February 2015 – Under the Limit

Ontario: Ten years later, to some the “new” limitations regime is still new

Nearly two months into 2015, there’s only a trickle of new limitations jurisprudence, and so today we offer a practice tip.

As Under The Limit Readers know, 2014 marked ten years since the Limitations Act, 2002 came into force. You’d think that over the course of the last decade, bench and bar would have become accustomed to the new limitations regime, and it would have stopped feeling quite so new.

This is the case, mostly. We still see decisions that revert to the old limitations regime or, as in the recent decision in Bartholomew v. Coco Paving and LeFarge, inform us that “A new Limitations Act was passed in 2002” as if we were out-of-province and off-grid for the last 15 years.

These decisions are a reminder that for some, the Limitations Act remains a novelty. Be wary of taking anyone’s familiarity with the Act and its operation for granted, especially when the discovery provisions are in issue.

Ontario: Condo owners take note, a special assessment may not be a demand obligation

Valentina Vasilescu Tarko et al. v. Metropolitan Toronto Condominium Corporation 626 (MTC 626) et al. holds that a special assessment levied on a condo owner is not a demand obligation within the meaning of section 5(3) of the Limitations Act, 2002. The section provides as follows:

Demand obligations

For the purposes of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made.

Because the assessment provided a date for repayment, it wasn’t a demand obligation:

The appellants suggested that the Special Assessment was subject to s. 5(3) of the Limitations Act concerning demand obligations. A debt obligation that does not specify a date for repayment is a demand obligation. See Skuy v. Greenough Harbour Corp., 2012 ONSC 6998 (CanLII), 10 B.L.R. (5th) 146, at para. 31. The 2011 Special Assessment was made payable in three instalments, the first of which was July 1, 2011. Accordingly, the Special Assessment was an obligation which did specify a date when it was payable and it is not therefore a demand obligation. Section 5(3) of the Limitations Act has no application.

In his decision, Justice Marrocco also emphasised that there is no requirement for a limitations decision to refer to the specific wording of the Limitations Act,2002:

The appellants argued that the Deputy Judge’s oral reasons did not refer to the specific wording of the Limitations Act. The Deputy Judge was not required to refer to the specific wording of the Limitations Act. A review of the oral reasons reveals that the Deputy Judge considered the relevant factors set out in s. 5(1) of the Limitations Act in deciding to stay the appellants’ claim. The Court of Appeal in Ali v. Triple 3 Holdings Inc., 2002 CanLII 45126, at para. 4,¸stated that “an appellate court should not presume that the judge of first instance was not aware of or failed to apply the appropriate legal test merely because the test is not explicitly set out in the judge’s reasons.” A judge’s reasons are adequate if they demonstrate that judge has considered the relevant factors and important issues in the case. In R. v. Sheppard, 2002 SCC 26 (CanLII), [2002] 1 S.C.R. 869, at para. 42, the Supreme Court quoted with approval the words of Major J. in R. v. R.(D.), [1996[ 2 S.C.R. 191: “where the reasons demonstrate that the trial judge has considered the important issues in a case, or where the record clearly reveals the trial judge’s reasons, or where the evidence is such that no reasons are necessary, appellate courts will not interfere.”

This is a point that bears remembering when considering whether to appeal from a limitations judgment, particularly from a judgment of the Small Claims Court.

Ontario: Section 5 can require a plaintiff to bring a Wagg motion

In Lima v. Moya and Mata v. Moya, Master Haberman provides a detailed discussion of a plaintiff’s obligations under the Limitations Act, 2002 to investigate potential parties prior to the expiry of the limitation period. The relevant paragraphs are below.

Two issues bear noting. Firstly, Master Haberman refers to the discoverability doctrine and its application to the section 4 general limitation period. Technically speaking, this is incorrect. Section 5, which is the codification of the common law principle of discoverability, determines the commencement of the general limitation period.

