November 2014 – Under the Limit

Ontario: Even highways are subject to limitation periods (plus a novel discovery argument)

Readers of Under the Limit rejoice! There is now an answer to the question that worried us so while driving the 407: what limitation period applies to the collection of unpaid 407 tolls?

Not only did the Court answer this question in 407 ETR Concession Company v. Ira J. Day, it emphasised the universal application of the Limitations Act, 2002 and added a novel proportionality component to the discovery analysis.

Mr. Day refused to pay his 407 tolls. Unfortunately, the cameras of the 407 ETR Concession Company are all-seeing, and so in June 2013 the 407 ETR commenced an action against Mr. Day for payment of $9,808, plus interest, owed for driving the 407 on 2,194 occasions. Mr. Day admitted his use of the 407, but chose to fight a portion of the 407’s claim against him on the basis that it was statute-barred. 407 brought a r. 21 motion to determine the limitation issues. The 407 ETR was represented by a team of three from Lenczners led by Tom Curry. Mr. Day was represented by a team of two captained by Ronald Manes of Torkin Manes. The 407 is, evidently, serious business.

The 407 ETA’s argument was threefold. First, they argued that the Limitations Act, 2002 does not apply to claims brought by the 407 ETA. The basis for this position was the Highway 407 Act, which provides that “a toll and any related fee or interest is a debt owing to the owner, and the owner has a cause of action enforceable in any court of competent jurisdiction for the payment of that debt”. If the legislature intended this debt to be like any other, the 407 ETA suggested, there would be no reason to specify separately that the 407 ETR has a cause of action to enforce the debt. By implication, the cause of action is a stand-alone remedy available to the 407 ETA that is not subject to the Limitations Act, 2002 (presumably, the limiting principles of equity would still apply, though the 407 ETA doesn’t appear to have addressed this).

This is a problematic argument because it’s entirely at odds with a limitation period of general application. Justice Edwards rightly had none of it, noting that it “flies in the face” of the universal limitation period in section 4 of the act:

[41] There is nothing from my review of the Limitations Act nor the Highway 407 Act which would explicitly exempt the 407 ETR from Ontario’s limitation regime, nor is there anything that prescribes a separate limitation period for the toll debt. Presumptively the toll debt owed to the 407 ETR is, in my view, subject to sections 4 and 15 of the Limitations Act.

[…]

[43] In my view it would take explicit language in the 407 Act, and or an exception provided for in the Limitations Act, to give to the 407 ETR an ability to make a claim free of any limitations defence. No such language can be found in the 407 Act, nor is there any exception in the Limitations Act.

The 407 ETA’s second argument was that the applicable limitation period was 15 years pursuant to the transponder lease agreement Mr. Day signed. It argued that the agreement was valid under section 22 of the Limitations Act, 2002, which permits parties to extend a limitation period by agreement.

This argument also failed. Section 22(5) allows for the variance and exclusion of limitation periods under the act in respect of “business agreements”. The act defines “business agreement” as “an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002”. The Consumer Protection Act, 2002 defines a consumer as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.”

The lease agreement could not be a business agreement:

[51] The application for the Transponder Lease signed by Mr. Day makes quite clear on its face that he is signing for personal use as opposed to business use. The 407 ETR must have therefore known of the distinction between a consumer applying for a transponder in his personal capacity versus someone acting in his business capacity. Mr. Day, when he leased the transponder, did so as a consumer as defined by the Consumer Protection Act. As such, the 407 ETR cannot rely upon the 15 year limitation period set forth in the Transponder Lease Agreement, as the 407 ETR does not fall within the exception set forth in section 22(5)(1) of the Limitations Act given that it only applies in respect of business agreements. The Transponder Lease Agreement as signed by Mr. Day was not a business agreement.

This serves as a reminder to carefully word agreements excluding the Limitations Act, 2002.

The 407 ETA’s last argument was that the limitation period commenced when Mr. Day’s license plate went into “denial”, and not, as Mr. Day argued, on the date the 407 ETA issued each invoice. The Highway 407 Act empowers the 407 ETR to ask the Registrar of Motor Vehicles to deny the renewal of a license plate associated with outstanding 407 invoices.

Justice Edwards undertook a discovery analysis. He focussed on the criterion in section 5(1)(a)(iv) of the Limitations Act, 2002, whereby a party must discover that, “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”:

[57] It would be difficult to argue that the 407 ETR would not have the means to discover when an invoice is unpaid. In this age of computers it would undoubtedly be possible for the 407 ETR to have available to it the necessary information to determine that with the non-payment of an invoice 30 days after its issuance, that in fact “injury, loss or damage had occurred”. To require the 407 ETR to issue a claim for every unpaid invoice would not be an effective means, nor would it be an appropriate means to seek its remedy. The invocation of section 5(1)(a)(iv) of the Limitations Act is not a question of discoverability, but rather an application of proportionality, common sense and the effective means emphasized by the Divisional Court in 407 ETR Concession Company Limited (supra).

