and known event — when the deceased dies — and expires two years later: Levesque v. Crampton Estate (2017), 136 O.R. (3d) 161, [2017] O.J. No. 2866, 2017 ONCA 455, at para. 51Bikur Cholim Jewish Volunteer Services v. Penna Estate (2009), 94 O.R. (3d) 401, [2009] O.J. No. 841, 2009 ONCA 196, at para. 25.

(3)   The discoverability principles under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B do not apply to toll the limitation period under s. 38(3) of the Trustee ActGiroux Estate v. Trillium Health Centre (2005), 2005 CanLII 1488 (ON CA), 74 O.R. (3d) 341, [2005] O.J. No. 226 (C.A.), at para. 33Bikur Cholim, at para. 26; and Levesque, at para. 47. Although this can sometimes be harsh, since a claim under the Trustee Act can be time-barred even before it is discovered, this can be mitigated by common law rules, such as the doctrine of fraudulent concealment: Levesque, at para. 56Bikur Cholim, at para. 25.

 

It also summarises the principles of fraudulent concealment:

 

[19] The Supreme Court of Canada recently addressed the doctrine of fraudulent concealment in Pioneer Corp. v. Godfrey, [2019] S.C.J. No. 42, 2019 SCC 42, 437 D.L.R. (4th) 383. Justice Brown for the majority described fraudulent concealment as “an equitable doctrine that prevents limitation periods from being used ‘as an instrument of injustice'”: at para. 52, citing M. (K.) v. M. (H.)1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6, [1992] S.C.J. No. 85, at pp. 58-59 S.C.R. He stated that “[w]here the defendant fraudulently conceals the existence of a cause of action, the limitation period is suspended [page597] until the plaintiff discovers the fraud or ought reasonably to have discovered the fraud”, and noted that it is “a form of ‘equitable fraud’ . . . which is not confined to the parameters of the common law action for fraud”: at para. 52. See also M. (K.), at p. 56 S.C.R.; Giroux Estate, at para. 28.

[20] Pioneer was released a few months after the motion judge’s decision here. The motion judge had cited Colin v. Tan, [2016] O.J. No. 810, 2016 ONSC 1187, 81 C.P.C. (7th) 130 (S.C.J.), at para. 45, to suggest that fraudulent concealment has three “constitutive element[s]”:

(1)   the defendant and plaintiff have a special relationship with one another; (2) given the special or confidential nature of the relationship, the defendant’s conduct is unconscionable; and (3) the defendant conceals the plaintiff’s right of action either actively or the right of action is concealed by the manner of the wrongdoing.

[21] In Pioneer, however, Brown J. explained that although fraudulent concealment can apply when there is a special relationship between the parties, a special relationship is not required: at para. 54. Instead, fraudulent concealment can apply whenever “it would be, for any reasonunconscionable for the defendant to rely on the advantage gained by having concealed the existence of a cause of action” (emphasis in original).

 

Given the factual nature of fraudulent concealment, the Court held that it can’t be considered under r. 21.01(1)(a):

 

[29] As I will explain, the motion judge erred in deciding the question of fraudulent concealment as a question of law under rule 21.01(1)(a).

[30] This court has underscored that a motion under rule 21.01(1)(a) is not the proper procedural vehicle for weighing evidence or making findings of fact: see, e.g.McIlvenna v. 1887401 Ontario Ltd., [page599] [2015] O.J. No. 6312, 2015 ONCA 830, 344 O.A.C. 5, at paras. 19-20Andersen Consulting v. Canada (Attorney General)2001 CanLII 8587 (ON CA), [2001] O.J. No. 3576, 150 O.A.C. 177 (C.A.), at para. 35.

