September 2016 – Under the Limit

Ontario: The limitation of claims for trusts over real property

Justice Doyle’s decision in Campbell v. Nicol contains a helpful summary of the limitation of claims for the imposition of a constructive trust on real property:

[71]         With respect to equitable claims, the Ontario Court of Appeal dealt with this issue in McConnell v. Huxtable, 2014 ONCA 86 (CanLII), 118 O.R. (3d) 561, where the court dealt with a claim for the remedial constructive trust over real property based on an allegation of unjust enrichment. The Court held that the applicable limitation period was the 10 year period under s. 4 of the Real Property Limitations Act.

[72]         The question for the Court was whether a claim for unjust enrichment in which the claimant asks the court to impose a constructive trust upon the respondent’s real property is an action to recover any land. The Court answered in the affirmative. The Court concluded that the constructive trust remedy for unjust enrichment as well as the purposes and contextual interpretation of the Real Property Limitations Act justified a finding that the claim fell within this category.

[73]         The Court also found that the applicant’s alternative claim for monetary compensation was also governed by the 10-year limitation, not the two-year limitation period pursuant to the Limitations Act, 2002.

Analysis

[74]         The applicant issued his application six years after the date of separation. Given the decision in McConnell, the court finds that the proper limitation period for the claim in unjust enrichment is 10 years under the Real Property Limitations Act.

[75]         A claim based unjust enrichment has two remedies. The Court must first consider a monetary remedy and secondly a property remedy: see Kerr v. Baranow; Vanasse v. Seguin, 2011 SCC 10 (CanLII), [2011] 1 S.C.R. 269.

[76]         Here, the applicant did couch the remedy he was seeking as a property claim for the unjust enrichment claim. The Ontario Court of Appeal in McConnell confirmed that the limitation period for an unjust enrichment claim requesting a property remedy is 10 years. Even though a trial court will, upon finding unjust enrichment, must first determine if the unjust enrichment can first be remedied by a monetary claim as stated in Kerr and Vanasse, the McConnell case states that the claim for unjust enrichment has a limitation period of 10 years even if the alternate claim is for monetary compensation.

Ontario: If you sue, you’ve discovered your claim

Limitations issues have a way of encouraging creative but hopeless arguments.

Take for example Richards v. Sun Life Assurance Company of Canada. The plaintiff argued that the first clear and unequivocal denial of his benefits claim was contained in the defendant insurer’s statement of defence. Justice Bale had none of this:

[19] As previously noted, the plaintiff argued that the first clear and unequivocal denial of his claim was contained in Sun Life’s statement of defence. Assuming this to be the case, “clear and unequivocal denial” cannot be the applicable test, since the plaintiff would then have commenced his action prior to discovering his claim, a logically inconsistent result.

By commencing a proceeding in respect of a claim, a claimant necessarily acknowledges discovery of the claim. It is, as Justice Bale put it, logically fraught to both assert a claim and an argument that you have yet to discover it.

Justice Bale’s decision also contains a helpful discussion of rolling limitation periods:

[25]         The plaintiff argues that a rolling limitation period applies, and that the plaintiff is only barred from claiming the disability benefits that would have been payable more than two years before the action was commenced. I disagree.

[26]         A rolling limitation period may apply to claims for periodic payments, in cases where the issue is whether certain payments to which the plaintiff is entitled have been made (e.g. payments of rent), as opposed to cases where the issue is whether the plaintiff was entitled to the periodic payments in the first place. In the former type of case, the material facts will have arisen on a periodic basis, and it will not be unfair to require a defendant to litigate those facts during the applicable limitation period following the date upon which an individual payment became due. However, in the latter type of case, the material facts will have arisen at the time that the plaintiff alleges he or she first became entitled to periodic payments, and it would be unfair to require the defendant to litigate those facts, for a potentially unlimited period of time.

[27]         In the present case, the issue is whether the plaintiff was entitled to disability benefits, at the time of his application to Sun Life, and the concept of a rolling limitation period does not apply.

Ontario: Common law discoverability, and how it applies to the Competition Act

In Fanshaw College v. AU Optronics, Justice Grace held that the limitation period applicable to Competition Act claims is subject to discoverability. We wrote about it here. The Court of Appeal has upheld this decision.

The appellant argued that the discoverability principle shouldn’t apply for the same reason that it doesn’t apply to section 38(3) of the Trustee Act: the limitation period is linked to a fixed event (in the case of the Trustee Act, death). The Court rightly rejected this argument. The limitation period in section 36(4)(a)(i) is linked to the accrual of the cause of action—the wrongful conduct—not a fixed event. The term “conduct” in section 36(4)(a)(i) refers to the conduct giving rise to damages mentioned in section 36(1) (the statutory cause of action) and is a constituent element of the cause of action that is subject to the limitation period.

Apart from its significance to the competition bar, the decision is noteworthy because it includes a thorough discussion of the common law discoverability principle. Common law discoverability became mostly academic in Ontario when the legislature codified it into sections 4 and 5 of the Limitations Act, but it remains relevant in certain circumstances. I’m involved in a proceeding (ever more like Jarndyce and Jarndyce) that is subject to the previous limitations scheme and common law discoverability.

This is the Court’s discussion of discoverability:

[32]      The discoverability principle is a common law rule providing that “a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence”: Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147, at p. 224; see also Graeme Mew, Debra Rolph & Daniel Zacks, The Law of Limitations, 3rd ed. (Toronto: LexisNexis Canada Inc., 2016), at p. 75.

[33]      Discoverability is also an interpretive rule relevant to the construction of limitation statutes: Ryan v. Moore, 2005 SCC 38 (CanLII), [2005] 2 S.C.R. 53, at para. 23. As explained below, it provides certain presumptions for courts interpreting statutory limitation periods.

[34]      The approach for determining whether a particular statutory limitation period is subject to the discoverability principle was discussed by Twaddle J.A. in Fehr v. Jacob (1993), 1993 CanLII 4407 (MB CA), 14 C.C.L.T. (2d) 200 (Man. C.A.), at p. 206:

[T]he judge-made discoverability rule is nothing more than a rule of construction. Whenever a statute requires an action to be commenced within a specified time from the happening of a specific event, the statutory language must be construed. When time runs from “the accrual of the cause of action” or from some other event which can be construed as occurring only when the injured party has knowledge of the injury sustained, the judge-made discoverability rule applies. But, when time runs from an event which clearly occurs without regard to the injured party’s knowledge, the judge-made discoverability rule may not extend the period the legislature has prescribed.

The Supreme Court of Canada has endorsed this passage in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 37, and in Ryan, at para. 23.

[35]      Ryan is the latest statement from the Supreme Court of Canada on this issue. In that decision, at para. 24, Bastarache J. concluded as follows:

Thus, the Court of Appeal of Newfoundland and Labrador is correct in stating that the rule is “generally” applicable where the commencement of the limitation period is related by the legislation to the arising or accrual of the cause of action. The law does not permit resort to the judge-made discoverability rule when the limitation period is explicitly linked by the governing legislation to a fixed event unrelated to the injured party’s knowledge or the basis of the cause of action.

[36]      The applicability of discoverability is a matter of statutory construction. The jurisprudence noted above only provides presumptions and, in Ryan, at para. 23, Bastarache J. cautioned against applying the principle automatically or “systematically without a thorough balancing of competing interests”.