Secondly, Master Haberman held that a plaintiff’s obligation to take reasonable steps to investigate a potential claim can include bringing a Wagg Rule 30.10 motion (see this helpful explanation of Wagg motions). She found it “inconceivable” that personal injury counsel would be unfamiliar with this procedure for gaining access to police records, and that the failure to bring such a motion in this case “amounts to a lack of due diligence, such that discoverability cannot be relied on” (at paras. 95, 117).

[59]      The applicable limitation period here is two years, as per s. 4, of the Act, so it expired in July 2011, subject to the application of the discoverability doctrine.   The Act states that a party is presumed to have known of all necessary matters to start its claim on the day on which the act or omission on which the claim is based occurred, so that the plaintiff bears the onus of establishing that the presumption should be ousted.

[60]      Discoverability is discussed in s. 5(1)(b) of the Act, which states that:

A claim is discovered on the earlier of the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in Clause (a).

[61]      Case law has interpreted first ought to have known to mean would have found out had they used reasonable diligence. Thus, a plaintiff is bound to start his claim within two years of becoming aware of the material facts on which it is based having been discovered, or ought to have been discovered by the plaintiff by the exercise of reasonable diligence. (see Central Trust Co. v. Rafuse 1986 CanLII 29 (SCC), [1986] 2 SCR 147).

[62]      Where the plaintiff relies on their failure or inability to learn all of the facts they deem necessary to start their claim against a particular defendant, the onus is on him to lead cogent evidence to the effect that it would have been inappropriate or abnormal for him to have investigated further during the life of the limitation period (see Mercurio v. Smith [2011] OJ No. 5040).

[63]      In Aguonie v. Galion Solid Waste 1998 CanLII 954 (ON CA), 1998 CANLII 954, the Ontario Court of Appeal discussed the why discoverability was a necessary addition to the law of limitations. One of the scenarios considered was a case where the seriousness of the injuries sustained by a plaintiff was not clear within the two-year limitation period. Thus, though it might appear that a plaintiff was aware of all of the elements to allow the him to know he had a claim and against whom it should be brought within the limitation period, the essential ingredient of whether his injuries were serious enough to pass threshold may not have crystalized during that time frame. In such cases, the court was of the view that the deadline for starting the action should be extended until he could know, and discoverability principles were used as a basis for doing so.

[64]      The Court of Appeal has also looked at cases where identifying tortfeasors was the issue, pointing out that:

The discovery of a tortfeasor involves more than the identity of one who may be liable. It involves the discovery of his or her acts, or omissions, which constitute liability.

[65]      Again, the plaintiff will be held to a standard of having used reasonable diligence to obtain this information.

[66]      It is also understood that, in certain types of actions, identifying possible defendants is not always a straightforward exercise. For example, in medical malpractice cases, hospital charts may be illegible or not all medical staff in an operating room or on duty in the emergency room may be identified. In slip and fall actions, it may take time to determine all possible occupiers, or those contractually bound to maintain the upkeep of the property where the accident occurred.

[67]      It is understood that there will be cases where the plaintiff is not even aware that he is missing critical information leading to the identity of a possible defendant until examinations for discovery so he cannot be found at fault for failing to pursue further information (see Madrid v. Ivanhoe Cambridge Inc. 2010 ONSC 2235 (CanLII).

[68]      As the court pointed out in Western Mercantile Financial Corp. v. Ernst & Young Inc., 1999 ABQB 144 (CanLII), 11, CBR (4th) 149, not every item of evidence to support the plaintiff’s claim need be known before the limitation period commences to run.

[69]      Similarly, in Lawless v. Anderson, 2011 ONCA 102 (CanLII), the court stated:

Determining whether a person has discovered a claim is a fact-based analysis. The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant. If the plaintiff does, then the claim has been “discovered” and the limitation begins to run.

…Certainty of a defendant’s responsibility for the act or omission that caused or contributed to the loss is not a requirement.

[70]      Further, in The Investment Administration Solution Inc. v. Silver Gold Glatt & Grosman LLP 2011 ONCA 658 (CanLII), the Court of Appeal pointed out that discovery of new facts that might help the plaintiff’s case does not restart the limitation period.

