Month: June 2015

Alberta: Are there special circumstances?

In RVB Managements Ltd. V. Rocky Mountain House (Town), the Court of Appeal set out the special circumstances exception to statute-barred causes of action:

[21]           Under the analytical approach, the court presumes that amendments adding a new cause of action after the expiry of the limitation period will not be allowed, even in the absence of prejudice, unless the party seeking amendment can show special circumstances (see Graeme Mew, The Law of Limitations, 2nd ed. (Markham: Lexis Nexis, 2004) at 69). Courts have interpreted special circumstances to mean circumstances where all the facts required to support the claim had already been pled, there is no need to reopen discoveries, and most importantly, there is no possibility that the defendant would be prejudiced (Mew at 76).

[22]           In the case at bar “special circumstances” are not made out. When a trial has unfolded on the basis of evidence preferred in respect of issues set out in the pleadings, a new issue that sees the light of day for the first time in written argument post-trial, will almost inevitably operate prejudicially.  (See the general rule in Cels v. Railway Passenger Assurance Co. (1909), 11 WLR 706, at page 711-712, cited in Litemor Distributors (Edmonton) Ltd. v. Midwest Furnishings & Supplies Ltd., 2005 ABQB 520 (CanLII) at paras 19-21). It follows that if, as the appellants maintain, a functional rather than an analytical approach is warranted in this case, the trial judge did not err by dismissing the appellants’ application to amend their pleadings.

Curiously, the special circumstances exception no longer exists in Ontario, though its reformed limitation regime is similar to Alberta’s.

Ontario: discovery applies to the limitation period for crossclaims

Justice Leach’s decision in Demide v. Attorney General of Canada et al. holds that the limitation period applicable to claims for contribution and indemnity is subject to discoverability.  This departs from the jurisprudence, which generally considers this to be a fixed two-year limitation period beginning on the date of service of the plaintiff’s claim.

Section 18(1) of the Limitations Act provides when this limitation period begins:

(1) For the purposes of subsection 5 (2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place.

Prior to this decision, I would have said that it was settled that this provision provides a two year limitation period for bringing crossclaims, running from deemed discovery on the date of the claim’s service, and not subject to extension by application of the section 5 discovery provisions.   As Justice Leach notes, this is the position of many of his colleagues on the Superior Court, including Justice Perell who articulated it eloquently in Miaskowski v. Persaud:

[81]           Pursuant to s. 18 of the Limitations Act, a claim for contribution and indemnity is deemed to be discovered on the date upon which the “first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought,” and with this deeming provision, the limitation period expires two years after the date on which the claim is served.

Justice Perell’s analysis in Miaskowski turned on the language of section 18.  The word “deemed” is a declarative legal concept that is a “firmer or more certain assertion of discovery” than the rebuttable presumption of discovery contained within section 5(2).  Further, section 18 does not contain the moderating language “unless the contrary is proved” present in section 5(2), i.e. a person discovers a claim on the date of the act or omission unless she proves the contrary.

Justice Leach disagreed.  His reasoning also starts with the language of section 18.  In his view, approaching section 18 as a self-contained deeming provision ignores its opening words.  Those words provide expressly that the provision was enacted for “the purposes of subsection 5(2) and 15”, that is, to inform and dictate the meaning of those subsections.  When applying section 5(2) to claims for contribution and indemnity, section 18(1) dictates that the presumed commencement date for the two year limitation is the date of service of the claim for which contribution and indemnity is sought.  The defendant can rebut this presumption by proving the contary.

The reference to section 15, the ultimate limitation period, reinforces this conclusion.  If section 18 is an absolute two-year limitation period beginning on a fixed date, section 15 could have no application.  Only if the section 5 discovery provisions can delay the beginning of the limitation period is there need for an ultimate limitation period.

This is a very compelling analysis, and I’m persuaded that it’s correct even if it’s currently an outlier–the Court continues to deliver decisions like this one (see paragraph 58) based on section 18 being a fixed limitation period.  It will be interesting to see how the Court of Appeal determines the issue should it come before it.  I don’t expect that it will; it’s surely the rare case where a defendant through reasonable diligence can’t discover a crossclaim within two years of service of the plaintiff’s claim.

