Month: January 2015

Ontario: just because a claim affects property doesn’t mean the limitation period is ten years

Update: The Supreme Court refused leave to appeal from the Court of Appeal’s judgment.

The Court of Appeal’s decision in Zabanah v. Capital Direct Lending brings certainty to the application of the Real Property Limitations Act (and its plaintiff-friendly limitation periods).  There mere fact that a claim affects real property will not exclude the application of the Limitations Act, 2002.

The appellant purchased a second mortgage on a home from the respondent, Capital Direct.  The mortgagor had fraudulently informed Capital Direct that the balance of the first mortgage on her home was $83,000 when it exceeded $200,000.  The mortgagor made an assignment in bankruptcy.  The first mortgagee advised the appellant that the sale of the home under power of sale had yielded insufficient proceeds to pay off the first mortgage. There was nothing left for the appellant.

The appellant claimed against Capital direct for negligence, breach of contract, and breach of fiduciary duty.  Capital Direct succeeded on a motion for summary judgment on the basis that the action was started after the expiry of two-year limitation period in the Limitations Act, 2002.  On appeal, the appellant argued that it was the ten-year limitation period in section 43 of the Real Property Limitations Act that applied. Section 43 provides as follows:

Mortgage covenant

(1) No action upon a covenant contained in an indenture of mortgage or any other instrument made on or after July 1, 1894 to repay the whole or part of any money secured by a mortgage shall be commenced after the later of,

(a) the expiry of 10 years after the day on which the cause of action arose; and

(b) the expiry of 10 years after the day on which the interest of the person liable on the covenant in the mortgaged lands was conveyed or transferred.

The appellant’s position was that her claim affected real property because her loss was the reduced value of her security interest in the property.  She relied on the Court of Appeal decision in The Equitable Trust Co. v. Marsig (2012) for the proposition that the Limitations Act, 2002 does not apply to a claim affecting real property.

Justice Blair disagreed. The appellant’s claim sounded in negligence and contract.  The negligence related to what Capital Direct allegedly did and said.  The contract related to the transaction where the appellant acquired the second mortgage.  Neither claim was within the category of claims described by section 43.  Marsig involved a guarantee covenant contained in a mortgage and was distinguishable on that basis.  The court’s obiter in Marsig about the application of the Limitations Act, 2002 to claims affecting real property was limited to the distinction between guarantees associated with land transactions, which are subject to the Real Property Limitations Act, and guarantees associated with contract claims, which are not.

Accordingly, section 43 does not apply to every action in which a mortgage or real estate is involved:

[18]      We agree with the motion judge’s qualification regarding s. 43 of the RPLA, that “[t]o the extent that language could be read as encompassing every action in which a mortgage or piece of real estate is in any way involved, I do not believe that it accurately describes the present state of the law.” The motion judge’s statement at the end of para. 46 is unassailable, and makes all the difference: “Nothing that this court decides will affect any party’s relationship to the second mortgage or the property.” The appellant’s action, as against Capital Direct, is simply a negligence and contract claim, and is not a claim to an interest in land, as in Marsig.

 

 

 

 

 

Ontario: Read business agreements varying the limiation period “broadly and purposively”

Section 22(5) of the Limitations Act, 2002 permits contracting out of the statutory limitation period unless one of the parties to the contract is an individual.  The word “parties” in this section does not have only its literal meaning. The Court of Appeal in Kassburg v. Sun Life Assurance Company of Canada instructs us to read it broadly and purposively so that its meaning is consistent with the objective of the section.

The respondent in Kassburg was an insured under a group policy issued by the appellant Sun Life to the North Bay Police Association.  The respondent submitted a claim for long-term disability benefits that Sun Life denied.

She commenced an action claiming entitlement to the benefits.  Sun Life moved for summary judgment on the basis that her claim was out of time.  Among other things, Sun Life relied on a one-year limitation period contained in the insurance contract.  It argued that this was a limitation period subject to section 22(5) of the Limitations Act, 2002.  Section 22(5) and 22(6) provide as follows:

The following exceptions apply only in respect of business agreements:

Section 22(5)

  1. A limitation period under this Act, other than one established by section 15, may be varied or excluded by an agreement made on or after October 19, 2006.
  2. A limitation period established by section 15 may be varied by an agreement made on or after October 19, 2006, except that it may be suspended or extended only in accordance with subsection (4).

Section 22(6)

“business agreement” means an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002 (“accord commercial”) [Section 1 of the Consumer Protection Act, 2002 defines “consumer” as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes; (“consommateur”)];

“vary” includes extend, shorten and suspend. (“modifier”)

The motion judge held that the insurance policy fit within this business agreement exception. Because the parties to the insurance contract were the Police Association and the appellant, the contract was not entered into by an individual acting for personal, family, or household purposes.

Justice van Rensburg rejected this reasoning.  The word “parties” in section 22(5) must be given a broad, purposive reading consistent with the objective of the provision:

[58]      The clear wording of s. 22(5) permits contracting out of the statutory limitation period, unless the parties to the contract include an individual, and the contract was for “personal, family or household purposes”. There are therefore two requirements for a business agreement to exist: the parties must not include individuals, and the contract must not have been for personal, family or household purposes.

[59]      The literal reading of the “parties” aspect of the section that appears to have been accepted by the motion judge, in my view, is inconsistent with the objective of s. 22 of the Limitations Act, 2002, which is to restrict the circumstances in which the statutory limitation periods under the Act can be altered by contract. In my view, the word “parties” in s. 22(6) should be given a broader, purposive reading to accord with the objective of s. 22.

[60]      In this action, the respondent is asserting a personal claim for LTD benefits provided under a group policy. She is entitled to assert the claim directly against the insurer under s. 318 of the Insurance Act, R.S.O. 1990, c. I.8. Although the group insurance contract under which she is making her claim was entered into between the NBPA and the appellant, the appellant relies on a limitation period contained in that contract to exclude her claim. The respondent is in effect deemed to be a party for the purpose of asserting her claim, and for the purpose of the appellant’s limitations defence.

[61]      With respect to the “purposes” requirement, the contract is for personal purposes, and accordingly is not a “business agreement” under s. 22(5).