[31] This court has applied this general principle in a long line of cases in which it has discouraged using rule 21.01(1) (a) to determine limitation period issues except in very narrow circumstances where pleadings are closed and the facts relevant to the limitation period are undisputed: Kaynes v. BP, P.L.C., [2012] O.J. No. 266, 2021 ONCA 36, at para. 74Beardsley v. Ontario (2001), 2001 CanLII 8621 (ON CA), 57 O.R. (3d) 1, [2001] O.J. No. 4574 (C.A.), at para. 21Tran v. University of Western Ontario, [2016] O.J. No. 6645, 2016 ONCA 978, 410 D.L.R. (4th) 527, at paras. 18-21; and Golden Oaks Enterprises Inc. (Trustee of) v. Lalonde (2017), 137 O.R. (3d) 750, [2017] O.J. No. 3188, 2017 ONCA 515, at paras. 42-45.

[32] The rationale for this position was recently explained by Feldman J.A. in Kaynes, at para. 81. She noted that discoverability issues are factual and it is unfair to the plaintiff for a motion judge to make such factual findings on a motion to determine a question of law under rule 21.01(1)(a), because that rule prohibits evidence on the motion except with leave of the court or on consent:

In establishing the main rule that a claim should not normally be struck out as statute-barred using r. 21.01(1) (a), the courts have noted that discoverability issues are factual and that the rule is intended for legal issues only where the facts are undisputed. It would therefore be unfair to a plaintiff where the facts are not admitted, to use this rule, which does not allow evidence to be filed except with leave or on consent. But where a plaintiff’s pleadings establish when the plaintiff discovered the claim, so that the issue is undisputed, then the courts have allowed r. 21.01(1)(a) to be used as an efficient method of striking out claims that have no chance of success, in accordance with the principle approved in Knight v. Imperial Tobacco Canada Ltd.2011 SCC 42, [2011] 3 S.C.R. 45, at para. 19.

[33] Thus, a factual dispute about the discovery date of a cause of action precludes the use of rule 21.01(1)(a) to determine whether a limitation period subject to discoverability has expired, because this rule is limited to determining questions of law raised by a pleading. If the parties have joined issue on disputed facts on the limitations issue, the preferable procedure might be a motion for summary judgment under Rule 20, which provides the court with certain fact-finding powers: Kaynes, at para. 80Brozmanova v. Tarshis, [2018] O.J. No. 3097, 2018 ONCA 523, 81 C.C.L.I. (5th) 1, at paras. 21, 23 and 35; and rule 20.04(2.1).

[34] These principles about the limited scope for using rule 21.01(1)(a) to address discoverability under the Limitations Act, 2002 also apply to fraudulent concealment. Just as factual issues should not be decided in relation [page600] to discoverability on a motion under rule 21.01(1)(a), they should also not be decided in relation to fraudulent concealment. To do so would be unfair to a plaintiff when no evidence is admissible on such a motion except with leave of the court or on consent.

[39] However, the respondent doctors assert in their factum that the April 2017 claim “provides definitive evidence that the [page601] [a]ppellants had knowledge of their cause of action as of April 27, 2017”. They note that courts have considered prior pleadings in motions under rule 21.01(1)(a), citing Metropolitan Toronto Condominium Corp. No. 1352 v. Newport Beach Development Inc. (2012), 113 O.R. (3d) 673, [2012] O.J. No. 5682, 2012 ONCA 850, at paras. 111-113 and Torgerson v. Nijem, [2019] O.J. No. 2930, 2019 ONSC 3320 (S.C.J.). But neither of those cases purports to authorize a court to make a factual finding on a disputed point on a motion under rule 21.01(1)(a). The appellants assert that issuing a statement of claim is not necessarily determinative of their “knowledge” of a cause of action, and that the April 2017 claim simply reflected their “suspicion” that a cause of action may have existed. The case law requires knowledge of the cause of action, not mere suspicion. For example, in Pioneer, at para. 53, Brown J. cited approvingly P. (T.) v. P. (A.), [1988] A.J. No. 1055, 1988 ABCA 352, 92 A.R. 122, though on a different point, in which the Alberta Court of Appeal discussed fraudulent concealment and stated that “[s]uspicion is not knowledge”: at para. 15. See also Zeppa v. Woodbridge Heating & Air-Conditioning Ltd. (2019), 144 O.R. (3d) 385, [2019] O.J. No. 610, 2019 ONCA 47, at para. 41, leave to appeal to S.C.C. refused [2019] S.C.C.A. No. 91; Lawless v. Anderson, [2011] O.J. No. 519, 2011 ONCA 102, 276 O.A.C. 75, at paras. 21-28; and Kaynes, at para. 56. Because this is a fact-based analysis and both parties’ positions depend on evidence, this factual dispute cannot be decided on a motion under rule 21.01(1)(a).