Should you be interested, these are the relevant paragraphs from Justice Leach’s decision:

 

[87]           […]  With great respect, I disagree with that view, as it seems to approach section 18 as if it were a self-contained deeming provision, and ignores the opening words of s.18(1).  In my opinion, those words make it clear that section 18 was not intended to operate as a “stand alone” limitation period, with independent application, or a provision to be viewed and read separately and in contrast to s.5(2).  Rather, section 18 expressly was enacted “For the purposes of subsection 5(2) and 15”, [emphasis added]; i.e., to inform and dictate the meaning to be given to certain concepts referred to in ss.5(2) and 15, when applying those sections.  In particular, when applying s.5(2) to claims for contribution and indemnity, s.18(1) dictates that the “day [of] the act or omission” referred to in s.5(2) shall be the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought.  Subsection 18(1) thereby dictates the relevant presumed starting point for the basic two year limitation period, in relation to the operation of s.5(2); a presumption that is still capable of being rebutted by proof to the contrary, pursuant to the provisions of s.5(2).  In particular, I see nothing in the language of s.18(1) that displaces or alters the natural meaning to be given to the other language of s.5(2).  Section 18 itself does not have or require language of presumption or proof to the contrary, in relation to operation of the basic limitation period, but this is because its inclusion in section 18 would have been unnecessary and redundant, given that such wording already is found in s.5(2), with which it is expressly and inextricably linked.  In my opinion, reading s.18(1) in conjunction with s.5(2), as the legislation intended, and substituting into s.5(2) only those concepts whose substitution is dictated by s.18(1), one finds that s.5(2) effectively reads as follows in relation to claims for contribution and indemnity:  “An alleged wrongdoer with a claim against another alleged wrongdoer for contribution and indemnity shall be presumed to have known of the matters referred to in clause 5(1)(a) on the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought,unless the contrary is proved.”  [Emphasis added.]   The presumption applicable to such claims is therefore rebuttable, not conclusive.

 

Moreover, that conclusion is reinforced by the fact that the opening words of s.18(1) refer not only to s.5(2) but also to section 15; i.e., the “ultimate limitation period” of 15 years.  As with s.5(2), s.18(1) informs and dictates the meaning to be given to certain concepts referred to in section 15.  In particular, s.18(1) informs the meaning to be given to “the day on which the act or omission on which the claims is based took place”, for the purposes of s.15(2).  In my opinion, reading s.15(2) in conjunction with s.18(1), as the legislation intended, and substituting into s.15(2) only those concepts whose substitution is dictated by s.18(1), one finds that s.15(2) effectively reads as follows, in relation to claims for contribution and indemnity:  “No proceeding shall be commenced in respect of any claim for contribution and indemnity after the 15th anniversary of the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought”.   I fail to understand how s.18(1) can be interpreted as creating a conclusive and “absolute” two year limitation period for contribution and indemnity claims, running from the date on which the first alleged wrongdoer was served with the underlying claim in respect of which contribution and indemnity is sought, when the legislature clearly contemplated the possibility that the operation of section 15 might be required to put an end to such possible claims fifteen years after service of the claim in respect of which contribution and indemnity is sought.  In my opinion, the obvious conclusion is that the legislature thought section 15 might be needed in relation to claims for contribution and indemnity for the same reason section 15 might be needed in relation to other claims; i.e., because operation of the applicable limitation period might be extended beyond the contemplated two year basic limitation period by considerations of discoverability.

 

[88]         Second, I cannot and do not disagree with Justice Perell’s view that an absolute two year limitation period for contribution and indemnity, (with no allowance whatsoever for possible lack of discoverability, even when capable of proof), would provide certainty and efficiency, which was definitely one of the policies underlying the reforms introduced in the Limitations Act, 2002, supra.   However, one could say that in relation to making any limitation period absolute.  As Justice Sharpe emphasized in Canaccord Capital Corp. v. Roscoe, supra, at paragraph 17, the overall goal of the legislation was the creation of a clear and comprehensive scheme for addressing limitation issues that would balance a defendant’s need for certainty with the plaintiff’s right to sue.  A review of the legislation suggests that, with indicated exceptions, the Legislature generally tried to strike that balance by imposition of a presumptive two year limitation period, capable of extension by demonstrable lack of discovery, (proof of which was the obligation of the claimant).  Although the legislature clearly felt that claims for contribution and indemnity warranted a measure of exceptional treatment, to encourage resolution of all claims arising from the wrong at the same time, it seems to me that the approach chosen by the legislature in that regard was the introduction of a modified presumption; i.e., one that moved the presumed starting date of the basic two year limitation period forward considerably, (from the much later starting dates permitted under the previous legislation), to the date on which the party seeking contribution and indemnity was served with the claim in respect of which contribution and indemnity is sought.  Such a party, who fails to approach the possibility of contribution and indemnity claims with due diligence during the ensuing presumptive two year limitation period, from that much earlier date, does so at that party’s considerable peril.  However, I see nothing in the legislation that suggests the legislature intended to go an extra step; i.e., by absolutely precluding any possibility whatsoever of an extension of time for a party capable of proving that a contemplated claim for contribution and indemnity was indeed incapable of being discovered, even with reasonable due diligence, within two years of the party being served with a statement of claim.  As emphasized by our Court of Appeal in Pepper v. Zellers Inc., 2006 CanLII 42355 (ON CA), [2006] O.J. No. 5042 (C.A.), the discoverability principle ensures that a person “is not unjustly precluded from litigation before he or she has the information to commence an action provided that the person can demonstrate he or she exercised reasonable or due diligence to discover the information”.  In my view, the court should be reluctant to adopt a legislative interpretation that effectively permits the possibility of such an injustice, unless that is the outcome clearly dictated by the legislation.   As demonstrated by the ultimate limitation period provisions of section 15, the legislature has the ability to make such an intention quite clear, when it has that intention.