[71]      In summary, as long as the identity of a potential tortfeasor is known and there is some information on which a court could make a finding of liability, there is no room for discoverability to delay the starting point of the limitation period.   Having enough information to form an allegation of negligence is quite different from having a winning case against a particular defendant – it is only the former that is required for the limitation clock to start running.

[72]      Further, while new information may emerge down the road that strengthens the case against the proposed defendant, this will not restart the clock. A plaintiff should not wait until he has a good case against a defendant before starting a claim against him – as long as he has a case he can try to make, he must move within the limitation period.

[73]      In terms of what does and does not constitute due diligence in assessing whether grounds to sue a particular individual exist, Master Dash noted in Wakelin v. Gourley et al 2005 CanLII 23123 (ON SC), 76 OR (3d) 272, that if all the plaintiff does during the two years after an accident in order to identify tortfeasors is request a copy of the police report, that will not constitute reasonable diligence.

[74]      The plaintiffs rely on the case law that dictates the approach the court should take when dealing with motions such as there, where the issue of discoverability is on the table and there is a credibility issue. They maintain that the case law suggests that leave should be granted to add the proposed party, while also allowing the defendant to plead the expiry of the applicable limitation period.

[75]      However, it appears clear that such an approach is only advocated when there is an issue of credibility that has to be resolved regarding who knew what and when, such that a trial is a better mechanism for resolving the issue (see Wong v. Sherman [1998] OJ No. 1534).   The “let it go and flesh out the facts at trial” approach is only appropriate when the basis for the discoverability of the claim must be explored in more depth and the evidence about it needs to be tested.

[76]      I should not have to point this out in 2015, the plaintiff’s only salvation in the face of an expired limitation period is the application of the discoverability doctrine. The doctrine of “special circumstances” was clearly laid to rest in Joseph v. Paramount Canada’s Wonderland, 2008 ONCA 469 (CanLII), a decision of the Ontario Court of Appeal released in February 2008.   Cases that talk about lack of prejudice are generally dealing with special circumstances so the presence or absence of prejudice really is not a factor here.   When dealing with discoverability, the issue is whether someone discovered, or ought to have, that they have a claim, along with the essential elements that go with it to enable them to start an action. This is a fact-based analysis [emphasis in original].

Ontario: Justice Perell on the operation of the section 5 discovery provisions

In Zhu v. Matadar, Justice Perell provides a succinct and helpful description of how sections 5(1) and (2) of the Limitations Act, 2002 operate:

[6]               Not surprisingly, in bringing a summary judgment motion, a defendant advancing a limitation period defence will rely on the statutory presumption in s. 5 (2) of the Limitations Act, 2002 that unless the contrary is proven, the claimant is presumed to have known the elements for his or her claim on the day the events of the claim occurred.

[7]               Not surprisingly, on the summary judgment motion, a plaintiff will attempt to rebut the statutory presumption by tendering evidence that he or she both subjectively and objectively did not discover the claim until sometime after the day the events of the claim occurred.

[8]               In order to rebut the presumption, the claimant must meet both a subjective and an objective standard because s. 5 (1) of the Act defines discovery by relation to “the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).”

[9]               Practically speaking, applying s. 5 (2) of the Limitations Act, 2002 to any case and focussing on the commencement of the running of the limitation period means that for the claimant to prove that his or her claim is timely, the claimant must prove that he or she subjectively and objectively did not discover the claim in the period between the events giving rise to the claim and a date that is two years before an action was commenced; otherwise the two year period will begin at the date of the event and end at the second anniversary of the event.

Nothing in this description is novel, and one might assume it’s well familiar to lawyers who have practiced under the Limitations Act, 2002 for the past ten years. Nevertheless, I often encounter misunderstandings about the interaction of section of 5(1) and (2), from both bench and bar.