To my knowledge, this is a novel reading of section 5(1)(a)(iv). If there’s a standard definition of “appropriate”, it’s “legally appropriate” (see Markel Insurance Company of Canada v. ING Insurance Company of Canada at para. 34). This section is mostly invoked to delay the commencement of a limitation period while the underlying damage, though discovered, is trivial and a claim for damages is legally inappropriate. Here the issue isn’t the triviality of the 407 ETR’s damage, but the burden of imposing a limitation period that would oblige it to commence thousands of claims.

If this proportionality approach to section 5(1)(a)(iv) finds traction, I look forward to seeing how the courts determine the balance. If the prospect of thousands of actions means a claim is not legally appropriate, what of the prospect of just a thousand actions, or five hundred, or fifty? How much burden must there be to prevent a claimant from discovering its claim?

Another implication of Justice Edwards’s analysis is to give the 407 ETR control of the commencement of the limitation period. It’s the 407 ETR that initiates a plate denial. In theory, the 407 ETR could wait years before causing the limitation period to run, subject only to the 15 year ultimate limitation period, and enjoy the benefit of accruing interest. This gives defendants no security that they “will not be held to account for ancient obligations”, a fundamental purpose of limitations legislation (see M.(K.) v. M.(H.)).

BC: When it comes to death, there is no temporal elasticity (at least for limitation periods)

Generally, the discovery rule won’t extend a limitation period tolled by a fixed event like death; for these limitation periods there is, in the words of the Ontario Court of Appeal, “no temporal elasticity” (See Waschkowski v. Hopkinson Estate at paras. 8 and 9). In Buhr v. Manulife Financial, the BC Court of Appeal affirmed this principle by finding that the discovery rule can’t extend the limitation period applicable to claims against an insurer for death benefits.

Burh claimed against her deceased husband’s insurer for death benefits. On appeal, the insurer argued that the expiry of the limitation period in section 65 of the former Insurance Act barred the claim.

Section 65 provided that “proceedings against an insurer for the recovery of insurance money must not be commenced […] more than 6 years after the happening of the event on which the insurance money becomes payable”.

The Court accepted the insurer’s argument:

[T]he limitation period in this case began to run from the date of Mr. Mattern’s death, regardless of when Ms. Buhr became aware of potential claims. The event on which the insurance money becomes payable, contemplated in s. 65 of the former Insurance Act, is death in cases involving death benefits. The statute designates a fixed event, unrelated to the plaintiff’s knowledge of a cause of action, to start the limitation period, requiring commencement of an action within six years. The discoverability rule does not operate to extend the prescribed period.

In 2012, section 76 of the current Insurance Act replaced section 65. It provides as follows:

76 (1) Subject to subsections (2) and (5), an action or proceeding against an insurer for the recovery of insurance money payable in the event of a person’s death must be commenced not later than the earlier of

(a) 2 years after the date evidence is furnished under section 73, and

(b) 6 years after the date of the death.

The explicit reference to the date of death in section 76(1)(b) means that the discovery rule cannot extend this limitation period. Although the claimant in Buhr evidently required more than six years to bring her claim, six years is three times as generous as the two year limitation period in Ontario’s Trustee Act, which also begins to run from the date of death. I acknowledge that she is unlikely to find this aspect of Canadian limitations jurisprudence consoling.

Ontario: In an accident benefit claim, a denial triggers the limitation period

Time begins to run for the mediation of a denied accident benefit claim from the date of the denial. A party can’t stop the commencement of the limitation period by sneakily (or inadvertently) omitting certain documents from the accident benefits application.

The appellant in Sagan v. Dominion of Canada General Insurance Company was in a car accident in March 2008. In the same month, he advised his insurer of his claim. The insurance company sent him a package that included the OCF 1 application for accident benefits form and the OCF 3 disability certificate. The appellant filed the OCF 1 form but not the OCF 3 certificate.

The respondent denied the claim in April 2008. In April 2011, the appellant applied for mediation of the denial. The respondent took the position that the two-year limitation period had expired. The appellant commenced an action, which the Court dismissed on a motion for summary judgment.

The appellant argued that the limitation period begins to run not from the date of just any claim, but a valid claim. The appellant’s claim was invalid because it didn’t include a disability certificate. A claim for accident benefits requires a disability certificate pursuant to section 35(2) of the Regulations under the Insurance Act governing claims for accident benefits.

The Court rejected this position:

1. A plain reading of section 35(2) provides that the disability certificate is to be filed with the application for benefits. It is not the application. In addition, section 35(6) provides for claims to be considered in cases where there is no disability certificate filed at all.

2. The statutory regime is designed to ensure timely submission and resolution of accident benefits. It is not in keeping with this overall purpose to suggest that a claimant can delay the start of the limitation period – perhaps indefinitely – by not submitting a disability certificate.

And so sound judicial resoning triumphed over a cute, but improbable argument.