Month: June 2017

Ontario: no discovery for Public Hospitals Act limitation period

The decision in Rawsthorne v. Marotta confirms that s. 31 of the Public Hospitals Act is not subject to the common law principle of discovery:

[30]         The case law is clear that the s. 31 limitation period is not subject to the principle of discoverability. The provision is mandatory in its wording and it runs from the day the patient ceases to receive treatment at the hospital or from the patient’s discharge from the Hospital.[11]

As this limitation period is no longer in force, this point is largely (but, as the decision demonstrates, not entirely) academic.

Ontario: CA on adding a party outside of presumptive limitation period

We overlooked this 2016 Court of Appeal decision in Arcari v. Dawson that considers adding a party to a proceeding after the presumptive expiry of the limitation period.

The Court described the relevant principles:

[10]      When a plaintiff’s motion to add a defendant is opposed on the basis that her claim is statute-barred, the motion judge is entitled to assess the record to determine whether, as a question of fact, there is a reasonable explanation on proper evidence as to why she could not have discovered the claim through the exercise of reasonable diligence. If the plaintiff does not raise any credibility issue or issue of fact that would merit consideration on a summary judgment motion or at trial and there is no reasonable explanation on the evidence as to why the plaintiff could not have discovered the claim through the exercise of reasonable diligence, the motion judge may deny the plaintiff’s motion (Pepper v. Zellers Inc. (2006), 2006 CanLII 42355 (ON CA), 83 O.R. (3d) 648 (C.A.), at paras. 18, 19, 24).

[…]

[15]      There is no evidence to support this submission, such as evidence from the engineer explaining why the issue was not clear to him. As is stated in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 2d ed. (Markham, Ont.: LexisNexis, 2014), at para. 2.284: “it is incumbent upon the plaintiff to lead some evidence of the steps he or she took to ascertain the identity of the responsible party and provide some explanation as to why the information was not obtainable with due diligence before the expiry of the limitations period.” We also reject the appellant’s submission that merely retaining an engineer was sufficient to discharge the due diligence responsibility and postpone the limitation period indefinitely.

Two facts are noteworthy:

  1. The Court left open the possibility that it will revisit the rule in favour of committing the issue of discoverability to trial:

[17]      Although a motion to add defendants is not a motion for summary judgment, the goal of “a fair process that results in just adjudication of disputes” that is “proportionate, timely and affordable” is relevant in this context as well: Hryniak v. Mauldin, 2014 SCC 7 (CanLII), [2014] 1 S.C.R. 87, at para. 28. It may well be that this court should interpret Pepper in light of Hryniak and re-evaluate the suggestion that Pepper sets a strong default rule in favour of committing the issue of discoverability to trial.  We leave that matter for another day.

2.  The plaintiff claimed based on injuries resulting from being hit by a car. The plaintiff retained an accident reconstruction expert to produce a report about the cause of the accident.  This engineer found that the driver’s speed was the cause.  The plaintiff subsequently learned that the design of the crosswalk where she was hit may also have contributed to her accident and sought to sue the parties who owned it.  The Court rejected the plaintiff’s submission that merely retaining an engineer to determine the cause was sufficient to discharge the due diligence responsibility.  Arguably, this heightens the responsibility.

Ontario: claims raised in a Notice of Objection subject to Limitations Act

In Bank of Nova Scotia Trust Company v. Iaboni, Justice Mullins held that claims asserted in a Notice of Objection filed in an application to pass account are statute-barred:

[32]           The objections of Mr. C. Iaboni that the trustee ‘excluded’ many valuable assets such as a mortgage, two businesses, a condo and life insurance policy from the estate of Lidia Iaboni and that when Lidia Iaboni became disabled, her husband’s wealth evaporated and the applicant has no interest in marshalling this wealth is, in part, a complaint about the administration of Umberto Iaboni’s affairs, between the onset of his disability in 2006 and his death in 2010 and latterly a complaint about the administration of his mother’s affairs between the onset of her disability in 2006/2007 and before her death in 2012. His allegations in the Notice of Objection filed in his mother’s estate, as outlined above were in substance the same as those made in the litigation he initiated on December 15, 2010.  All of the transactions about which he complains were disclosed to him no later than the accounting delivered on behalf of his siblings pursuant to the Minutes of Settlement, with the possible exception of the discharge of the mortgage on his sister’s home, which was a matter of public record.  His civil action was dismissed on May 15, 2013.