This is particularly so regarding Justice Perell’s reminder that the practical implication of section 5(2) is to require a plaintiff to meet the “modified objective” test in section 5(1)(b) (see Ridel v. Cassin at para. 4), rather than merely the subjective test in section 5(1)(a). There’s no gain in establishing when the plaintiff subjectively discovered the claim when the defendant will establish that the plaintiff ought to have discovered it earlier.

Ontario: Remember, knowing of a possible claim doesn’t start the limitation period

AIG Insurance Co. v. Canjam Trading Ltd is of interest because it relies on the practically ancient (at least in terms of limitations jurisprudence) decision in Consumers Glass Co. v. Foundation Co. of Canada Ltd (1985) for the principle that “mere knowledge of a possible claim is not sufficient to trigger the commencement of time for limitation purposes.”

This principle has been codified in section 5(1)(a) of the Limitations Act, 2002 since January 2004. Nevertheless, it’s good that the Court is emphasising the point, even if by relying on dusty, albeit still frequently-cited authority. It remains frustratingly difficult for many who practiced under the old Act to accept that the limitation period doesn’t necessarily commence on the date of the loss.

Ontario: Delay may bar summary judgment motions on limitations defences

During a recent talk, I observed that ten years after the Limitations Act, 2002 came into force, the many and various former limitation periods are now just half-remembered curiosities. Maybe so, but Farmers Oil v. Her Majesty the Queen et al. reminds us that they’re not yet entirely irrelevant. At issue in this case was the six-month limitation period applicable to acts done pursuant to statutory or other public duty or authority that existed, until January 1, 2004, in section 7(1) of the Public Authorities Protection Act, R.S.O. 1990, c. P.38 (“PAPA”).

The defendant pleaded this limitation period when it delivered its defence in January 2002. In October 2014, it brought a motion for summary judgment to dismiss the plaintiff’s claim on the basis of this limitations defence.

The defendant’s delay caused Justice Mew to question the propriety of the motion:

[40] Given that the defendant’s position that this motion can be determined based only on the statement of claim, it is extraordinary that it let this action continue for 12 years before bringing its motion. The record does not disclose the merest whisper that a motion on the limitation issue was being contemplated until February 2014. If the defendant genuinely believed that the court does not need to make any findings of fact in order to dispose of the motion, why was the motion not brought sooner, before significant costs and utilisation of the court’s resources had occurred?

Justice Mew noted that post-Hryniak, conventional wisdom is that the Court must grant summary judgment whenever there is no genuine issue requiring trial. However, he suggested that there may be cases where it’s appropriate to dismiss a summary judgment motion on the basis of its timing:

[43]         I considered long and hard whether to deny the defendant’s motion for summary judgment solely on the basis that it has been brought too late in the action for the objectives of a just, expeditious and least expensive resolution of the case to be achieved.

[44]         As I have alluded to earlier, much of the discussion in Hryniak and the cases that have followed it focuses on the need for timely, cost-effective resolution of disputes. Part of that calculation would have entailed consideration of how the court’s resources could be most effectively deployed.

[45]         In the present case, if I were to grant summary judgment, justice would hardly have been timely or cost effective. That ship sailed some time ago. This action has already consumed days of the court’s resources, not to mention the time and money spent on discovery (documentary and oral), the failed mediation and the de bene esse examination of Dr. Palonen.

[46]         Ultimately, I talked myself out of simply dismissing the defendant’s motion based solely on the basis that it has been brought too late in the life of the action. But I would suggest that there may be cases, for example where a case is close to, if not ready for trial, and there are no, or weak, excuses for the moving party not to have brought its motion sooner, where the court goes further than I have chosen to be on this occasion and simply declines to entertain a motion for summary judgment.

This suggestion is certainly reasonable, and I expect that we’ll soon see plaintiffs citing it in response to summary judgment motions brought in the late stages of litigation.

In this case, the plaintiff’s position was that the limitation period did not apply because the dealings in issue were commercial and predominantly private in character, and therefore outside the scope of the PAPA. Justice Mew concluded that the evidentiary record did not allow him to find whether this was so, and he declined summary judgment on the basis that there was a triable issue . If the action proceeds to trial, it will almost certainly be the last judicial consideration of section 7(1) of the PAPA.

