Ontario Real Property Limitations Act

Ontario: common law discovery and s. 4 of the RPLA

Khan v. Taji confirms that common law discovery applies to the limitation period in s. 4 of the Real Property Limitations Act.  It provides a good overview of the issue:

[72]           The defendants argue that the discoverability principle in s. 5 of the Limitations Act, 2002, has no application to s. 4 of the RPLA. They argue that the discoverability principle is a statutory construct, and does not apply unless expressly stated in the statute. In the absence of an express statement, the right to bring an action for the recovery of land first accrues the moment the trust is established, not on the date that a breach of trust is discovered.

[73]           There is no question that the application of the discoverability rule is a question of statutory interpretation, but the analysis is not as simple as that proposed by the defendants.  In Pexeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549 (S.C.C.), the Supreme Court of Canada dealt with the question of whether the discoverability rule applied to all limitation provisions or whether its application depended upon the actual wording of the statutory limitation. Major J. adopted the following statement from the Manitoba Court of Appeal in Fehr v. Jacob , at para. 37:

[T]he judge-made discoverability rule is nothing more than a rule of construction. Whenever a statute requires an action to be commenced within a specified time from the happening of a specific event, the statutory language must be construed. When time runs from “the accrual of the cause of action” or from some other event which can be construed as occurring only when the injured party has knowledge of the injury sustained, the judge-made discoverability rule applies. But, when time runs from an event which clearly occurs without regard to the injured party’s knowledge, the judge-made discoverability rule may not extend the period the legislature has prescribed. (Emphasis added)

[74]           In McCracken v. Kossar, 2007 CanLII 4875 (ON SC), Shaw J. concluded that the language of s. 4(1) of the RPLA did nor preclude the application of the discoverability rule, at para. 54:

Ms. Kossar submits that the discoverability principle does not apply to s. 4(1) of the Real Property Limitations Act. She quotes in support of her submission the words in s. 4(1), “… when the right to bring such action first accrued.” However, Fehr v. Jacob, cited with approval by Major J. in Pexeiro, refers to very similar language as leading to the possible application of the discoverability rule.

[75]           In any event, I note that s. 28 of the RPLA does expressly provide for a discoverability rule in cases of concealed fraud. Section 28 provides:

28.  In every case of a concealed fraud, the right of a person to bring an action for the recovery of any land or rent of which the person or any person through whom that person claims may have been deprived by the fraud shall be deemed to have first accrued at and not before the time at which the fraud was or with reasonable diligence might have been first known or discovered.

[76]           In the present case, the plaintiff has pleaded fraud with respect to the transfers of both properties.

Ontario: the Trustee Act doesn’t supersede the RPLA

Wilkinson v. The Estate of Linda Robinson is a reminder that the Trustee Act does not supersede the RPLA.  An estate’s claim for the recovery of an interest in real property is subject to the RPLA, not the Trustee Act:

[19]           The position of the Estate that the Trustee Act is an absolute bar to the constructive trust claim is not borne out by the prior cases or by the legislation. The Estate takes the position that if the parties were alive, the ten-year rule would apply, but since the death of Robinson, the limitation period becomes two years.

 [20]           While there is no doubt that section 38(3) of the Trustee Act is a hard limitation, there is no jurisprudence to demonstrate that the Real Property Limitations Act should not apply in cases of a constructive trust as has already been determined by the Court of Appeal in McConnell v. Huxtable.
 [21]           In Rolston v. Rolston, 2016 ONSC 2937, the Court was asked to consider whether the Plaintiff’s claim for constructive trust was barred by the limitation period in s.38(3) of the Trustee Act. The claims were brought some seven years after the date of death. In considering what limitation period would apply to actions for unjust enrichment seeking a remedial constructive trust, Leach J., accepted at paras 58 and 59 that section 38 of the Trustee Act was intended to apply not only to tort actions, but to other “personal” actions. However he went on to note that the Trustee Act was entirely dependent on provisions of the Limitations Act, that the same legislation confirms that it does not apply to claims pursued in proceedings to which the Real Property Limitations Act applies and that as confirmed by the Court of Appeal in McConnell v. Huxtable, claims for unjust enrichment and associated remedies of constructive trust are governed by section 4 of the Real Property Limitations Act.
 [22]           The heading of the applicable section in the Trustee Act refers to claims in tort. This is not a tort claim. This is an action for an interest in property.
 [23]           A simple analysis is that the Real Property Limitations Act is dealing with a right to land, not with a wrong against a person. This case, as in McConnell v. Huxtable, deals with a right to property.