Ontario: Court of Appeal on the factual nature of discovery

The Court of Appeal decision in Albert Bloom Limited v. London Transit Commission contains a great statement on the factual nature of the s. 5(1)(a) analysis.  When a claimant knows the s. 5(1)(a) discovery matters is fact-specific and there’s little value in comparing the unique facts of one case to another:

 

[31]      To be clear, the determination of when a claimant obtains actual knowledge of a claim is case-specific. Little is to be gained from comparing the unique circumstances of one case to another. There is no bright-line test that establishes when a party has actual knowledge of a claim. Instead, the totality of factual circumstances will dictate how and when a claimant obtains actual knowledge. In the present case, the motion judge undertook a detailed analysis of the factual circumstances. The evidence she relied on was uncontested, and I do not understand LTC to be arguing that the motion judge committed any palpable and overriding errors of fact.

The decision also shows the consequences of admitting facts material to the discovery analysis in a pleading. The plaintiff argued that such an admission was ignorable “boilerplate”, but filed no evidence to support this argument (also note that the Court found that an affidavit’s double hearsay was inadmissible):

 

[32]      There is another unique circumstance in this case that supports the motion judge’s finding regarding actual knowledge. It is the plea in the statement of defence and crossclaim that the contamination was caused by a previous owner of the LTC property. That fact clearly distinguishes this case from Crombie, where there was no such plea.

[33]      On the motion and this appeal, LTC attempts to explain away that pleading: it was just a “standard pleading” and did not reflect its actual state of knowledge at the time of the filing of the statement of defence and crossclaim. However, the evidence that counsel had informed the affiant in the affidavit filed by LTC that this was a standard pleading was double hearsay. Contrary to what the affiant stated in her affidavit, on cross-examination, she testified that she had never been provided with this information by LTC’s counsel. In fact, she had received the information from her predecessor at LTC, who apparently was told the information by legal counsel. This evidence was therefore inadmissible on the motion.

[34]      LTC asserts, “[t]here was absolutely no evidence on the record before the Motions Judge to suggest that this pleading was other than a boilerplate pleading commonly set out in environmental defences without any factual knowledge attributable to LTC” : Factum, para. 27.  This submission reflects a fundamental misunderstanding of the onus on the motion. LTC’s onus was not met by asserting that there was no evidence that this was not a boilerplate pleading. LTC had an obligation to adduce compelling and admissible evidence that it was boilerplate and thus could be ignored. It failed to adduce that evidence.

Ontario: Court of Appeal on the limitation of FLA actions

The Court of Appeal decision in Malik v. Nikbakht summarises the limitation of FLA actions.  Because they are derivative, the limitation period that applies to the injured person’s action also applies to the dependant’s action:

[9]         In my view, the appeal judge was correct in holding that a s. 61 FLA claim is a cause of action that, in Mr. Malik’s case, is statute barred.

[10]       As the appeal judge correctly acknowledged, the common law does not permit family members to sue for compensation for injuries to their relatives. He explained, at para. 26, that s. 61(1) FLA therefore “created” a statutory cause of action that did not previously exist at common law: Camarata v. Morgan2009 ONCA 38, 246 O.A.C. 235, at para. 10.

