April 2018 – Under the Limit

Ontario: the limitation of claims arising from assault and battery

The Court of Appeal granted the plaintiff’s appeal in Brown v. Woodstock. The motion judge had found his claims statute-barred based on jurisprudence holding that a cause of action for damages for false arrest, false imprisonment, and breach of Charter rights crystallizes on the date of arrest, and that the limitation period for an assault or battery runs from the date assault or battery occurred. I though it want’t a very good limitations decision, because cause of action accrual has nothing to do with the commencement of time.

The court followed its decision in Winmill as the basis for overturning the summary judgment:

[5] In our view, Winmill cannot be distinguished from this case on the basis that the charges in this case are different, or that the prosecution of the appellant ended with his entering into a peace bond rather than an acquittal. Nor is it relevant that Winmill was also concerned with a claim for negligent investigation. The key point is that, as in Winmill, the battery action is essentially a mirror image of the criminal charge the appellant was facing. As a result, it was open to the appellant to await the outcome of the criminal proceedings against him before finally deciding whether to bring his action, regardless of when he first formed the intention to sue.

[6] Specifically, the discovery date for the appellant’s action was October 22, 2015 – the date the criminal charges him were brought to a conclusion with a peace bond. The appellant had two years from that date in which to bring his action. Therefore, the appellant’s action, which was commenced May 13, 2016, is not time barred. The respondent fairly concedes that, if the claim in battery is to proceed, then it is appropriate to reinstate the entire action, with the exception of the appellant’s claim for malicious prosecution, which the appellant has abandoned.

Ontario: The Court of Appeal reminds that limitations defences are affirmative

Two aspects of the Court of Appeal decision in Abrahamovitz v. Berens are noteworthy.

First, the court explains why the expiry of the limitation period is a defence that must be pleaded in enough detail to makes this a candidate for leading decision on the principle:

[30]      This court explained in Beardsley v. Ontario (2001), 2001 CanLII 8621 (ON CA), 57 O.R. (3d) 1 (C.A.), at para. 21 that “the expiry of a limitation period does not render a cause of action a nullity; rather, it is a defence and must be pleaded”. See also:Strong v. Paquet Estate (2000), 2000 CanLII 16831 (ON CA), 50 O.R. (3d) 70 (C.A.), at paras. 35-37; Tran v. University of Western Ontario, 2016 ONCA 978 (CanLII), 410 D.L.R. (4th) 527, at para. 18; and Salewski v. Lalonde, 2017 ONCA 515 (CanLII), 137 O.R. (3d) 750, at para. 43.

[31]      There are two aspects to the statement from Beardsley. One is that from a procedural fairness point of view, a plaintiff is entitled to plead in response to a limitations defence, so that if a motion is brought to dismiss the claim, the court will have all the facts relied on to assess discoverability, or whatever other factors a plaintiff may wish to raise in response: Beardsley, at para. 22;Strong Estate, at para. 38; Metropolitan Toronto Condominium Corp. No. 1352 v. Newport Beach Development Inc., 2012 ONCA 850 (CanLII), 113 O.R. (3d) 673, at paras. 115-116; and Greatrek Trust S.A./Inc. v. Aurelian Resources Inc., [2009] O.J. No. 611 (Ont. S.C.J.), at para. 18.

[32]      The requirement that an affirmative defence, including a limitations defense, be pleaded to avoid surprise to the opposite party is reflected in r. 25.07(4) of the Rules of Civil Procedure, which provides:

In a defence, a party shall plead any matter on which the party intends to rely to defeat the claim of the opposite party and which, if not specifically pleaded, might take the opposite party by surprise or raise an issue that has not been raised in the opposite party’s pleading.

[33]      The second aspect of the statement from Beardsley, however, is more germane to this case. A limitations defence is “just that, a defence”: Lacroix (Litigation Guardian of) v. Dominique, 2001 MBCA 122 (CanLII), 202 D.L.R. (4th) 121, at para. 18. A defendant chooses whether or not to rely on a limitations defence, but is not obliged to do so: Graeme Mew, Debra Rolph, & Daniel Zacks, The Law of Limitations, 3rd ed. (Toronto: LexisNexis Canada Inc., 2016) p.166. See e.g.: Strong Estate, at paras. 35-40; and Girsberger v. Kresz (2000), 2000 CanLII 22406 (ON SC), 50 O.R. (3d) 157 (C.A.), at para. 13.

