{"id":515,"date":"2016-10-07T16:42:59","date_gmt":"2016-10-07T20:42:59","guid":{"rendered":"http:\/\/limitations.ca\/?p=515"},"modified":"2016-10-07T18:46:39","modified_gmt":"2016-10-07T22:46:39","slug":"ontario-highways-are-still-subject-to-limitation-periods","status":"publish","type":"post","link":"http:\/\/limitations.ca\/?p=515","title":{"rendered":"Ontario: Highways are still subject to limitation periods"},"content":{"rendered":"

The Court of Appeal allowed the 407’s appeal of Justice Edward’s decision in 407 ETR Concession Company Limited v. Day<\/em><\/a>.\u00a0 Apart from settling the great question of how the passage of time limits 407’s claims for unpaid tolls, Justice Laskin’s decision suggests a maturity in s. 5(1)(a)(iv)<\/a>\u00a0jurisprudence.<\/p>\n

\u00a0<\/sub>The circumstances of the claim are rather bewildering.\u00a0 The defendant Day, a person of some means, refused to pay the approximately $13,000 plus interest he owed 407 for unpaid tolls.\u00a0 407 sued him.\u00a0 Day pleaded a limitations defence, and\u00a0 407 brought a r. 21 motion to resolve\u00a0questions of limitations law. \u00a0Justice Edwards determined when 407 discovered its claims against Day and rejected the validity of an agreement between Day and 407 extending the limitation period.<\/a>\u00a0 407 appealed.<\/p>\n

Facts<\/strong><\/p>\n

Some facts are necessary to understand the limitations issue.<\/p>\n

407 can collect its unpaid tolls by civil action in the courts or by license plate denial.\u00a0 The statutory authorization for these two methods is set out in the Highway 407 Act, 1998<\/em><\/a>.<\/p>\n

When a person drives a vehicle on the 407, s. 13(1) of the 407 Act provides that the person in whose name the vehicle’s license plate is registered is liable to pay the tolls and related charges.<\/p>\n

Sections 15(1) and (2) of the 407 Act provide that tolls are due and payable on the day 407 sends a toll invoice, and that interest begins to accrue 35 days later.\u00a0 Section 15(3) provides the 407 with a cause of action for nonpayment .<\/p>\n

407 can also initiate a license plate denial.\u00a0 Under s. 16(1) of the 407 Act, if a toll isn’t paid within 35 days after 407 sends an invoice, 407 may send the person responsible for payment a notice of failure to pay.\u00a0 If the debt remains unpaid 90 days later, s. 22(1) of the 407 Act entitles 407 to notify the Registrar of Motor Vehicles of the failure.\u00a0 This notice puts the defaulting debtor into license plate denial.\u00a0 Section 22(3) requires 407 to inform the recipient of a notice sent under s. 16(1) that 407 has given\u00a0notice to the Registrar.<\/p>\n

Once 407 notifies the Registrar, s. 22(4) provides that the Registrar must refuse to validate the vehicle permit issued to the recipient of the s. 16 notice at its next opportunity, and refuse to issue a vehicle permit to that person.\u00a0 The Registrar’s next opportunity is typically the date the validation for a vehicle permit expires and must be renewed.\u00a0 The Vehicle Permits Regulation <\/em>under the Highway Traffic Act <\/em>\u00a0provides that the maximum validation period for a vehicle permit is two years.<\/p>\n

Lastly, s. 25 of the 407 Act provides that license plate denial is a complementary rather than exclusive remedy.<\/p>\n

The r. 21 motion<\/strong><\/p>\n

407 raised two issues on the motion.<\/p>\n

The first issue was the discovery of 407’s claim.\u00a0 Justice Edwards held that 407 discovered its claim on the earliest date under the 407 Act that it could have notified the Registrar to put Day into license plate denial.<\/p>\n