[11]      Section 61(1) FLA provides:

If a person is injured or killed by the fault or neglect of another under circumstances where the person is entitled to recover damages, or would have been entitled if not killed, the spouse, … children, grandchildren, parents, grandparents, brothers and sisters of the person are entitled to recover their pecuniary loss resulting from the injury or death from the person from whom the person injured or killed is entitled to recover or would have been entitled if not killed, and to maintain an action for the purpose in a court of competent jurisdiction.

[12]      As put by Laskin J.A. (concurring), this provision “dramatically expanded recovery”: Macartney v. Warner (2000), 2000 CanLII 5629 (ON CA), 46 O.R. (3d) 641 (Ont. C.A.), at para. 51.

[13]      Significantly, the new cause of action created by s. 61 of the FLA is “derivative”: Camarata, at para. 9. In other words, Mr. Malik’s s. 61 FLA claim would be for his damages arising out of injuries caused to his children as the result of allegedly negligent breaches by the defendants of duties of care they owed to his children. As the appeal judge pointed out, at paras. 28-29, this is a fundamentally different claim than Mr. Malik’s negligence action, which claimed damages arising out of his own injuries caused as the result of allegedly negligent breaches by the defendants of duties of care they owed to him. Indeed, as the appeal judge recognized, at para. 17, had Mr. Malik brought his s. 61 FLA claims in a timely way, he could have done so even without instituting a negligence action of his own.

[14]      I do not read this court’s decision in Ridel v. Cassin2014 ONCA 763, which cites Bazkur, at para. 10, as holding that Bazkur was correctly decided. In Ridel, this court cited Bazkur, along with other authorities, only for the uncontroversial proposition that claims for additional damages arising from an existing cause of action in a timely claim are not barred by the Limitations Act, 2002. The error in Bazkur occurred in the application of that principle.

[15]      It follows that the appeal judge was correct in finding that Mr. Malik was not entitled to amend his statement of claim to bring a new statutory cause of action outside of the applicable limitation period.

 

This is settled law, but it’s never made sense to me. A person injured through fault or neglect has a cause of action in tort as against the wrongdoer.  The elements of that tort include the wrongdoer’s actionable conduct and the resulting damage to the injured person.  An FLA cause of action derives from the tort committed to the injured person in that it arises from the same actionable conduct, but the damage is to the FLA claimant, not the injured person.  Even if the FLA cause of action is conditional on the tort, they are independent causes of action based on discrete losses.

Why should the same limitation period apply to the tort and the FLA cause of action?  The FLA claimant may not discover her pecuniary loss when the injured person discovers her injury.  The injury that founds the tort and the pecuniary loss that founds the FLA claim don’t necessarily occur contemporaneously.  I’d like to think that with the right facts, the Court of Appeal might be persuaded to acknowledge this.

Ontario: Court of Appeal on the limitation of aniticatory breach actions

In Fram Elgin Mills 90 Inc. V Romandale Farms Limited, the Court of Appeal summarised the limitation of anticipatory breach actions:

[258]   An anticipatory breach of contract occurs when one party to a contract, by express language or conduct, or as a matter of implication from what it has said or done, repudiates its contractual obligations before they fall due: Ali v. O-Two Medical Technologies Inc., 2013 ONCA 733, 118 O.R. (3d) 321, at para. 22, citing G.H.L. Fridman, The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011), at p. 585.

[259]   An anticipatory breach does not, in itself, terminate the contract. Once the offending party shows its intention not to be bound by the contract, the innocent party has a choice. The innocent party may accept the breach and elect to sue immediately for damages, in which case the innocent party must “clearly and unequivocally” accept the repudiation to terminate the contract. Alternatively, the innocent party may choose to treat the contract as subsisting, continue to press for performance, and bring the action only when the promised performance fails to materialize. However, by choosing the latter option, the innocent party is bound to accept performance if the repudiating party decides to carry out its obligations: Aliat para. 24.