[34]      The fact that the choice belongs to the defendant is codified in s. 22 of the Limitations Act, 2002, which allows a limitation period to be suspended or extended by agreement.

[35]      This is a very important and useful provision that allows parties to a potential claim to suspend the running of a limitation (toll the limitation period) to allow them to conduct investigations or settlement discussions, without pressure on the claimant to commence the action unnecessarily. It promotes judicial economy and is cost-effective for the parties.

[36]      Obviously, this provision would be ineffective if another party could assert the limitation period in spite of the defendant’s agreement to toll the limitation period, or if the action became a nullity on the expiry of the limitation period. See for example, Schreiber v. Lavoie (2002), 2002 CanLII 49430 (ON SC), 59 O.R. (3d) 130 (S.C.J.), where a third party was not entitled to rely on r. 29.05(1) (a rule which allows a third party to plead a defence not raised by the defendant) to assert a limitations defense that the defendant had expressly agreed it would not rely on.

Second, there is a reminder that special circumstances doctrine is of no application:

[24] I would not accept this argument for two reasons. First, the Estate has not commenced any proceeding or claimed any relief. The essence of this argument amounts to invocation of the old common law doctrine of special circumstances that no longer applies under the Limitations Act, 2002. See: Joseph v. Paramount Canada’s Wonderland, 2008 ONCA 469 (CanLII), 90 O.R. (3d) 401. The Estate is essentially saying that because all of the facts have already been pleaded in the action, there is no surprise and no prejudice to the defendants (or other parties) to allow the Estate to be added as a party now, even though the limitation period has expired.

Ontario: S. 21 might include mistake as to identity

In Douglas v. Stan Fergusson Fuels Ltd., the Court of Appeal left open the possibility that s. 21 of the Limitations Act might be broad enough to include mistake as to identity rather than merely a misdescription:

[112] In my view, while the test for misnomer may be broad enough to embrace a mistake as to the identity of the person who should have brought a suit (rather than a misdescription of the person suing),[8] it cannot do so in this case. This is because, as I have explained above, at the time State Farm chose to commence a claim, it did not have capacity to do so in its own name. As a result, it cannot be said that State Farm made a “mistake” in naming the Douglases as plaintiffs instead of itself.

Ontario: two common sense constructions of s. 18

One of the few really consequential unresolved limitations issues is whether the commencement of the limitation period for claims for contribution and indemnity commences always on the day of service of the statement of claim in the proceeding for which contribution and indemnity is sought, or on discovery of the claim for contribution and indemnity.

I’ve long argued that this was a silly debate, and notwithstanding a line of jurisprudence suggesting otherwise, there can be no serious question that s. 18 merely change the event that triggers the presumptive discovery of the limitation from the act or omission giving to the claim to the service of the statement of claim.

Two recent decisions have interpreted s. 18 this way.

In Murphy v. Hart, Justice Monahan reviewed the leading decisions on both sides of the debate and then explains, persuasively, why Demide‘s construction of s. 18 is correct:

[28]           The Hart Defendants rely in particular on the judgment of Perell J. in Miaskowski (Litigation Guardian of) v. Persaud.[3] In Miaskowski, Perell J. was of the view that section 18 of the Act provides that 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.” Perell J. placed particular emphasis on the use of the word “deemed” in section 18 which, he noted, was a “declarative legal concept [that is] a firmer or more certain assertion of the discovery of a claim than the rebuttable presumption of discovery contemplated by section 5 of the Limitations Act, 2002.” He further observed that section 18 did not contain the moderating language “unless the contrary is proved” that is found in section 5(2) of the Act. In his view, “by using the language of a deeming provision without any reference to the deeming of discovery of the claim being rebuttable, the Legislature intended to impose an absolute two year limitation period with respect to claims for contribution and indemnity.”

[29]           In Perell J.’s view, this approach would bring certainty and efficiency to the law of limitations, while remaining consistent with the policy purposes of the Act. He also noted that it would be a rare case where a defendant would not know whom to sue for contribution and indemnity, and the period of two years following service of the underlying claim would provide “ample time” to exercise due diligence to determine against whom to claim.