The second issue was the enforceability of the 15-year limitation period in Day’s transponder lease agreement with 407.\u00a0 Justice Edwards held that 407 could not rely on s. 22 of the Limitations Act, which permits parties to contract out of the basic limitation period, because the lease agreement was not a “business agreement” as defined by that section.<\/p>\n

The Court of Appeal’s analysis<\/strong><\/p>\n

Discovery of 407’s claim turned on s. 5(1)(a)(iv) of the Limitations Act<\/a>: when, having regard to the nature of the loss, a proceeding would be an appropriate means to seek to remedy it.<\/p>\n

Assessing the date when a civil action became an appropriate means for 407 to recover its loss required considering the purpose of s. 5(1)(a)(iv) in the context of the statutory regime under which 407 operates.<\/p>\n

To give effect to the legislature’s intent in the 407 Act, the limitation period must be tied to the license plate denial process: ” The legislature enacted that process for a reason: it was not content to force 407 ETR to sue in the courts for unpaid toll debts. I fully agree with the Divisional Court that licence plate denial is an effective, necessary and indeed integral feature of an open access toll highway. Tying the start date of the limitation period to the licence plate denial process acknowledges the significance the legislature attached to that process for the collection of unpaid tolls.”<\/p>\n

A civil action becomes appropriate when 407 has reason to believe that it will not otherwise be paid.\u00a0 This is when the usually effective license plate denial process runs its course. \u00a0This happens\u00a0when a vehicle permit expires for failure to a pay a toll debt; thereafter, a claim becomes an appropriate remedy to recover the debt and the limitation period commences.<\/p>\n

Justice Laskin cited four reasons in support of this conclusion.<\/p>\n

[40]\u00a0\u00a0\u00a0\u00a0\u00a0 First, under s. 5(1)(a)(iv) of the Limitations Act, 2002, the date a proceeding would be an appropriate means to recover a loss must have \u201cregard to the nature of the … loss\u201d. So, in fixing the appropriate date, it may not be enough that the loss exists and the claim is actionable. If the claim is the kind of claim that can be remedied by another and more effective method provided for in the statute, then a civil action will not be appropriate until that other method has been used. Here, a claim will not be appropriate until 407 ETR has used that other method, without success.<\/p>\n

[41]\u00a0\u00a0\u00a0\u00a0\u00a0 [\u2026] licence plate denial \u2013 is far more effective than a civil action. By providing for licence plate denial, the legislature must be taken to have recognized its effectiveness. People who cannot renew their vehicle permits until they deal with their toll debts have a powerful incentive to pay.<\/p>\n

[42]\u00a0\u00a0\u00a0\u00a0\u00a0 The statistical evidence bears out the effectiveness of licence plate denial. 407 ETR issues over one million invoices a month. Nearly 70 per cent of those invoices are paid within one month, which means just over 30 per cent are not. Significantly, about 75 per cent of permit holders in default pay their toll debts after being advised the Registrar has sent a s. 22 notice. Of those, just over one half pay before or on the date their vehicle permits have to be renewed; the remainder pay after their vehicle permits have expired.<\/p>\n

[43]\u00a0\u00a0\u00a0\u00a0\u00a0 These statistics show that the motion judge\u2019s start date \u2013 the delivery of a s. 22 notice to the Registrar \u2013 is too early in the process. It comes at the beginning of the process instead of where I think it should come, at the end. The licence plate denial process should be allowed to run its course. As the statistics show, most people, fearing the consequences, eventually pay after receiving a s. 22 notice. Only if the process fails to prompt payment does litigation become an appropriate means to recover the debt.<\/p>\n