Ontario: Court of Appeal on s. 43(1) of the RPLA

In Hilson v. 1336365 Alberta Ltd., the Court of Appeal confirmed that the ten-year limitation period in s. 43(1) of the RPLA applies to a stand-alone mortgage guarantee.

The respondents argued that s. 43(1) should be read narrowly to deal only with the circumstances that existed when its predecessor provision was enacted, and that “instrument” as used in the provision should have the same definition prescribed in the Registry Act.  The court rejected both arguments in comprehensive reasons.  I think it’s a good decision.

Ontario: a messauge doesn’t necessarily engage the RPLA

The decision in Beniuk v. Leamington (Municipality) affirms an esoteric aspect of real property limitations (though to be fair, most aspects of the RPLA are esoteric).  It affirms that the presence of a messuage doesn’t necessarily engage the RPLA.

The plaintiffs argued that the tort of private nuisance to land was effectively an action to recover messuages and therefore subject to the s. 4 limitation period, which applies to actions for recovery of land.  Section 1 of the RPLA defines land to include “messauges”—a dwelling house, its out buildings, the area immediately surrounding the dwelling, and adjacent land appropriate to its use.  Whether or not the property was a messuage, the action concerned land, but was not to recover land.

Ontario: Court of Appeal on adverse possession and prescriptive easements

The Court of Appeal decision in Majewsky v. Veveris restates two real property principles:

  1. Adverse passion can be established with respect to lands registered under the Land Titles Act by possession meeting the necessary requirements during any continuous ten-year period prior to registration in Land Titles.
  2. To acquire a prescriptive easement whether under the doctrine of lost modern grant or by prescription under the RPLA, the claimant must demonstrate use that is continuous, uninterrupted, open, and peaceful for a period of 20 years.

Ontario: the Land Titles Act and possessory and prescriptive rights

Aragon (Wellesley) Development (Ontario) Corp. v. Piller Investements Ltd. will be useful to the real property bar for its summary of the effect of the Land Titles Act on possessory and prescriptive rights (starting at para. 122), abandonment of easements (starting at para. 154), and prescriptive easements (starting at para. 165).

 

 

Ontario: Easements by prescription

 

The Court of Appeal decision in Hunsinger v. Carter contains a statement of the principles of establishing an easement by prescription (which, as I like to point out, is a limitation issue):

(1)         Establishment of an easement by prescription

[9]         An easement by prescription can arise either under s. 31 of the Real Property Limitations Act, R.S.O. 1990, c. L.15, or pursuant to the doctrine of lost modern grant. Both have the same four requirements, which were properly recognized by the application judge: i) a dominant tenement that enjoys the benefit of the easement and a servient tenement whose owner suffers some use of its land; ii) the properties cannot be owned by the same person; iii) the benefit of the easement must be reasonably necessary for the enjoyment of the dominant tenement; and iv) there must be 20 or 40 years’ (see: Kaminskas v. Storm, 2009 ONCA 318 (CanLII), 95 O.R. (3d) 387, at paras. 31-36) continuous, uninterrupted, open, and peaceful use enjoyed without obtaining the permission of the servient tenement owner. See: Henderson et al. v. Volk et al. (1982), 1982 CanLII 1744 (ON CA), 35 O.R. (2d) 379 (C.A.).