[33]           It appears, therefore, that Mr. C. Iaboni’s Notice of Objection raises issues as particularized above that are outside of the 2-year period within which they may have been pursued.

This is noteworthy because it takes for granted that the Limitations Act applies to claims asserted in a Notice of Objection.   Whether this is so remains the subject of debate.  I’ve argued that the Limitations Act does apply, and so am pleased to see a decision that moves the law in that direction.

Ontario: limitation period in Teacher’s Life policy invalid

In Parmar v. Teachers Life, Justice Faieta held that the limitation period in Teachers Life’s “Educators Income Protection Plan and Policy” doesn’t apply to a claim for denial of coverage under the policy.  Instead, the Limitation Act‘s basic two-year limitation applies:

[32]           The defendant submits that this action is barred by the two-year limitation period found in Policy.  The relevant provision, at p. 50 of the Policy, states:

In the case where benefits have not been paid or have been paid on a without prejudice basis, a legal proceeding shall not be commenced in respect to a claim under this policy after the second anniversary of the day the claim was discovered.  Discovery of a claim shall be defined as the earlier of the date a claim was first filed with Teachers Life, or the day a reasonable person ought to have known that a claim for benefits should have been filed with Teachers Life. [Emphasis added.]

[33]           However, the Act provides that a limitation period under the Act applies despite any agreement to vary or exclude it unless (1) such agreement was made before January 1, 2004; or (2) it is a “business agreement”, among other exceptions: see s. 22 of the Act.  I find that neither exception applies.

[34]           First, the Policy states that it was revised September 1, 2009 and “replaces all previous polices issued for Plan holders who are not currently receiving Disability Benefits”: see Policy, at p. 2.  Accordingly, I find that the Policy was not made before January 1, 2004.

[35]           Second, the Policy names (1) the defendant as the insurer; (2) the Ontario Secondary School Teachers’ Federation, District 12, as the Plan Sponsor; and (3) the individual member as the Policyholder.  I find that the Policy is not a “business agreement” because (1) the plaintiff is a party to the Policy; and (2) the Policy was made for “personal, family or household purposes”: see Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922 (CanLII), at paras. 58-61.  Accordingly, the limitation period provision found in the Policy, including the trigger for the discovery of a claim, has no effect.

Ontario: undertaking alternative remedial processes can delay discovery

Presidential MSH Corporation v. Marr Foster & Co. LLP is another excellent decision from the Court of Appeal applying s. 5(1)(a)(iv) of the Limitations Act.  Where the plaintiff relies on an alternative process that would substantially eliminate its loss so that court proceedings would be unnecessary to remedy it, and the date the alternative process runs its course is reasonably ascertainable, a proceeding will not be an appropriate remedy until that alternative process concludes.

While this decision doesn’t break new ground, it clarifies the impact remedial measures can have on discovery of a claim.  This is of particular consequence in professional negligence claims, which was the case in Presidential.

The respondents filed the appellant’s corporate tax returns after their due date. As a result, the CRA denied tax credits that would have been available had the returns been filed on time.

The appellant received the CRA’s Notices of Assessment disallowing each of the claimed credits on April 12, 2010. When the appellant received the notices, he immediately asked the respodnents what to do and how to fix the problem.

The motion judge inferred that the respondents advised the appellant to retain a tax lawyer to determine how to solve the tax problem but didn’t advise him to obtain legal advice about a professional negligence claim against the respondents.

The appellant did retain a tax lawyer on April 15, 2010, but there was no discussion of a possible action against the respondents. The tax lawyer filed a Notice of Objection to the CRA assessments, as well as an application for discretionary relief. The respondent helped the appellant prepare its appeals to the CRA by drafting the application for relief and helping the appellant and its lawyer with whatever else they needed, until at least November 2011.

