Prima facie knowledge

Ontario: Court of Appeal continues to disagree about limitations analyses (and clarifies that fraudulent concealment doesn’t apply to s. 5)

 

It’s not often that the Court of Appeal disagrees on a limitations issues (or at least until recently when there have been a number of dissents in limitations decisions), and it’s especially rare that the Court disagrees about whether there have been errors of fact.  That’s what make Zeppa v. Woodbridge Heating & Air-Conditioning Ltd. interesting.  Justice Brown, with Justice Strathy concurring, disagreed with Justice Feldman about what facts were necessary for the plaintiff to know that the defendant HVAC installer had caused or contributed to a faulty HVAC system.   

The motion judge found that problems with the HVAC system were necessarily the result of the defendants’ act or omissions because the defendant installed it:

It is crystal clear from these reports, as well as Christopher’s Examination, that the Plaintiffs knew long before February 2010 that the HVAC system was not functioning properly. Woodbridge was clearly responsible since they had installed the system…

Justice Brown did not find any error with this reasoning:

[46]      Unlike my colleague, I see no error in the factual findings that would justify appellate intervention. The motion judge did not misapprehend the evidence. His findings were solidly grounded in the record before him. Accordingly, I would not give effect to this ground of appeal.

However, Justice Feldman didn’t agree that it necessarily followed from the fact of the HVAC problems that the defendant had caused or contributed to them:

[92]      The motion judge found, at para. 33, that “it was not necessary for Christopher to have knowledge of the fact that the Quietside boilers were installed improperly in order for the limitation period to commence running. What was needed was knowledge, actual or imputed, that he had a “claim” against Woodbridge.” This was a legal error.

[93]      In the circumstances of this case, knowledge of the improper installation was an essential element of discoverability of the appellants’ claims for negligence and breach of contract.

[95]      Until Woodbridge’s improper installation was revealed, the Zeppas knew that the system had many problems, but they did not know that the problems were caused by the act of improper installation by the respondent. They did not know of any act or omission by Woodbridge or the day it occurred.

[96]      In fact, when the Zeppas first came to Woodbridge with complaints, Woodbridge informed them that the problems with the system were due to lack of maintenance. There were no problems with the HVAC system itself and no suggestion that the problem was caused by improper installation. On the basis of Woodbridge’s assurances, the Zeppas entered into a two-year maintenance agreement. This cost them approximately $4600.

[97]      However, Woodbridge knew that maintenance would never fix the HVAC system. Woodbridge concealed the fact that its faulty installation of the boilers was the central cause of the Zeppas’ problems. Until Quietside revealed that fact to the Zeppas, Woodbridge’s fraudulent concealment prevented the Zeppas from knowing whom to hold responsible for the damage to their family home and why.

[99]      If the action had been pleaded as a breach of an implied warranty, or if Woodbridge had provided an explicit warranty, the Zeppas’ knowledge that the HVAC system was not working properly may have been sufficient to trigger the running of the limitation period. But that is not the claim here.

[100]   Problems that can be resolved through maintenance are not necessarily caused by the acts or omissions of the installer. The motion judge’s finding that the Zeppas’ problems were clearly caused by Woodbridge’s acts or omissions was not based on any evidence other than the fact that there were ongoing problems with the HVAC system. He treated the cause of action as if it were for breach of warranty and not for negligence or breach of contract in the installation of the system.

[101]   Mr. Zeppa first contacted Quietside because he had heard that its boilers were terrible and that was why Quietside was no longer operating in Canada, i.e. the boilers had a possible manufacturing defect or were inherently faulty. When he asked the manufacturer for assistance, Quietside responded to his inquiries with the letter that revealed Woodbridge’s faulty installation of the boilers and Woodbridge’s knowledge that its faulty installation was the cause of the problems.

[103]   Mr. Zeppa’s evidence demonstrates why knowledge that the HVAC system was not working properly was not enough to trigger the basic limitation period. In the face of Woodbridge’s assurances, Mr. Zeppa reasonably suspected that the boiler manufacturer may have been responsible for the HVAC problems. Woodbridge’s false assurances continued until late 2010.

I find Justice Feldman’s reasoning significantly more persuasive.  It’s not evident to me why the court considered it “crystal clear” that if the HVAC wasn’t working it was the installer’s fault.  Knowledge that the installation was faulty is not “the how it happened” that Justice Brown refers to (at para. 43) of his reasons, but prima facie knowledge of actionable conduct.  In the absence of prima facie knowledge that defendant at contributed to the loss, I don’t see how the plaintiff could have discovered the claim.  Perhaps there’s something in the record that explains this, but not on the face of the decision.

Two other aspects of the decision are noteworthy.