Ontario: the limitations jurisprudence of 2014 in review

This post is a paper I wrote for LawPro on the year’s limitations jurisprudence. It may be of interest to Under the Limit readers; if you’d like a PDF version , just ask.

The limitations jurisprudence of 2014 in review

Dan Zacks[1]

January 1, 2014 marked ten years since the Limitations Act, 2002 came into force. Now many aspects of the old limitations regime are forgotten, or will be soon. Consider for instance the classification of actions. Once a key step in the limitations analysis, it is barely remembered, and rarely fondly.[2]

Meanwhile, the courts have developed an extensive body of jurisprudence interpreting and applying the new Act. To be sure, this jurisprudence remains in development. Many of 2014’s leading decisions consider fundamental limitations issues arising from the Limitations Act for the first time. For example, in 2014 we learned from the Court of Appeal how a plaintiff should plead a discoverability argument (by reply), and that there is no legislative gap that would prevent the Limitations Act from applying to claims for unjust enrichment (Collins v. Cortez and McConnell v. Huxtable respectively, both discussed below). The Superior Court also delivered decisions of consequence, in particular by confirming that the Limitations Act applies to will challenges (Leibel v. Leibel, also discussed below).

While it is difficult to identify definite trends in the year’s limitations jurisprudence, several lower court decisions point toward an increasing receptiveness to boundary-pushing discovery analyses. In one case, the “no, I won’t pay my 407 toll” decision, the Court found that proportionality can be a factor when determining whether a plaintiff has discovered that a proceeding is an appropriate means to seek a remedy.[3] In another somewhat eccentric case, the Court found that, pursuant to “cultural dimension theory”, being Slovenian can determine when a plaintiff discovers her claim.[4] It will be interesting to see whether courts follow either of these decisions, and more generally, whether they remain open to creative discovery arguments.

What follows is a summary of the more consequential Ontario limitations decisions from 2014. For mostly up-to-date reporting on this year’s limitations jurisprudence, you are welcome to visit limitations.ca.

McConnell v. Huxtable: In which the Court of Appeal says yes, a claim for unjust enrichment is subject to the Limitations Act[5]

McConnell is a family law decision involving an unmarried couple. The applicant made a constructive trust claim for an ownership interest in the respondent’s house and, in the alternative, for compensation in money. The respondent sought the dismissal of the claim on the basis that it was barred by the expiry of the limitation period.

The motion judge’s 2013 decision[6] was sensational, at least in the rather staid world of limitations. In thorough and persuasive reasons, Justice Perkins held that the discovery provisions of the Limitations Act cannot apply to a remedial constructive trust based on a claim of unjust enrichment. Taken to its logical conclusion, this meant that in a great many circumstances, only the equitable doctrine of laches and acquiescence would limit a claim for unjust enrichment.

A limitation period commences when the injured party discovers the claim within the meaning of section 5 of the Limitations Act. Justice Perkins concluded that a claim for constructive trust is not in all circumstances discoverable as contemplated by this section. If a claim is not discoverable, the limitation period will never commence. If the limitation period never commences, there is no limitation period. This is how he described the problem:

I think that section 5(1)(a) makes it impossible to know when if ever the limitation [period] would start running because the claimant may never (reasonably) know of a “loss, damage or injury” and because there is no act or omission of the respondent that the claimant is required to or is even able to point to in order to “discover” a claim for a constructive trust. Claims to recover land aside, the Limitations Act, 2002 may have been meant to but does not manage to encompass constructive trust claims. I am unable to give effect to the precise and detailed wording of sections 4 and 5 so as to make them apply to constructive trusts in family law cases.[7]

Not surprisingly, Justice Rosenberg, writing for the Court of Appeal, disagreed, and held that there is no legislative gap:

I do not agree with the motion judge that a remedial constructive trust claim does not require any act or omission by the person against whom the claim is brought. Generally speaking, a claim of unjust enrichment requires that the defendant retain a benefit without juristic reason in circumstances where the claimant suffers a corresponding deprivation. In other words, the relevant act of the defendant is simply the act of keeping the enrichment (or the omission to pay it back) once the elements of the unjust enrichment claim have crystallized. In the family law context, this may typically occur on the date of separation, when shared assets, including real property, are divided and the possibility therefore arises of one party holding onto more than a fair share.[8]

Justice Rosenberg acknowledged that in some cases it may be difficult to apply section 5 to a claim for unjust enrichment, but it applies nonetheless. Even if the difficulty means the claim is never discovered, the ultimate limitation period will still limit it. This is sound reasoning, but terribly disappointing to the plaintiffs’ bar, who had begun to think very hard about how to make every old claim one for unjust enrichment.

McConnell also brings clarity to the application of the Real Property Limitations Act. The fact that the respondent sought a monetary award in the alternative to an interest in land did not mean that the claim wasn’t for a share of property, and subject to section 4 of the Real Property Limitations Act with its plaintiff-friendly ten year limitation period.[9]

Longo v. McLaren Art Centre: The Plaintiff must not delay, not even for Rodin[10]

This Court of Appeal decision written by Justice Hourigan quickly became a leading authority on the duty imposed by the Limitations Act on plaintiffs to investigate potential claims. It is already much-cited by defendants when arguing that a plaintiff was dilatory in discovering their claim and, more specifically, when envoking section 5(1)(b) of the Act.

Justice Hourigan’s reasoning is not especially novel; rather, he adopts a line of discoverability jurisprudence developed under the previous Act exemplified by Soper v. Southcott (1998)[11]. In essence, a plaintiff must take reasonable action to investigate the matters described in section 5(1)(a) of the Act. What is reasonable depends on the plaintiff’s circumstances and the nature of the potential claim. However, it is never necessary for the plaintiff to investigate to the point where she knows with certainty that a potential defendant is responsible for the impugned acts or omissions. It is enough that she has prima facie grounds to infer that the potential defendant caused the acts or omissions. Establishing these grounds may require an expert report.[12]

Longo has almost glamorous facts. At issue was the appellants’ discovery of damage to their sculpture Walking Man, possibly the work of Rodin. The sculpture was harmed while in the respondents’ care and the appellants claimed for damages. The court dismissed the claim on motion for summary judgment on the basis that it was commenced out of time.

Justice Hourigan set aside the decision of the motion judge and held that there was a genuine issue requiring a trial. Determining whether a reasonable person with the abilities and in the circumstances of the appellants ought to have discovered the claim required a full trial record. Justice Hourigan nevertheless shared his view on what was appropriate in the circumstances. On learning of concerns about the condition of Walking Man, a reasonable person would arrange for an inspection of the sculpture.

Collins v. Cortez: Respond with a reply[13]

This decision is a primer on how pleadings should address a limitations defence, which is often a point of confusion for counsel.

Cortez moved to dismiss Collins’s personal injury claim on the basis that it was commenced two years after her accident and statute-barred by the expiry of the limitations period. Justice Gordon granted the motion. He gave effect to the presumption in section 5(2) of the Limitation Act that the limitation period commenced on the date of the accident. He held that because Collins did not plead discoverability facts in her Statement of Claim, she could not make out a section 5(1) discoverability argument.

Not so, held the Court of Appeal. In the normal course, if a limitations defence is raised in a Statement of Defence, and the plaintiff relies on the discoverability principle, the plaintiff should plead the material facts relevant to discoverability in reply, not the Statement of Claim. The expiry of a limitation period is a defence to an action that must be pleaded in a Statement of Defence. As such, a plaintiff needn’t anticipate discoverability and address it in her Statement of Claim.