By letter dated May 16, 2011, the CRA responded to the Notice of Objection advising that it intended to confirm the assessments. It did in fact confirm them on July 7, 2011.

The motion judge found that, as late as July 2011, there was still a reasonable chance that the application for discretionary relief would mitigate some or all of the appellant’s loss.

On August 1, 2012, the appellant issued its statement of claim against the respondents. This was more than two years after the initial denial by CRA of the credits, but within two years of CRA’s refusal to alter the assessments in response to the Notice of Objection.

The motion judge held that the appellants claim would have been appropriate while the CRA appeal was still ongoing because the appeal would not have fully eliminated the appellant’s claim against the respondents.  In particular, it would not have eliminated the appellant’s claim for the costs of retaining a tax lawyer to prosecute it.

Justice Pardu rejected this reasoning.  She summarised the applicable principles:

[20]      First, the cases suggest that a legal proceeding against an expert professional may not be appropriate if the claim arose out of the professional’s alleged wrongdoing but may be resolved by the professional himself or herself without recourse to the courts, rendering the proceeding unnecessary.

[…]

[26]      Resort to legal action may be “inappropriate” in cases where the plaintiff is relying on the superior knowledge and expertise of the defendant, which often, although not exclusively, occurs in a professional relationship. Conversely, the mere existence of such a relationship may not be enough to render legal proceedings inappropriate, particularly where the defendant, to the knowledge of the plaintiff, is not engaged in good faith efforts to right the wrong it caused. The defendant’s ameliorative efforts and the plaintiff’s reasonable reliance on such efforts to remedy its loss are what may render the proceeding premature.

[27]      Finally, I note that cases in which a defendant who is an expert professional attempts to remedy a loss that a plaintiff has discovered and alleges was caused by the defendant (engaging the potential application of s. 5(1)(a)(iv)) are distinct from  cases in which courts have held that  a client has not discovered a potential claim for solicitor’s negligence until being advised by another legal professional about the claim: see Ferrara, at para. 70; and Lauesen v. Silverman, 2016 ONCA 327 (CanLII), 130 O.R. (3d) 665, at paras. 25-31. In the latter category of cases, the issue is whether the plaintiff knew or ought reasonably to have knowninjury, loss or damage had occurred (under s. 5(1)(a)(i)) that was caused by or contributed to by an act or omission of the defendant (under ss. 5(1)(a)(ii) and (iii)). Section 5(1)(a)(iv) comes into focus where the plaintiff knew or ought reasonably to have known of his or her loss and the defendant’s causal act or omission, but the plaintiff contends the limitation period was suspended because a proceeding would be premature. Although discoverability under more than one subsection of s. 5(1)(a) may be engaged in a single case, it is important not to collapse the analysis of discoverability of loss or damage and the defendant’s negligence or other wrong with the determination whether legal action is appropriate although other proceedings to deal with the loss may be relevant to both questions.

(3)         The effect of other processes which may eliminate the loss

[28]      A second line of cases interpreting and applying s. 5(1)(a)(iv) of the Act involves a plaintiff’s pursuit of other processes having the potential to resolve the dispute between the parties and eliminate the plaintiff’s loss.

[29]      This approach to discoverability is consistent with  the rule in administrative law that it is premature for a party to bring a court proceeding to seek a remedy if a statutory dispute resolution process offers an adequate alternative remedy and that process has not fully run its course or been exhausted: see Volochay v. College of Massage Therapists of Ontario, 2012 ONCA 541 (CanLII), 111 O.R. (3d) 561, at paras. 61-70.

[…]

[39]      Non-administrative, alternative processes have also been seen in other cases as having the potential to resolve a dispute, thus rendering a court proceeding inappropriate or unnecessary.

