July 2016 – Under the Limit

Ontario: The Court of Appeal getting discovery right

In upholding the decision in Chelli-Greco v. Rizk, which we wrote about here, the Court of Appeal described when discovery of a claim occurs:

[3] Under s. 5 (1)(a) of the Act, a claim is discovered on the date the claimant knew, or ought to have known, the material facts giving rise to the claim, and that a proceeding would be an appropriate means to seek to remedy the claim. The date is determined on a fact-based analysis.

This statement of law is deceptively significant.

Since its decision in Lawless, the Court of Appeal has often described discovery in terms of the old common law test—discovery occurs when the plaintiff reasonably ought to have knowledge of the material facts of her cause of action. This is problematic because discovery under section 5 of the Limitations Act occurs not just when the claimant has knowledge of the material facts of the cause of action, but, pursuant to section 5(1)(a)(iv), when she knows that a proceeding is an appropriate remedy for her claim. Using the common law test to determine discovery necessarily removes the section 5(1)(a)(iv) criterion from the analysis. This is problematic, and I’ve written about it before.

The Court of Appeal’s explicit acknowledgement that discovery requires satisfaction of section 5(1)(a)(iv) is a departure from its jurisprudence that follows Lawless. This is the decision you should cite when describing discovery under the Limitations Act.

This is the Court’s analysis:

[4] The issue before the motion judge was when did the respondent know that a proceeding would be an appropriate means to seek a remedy. The motion judge accepted the respondent’s evidence that her decision to continue treatment with the appellant beyond September 21, 2011 was based on the appellant’s advice to her that “her failed bridge was not his fault and he would endeavour to repair and remediate the problem.” . Given this finding, we see no error in the motion judge’s conclusion that the respondent’s action was not discovered until after the treatment and the dentist-patient relationship had ended and that her action was not statute barred as a result. See Brown v. Baum, 2016 ONCA 325(CanLII), at para. 18.

Ontario: Section 5 of the Limitations Act always applies

The decision in Najafi v. Shapiro provides a teachable moment. The decision implies that the precondition for the application of section 5 of the Limitations Act is the plaintiff raising discoverability:

[35] The moving defendants rely upon Section 4 and Section 5 of the Limitations Act, 2002 as the substantive law for the limitation defence they ask the court to apply to dismiss the 2015 action as against them. Section 4 of the Limitations Act, 2002, reads as follows […]

[36] On facts where discoverability is raised as an issue, Section 5 is applicable […]

This is wrong. There’s no precondition to the application of section 5, which is a necessary part of a limitations analysis. Section 4 links the commencement of the basic limitation period to the discovery of a claim. Section 5 provides when discovery of a claim occurs. Accordingly, it’s impossible to determine when a limitation period commences without applying section 5.

Here’s the language of section 4 and 5(1)-(2):

Basic limitation period

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. 2002, c. 24, Sched. B, s. 4.

Discovery

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) 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). 2002, c. 24, Sched. B, s. 5 (1).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved. 2002, c. 24, Sched. B, s. 5 (2).

Ontario: A Trustee Act Refresher

Justice Newbould’s decision in John C. Chapling v. First Associates Investments Inc. et al. provides a useful summary of the limitation of actions under the section 38 of the Trustee Act:

[10]         First Associates relies on the two year limitation period contained in the Trustee Act, RSO 1990, c T.23:

38. (1) Except in cases of libel and slander, the executor or administrator of any deceased person may maintain an action for all torts or injuries to the person or to the property of the deceased in the same manner and with the same rights and remedies as the deceased would, if living, have been entitled to do, and the damages when recovered shall form part of the personal estate of the deceased; but, if death results from such injuries, no damages shall be allowed for the death or for the loss of the expectation of life, but this proviso is not in derogation of any rights conferred by Part V of the Family Law Act.

(2) Except in cases of libel and slander, if a deceased person committed or is by law liable for a wrong to another in respect of his or her person or to another person’s property, the person wronged may maintain an action against the executor or administrator of the person who committed or is by law liable for the wrong.

(3) An action under this section shall not be brought after the expiration of two years from the death of the deceased.