[10]      After a property has been registered under the Land Titles system, a pre-existing prescriptive easement over the land can be established if the four criteria can be proved to have been met before the land was transferred into Land Titles: Carpenter v. Doull-MacDonald, 2017 ONSC 7560 (CanLII), at paras. 54-55.

Ontario: the limitation of stand-alone mortgage guarantees

In Hilson v. 1336365 Alberta Ltd., the court determined, for the first time, the limitation period for a stand-alone mortgage guarantee agreement. A stand-alone guarantee that affects or relates to an interest in land, and includes covenants to pay money secured by a mortgage, is subject to a ten year limitation period under s. 43(1) the Real Property Limitation Act.

[41]           The application of a predecessor provision to s. 43(1) of the Real Property Limitations Act (being s. 49(1)(k) of the Limitations Act, R.S.O. 1914, c. 75) was considered by the Ontario Court of Appeal in Martin v. Youngson (1924), 55 O.L.R. 658 (C.A.).  In that case, the mortgagee commenced an action against the guarantor of the mortgage more than ten years after the mortgage became due.  If the predecessor to s. 43(1) did not apply, the limitation period would have been 20 years.   Pursuant to s. 49(1)(b) of the predecessor statute, the 20-year limitation period applied to “an action under a bond, or other indenture, except upon a covenant contained in an indenture of mortgage”.  The guarantee covenant in Martin was contained in the mortgage indenture, which the guarantor had executed.  At p. 663, the court found that the applicable limitation period was ten years, as indicated below:

Dealing now with the successive points argued by the appellant, I think that this is “an action upon a covenant contained in an indenture of mortgage,” and therefore comes within sec. 49, subsec. 1(k), of the Limitations Act. The whole document, exhibit 1, is an indenture of mortgage. I express no opinion as to what would be the proper conclusion if the guaranty were contained in a separate collateral document. That point can be decided when it arises. But, so far as this action is concerned, it seems to me that it falls precisely within the words of the statute, and therefore that the period of limitation is 10 years, and not 20. [Emphasis added.]

[42]           In its 2012 decision in Equitable Trust, the Ontario Court of Appeal considered and affirmed its previous decision in Martin.  As in Martin, the issue in Equitable Trust was the applicable limitation period where the guarantee covenant was contained in the mortgage indenture that the guarantor signed, rather than in a “separate collateral document”.  Counsel did not bring to my attention any subsequent decision that considered whether the ten-year limitation period would apply to a claim under a guarantee covenant in a separate document, the issue that Martin expressly left outstanding.

[43]           In Equitable Trust, the guarantor argued that the limitation period for the guarantee contained in the mortgage was two years, based on the following reasoning.  The guarantee covenant in that case was a demand obligation governed by ss. 5(3) and (4) of the Limitations Act, 2002.  Those provisions were intended to apply to all demand obligations, including a demand guarantee obligation contained in a mortgage indenture.  The court rejected that argument.  Relying on s. 2(1)(a) of the Limitation Act, 2002, the court held that the ten-year limitation period in the Real Property Limitations Act applied.  In doing so, the court stated as follows (at paras. 27, 28, 30 and 31):

27        … [T]he effect of s. 2(1)(a) of the Limitations Act, 2002 is to preclude the limitation periods of that Act from applying when the Real Property Limitations Act applies. Put simply, the Limitations Act, 2002, was enacted to deal with limitation periods other than those affecting real property.

28        A guarantee given in conjunction with a mortgage transaction affects real property law rights. Guarantors, if they have made payments toward the mortgage debt, need to be served in mortgage enforcement proceedings because they have an equity of redemption and an interest in the mortgaged property…. [Case citations omitted.]