[44]\u00a0\u00a0\u00a0\u00a0\u00a0 Second, in determining when a claim ought to have been discovered, s. 5(1)(b) of the Limitations Act, 2002 requires the court to take account of \u201cthe circumstances of the person with the claim\u201d. 407 ETR\u2019s \u201ccircumstances\u201d differ from those of many other creditors. Highway 407 itself is enormously busy: 380,000 trips on an average workday. As a consequence, 407 ETR must process an enormous number of invoices, almost all for amounts of no more than a few hundred dollars apiece. And unlike, for example a credit card company, which can cancel a customer\u2019s credit card for non-payment of a debt, 407 ETR cannot bar a defaulting debtor\u2019s access to the highway.<\/p>\n

[45]\u00a0\u00a0\u00a0\u00a0\u00a0 407 ETR\u2019s \u201ccircumstances\u201d strongly suggest that requiring it to sue before finding out whether licence plate denial has achieved its purpose would be inappropriate. An important case on the significance of a plaintiff\u2019s \u201ccircumstances\u201d is the majority judgment in Novak v. Bond, 1999 CanLII 685 (SCC), [1999] 1 S.C.R. 808. In that case, McLachlin J. considered s. 6(4)(b) of British Columbia\u2019s Limitations Act, R.S.B.C. 1996, c. 266, which provided that time did not begin to run against a plaintiff until \u201cthe person whose means of knowledge is in question ought, in the person\u2019s own interests and taking the person\u2019s circumstances into account, to be able to bring an action\u201d [\u2026].<\/p>\n

[46]\u00a0\u00a0 \u00a0\u00a0\u00a0[\u2026] holding that time begins to run against 407 ETR before it knows whether licence plate denial has prompted payment would be unfair, or to use the word of our statute, would not be \u201cappropriate\u201d.<\/p>\n

[47]\u00a0\u00a0 \u00a0\u00a0\u00a0Holding that the two-year period begins after the licence plate denial process fails to prompt payment does not raise the concern Sharpe J.A. referred to in\u00a0Markel Insurance Co. of Canada v. ING Insurance Co. of Canada<\/em>,\u00a02012 ONCA 218\u00a0(CanLII)<\/a>,109 O.R. (3d) 652, at para. 34. There, he said that \u201cappropriate\u201d must mean \u201clegally appropriate\u201d. By using that phrase he signified that a plaintiff could not claim it was appropriate to delay the start of the limitation period for tactical reasons, or in circumstances that would later require the court to decide when settlement discussions had become fruitless. In this case, however, 407 ETR seeks to delay the start of the limitation period for a legally appropriate reason: waiting until a statutorily authorized process has been completed.<\/p>\n

[48]\u00a0\u00a0 \u00a0\u00a0\u00a0A third consideration is what I take to be an important purpose of\u00a0s. 5(1)<\/a>(a)(iv). The overall purposes of limitation statutes are well-established and well-known: certainty, finality and the unfairness of subjecting defendants to the threat of a lawsuit beyond a reasonable period of time. But it seems to me one reason why the legislature added \u201cappropriate means\u201d as an element of discoverability was to enable courts to function more efficiently by deterring needless litigation. As my colleague Juriansz J.A. noted in his dissenting reasons in\u00a0Hare v. Hare<\/em>\u00a0(2006),\u00a02006 CanLII 41650 (ON CA)<\/a>,\u00a083 O.R. (3d) 766 (C.A.), at para. 87, courts take a dim view of unnecessary litigation.<\/p>\n

[49]\u00a0\u00a0 \u00a0\u00a0\u00a0If the limitation period runs concurrently with the licence plate denial process, as would be the case under the motion judge\u2019s start date, then there would be the real possibility of numerous Small Claims Court claims. And these claims would be needless because the vast majority of defendants would likely pay their debts to avoid having their vehicle permits expire. [\u2026]<\/p>\n

[51]\u00a0\u00a0 \u00a0\u00a0\u00a0Finally, although 407 ETR has discretion when and even whether to send a s. 22 notice to the Registrar, that discretion does not detract from the appropriateness of using the end of the licence plate denial process as the start of the two-year limitation period. In theory, I suppose, as Mr. Day contends, 407 ETR could use its discretion to manipulate the start date. But why, one may ask rhetorically, would it do so? Its commercial interests dictate otherwise.<\/p><\/blockquote>\n