 

[89]         Third, I similarly do not disagree with Justice Perell’s view that it would be a rare case that a defendant, exercising due diligence within two years of being served with a claim, would not know the parties against whom to claim contribution and indemnity.  However, rarity is not impossibility, and in my view, the rarity of such a possibility underscores the somewhat modest concession to fairness, (from a claimant’s point of view), of the Legislature making the limitation period for contribution and indemnity claims subject to discoverability.

Update: Miaskowski was appealed, but on unrelated issues.

Ontario: limiting fraudulent conveyance actions

 

In Conde v. Ripley et al., Justice Dunphy held that the limitation period applicable to a claim under section 2 of the Fraudulent Conveyances Act depends on whether the claim is to recover land, in which case the ten year limitation period in the Real Property Limitations Act applies, or for personal property, in which case the general two year limitation in the Limitations Act, 2002 applies.

Section 2 of the FLA entitles a person to commence an action against a transferee of real or personal property to declare the transfer to be void as against “creditors or others” where there was fraudulent intent.

The defendants in Conde argued that such an action is subject to the Limitations Act alone.  In a well-reasoned and correct decision, Justice Dunphy rejected this position.

Section 2(1)(a) of the Limitations Act provides that the Act doesn’t apply to proceedings subject to the RPLA.  Section 4 of the RPLA applies to “an action to recover any land”.  If the two year limitation period in the Limitations Act applied to an FCA action seeking to invalidate a  transfer of an interest in land while the claim to the land itself is subject to the ten year RPLA limitation period, it would be “inconsistent in the extreme”; the action to set aside the  transfer would be barred before the action to claim the interest.  This result, Justice Dunphy noted, “appears contrary to common sense”. (I wonder whether it is the two year limitation period that would apply to the FCA claim under the Limitations Act; section 16(1)(a) provides that no limitation period applies to claims that seek only a declaration–ie, that a transfer of land is void).

The problem with the defendants’ position was their confusion between standing to bring a claim under the FCA and  the nature of the FCA claim itself:

[40]           In arguing for a two year limitation period, the moving parties have confused standing to bring a claim under the FCA with the nature of the FCAclaim itself.  Standing – which is granted by s. 2 of the FCA to “creditors or others” – is to be distinguished from the nature of the action itself.  As I have explained at some length, standing to bring FCA claims is granted to “creditors or others” whereas a claim, once brought by a creditor with standing, has many of the characteristics of a class proceeding.  For limitations purposes, in my view, it is necessary to consider the nature of the FCA claim and not the standing of the individual claimant.

[41]           An FCA claim, if successful, does no more or less than invalidate the impugned transfer as against “creditors or others” of whom the plaintiff is obviously an exemplar.  Where the conveyance attacked is of real property, such an action is thus quite literally an “action to recover land” since the outcome of the action, if successful, is to “recover” the land to the estate of the transferor (in this case Mr. Ripley) so that – once so recovered – it can respond to the claims of creditors or others as if it had never been transferred.  The outcome of the plaintiff’s claim against the transferor may well be a money judgment – the outcome of the claim against the transferee under the FCA is an order “to recover land” which is then available to satisfy that claim.

[42]           Importantly, even if the underlying claim of the “creditor or others” is a money claim, the outcome of an FCA action is not a money judgment ordering the transferee to pay that claim.  The transferee may well pay the judgment to free the property of the claim – if they so choose.  That, however, is a consequence of choice and not of the order made.