Leibel v. Leibel: Two year to challenge a will[14]

Since the Limitations Act came into force, the estates bar has speculated as to whether a limitation period applies to will challenges. Many thought that it would not, based in part on an influential article by Anne Werker on limitation periods in estate actions:

It has been suggested that the 15-year absolute limitation period applies to will challenges. I do not agree. Section 16(1)(a) of the new Act expressly states that there is no limitation period in respect of “a proceeding for a declaration if no consequential relief is sought”. [15]

The courts have tended increasingly toward asserting the application of the Limitations Act, and it came to seem likely a court would apply the Act to a will challenge. This is what Justice Greer did in Leibel.

The case involved two wills. The testatrix’s son Blake applied for a declaration that the wills were invalid, and another son and other respondents moved for an order dismissing the application on the basis that it was statute-barred by the expiry of the limitation period.

Justice Greer held that the limitation period began running in June 2011, the date of the testatrix’s death, because a will speaks from death. However, Blake discovered his claim within the meaning of the Limitation Act about a month later in July 2011 (for reasons that don’t bear mentioning here, but are at paragraph 39 of the decision). This meant that he commenced his application out of time.

In particular, Justice Greer rejected Blake’s argument that no limitation period applied to his will challenge pursuant to section 16(1)(a). She held that the legislature did not intend for section 16(1)(a) to exclude will challenges from the two-year limitation period:

To say that every next-of-kin has an innate right to bring on a will challenge at any time as long as there are assets still undistributed or those that can be traced, would put all Estate Trustees in peril of being sued at any time. There is a reason why the Legislature replaced the six-year limitation in favour of a two-year limitation.[16]

Kassburg v. Sun Life Assurance Company of Canada: In business agreements, the party isn’t literal[17]

Kassburg demonstrates the Court’s commitment to protecting individuals from contracts that impose shortened limitation periods. It deals with section 22(5) of the Limitations Act, which permits contracting out of the statutory limitation period through “business agreements” unless one of the parties to the contract is an individual. Rather than limiting the word “parties” in this section to its literal meaning, the Court of Appeal instructs us to adopt a meaning consistent with the objective of protecting individuals from unexpectedly or unfairly abridged limitation periods.

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).

The motion judge held that the insurance policy fit within the 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.

Justice van Rensburg rejected this reasoning. The word “parties” in section 22(5) must be given a broad, purposive reading. The literal reading of “parties” is inconsistent with the objective of section 22, which is to restrict the circumstances in which a contract can alter the statutory limitation periods in the Limitations Act. Although the group insurance contract under which Kassburg made her claim was between the Police Association and Sun Life, Justice van Rensburg deemed Kassburg to be a party for the purpose of asserting her claim, and for Sun Life’s limitations defence.[18]

Green v. Canadian Imperial Bank of Commerce: Plaintiffs must fully control whether they commence an action in time[19]

In Green, the Court of Appeal overturned its decision in Sharma v. Timminco (2012)[20], thus restoring peace and order to the limitation scheme under the Securities Act. [21]

Timminco created a distinctively perverse phenomenon in limitations jurisprudence: a limitation period that did not allow plaintiffs to control whether they commenced an action in time. As Justice Feldman noted in her decision for the Court of Appeal, this was unprecedented and entirely foreign to the concept of limitations.

At issue in both cases was the statutory cause of action in section 138.3 of the Securities Act. This section creates a cause of action for misrepresentations regarding shares trading in the secondary market. A plaintiff, most often a representative plaintiff in a class proceeding, can only commence a section 138.3 claim with leave. Pursuant to section 138, a plaintiff has three years from the date of the misrepresentation to obtain leave and commence the action. [22]

The Timminco Court held that a claim for damages under section 138.3 is statute-barred if the plaintiff does not obtain leave to commence it within the three-year limitation period, and that section 28 of the Class Proceedings Act[23], which suspends limitation periods in favour of class members once a claim is asserted in a class proceeding, will not operate in respect of a 138.3 claim until leave is obtained.

The Timminco Court reasoned that a section 138.3 claim is “asserted” within the meaning of section 28 of the Class Proceedings Act only when leave is granted because leave is a component of the cause of action. Given the dictionary definitions before the Court of “assert”, this conclusion was sound, at least in theory.