[11]         This limitation period is a strict one and the discoverability rule has no application. See Ryan v. Moore 2005 SCC 38 (CanLII), [2005] 2 S.C.R. 53 at para. 31:

31   In my view, the case that best assists this Court in the present matter is the one giving rise to the Ontario Court of Appeal’s decision in Waschkowski v. Hopkinson Estate (2000), 2000 CanLII 5646 (ON CA), 47 O.R. (3d) 370. The court had to determine the possible application of the discoverability rule to s. 38(3) of theTrustee Act, R.S.O. 1990, c. T.23, the statutory provision in Ontario permitting an action in tort by or against the estate of a deceased person and limiting the period during which such actions may be commenced. Abella J.A., as she then was, concluded, at para. 16, that the discoverability rule did not apply to the section since the state of actual or attributed knowledge of an injured person in a tort claim is not germane when a death has occurred. She explained at paras. 8-9:

In s. 38(3) of the Trustee Act, the limitation period runs from a death. Unlike cases where the wording of the limitation period permits the time to run, for example, from “when the damage was sustained” (Peixeiro) or when the cause of action arose (Kamloops), there is no temporal elasticity possible when the pivotal event is the date of a death. Regardless of when the injuries occurred or matured into an actionable wrong, s. 38(3) of the Trustee Act prevents their transformation into a legal claim unless that claim is brought within two years of the death of the wrongdoer or the person wronged.

The underlying policy considerations of this clear time limit are not difficult to understand. The draconian legal impact of the common law was that death terminated any possible redress for negligent conduct. On the other hand, there was a benefit to disposing of estate matters with finality. The legislative compromise in s. 38 of the Trustee Act was to open a two-year window, making access to a remedy available for a limited time without creating indefinite fiscal vulnerability for an estate. [Emphasis in original.]

[12]         Section 38(1) refers to “an action for all torts or injuries to the person or to the property of the deceased”. It has been held that this language covers claims in tort, contract and breach of fiduciary duty. See Lafrance Estate v Canada (Attorney General) (2003), 2003 CanLII 40016 (ON CA), 64 OR (3d) 1 (C.A.) in which claims were made by native persons who when children were sent to residential schools in Northern Ontario. Some of the persons had died and claims were made by their estates. Some of the claims made were for unpaid wages caused by forced labour. It was argued on behalf of the estates that these claims were contractual in nature and that as a claim for breach of contract could be sustained at common law, such claims did not depend upon the existence of the Trustee Act and, therefore, were not statute-barred. That argument did not succeed. The Court stated:

[54]   In determining whether the estate claims fall within the scope of s. 38(1) of the Trustee Act, the focus is not upon the form of the action but, rather, the nature of the injury. The question to be asked in determining its applicability is whether the alleged wrong constituted an injury to the deceased person. See Smallman v. Moore, 1948 CanLII 4 (SCC), [1948] S.C.R. 295, [1948] 3 D.L.R. 657, and Roth v. Weston Estate (1997),1997 CanLII 1125 (ON CA), 36 O.R. (3d) 513, 20 E.T.R. (2d) 69 (C.A.).

[55]   Whether the claim for forced labour is framed in tort, contract, quasi-contract or breach of fiduciary duty, the claim is for injury of a personal nature. The core of the alleged wrongdoing is the failure of those running the residential schools to compensate the deceased persons for the work they were forced to perform. In other words, the claims arise out of the treatment that the deceased plaintiffs endured at the residential schools. As such, the claims for forced labour are within the meaning of “injuries to the person”. Accordingly, they fall squarely within the provisions of s. 38(1) of the Trustee Act and are subject to the applicable two-year limitation period in s. 38(3).

[56]   The same analytical approach applies to the estate claims for breach of fiduciary duty. Again, the focus is not upon the form of the action but whether the alleged wrong constitutes an injury to the person. It is apparent that the alleged breaches of fiduciary duty are said to have inflicted injury upon the deceased persons and therefore the claims for breach of fiduciary duty are within the ambit of s. 38(1).

Justice Newbould also rejected the argument that the word “injury” in section 38(1) does not apply to claims for pure economic loss.

[14]         The plaintiff relies on the case of English Estate v. Tregal Holdings Ltd. [2004] OJ No 2853 in which a deceased had transferred shares in one company to another and a claim had been made by her estate against the two companies and several officers for oppression and fraud. Pepall J. (as she then was), held that the word “injury” in section 38(1) of theTrustee Act did not apply to claims for pure economic loss. She stated:

[23]   Counsel were unable to locate any Ontario cases that were precisely on point. Adopting the British Columbia Court of Appeal decision in Alberni District Credit Union v. Cambridge Properties Ltd., 1985 CanLII 567 (BC CA), [1985] B.C.J. No. 1829, the Alberta Court of Appeal in Guest v. Bonderove & Co.[1988] A.J. No. 323 held that the word “injury” imported something in the nature of physical injury or damage and pure economic loss was not included.