[260]   Section 4 of the Limitations Act provides that “a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.” Section 5(1)(a) sets out the factors for determining when a party discovers a claim. However, where the innocent party does not accept the repudiation of the contract, the limitation period does not begin to run until the breach actually occurs: Ali, at paras. 26-27.

Ontario: Court of Appeal on the factual nature of an appropriateness analysis

In Fercan Developments Inc. v. Canada (Attorney General), the Court of Appeal emphasizes the factual nature of the s. 5(1)(a)(iv) analysis.  The decision is also an example of an appeal in related proceedings impacting on appropriateness.

The AGC brought an unsuccessful criminal forfeiture application against the plaintiffs.  Then the AGO commenced unsuccessful forfeiture proceedings under the Civil Remedies Act. Leave to appeal was refused and an appeal from a costs award failed. The plaintiffs sued the AGC and the AGO alleging malicious prosecution, negligent investigation, misfeasance in public office, and civil conspiracy.  The defendants moved for summary judgment on their limitations defence.  The motion judge found the proceeding didn’t become an appropriate remedy for the loss until at least the civil forfeiture proceedings had concluded.  This meant discovery occurred within two years of the plaintiffs commencing the action.

The defendants appealed.  They argued that motion judge’s decision “significantly expands the application” of s. 5(1)(a)(iv) beyond the two circumstances the court has recognized might impact on the appropriates of a proceeding as a remedy:

[15]      The appellants argue that the motion judge’s decision significantly expands the application of the “appropriate means” element of the discoverability test under s. 5(1)(a)(iv) beyond any previous jurisprudence from this court, and that it injects uncertainty into the law of limitations. They contend that the motion judge relied on irrelevant factors, and that she ought to have restricted her analysis to a consideration of whether the respondents were pursuing an alternative means of remedying their alleged losses, such that it was not yet appropriate for them to commence an action in respect of those losses.

The Court of Appeal rejected this argument and dismissed the appeal.  When a proceeding becomes appropriate is a question of fact, and there aren’t only two factual circumstances the impact on appropriateness:

[16]      We disagree. Contrary to the submissions of the appellants, the motion judge properly recognized that there were not simply two categories of cases in which it might not be legally appropriate to start a proceeding despite the claim having been discovered, within the meaning of s. 5(1)(a)(i)-(iii): Nasr, at para. 51. The motion judge did not err when she considered all of the relevant circumstances and not simply whether the forfeiture proceedings provided an alternative means for the respondents to remedy their alleged losses. She was required to consider the “nature of the injury, loss or damage” under s. 5(1)(a)(iv), as well as, under s. 5(1)(b), using a “modified objective” test, what a reasonable person with the abilities and in the circumstances of the respondents ought to have known: Presidential, at para. 18; Service Mold + Aerospace Inc. v. Khalaf, 2019 ONCA 369, 146 O.R. (3d) 135, at para. 32. While previous cases can assist in identifying certain general principles, whether a proceeding would have been an appropriate means to seek to remedy a claimant’s damage, injury or loss will turn on the facts of each case and the abilities and circumstances of the particular claimant: Presidential, at para. 19; ETR Concession Company, at para. 34.

The Court cautioned against conflating the considerations in s. 5(1)(a)(i)-(iii) with those in s. 5(1)(a)(iv).  Despite the plaintiffs’ knowledge of the first three discovery matters, it would have been premature for them to commence the action while responding to the state’s civil forfeiture proceedings.  If the forfeiture proceedings had been successful, the defendants would have had a strong to defence to the plaintiffs’ action.  Further, the costs decision implicated the defendants’ conduct, and the appeal from it challenged findings of the defendants’ misconduct:

[19]      In concluding that the time for commencement of an action against the AGC began to run “at the earliest” on June 26, 2014, the motion judge relied on the civil forfeiture proceedings that were commenced and pursued by the appellants against the respondents. She observed that the appellants, in undertaking such proceedings, were pursuing a process that, if successful, could have left the respondents with little to no loss to claim. We agree with the motion judge’s observation that it is important not to conflate the considerations under the first three elements of the discoverability test with the appropriate means element set out in s. 5(1)(a)(iv). The question is not, as the appellants suggest, whether an action could have been brought by the respondents, but when it was appropriate to do so. While knowledge of the extent of a plaintiff’s damages is not required under (i) to (iii), the motion judge was entitled to take into consideration the ongoing forfeiture proceedings that the parties were engaged in, when determining under s. 5(1)(a)(iv) whether it was appropriate for the respondents to bring an action. She concluded that, in the particular circumstances, it would have been premature to require the respondents to launch a lawsuit, as they were embroiled in the civil forfeiture application, a related matter brought against them “by the state with all of its resources”, which could have rendered their lawsuit non-viable and unworthy of pursuing.

[20]      We see no error in the motion judge’s determination that it was premature for the respondents to commence their action until after the civil forfeiture proceedings were completed on June 26, 2014. She came to this conclusion after considering all of the relevant circumstances. The facts were unusual. Despite the fact that the AGC was unsuccessful in obtaining an order for criminal forfeiture and was subject to an order for costs that was critical of its conduct, the provincial authorities commenced civil forfeiture proceedings with the same objective – to seize the proceeds of sale of the respondents’ properties. DC Hayhurst was involved in both sets of proceedings. If the civil forfeiture proceedings had been successful, no doubt all of the appellants would have had a strong defence to any action that was commenced by the respondents. The conclusion, on this record, that it was premature for the respondents to pursue a civil action while they were continuing to oppose the forfeiture proceedings, reveals no error.

[23]      The motion judge recognized that West J.’s costs decision “directly and explicitly addressed the conduct of the federal Crown”, and that he had determined that the Crown’s conduct “exhibited a marked and substantial departure from the reasonable standards expected of the Crown”. Nevertheless, she observed that costs against the Crown in such proceedings are a “rare and extraordinary remedy”, that the AGC’s appeal specifically sought to attack the findings of Crown misconduct, that there was precedent for this court taking a very different view, and accordingly, that there was a clear risk that West J.’s findings of misconduct might be rejected on appeal, which would have seriously undermined any action brought by the respondents. The fact that there was another ongoing proceeding – the appeal of West J.’s costs decision – that could have impacted the viability of the respondents’ action was relevant to the application of s. 5(1)(a)(iv) in the circumstances of this case.

 [25]      We see no palpable and overriding error in the motion judge’s conclusion that the time began to run under s. 5(1)(a)(iv) in respect of the claims against all appellants on April 14, 2016, when this court released its decision dismissing the appeal from West J.’s costs order. Again, the circumstances were highly unusual. The same parties were already involved in litigation commenced and pursued by the appellants, in which the appellants’ alleged misconduct had taken centre stage. In pursuing the appeal, the AGC did not accept and sought to overturn the findings of West J., ensuring that whether or not there was prosecutorial misconduct remained a live issue until it was determined by this court. As the motion judge reasonably observed, there was a clear risk of a successful appeal, which would have impacted the viability of an action based on the same allegations of prosecutorial misconduct.

[27]      After assessing the claims against all parties, it was open to the motion judge to conclude, as she did, that a successful appeal of the costs decision would have undermined the claims against all of the appellants, including the OPP Defendants. This was not, as the appellants contend, a tactical decision on the part of the respondents, as in Markel, or simply a question of a plaintiff waiting until the end of other proceedings that might improve their chances of success in a civil action, as in Sosnowski v. MacEwen Petroleum Inc.2019 ONCA 1005, 441 D.L.R. (4th) 393. Rather, as in Winmill v. Woodstock (Police Services Board), 2017 ONCA 962, 138 O.R. (3d) 641, at para. 31, leave to appeal refused, [2018] S.C.C.A. No. 39, the result of the proceedings in which the parties were already involved, including the determination by this court of the prosecutorial misconduct allegations, would have been a “crucial, bordering on determinative factor” in whether the respondents had a civil claim to pursue.