Justice Dunphy found nothing regrettable about the two separate limitation periods applying to FCA actions:

[44]           This might seem somewhat inelegant or even regrettable.  In my view, it is neither.  It is simply the by-product of the FCA being a descendent of a very old statute going back literally hundreds of years upon which has been overlaid a more comprehensive and newly-elaborated system of limitation periods than formerly applied.  FCA actions were once considered to be actions for which no limitation period specifically applied.  The Legislature has seen fit to change that, and in so doing, to differentiate between actions involving recovery of land and other types of actions.  The result, when applied to this old statute, is what I have described.

It’s also worth noting Justice Dunphy’s rather pithy reminder that for the purposes of the limitation period, the law will impute a solicitor’s knowledge on her client:

[67]           The limitation period commences when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence:  Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., 2013 ONSC 80 (CanLII) at para. 56.  The plaintiff here had the facts but chose to disbelieve them due to a search conducted without due care and accepted without sufficient examination.  As between the two, it may well be that the solicitor should have found what her client failed to, but I must attribute the knowledge of one to the other.

[68]           To hold otherwise would be, in my view, to provide a solicitor’s negligence exception to the Limitations Act, 2002.  While such a development would, I have no doubt, warm the hearts of lawyer insurance providers everywhere, I can find no support for it in the statute.  Section 5(1)(b) requires the application of an objective test to a consideration of the subjective capacities of the plaintiff.

Saskatchewan: statutory time limits aren’t necessarily limitation periods

A statutory limit on when something must be done is not necessarily a limitation period or subject to the common law discoverability principle.

LeCaine v. Registrar of Indian and Northern Affairs concerned an entitlement to be a member of the Wood Mountain Lakota Nation.  The appellants filed a protest with the Registrar of Indian Affairs against the inclusion of certain individuals on the Band List of the Nation and as Indians under the Indian Act.  The Registrar refused to consider the protests on the basis that they were filed out of time.

Section 14.2 of the Indian Act permits the filing of a protest within three years after the addition of the name of a person to a Band List:

Protests
14.2(1)  A protest may be made in respect of the inclusion or addition of the name of a person in, or the omission or deletion of the name of a person from, the Indian Register, or a Band List maintained in the Department, within three years after the inclusion or addition, or omission or deletion, as the case may be, by notice in writing to the Registrar, containing a brief statement of the grounds therefor.

The appellants took the position that section 14.2 is a limitation period to which the discoverability principle should apply.

The Court of Appeal found that the this position assumed that only if section 14 is a limitation period must the appellants comply with it, and then they would have the benefit of the discoverability principle.  Justice Jackson rejected this reasoning:

[28]   […] Not every time period in legislation creates a limitation of action to which limitations legislation applies. Further, if a statute provides that an action may be done within a certain time, it does not necessarily mean that the action may be done at a later time. The true issue is whether s. 14.2 of the Indian Act permits a protest to be “made” after the expiry of the three-year period.

The Court answered the “true” issue by holding that the section “permits or empowers a person to protest but only insofar as he or she acts within three years of the event complained.  If the protest is not filed within three years, there is no right to make a protest.”

Accordingly, it was not a limitation period:

[49]   Whenever Parliament or a legislature prescribes a time period within which something must be done, the time period is not automatically a “limitation period.” In order for the time period to be considered a “limitation period,” the legislation in question must impose a limit on the bringing of a claim with respect to a cause of action or other claim for injury, loss or damage or tie the bringing of a claim to an event that is dependent on the claimant’s knowledge.

Discoverability does not apply to the section in any event because the time to commence the protest begins to run on a fixed date.  It’s long settled that  discoverability will not extend a limitation period when it runs from an event that occurs without regard to the injured party’s knowledge.

[50]        Subsection 14.2(1) prescribes a time period for the doing of something, i.e., for the filing of a protest, but the commencement of the time period is not dependent on when the protestor learns about the act leading to the protest. Time begins to run from the moment the Registrar makes an addition to, or deletion from, the Indian Register. This is a time period linked to a fixed event that is unrelated to and not dependent upon the protestor’s knowledge. Further, a protestor’s claim is not the same as a claim for injury, loss or damage. It cannot be said that a protestor under s. 14.2(1) is an injured party in the sense of having suffered compensable tortious harm.

[51]   If Parliament had intended s. 14.2(1) to be subject to the discoverability principle, the Indian Act would have been drafted to indicate that the time limit would begin to run when the potential protestor became aware of the addition, omission or deletion from the Register.

Ontario: when it comes to a car accident, you can rely on the cops

In regards of discovering a claim for the purpose of the limitation period, a plaintiff can rely on the contents of a motor vehicle accident report prepared by the police at the scene of the accident.