…

30        It is true that it may not always be easy to determine whether a particular guarantee … is subject to the Limitations Act, 2002 or, like the guarantee in the case at bar, is subject to the Real Property Limitations Act. However, it does not follow that all guarantees should be treated the same way. It has been the case historically that guarantees associated with land transactions have different limitation periods from guarantees associated with contract claims. Moreover, as already noted, it is my view that the Legislature intended that all limitation periods affecting land be governed by the Real Property Limitations Act.

31        The mortgage enforcement practice, as demonstrated in the case at bar, is to give guarantors notice of power of sale proceedings. In my view, it would cause much more confusion and uncertainty in the law, if the limitation period for enforcing the mortgage debt was different from the limitation period for enforcing guarantees of that debt. [Emphasis added].

[44]           In its subsequent decision in Zabanah v. Capital Direct Lending Corp., 2014 ONCA 872 (CanLII), 123 O.R. (3d) 350, the Court of Appeal acknowledged that it was appropriate to circumscribe the expansive expression in Equitable Trust (at para. 30) of the legislative intent that “all limitation periods affecting land be governed by the Real Property Limitations Act.”  In Zabanah, the assignee of a mortgage was unable to recover the amount due under the mortgage either from the mortgagor or upon the sale of the mortgaged property.  The assignee sued the original mortgagee for negligence and breach of contract.  Summary judgment was granted, dismissing the action against the original mortgagee on the basis that the action had not been commenced within the two-year limitation period in the Limitations Act, 2002.  The assignee argued on appeal that the ten-year limitation period in Real Property Limitations Act applied, relying on the statement in Equitable Trust that all limitation periods affecting land were governed by that statute.  The appeal court held that the motion judge was correct that the two-year limitation period applied.  The court distinguished Equitable Trust on that basis that the assignee’s action against the original mortgagee “is simply a negligence and contract claim, and is not a claim to an interest in land, as in [Equitable Trust].”

[45]           Defence counsel argued that as in Zabanah, the plaintiff’s claim against the Lightles under the stand-alone guarantees was a contract claim, not a claim to an interest in land.  By the same reasoning, the two-year limitation period would apply to the plaintiff’s claim against the Lightles under those agreements, according to the defence.

[46]            Defence counsel also argued that s. 43(1) of the Real Property Limitation Act does not apply because the stand-alone guarantees do not constitute an “other instrument … to repay the whole or any part of any money secured by a mortgage.”  While the term “instrument” is not defined in the Real Property Limitation Act, defence counsel referred to other statutory provisions to support his argument that the term “instrument” should be read as being limited to an instrument that affects or relates to an interest in land.  In his submission, the stand-alone guarantees did not fall within the meaning of “instrument” as that term was used in s. 43(1).

[47]           In particular, defence counsel referred to the definition of “instrument” in s. 1 of the Registry Act, R.S.O. 1990, c. R.20, as follows:

“instrument” includes every instrument whereby title to land in Ontario may be transferred, disposed of, charged, encumbered or affected in any other way, and, without limiting the generality of the foregoing, includes … a deed, conveyance, mortgage, assignment of mortgage, certificate of discharge of mortgage, … a contract in writing, … and every notice, caution and other instrument registered in compliance with an Act of Canada or Ontario;

[48]           Under s. 22 of the Registry Act, any instrument as defined in s. 1 may be registered under that Act, subject to specified exceptions.  As well, under s. 23 of that Act, the land registrar may refuse to accept for registration any instrument that, in the registrar’s opinion, does not affect or relate to an interest in land.  On the same basis, the registrar may refrain from recording part of a registered instrument.  As defence counsel also noted, there is no definition of “instrument” in the Land Titles Act, but s. 81 of that Act is to the same effect as s. 23 of the Registry Act.  Under s. 81 of the Land Titles Act, the land registrar may refuse to register all or part of an instrument on the basis that it does not affect or relate to an interest in land.