[24]   In examining the nature of the injury, I am unable to conclude that the wrongs alleged constitute an injury to Ms. English or her property of the type contemplated by section 38(1) of the Act. In my view the claims in this action are not for injury of a personal nature. They therefore are not captured by section 38(1) of the Act and hence are not barred by section 38(3).

[15]         I have difficulty with this decision and would not follow it. The Guest case referred to in English Estate dealt with the limitations legislation in Alberta that provided a two year limitation period for an action “for trespass or injury to real property or chattels”. It was held that these words did not encompass an action alleging pure economic loss without injury to the real property in question. That language is not the language of section 38(1) of our Trustee Act. The Alberni case referred to involved British Columbia legislation providing for a two year limitation period “for damages in respect of injury to person or property, including economic loss arising from the injury” and a claim relating to damaged property. It was held that “injury” imported something in the nature of physical injury or damage and as the building had not been injured, the limitation period did not apply. There was no discussion of whether pure economic loss would constitute an injury to the person. The case did to raise the issue raised in this case.

[16]         Section 38(1) of the Trustee Act does not contain any language that suggests that the claims made in this case are not actions “for all torts or injuries to the person or to the property of the deceased”. The property of the deceased, being her money, was allegedly destroyed in value due to the wrongful acts of Mr. Monaghan. Black’s Law Dictionary includes in the definition of “injury” the “violation of another’s legal right, for which the law provides a remedy; a wrong or injustice” and “any harm or damage”. That is broad enough to include the claims here for damages arising from the actions of Mr. Monaghan who was a registered investment advisor with First Associates.

[17]         In Lafrance Estate it was held that the claim for unpaid wages fell within section 38(1) of the Trustee Act. I recognize the claim as pleaded arose from being required to perform forced labour, but it was a claim for economic damages.

[18]         Section 38(2) of the Trustee Act applies to claims against the estate of a deceased who committed “a wrong to another in respect of his or her person or to another person’s property”. Bikur Cholim Jewish Volunteer Services v. Penna Estate 2009 ONCA 196 (CanLII) involved a claim against a deceased’s estate arising out of economic loss allegedly caused to the plaintiff. It was held that section 38(3) applied to bar the claim. The point as to whether the claim involved a “wrong to another in respect of his person or another person’s property” was not an issue directly raised, but the premise of the decision was that causing an economic loss was a “wrong”. While section 38(2) of the Trustee Act does not include the word “injury” and section 38(1) does not include the word “wrong”, in principle there is no reason why the two should be treated differently. As stated in Black’s Law Dictionary, injury includes a wrong.

[19]         I conclude that the claims asserted in this case fall within the language of section 38(1) of the Trustee Act, and are statute barred under section 38(3) unless there is reason otherwise as claimed by the plaintiff.

Ontario: Acknowledgments of liability must be clear, unequivocal

Section 13(1) of the Limitations Act applies to acknowledgments of liability:

Acknowledgments

13. (1) If a person acknowledges liability in respect of a claim for payment of a liquidated sum, the recovery of personal property, the enforcement of a charge on personal property or relief from enforcement of a charge on personal property, the act or omission on which the claim is based shall be deemed to have taken place on the day on which the acknowledgment was made. 2002, c. 24, Sched. B, s. 13 (1).

What type of acknowledgement will engage this provision? One that is clear and unequivocal. A mere proposal for a settlement plan that doesn’t acknowledge an amount owing won’t suffice. The Court of Appeal decision in 1702108 Ontario Inc. v. 328331 Canada Inc. reiterates the principle:

[5] The language of the statute sets out the applicable test: s. 13(1) is engaged when a person acknowledges liability in respect of a claim for payment of a liquidated amount. In Middleton v. Aboutown Enterprises Inc., 2009 ONCA 466 (CanLII), this court held, at para. 1, that s. 13(1) requires a “clear and unequivocal acknowledgement of the debt claimed.” In that case, the court upheld the motion judge’s finding that a mere offer to settle a claim, without acknowledging that any amount remained owing, did not amount to an acknowledgement of liability for the purposes of s. 13(1).

[6] In the present case, Mr. Durrani’s March 14 email did not acknowledge liability for the liquidated sum of $296,700 demanded by the appellant in its March 14 correspondence. At most, the respondent’s March 14 email proposed negotiating a settlement plan, without acknowledging that any amount remained owing. When the appellant subsequently pressed for an acknowledgement of liability for the liquidated sum, the respondent refused to give one. Accordingly, we see no basis to interfere with the motion judge’s conclusion that the March 14, 2013 email was not an acknowledgement. We would not give effect to this ground of appeal.