In Lingard v. Milne-McIsaac, the plaintiff acted reasonably by relying on a statement in such a report that the defendant was insured.  It was reasonable for the plaintiff to assume that the police officer who completed the report asked the defendant for proof of insurance.  The Court of Appeal held that the plaintiff had no reason to treat insurance coverage as a live issue until he became aware that the defendant may not have coverage.

BC: demand loans v. contingent loans

Kong v. Saunders provides a helpful overview of the limitation periods applicable to demand loans and contingent loans under the previous Limitations Act.  While the new Limitations Act recently turned two years old, it will be some time before it applies to all new actions, so there remains value in reviewing these concepts.  These are relevant paragraphs:

[17]        The previous Limitation Act applies to this case because it was still in effect at all materials times prior to the commencement of the underlying action.  Under s. 3(5) of that Act, the residual six-year limitation period, which applies in this case, began to run on the date on which the right to bring the action arose.

[18]        The jurisprudence has established a distinction between demand loans and contingent loans in respect of the commencement of the running of the limitation period.  Demand loans are, of course, loans payable on demand.  Contingent loans are loans that are payable on a future date or upon the occurrence of a specified event.

[19]        The limitation period in respect of contingent loans begins to run on the repayment date or the occurrence of the contingency.  This is because an action for repayment of the loan cannot be brought prior to the repayment date or the occurrence of the contingency, as the case may be.

[20]        It may seem intuitive that the limitation period in respect of demand loans begins to run on the date of the demand for repayment, but this is not so.  The reason is that the law has developed in a manner that it is not necessary for demand to be made before action can be brought for repayment of the loan.  This means that an action may be brought at any time after the demand loan is made.  As a result, the limitation period begins to run on the day the loan is made.

[21]        The above principles have been previously accepted by this Court in one of the cases relied upon by Mr. and Mrs. Kong, Berry v. Page, where Mr. Justice Wallace said the following at 247 (B.C.L.R.):

            The characterization of the loan as either a contingent loan or a demand loan determines whether or not the action is statute barred under theLimitation Act. It is well established that the cause of action accrues, and the statute of limitations runs, from the earliest time at which repayment can be required (Chitty on Contracts, 25th ed. (1983), vol. I, para. 1843, p. 1024). For a demand loan, the statute of limitations runs as of the date of the advancement of the funds, and not from the date of the demand. No demand is necessary in order for the cause of action to arise: Barclay Const. Corp. v. Bank of Montreal (1988), 1988 CanLII 2898 (BC SC), 28 B.C.L.R. (2d) 376 at 381, [1988] 6 W.W.R. 707, 40 B.L.R. 150 (S.C.); Heubach v. Sprague, 41 Man. R. 292, [1933] 2 W.W.R. 99, [1933] 3 D.L.R. 647 (C.A.).

            Case law supports the proposition that if money is lent to be repaid at a particular time in the future, or upon the happening of a specified contingency, then the cause of action arises at the time specified or upon the happening of the contingency: Ingrebretsen v. Christensen, 37 Man. R. 93,[1927] 3 W.W.R. 135 (C.A.); Re Gould; Ex parte Garvey, 1940 CanLII 89 (ON CA), [1940] O.R. 250, [1940] 3 D.L.R. 12 (C.A.). In these circumstances, the cause of action does not arise, and the statute of limitations does not run until the contingency is satisfied.

[22]         A more recent decision of this Court, Ewachniuk Estate v. Ewachniuk, 2011 BCCA 510 (CanLII), has also acknowledged these principles.  In that case, the Court held that a loan payable one year after demand fell within the category of a contingent loan, with the result that the limitation period did not begin running on the day the loan was made.  The reason is that an action could not have been brought for repayment of the loan on the day the loan was made because the demand and the lapse of time after the demand were conditions precedent to the bringing of an action.

[23]        The common law is the same in other provinces: see, for example, Johnson v. Johnson, 2012 SKCA 87 (CanLII).  Interestingly, with the new Limitation Act, British Columbia has joined Alberta and Ontario in specifically addressing the limitation period for a demand obligation.  Section 14 of the newAct effectively provides that the limitation period does not begin running until demand is made.

Alberta: Limitations defences are only available to defendants

The Court of Appeal has confirmed that a third party cannot rely on a limitation defence unless the defendant to the main action has properly pleaded it.  A limitations defence is only available to the party against whom the plaintiff is seeking the remedial order–generally, the defendant—and only if the party expressly pleads it.