[49]           Applying the foregoing legislative provisions, it is clear that only instruments that affect or relate to an interest in land are capable of being registered under the Land Titles Act or the Registry Act.  Registration under those statutes provides public notice relating to ownership and other interests in real property in Ontario, and provides the basis for determining the priority of those interests.  What was not clear to me was why the meaning of instrument for registration purposes was determinative (or even relevant) when interpreting the meaning of that term for purposes of determining the limitation period for court proceedings, as set out in s. 43(1) of the Real Property Limitation Act.

[50]           In any case, plaintiff’s counsel did not dispute that the term “instrument” in s. 43(1) should be interpreted as meaning an instrument that affects or relates to an interest in land.  As explained further below, I agree with plaintiff’s counsel that the stand-alone guarantees are instruments that affect or relate to an interest in land, applying the reasoning of the Court of Appeal in Equitable Trust.  As well, by their terms, the stand-alone agreements include covenants “to repay … money secured by a mortgage”, that is, the second mortgages between the plaintiff and the corporate defendants.  Accordingly, I have concluded that the limitation period for the plaintiff’s claim under the stand-alone guarantees was ten years.

This reasoning seems sound to me, but I find the real property limitations scheme as arcane as everyone else.

Ontario: the limitation of applications to recover real estate advances

In Scicluna v. Solstice Two Limited, the Court of Appeal reminds us that an application to recover monies advanced in a real estate purchase is subject to the Real Property Limitations Act:

[25]      Although the application judge should have responded overtly in her decision to Solstice’s limitation period defence, she was clearly correct to reject it. In my view, Yim v. Talon International Inc., 2017 ONCA 267 (CanLII), 137 O.R. (3d) 184 confirms that Ms. Scicluna’s claim is governed by the 10 year limitation period in s. 4 of the Real Property Limitations Act, R.S.O. 1990, c. L.15(“RPLA”), not by the Limitations Act. I reject Solstice’s attempt to distinguish this case based on the factual difference that Yim dealt with a deposit whereas the “forfeited money” claimed by Solstice is no longer a deposit. The RPLA governs actions to recover “land”, and “land” is defined in s. 1 as including “money to be laid out in the purchase of land”. Ms. Scicluna’s application to recover monies advanced in a real estate purchase falls under that definition regardless of whether it is properly characterized as a deposit.al

Ontario: Prescriptive easements (are a limitations issue)

Carpenter v. Doull-MacDonald well summarises the principles of prescriptive easements, which you may be surprised to learn is a limitations issue.  Section 31 and 32 of the Real Property Limitations Act govern the establishment of prescriptive easements:

[40]           As adjusted by the Land Titles Act,[15] discussed below, a prescriptive easement may be established in two ways under the Real Property Limitations Act,[16] and a third way pursuant to what is known as the doctrine of lost modern grant. At common law, prescription was based on the legal fiction that if there were 20 years of uninterrupted use by the owner of the dominant tenement, it could be presumed that there had been a grant of an easement and that the grant had been lost.[17]

[41]           The relevant provisions of the Real Property Limitation Act are set out below:

  1. No claim that may be made lawfully at the common law, by custom, prescription or grant, to any way or other easement, or to any water course, or the use of any water to be enjoyed, or derived upon, over or from any land or water of the Crown or being the property of any person, when the way or other matter as herein last before-mentioned has been actually enjoyed by any person claiming right thereto without interruption for the full period of twenty years shall be defeated or destroyed by showing only that the way or other matter was first enjoyed at any time prior to the period of twenty years, but, nevertheless the claim may be defeated in any other way by which it is now liable to be defeated, and where the way or other matter as herein last before-mentioned has been so enjoyed for the full period of forty years, the right thereto shall be deemed absolute and indefeasible, unless it appears that it was enjoyed by some consent or agreement expressly given or made for that purpose by deed or writing.
  2. Each of the respective periods of years mentioned in sections 30 and 31 shall be deemed and taken to be the period next before some action wherein the claim or matter to which such period relates was or is brought into question, and no act or other matter shall be deemed an interruption within the meaning of those sections, unless the same has been submitted to or acquiesced in for one year after the person interrupted has had notice thereof, and of the person making or authorizing the same to be made.