First, it reiterates that the principle of fraudulent concealment is not a consideration in a s. 5 analysis, a point on which the majority and the dissent agree.  This is because s. 5 achieves the same result:

[71]      The decisions in Dhaliwal and Kim, together with the plain language of ss. 4 and 5 of the Act, support the conclusion that there is no independent work for the principle of fraudulent concealment to perform in assessing whether a plaintiff has commenced a proceeding within the basic two-year limitation period. That is because the elements of the discoverability test set out in ss. 5(1)(a) and (b) address the situation where a defendant has concealed its wrong-doing. If a defendant conceals that an injury has occurred, or was caused by or contributed to by its act or omission, or that a proceeding would be an appropriate means to seek to remedy it, then it will be difficult for the defendant to argue that the plaintiff had actual knowledge of those facts until the concealed facts are revealed. Whether the plaintiff ought to have known of those matters, given their concealment, is a matter for inquiry under s. 5(1)(b).

[72]      If the defendant’s concealment of facts results in a lack of actual or objective knowledge by the plaintiff of the elements set out in s. 5(1)(a) of the Act, then the plaintiff does not discover his or her claim until the date the concealed facts are revealed to or known by the plaintiff, at which point time begins to run. That is to say, the analysis required by s. 5(1) of the Act captures the effect of a defendant’s concealment of facts material to the discovery of a claim.

Also note that this is now the leading description of the principle, as demonstrated by the Court’s reference to it in Endean.

Second, it contains a disappointing reference to Lawless:

[42]      As this court observed in Lawless, at para. 23, the question to be posed in determining whether a person has discovered a claim is whether the prospective plaintiff knows enough facts on which to base a legal allegation against the defendant. In support of that proposition, Lawless cited the decision of this court in McSween v. Louis (2000), 2000 CanLII 5744 (ON CA), 132 O.R. (3d) 304 (C.A.), where Feldman J.A., writing for the majority, stated, at para. 51:

The question to be posed when assessing discovery is when the plaintiff had knowledge of the discovery matters, not knowledge of the facts necessary for a legal allegation (which is the question required by common law discovery).  Nevertheless, the Court’s point regarding the amount of knowledge necessary to satisfy the discovery matters—prime facie knowledge—remains valid without reverting to common law discovery principles to describe discovery under s. 5.

Ontario: the Court of Appeal on the evidence required for discovery

It sometimes happens that I miss notable decisions.  And so, better late than never, I draw Crombie Property Holdings Limited v. McColl-Frontenac Inc. to your attention.

These are the noteworthy aspects of the Court of Appeal decision:

1.  It recaps the standard of review for limitations analyses:

[31]      The Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7 (CanLII), [2014] 1. S.C.R. 87, at para. 81, established the standard of review on appeal of a summary judgment. The court stated that, “[w]hen the motion judge exercises her new fact-finding powers under Rule 20.04(2.1) and determines whether there is a genuine issue requiring a trial, this is a question of mixed fact and law”, reviewable only for a “palpable and overriding error”, unless there is an “extricable error in principle”. Further, the question whether a limitation period expired prior to the commencement of an action is typically a question of mixed fact and law and therefore subject to review on a “palpable and overriding error” standard: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526(CanLII), 323 O.A.C. 246, at para. 38. A “palpable and overriding error” is “an obvious error that is sufficiently significant to vitiate the challenged finding of fact”: Longo, at para. 39.

2.  It succinctly summarises the evidentiary burden on a summary judgment motion to dismiss on the basis of an expired limitation period:

[33]      In order to obtain a summary dismissal of the action, the moving parties were required to establish that there was no issue requiring a trial about their limitation defence. The specific issue was whether Crombie’s claim in respect of the environmental contamination of its property was “discovered” within the meaning of s. 5 of the Limitations Act, 2002 before April 28, 2012.

3.  It cites Van Allen for the principle that it is reasonable discovery and not the mere possibility of discovery the causes the limitation period to commence: see para. 35
It inaccurately describes the knowledge necessary to cause discovery of a claim:

[35]      The limitation period runs from when the plaintiff is actually aware of the matters referred to in s. 5(1)(a)(i) to (iv) or when a reasonable person with the abilities and in the circumstances of the plaintiff first ought to have known of all of those matters: Longo, at para. 41. The knowledge sufficient to commence the limitations clock has been described as “subjective” knowledge or “objective” knowledge.

This paragraph appears to conflate the amount of knowledge required by s. 5 with the subjectivity of the knowledge.  A claimant requires prima facie knowledge.  This is knowledge that is greater than suspicion but less than certainty.  See for example Brown v. Wahl at 15.  Then there is question of whether the plaintiff subjectively or subjectively-objectively had this knowledge (not purely objectively, as the Court suggests in this decision, because the question asked in s. 5(1)(b) is a “modified objective” test as it doesn’t ask about the knowledge of a reasonable person, but a reasonable person with the abilities and in the circumstances of the claimant.

Knowledge of a possible wrong (a mere suspicion) is insufficient for discovery of a claim; prima facie knowledge of an actual wrong is necessary:

[42]      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.