[…]

[45]      Many of the cases dealing with the effect of alternative processes on the appropriateness of a court proceeding have applied the concept of a proceeding being “legally appropriate” articulated by this court in Markel. Markel involved a dispute between sophisticated insurers claiming indemnity under statutory loss transfer rules. The limitations issue that arose concerned whether a legal proceeding was “inappropriate” while settlement discussions between the parties were ongoing and thus, whether a claim was not discovered until these negotiations broke down.

[46]      Recall that, in Markel, the court held that the term “appropriate” in s. 5(1)(a)(iv) means “legally appropriate”. This interpretation avoided entangling courts in the task of having to “assess [the] tone and tenor of communications in search of a clear denial” that would indicate the breakdown of negotiations between the parties. That would permit a plaintiff to delay the discoverability of a claim for “some tactical or other reason” and “inject an unacceptable element of uncertainty into the law of limitation of actions” (at para. 34).

[47]      Similarly, in 407 ETR Concession Company, at para. 47, Laskin J.A. stated that the use of the term “legally appropriate” inMarkel “signified that a plaintiff could not claim it was appropriate to delay the start of the limitation period for tactical reasons, or in circumstances that would later require the court to decide when settlement discussions had become fruitless” (emphasis added).

[48]      These cases instruct that if a plaintiff relies on the exhaustion of some alternative process, such as an administrative or other process, as suspending the discovery of  its claim, the date on which that alternative process has run its course or is exhausted must be reasonably certain or ascertainable by a court.

Accordingly, the motion judge erred in holding that the appellant knew or ought to have known that its proceeding was appropriate as early as April 2010, when it received the CRA’s Notices of Assessment disallowing its tax credits. The proceeding was not appropriate, and the appellant’s underlying claim was not discovered, until May 2011, when the CRA responded to the appellant’s Notice of Objection and advised that it intended to confirm its initial assessments. The motion judge erred by equating knowledge that the respondents had caused a loss with a conclusion that a proceeding would be an appropriate means to seek a remedy for the loss.

Had the respondents together with the tax lawyer prosecuted the CRA appeal successfully, the appellant’s loss would have been substantially eliminated, and it would have been unnecessary to resort to court proceedings to remedy it. The fact that the appellant would have been unable to recover the fees it paid the tax lawyer, except through litigation, was inconsequential. It is the claim that is discoverable, not the full extent of damages the plaintiff may be able to recover. It would not have been appropriate under s. 5(1)(a)(iv) of the Act for the appellant to commence a proceeding until the respondents ameliorative efforts concluded.

The CRA appeal process had the potential to eliminate the appellant’s loss. As an alternative process to court proceedings, it could have resolved the dispute between the appellant and the respondents. These results would have made a proceeding unnecessary. It would not have been appropriate for the appellant to commence a proceeding until the CRA appeal process was exhausted in May 2011.

The court’s decision in Markel, as interpreted in 407 ETR Concession Company, about the meaning of the concept of a proceeding being “legally appropriate” under s. 5(1)(a)(iv) of the Act supported the appellant’s position. It was not a case where the appellant sought to toll the operation of the limitation period by relying on the continuation of an alternative process whose end date was uncertain or not reasonably ascertainable. It was clear that the end date of the CRA appeal was when the CRA responded to the appellant’s Notice of Objection advising that it intended to confirm the assessments. Thus the motion judge erred in invoking Markel to dismiss the appellant’s claim as time barred.

A last note: the Court of Appeal seems to still be ignoring its decision in Clarke where it held that  the section 5(1)(a)(iv) discovery criterion requires the claimant to have “good reason to believe he or she has a legal claim for damages”.  I don’t think any decision has followed this construction of the provision.

Ontario: CA confirms insurers have no duty to disclose limitation period

In Usanovic v. Penncorp Life Insurance Company (La Capitale Financial Security Insurance Company), Court of Appeal has confirmed that an insurer’s duty of good faith does not require it to give notice of the limitation period to its insured.  While the legislatures of some provinces have imposed a statutory obligation to this effect on insurers, Ontario has not.  Whether it should is a matter for the legislature.

We wrote about the lower court decision here.