In practice, it was problematic. Its effect was to require representative plaintiffs to move for and obtain leave to commence a section 138.3 claim within three years, but the plaintiffs could not control the timeliness. Obtaining leave within three years was challenging, if not impossible.

This limitation period is not subject to the discoverability provisions of the Limitations Act because it commences on the date of the misrepresentation. The longer it takes to discover the misrepresentation, the shorter the time for obtaining leave and commencing the action. Even if a plaintiff brought the motion in good time, the defendant could initiate procedural steps resulting in delay, and court availability could affect the timing of the hearing and the rendering of the decision.

And so the Court reversed itself. Justice Feldman set aside the Timminco Court’s interpretation of the Class Proceedings Act, holding instead that when a representative plaintiff brings a section 138.3 claim within the limitation period, pleads section 138.3 together with the facts that found the claim, and pleads an intent to seek leave to commence, the claim has been “asserted” for the purposes of the Class Proceedings Act, and the limitation period is thereby suspended for all class members.

This decision is obviously of great significance to the securities bar, but beyond that, it preserves the fundamental principle of limitations that a plaintiff must have unilateral control over whether it misses a limitation period.

And for the insurance bar…

Lastly, several insurance decisions bear noting.

From Sagan v. Dominion of Canada General Insurance Company, we learned that time begins to run for a claim for denied accident benefits on 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.[24]

In Sietzema v. Economical Mutual Insurance Company,[25] the Court of Appeal held that the limitation period begins to run for a claim for statutory accident benefits when the insurer denies the application for those benefits.

In Schmitz v. Lombard General Insurance Company of Canada[26], the court determined when the limitation period commences for a claim for indemnity under OPCF 44R, an optional endorsement for underinsured motorist coverage to the standard form automobile insurance policy. The limitation period does not start to run when the demand for indemnity is made because default must first occur. The limitation period begins to run the day after the demand for indemnity is made.

[1] Dan is a contributor to the upcoming fourth edition of The Law of Limitations and a lawyer at Clyde & Co. His practice focuses on commercial litigation and lawyers’ professional negligence. He also publishes Under the Limit, a blog about developments in the always riveting world of limitations jurisprudence.

[2] This is subject to the occasional exception. See for example Economical Mutual Insurance Company v. Zurich Insurance Company, 2014 ONSC 4763, in which the Court undertakes a classification of actions analysis, presumably out of nostalgia.

[3] See 407 ETR Concession Company v. Ira J. Day, 2014 ONSC 6409.

[4] See Miletic v. Jaksic, 2014 ONSC 5043 and the related post on Under the Limit, <http://limitations.ca/?p=19>.

[5] 2014 ONCA 86.

[6] 2013 ONSC 948.

[7] 2013 ONSC 948 at para. 143.

[8] 2014 ONCA 86 at para. 51.

[9] Conversely, the mere fact that a claim affects real property will not exclude the application of the Limitations Act. See Zabanah v. Capital Direct Lending, 2014 ONCA 872.

[10] 2014 ONCA 526 (“Longo”).

[11] 1998 CanLII 5359 (Ont. C.A.).

[12] See Longo, supra note 1, at paras. 41-44.

[13] 2014 ONCA 685.

[14] 2014 ONSC 4516.

[15] Anne Werker, “Limitation Periods in Ontario and Claims by Beneficiaries”, (2008) 34:1 Advocates’ Q at 24-28.

[16] 2014 ONSC 4516 at para. 52.

[17] 2014 ONCA 922.

[18] 2014 ONCA 922 at paras. 58-61.

[19] 2014 ONCA 90.

[20] 2012 ONCA 107.

[21] R.S.O. 1990, C. S.5.

[22] See also section 19 of the Limitations Act, 2002.

[23] S.O. 1992, C. 6.

[24]2014 ONCA 720.

[25] 2014 ONCA 111.

[26] 2014 ONCA 88.