Ontario: Court of Appeal on raising a limitations defence for the first time on appeal

In Vellenga v. Boersma, the Court of Appeal provides a reminder that you raise a limitations defence for the first time on appeal at your peril:

[41]      Finally, the appellants argue that Mr. Vellenga’s claim was statute-barred under s. 4 of the Real Property Limitations Act, which creates a ten-year limitation period for an action to recover land: Waterstone Properties Corporation v. Caledon (Town)2017 ONCA 62364 M.P.L.R. (5th) 179, at para. 31. Since Mr. Vellenga became aware that Weijs Investment owned the Boundary Lake Property as of 2004 at the latest, the appellants argue that his trust claim in 2015 was commenced after the expiry of the limitation period.

[42]      As this argument is being put forth for the first time on appeal, this court must consider whether or not to grant leave to allow the argument to be heard: Kaiman v. Graham2009 ONCA 77245 O.A.C. 130, at para. 18.
[43]      The decision to grant leave is discretionary. Appellate courts will not generally entertain entirely new issues on appeal, as “it is unfair to spring a new argument upon a party at the hearing of an appeal in circumstances in which evidence might have been led at trial if it had been known that the matter would be an issue on appeal”: Kaiman, at para. 18. The court’s discretion is to be “guided by the balancing of the interests of justice as they affect all parties”: at para. 18.
[44]      In my view, it would not be in the interests of justice to grant leave. Mr. Vellenga first commenced his application in 2004 and later amended his claim in 2015 to specifically include a trust claim. The application was not heard until 2018. The appellants had more than enough time to consider and raise this argument. They provided no persuasive reason to explain their failure to do so.
[45]      Furthermore, this court has explained that “[t]he expiry of a limitation period does not render a cause of action a nullity; rather, it is a defence and must be pleaded”: Beardsley v. Ontario (2001), 2001 CanLII 8621 (ON CA)57 O.R. (3d) 1 (C.A.), at para. 21. While this matter was commenced by way of application and did not involve formal pleadings, the key point is that the limitation argument was not raised at any time prior to this appeal.

Ontario: confusion in the Court of Appeal on the historical limitation of demand obligations

The Court of Appeal decision in Michel v. Spirit Financial Inc. includes the following paragraph that compels me to pedantry:

[14]      The trial judge made a finding of fact that all the advances made by Michel to Kramer and Spirit were loans. The loans were advanced from 2000 to 2009, during which time the Limitations ActR.S.O. 1990, c. L.15 was largely replaced by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. On January 1, 2004 the basic limitation period for demand loans was changed from six years from the date of the loan to two years from the date of the demand: Hare v. Hare2006 CanLII 41650 (ON CA)83 O.R. (3d) 766 (C.A.), at para. 11 and Limitations Act, 2002, at s. 5.

Here are the issues:

  1. The Limitations Act didn’t change the limitation of demand loans when it came into force on January 1, 2004. Section 5(3) wasn’t present in the initial version of the Limitations Act, which didn’t address the discovery of a claim arising from demand obligations at all.The Court cites Hare, but Hare actually holds that, under the version of the Limitations Act in force when it was decided, a demand obligation was actionable as of the funds being advanced and not the date of the demand.  This was manageable under the Former Act, which applied a six-year limitation period, but it’s problematic with a two-year limitation period.  This caused the Legislature to amend the Limitations Act in 2008 to add s. 5(3), which makes presumptive discovery of a claim arising from a demand loan the date of the demand for repayment.

    Frankly, it’s surprising that the Court would misstate the development of the law so materially.

  1. It’s misleading to say that the Limitations Act “largely” replaced the Former Act. The Limitations Act and the RPLA together entirely replaced the Former Act.  To be fair, the RPLA is Part I of the Former Act repackaged, and in that sense the Limitations Act only partially replaced the Former Act.  Nevertheless, this statement suggests that some part of the Former Act remains in force.  It doesn’t.