This was the plaintiff’s argument on appeal:

[20]      The appellant submits, however, that the insurer’s failure to inform him of the limitation period precludes it from relying on the limitation period to defend his claim. He submits that the insurer’s common law duty of good faith and fair dealing should require it to inform the insured of the existence of the limitation period.

[21]      The appellant concedes that there is no statutory obligation to this effect in Ontario. He submits, however, that this obligation flows from the insurer’s duty to give the same consideration to the insured’s interest as it does to its own interests and can be imposed through the development of the common law and need not be based on statute.

Justice Strathy rejected this argument:

[45]      The Ontario legislature might have gone further than it has, for example, by adopting the approach taken in Alberta or British Columbia. It presumably chose not to do so and, in my respectful view, the court should not impose consumer protection measures on insurers, outside the terms of their policies, that the legislature has not seen fit to require. A properly crafted regime, such as those in effect in Alberta and British Columbia, would not only have to specify the requirement to give notice, but also the consequences of failing to do so.

[46]      The consequences of the appellant’s proposed expansion of the duty of good faith are significant. The appellant’s interpretation would effectively judicially overrule the provisions of the Limitations Act, 2002 by making notice given by an insurer to an insured the trigger for the limitation period, rather than discoverability of the underlying claim. This would defeat the purpose of the statute and bring ambiguity, rather than clarity, to the process.

Ontario: no limitation period for possessory liens

In Edan Agency Inc. v. Palinkas, the Court of Appeal held that limitation periods do not “generally” run against possessory liens.  This is because such a lien is a defence, and defences are not subject to statutory limitation periods.

This is a settled point of law.  Accordingly, it’s curious that the court should have used the qualifying language of “generally”.  I’d like to know in what circumstance a possessory lien would be subject to a limitation period–I suspect there’s none.

Ontario: the Trustee Act limitation period trumps s. 18 of the Limitations Act

The Court of Appeal has held that when one joint tortfeasor has died and the other makes a crossclaim for indemnity against her estate, s. 38(3) of the Trustee Act limits the claim, not the Limitations Act’s s. 18 contribution and indemnity provision.

Justice Strathy’s decision in Levesque v. Crampton Estate is well-reasoned, and I think, correct.

Unfortunately, it missed an opportunity to resolve a limitations issue of more widespread application: whether the s. 5 discovery provisions apply to s. 18.    In Miaskowski v. Persaud, the court concluded that s. 18 is a self-contained deeming provision that imposes an absolute two-year limitation period for claims for contribution and indemnity.  The court’s analysis turns on the word “deemed” in s. 18, which, “as a declarative legal concept is a firmer or more certain assertion of the discovery of a claim than the rebuttable presumption of discovery contemplated by section 5”.

The problem with this analysis is that it fails to consider that s. 18 was expressly enacted “For the purposes of subsection 5(2) and section 15”, that is, to inform and dictate the meaning to be given to the concepts referred to in those sections when applying them.

This is the point made in detail by Justice Leach in Demide v. Attorney General of Canada et al.  Justice Leach systematically analysed the flaws in Miaskowski’s reasoning.   She concluded that the purpose of s. 18 is to provide when time begins to run for the basic and ultimate limitation periods in claims for contribution and indemnity.  It deems the day of service of the statement of claim giving rise to the claim for contribution and indemnity to be the commencement of the ultimate limitation period and the presumptive commencement of the basic limitation period.

The language Justice Strathy uses could support either construction.  He writes  that s. 18 “provides that a claim for contribution and indemnity is ‘discovered’ and, therefore, the limitation period begin to run, on the day on which the wrongdoer seeking indemnity is served with the plaintiff’s claim.”  Does this mean the limitation period begins to run presumptively, or begins to run in all circumstances?

Paragraph 17 tends to suggest that it runs in all circumstances:

[17]      Thus, the general two-year limitation period runs from the date that the party claiming contribution and indemnity is served with the claim in respect of which contribution is sought.

My hope is that when the Court of Appeal directly considers the matter, Justice Leach’s analysis will prevail.  Miaskowksi is at odds with a common sense reading of the Limitations Act as a whole, and introduces unnecessary and unhelpful complexity into the limitations scheme.