Justice Laskin also overturned Justice Edwards’s decision on the second limitations issue: whether the lease agreement could extend the applicable limitation period.\u00a0 Justice Edwards correctly found that the lease agreement was not a business agreement.\u00a0 However, under s. 22(3)<\/a> of the Limitations Act, parties can agree to contract out of the basic limitation period even in the absence of a business agreement:<\/p>\n

[62]\u00a0\u00a0 \u00a0\u00a0\u00a0Under s. 22(3), parties can only suspend or extend the two-year limitation period. Under s. 22(5), parties may vary or exclude altogether the two-year period. Importantly, in s. 22(6) \u201cvary\u201d is defined to include \u201cextend, shorten and suspend\u201d. Thus, parties to an agreement under s. 22(3), such as the transponder lease agreement, in which one party is a consumer, can suspend or extend the two-year limitation period. They cannot, however, shorten it. Only parties to a business agreement can also agree to shorten the two-year period. As Mr. Day\u2019s transponder lease agreement extends the two-year limitation period to 15 years, it is enforceable under s. 22(3).<\/p><\/blockquote>\n

Day also argued that the 15-year limitation period was unenforceable at common law. \u00a0The\u00a0common law\u00a0imposes specific requirements on\u00a0an agreement to vary a limitation period.\u00a0 These include expressly referring to and excluding the application of the statutory limitation period.\u00a0 Justice Laskin held that the Court of Appeal decision in Boyce <\/em>is determinative of the issue:<\/p>\n

[68]\u00a0\u00a0 \u00a0\u00a0\u00a0The resolution of this issue and its interplay with\u00a0s. 22<\/a>\u00a0is governed by this court\u2019s decision is\u00a0Boyce v. The Co-operators General Insurance Co.<\/em>,\u00a02013 ONCA 298\u00a0(CanLII)<\/a>,\u00a0116 O.R. (3d) 56, leave to appeal refused, [2013] S.C.C.A. No. 296.\u00a0[\u2026]<\/p>\n

[70]\u00a0\u00a0 \u00a0\u00a0\u00a0This court allowed Co-operators\u2019 appeal. The panel held that the agreement was a business agreement, and at para. 16 held that an agreement could be enforceable under\u00a0s. 22<\/a>\u00a0without any of the requirements imposed by the motion judge:<\/p>\n

We cannot accept that an agreement purporting to vary the statutory limitation period is enforceable under\u00a0s. 22<\/a>\u00a0of the\u00a0Limitations Act, 2002<\/a><\/em>\u00a0only if it contains the specific requirements set out by the motion judge. Nothing in the language of\u00a0s. 22<\/a>\u00a0offers any support for imposing these requirements. The only limitation in\u00a0s. 22(5)<\/a>\u00a0is found in the definition of \u201cbusiness agreement\u201d. No other limitation appears, expressly or by implication, and certainly no content related requirements appear in\u00a0s. 22(5)<\/a>.<\/p>\n

[71]\u00a0\u00a0 \u00a0\u00a0\u00a0Instead, at para. 20, this court set out what was required for the enforceability of an agreement under\u00a0s. 22<\/a>:<\/p>\n

A court faced with a contractual term that purports to shorten a statutory limitation period must consider whether that provision in \u201cclear language\u201d describes a limitation period, identifies the scope of the application of that limitation period, and excludes the operation of other limitation periods. A term in a contract which meets those requirements will be sufficient for\u00a0s. 22<\/a>\u00a0purposes, assuming, of course, it meets any of the other requirements specifically identified in\u00a0s. 22<\/a>.<\/p>\n