[42]           Section 31 of the Real Property Limitations Act sets a 20-year period or a 40-year period for the creation of prescriptive easements. The period of alleged prescriptive use is specified to be the period immediately before the commencement of an action.[18] For an easement created by the doctrine of lost modern grant, the duration of use does not have to be a 20-year or 40-year period immediately preceding the bringing of an action.[19] The doctrine of lost modern grant establishes that where there has been 20 years of uninterrupted enjoyment of an easement and such enjoyment has all the necessary qualities to fulfill the requirements of prescription, the law will adopt the legal fiction that such a grant was made.[20] The nature of the enjoyment of the land necessary to establish an easement under the doctrine of lost modern grant is exactly the same as that required to establish an easement by prescription under a statute of limitations.

[43]           To establish a prescriptive easement, the claimant must demonstrate a continuous, uninterrupted, open and peaceful use of the land, without objection by the owner.[21] To acquire an easement by prescription under a statute of limitations or under the doctrine of lost modern grant, the claimant’s use of the land must be “as of right” or, as described in the old authorities, “nec vi, nec clam, nec precario”—“without violence, without stealth (secrecy), without permission”.

[44]           To say that the use of the easement must be “as of right,” is to say that the enjoyment of the easement is not just permissive (i.e., not just a licence) and the owner of the dominant tenement must actually manifest an ownership right; i.e., an entitlement to use the easement.[22] A claimant may rely on the use of predecessor owners to make up the requisite period of “as of right” use.[23]

[45]           During the 20-year period under the Real Property Limitations Act or pursuant to the doctrine of lost modern grant, the owner of the servient tenement’s oral or written consent or permission defeats any claim for a prescriptive easement.[24] During the 40-year period under the Real Property Limitations Act, a written but not an oral consent will defeat any claim for a prescriptive easement.[25]

[46]           The Ontario Law Reform Commission Report on Limitation of Actions stated that “as of right” means that the claimant must show that he or she enjoyed the easement “as if entitled to it.”[26] In the English case of De La Warr v. Miles,[27] Brett, L.J. said that “as of right” meant “that he who asserts a prescriptive right claims as having a right to do it without the Lord’s permission, and that he has so done it without that permission.”[28] The Ontario Law Reform Commission in its report, states at p. 143:

The person claiming the easement must show that the owner of the land has acquiesced in his enjoyment. The latter must have acquiesced yet not given permission. It is not easy to tell whether or not there was, in fact, acquiescence in a particular case.

[47]           The theory behind a claim for an easement based on prescription under a limitations statute or under the doctrine of lost grant is that the evidence establishes that the owner of the servient tenement has with knowledge consented or acquiesced to the establishment of an incorporeal ownership interest in land by the owner of the dominant tenement as opposed to licensing the use of the land without conferring an ownership interest in it.[29] Use by permission or licence is insufficient for establishing a prescriptive easement.[30] The theory was explained in Sturges v. Bridgman[31] by Thesiger, LJ. as follows:

Consent or acquiescence of the owner of the servient tenement lies at the root of prescription, and of the fiction of a lost grant, and hence the acts or user, which go to the proof of either the one or the other, must be, in the language of the civil law, nec vi nec clam nec precario; for a man cannot, as a general rule, be said to consent to or acquiesce in the acquisition by his neighbour of an easement through an enjoyment of which he has no knowledge, actual or constructive, or which he contests and endeavours to interrupt, or which he temporarily licenses.

[51]           The threshold for meeting the criteria for establishing a prescriptive easement under the Limitations Act or by lost modern grant is high, and courts are hesitant to recognize an easement by prescription because doing so would permit a landowner’s neighbourly accommodation of sufferance to ripen into a legal burden on his or her lands without compensations.[40] Use permitted by neighbourliness and enjoyed on that basis is insufficient to establish an easement by prescription.[41]