 

 

Ontario: Appointing a guardian of property doesn’t start the limitation period

 

In Shaw v. Barber, Justice McNamara held that the appointment of the Office of the Public Guardian and Trustee as guardian of property doesn’t cause a limitation period to commence:

[13]           […] Where [the parties] disagree completely is when the six month limitation period for a claim for support under Section 61(1) of the Succession Law Reform Actbegins to run.

[14]           The first point that needs to be made is that under the Limitations Act the six month limitation period under the Succession Law Reform Act is incorporated into the act by Section 19(1) of the Limitations Act. That section provides that any limitation period set out in or under another act applies as long as the provision establishing it is listed in the schedule to the Limitations Act. There is no issue that this particular limitation period is in that schedule.

[15]           It is also common ground that the limitation period in question does not run in the circumstances set forth in Section 7(1) of the Limitations Act.That section provides:

7 (1) the limitation period established by section 4 does not run during any time in which the person with the claim,

(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and

(b) is not represented by a litigation guardian in relation to the claim.  2002, c. 24, Sched. B, s. 7 (1).

[16]           The six month limitation, then, did not run while Ms. Shaw was incapable of commencing a proceeding because of a mental condition and was not represented by a litigation guardian in relation to the claim (emphasis added).

[17]           The Estate argues that after its appointment as Ms. Shaw’s statutory guardian of property the OPGT had the authority to act as litigation guardian and were then under an obligation to advance a claim within a six month period of their appointment.

[18]           That argument, in my view, is flawed.

[19]           There is no mechanism in the Limitations Act for the self-appointment of a litigation guardian. To do that, regard must be had to the Rules of Civil Procedure. A number of provisions are relevant.

[20]           First is Rule 7.01(1) which provides as follows:

7.01  (1)  Unless the court orders or a statute provides otherwise, a proceeding shall be commenced, continued or defended on behalf of a party under disability by a litigation guardian.  O. Reg. 69/95, s. 2.

A proceeding, then, which includes an application, must be commenced on behalf of a party under a disability by a litigation guardian.

[21]           Next Rules 7.02(1) and 1.1(a) which provide:

7.02 (1) Any person who is not under disability may act, without being appointed by the court, as litigation guardian for a plaintiff or applicant who is under disability, subject to subrule (1.1).  O. Reg. 69/95, s. 3 (1).

 

 

Mentally Incapable Person or Absentee

 

(1.1)  unless the court orders otherwise, where a plaintiff or applicant,

(a) is mentally incapable and has a guardian with authority to act as litigation guardian in the proceeding, the guardian shall act as litigation guardian;

[22]           It is important to note that while the above section directs that the guardian shall act as litigation guardian, it does not dictate when that authority is to be exercised. That, in my view, occurs once the guardian of property has determined there is a basis for exercising their authority as litigation guardian.

[23]           Surely that is appropriate. As the affidavit of counsel at the Office of the Public Guardian and Trustee discloses, once they are appointed statutory guardian of property in a factual situation such as existed here, they begin an investigation into the entire matter. That can be, as the affidavit discloses, a time consuming process because there are usually information gaps because of the client’s incapacity which require the OPGT to be reliant on third party information with a need to be verified. The initial investigation is done by a client representative and if the situation warrants it, the matter is then referred to counsel in the OPGT’s office which in this case occurred in October of 2015. According to the evidence, further investigation continued under counsel’s direction exploring options available. Outside counsel was formally retained by the OPGT on May 6, 2016. The application was brought in August.

[24]           Moving carefully and cautiously prior to commencing litigation at public expense would require a thorough investigation of the facts and legal options available. As counsel in his affidavit points out, the client they act for has little capacity to properly advise them of her circumstances, so they have to rely on third party information which may support or not support or be neutral towards the incapable person’s position. I agree with counsel that imposing a limitation period commencing as of the OPGT’s appointment as guardian of property is not only contrary the wording of the Limitations Act, but would also create impossible timelines thus creating the potential for injustice being done to vulnerable individuals.