[\u2026]<\/p>\n

[74]\u00a0\u00a0 \u00a0\u00a0\u00a0Specifically in response to Mr. Day\u2019s contention, it is unnecessary to refer expressly to the exclusion of the two-year period. There was no express reference to it in the agreement in the\u00a0Boyce<\/em>\u00a0case, yet this court held the agreement was enforceable under\u00a0s. 22<\/a>. Similarly, I would hold that the transponder lease agreement signed by Mr. Day is enforceable under\u00a0s. 22(3)<\/a>\u00a0of theLimitations Act, 2002<\/a><\/em>\u00a0and is not rendered unenforceable at common law.<\/p><\/blockquote>\n

Why this decision matters<\/strong><\/p>\n

I think the real significance of this decision is a\u00a0s. 5(1)(a)(iv) analysis that suggests s. 5(1)(a)(iv) jurisprudence is maturing into a settled, useful aspect of the discovery analysis.\u00a0 I note in particular Justice Laskin’s recognition of the novelty of s. 5(1)(a)(iv):<\/p>\n

[33]\u00a0\u00a0 \u00a0\u00a0\u00a0The appropriateness of bringing an action was not an element of the former limitations statute or the common law discoverability rule. This added element can have the effect \u2013 as it does in this case \u2013 of postponing the start date of the two-year limitation period beyond the date when a plaintiff knows it has incurred a loss because of the defendant\u2019s actions.<\/p><\/blockquote>\n

Given the Court of Appeal’s enthusiasm for citing the common law discoverability rule and applying it to limitations analyses under the current Act, this is noteworthy and refreshing.\u00a0 I’ve written about the damage wrought by the Court of Appeal decision in Lawless<\/em><\/a>, which is frequently cited for its statement of common law discoverability.\u00a0 If you use\u00a0the common law test (knowledge of the material facts of a cause of action) to determine the date of discovery, it becomes awkward if not impossible to apply the s. 5(1)(a)(iv), because it’s not a material fact of any cause of action.<\/p>\n

I also think Justice Laskin’s consideration of the meaning of “appropriate” is significant:<\/p>\n

[34]\u00a0\u00a0 \u00a0\u00a0\u00a0Also, when an action is \u201cappropriate\u201d depends on the specific factual or statutory setting of each individual case: see\u00a0Brown v. Baum<\/em>,\u00a02016 ONCA 325\u00a0(CanLII)<\/a>,\u00a0397 D.L.R. (4th) 161, at para. 21. Case law applying\u00a0s. 5(1)<\/a>(a)(iv) of the\u00a0Limitations Act, 2002<\/a><\/em> is of limited assistance because each case will turn on its own facts.<\/p><\/blockquote>\n

In Markel<\/em>, the Court of Appeal defined “appropriate” as “legally appropriate” and discouraged courts from giving it an “evaluative gloss”.\u00a0 In this paragraph, Justice Laskin cites Brown <\/em><\/a>rather than Markel<\/a>. \u00a0<\/em>Justice Feldman held in Brown <\/em>that what is legally appropriate turns on the facts (it was not legally appropriate for the plaintiff in Brown to sue her doctor while he continued to treat her).\u00a0 Justice Laskin later in his decision considered\u00a0Markel<\/em>, and found that it was legally appropriate for 407 not to sue Day until the statutorily authorised plate denial process completed.<\/p>\n

The Court of Appeal may have defined “appropriate” as “legally appropriate”, but as a practical matter the meaning of “legally appropriate” seems to be settling as “what is appropriate in the circumstances of the case”. I think this is a reasonable approach, though it doesn’t bring any more certainty to the commencement of limitation periods.<\/p>\n

Interestingly, Justice Laskin does not cite Justice Juriansz’s decision in Clarke<\/em><\/a>, where he gave “appropriate” an especially expansive meaning (“appropriate” means having good reason to believe there is a legal claim). \u00a0Clarke<\/em>‘s influence on s. 5(1)(a)(iv) jurisprudence may prove to be limited.<\/p>\n

Justice Laskin’s analysis also raises some interesting questions:<\/p>\n