[30]           Perell J.’s reasons in Miaskowski have been followed in a number of subsequent decisions of this Court.[4] However it should also be noted that a different interpretation of the effect of section 18 was taken by Leach J. of this Court in Demide v. Canada (Attorney General).[5] In Demide, Leach J. held that section 18 of the Act merely determines the relevant presumed starting point for the basic two year limitation period for purposes of section 5(2), a presumption that was still capable of being rebutted by proof to the contrary. Although section 18 does not include language referring to “proof to the contrary”, Leach J. observed that the inclusion of such wording in section 18 was unnecessary given that this wording was already found in section 5 (2). He also noted that interpreting section 18 as establishing an absolute two-year limitation period for claims for contribution and indemnity would make the ultimate limitation period in section 15 redundant.

[31]           Leach J. accepted that an absolute two-year limitation period for contribution and indemnity claims would provide certainty and efficiency, which was one of the policies underlying the 2002 reforms to the Act. But, as he observed, the same could be said in relation to making any limitation period absolute. In Leach J.’s view, the overall goal of the legislation was to strike a balance between a defendant’s need for certainty with the plaintiff’s right to sue. The legislature generally tried to strike that balance by imposing a presumptive two-year limitation period, capable of extension by demonstrable lack of discovery, proof of which was the obligation of the claimant. While it might be a rare case that a defendant, exercising due diligence within two years of being served with the claim, would not know against whom to bring a claim for contribution and indemnity, rarity is not impossibility. In fact, the rarity of such a possibility underscored for Leach J. the somewhat modest concession to fairness of making the limitation period for contribution and indemnity claims subject to discoverability.

[32]           With due respect to the contrary view, I prefer the interpretation adopted by Leach J.

[33]           First, this interpretation is consistent with the plain meaning of the relevant provisions. As discussed earlier, section 18 is merely an interpretive provision. It specifies the date upon which the act or omission on which a claim for contribution and indemnity is deemed to have taken place. But section 18 is not a substantive provision purporting to limit the commencement of legal proceedings and, as such, it cannot operate as a “stand-alone” limitation period.

[34]           It is true that section 18 utilizes the term “deemed” rather than language referring to a rebuttable presumption or the possibility of “proof to the contrary”. But it is important to be clear about what is being “deemed” through this provision. As discussed earlier, section 18 does not deem a claim to have been “discovered” on the date of service of the underlying statement of claim; rather it deems the “date of the act or omission upon which the claim is based” to be the date of service of the underlying statement of claim. While the “date of the act or omission upon which the claim is based” is certainly a key date in the determination of the date upon which a claim is “discovered”, that determination can only be made through the application and operation of sections 5(1)(a), (1)(b) and 5(2) of the Act, which would necessarily include consideration of the qualifying language “unless the contrary is proved” as found in section 5(2).

[35]           Presumably, the legislature did not include language referring to “proof to the contrary” in section 18 because it did not want to leave any room for argument or doubt on the question of the date upon which the presumption in section 5 (2) have effect in cases of claims for contribution and indemnity. But the absence of any reference to a “rebuttable presumption” in section 18 does not in any way suggest that the presumption in section 5(2) should be ignored or read out of the Act.

[36]           As Leach J. pointed out in Demide, if section 18 is interpreted as creating an absolute two-year limitation period for claims for contribution and indemnity, section 15 of the Act is thereby rendered redundant. Yet this could not have been the intention underlying section 18 since it expressly referred to section 15. Unlike section 5(2), section 15 does not make reference to a rebuttable presumption or provide the possibility of proof to the contrary. Therefore, the effect of section 18 in relation to section 15 is to provide an absolute 15 year limitation period for claims for contribution and indemnity, commencing on the date of the service of the statement of claim against the first alleged wrongdoer.

[37]           It is a well-established principle of statutory interpretation that the legislature does not intend to produce consequences which would render a statute illogical or incoherent, or which render some aspects of it pointless or futile.[6] In my view, it would be illogical and incoherent for the legislature to provide that claims for contribution and indemnity are subject to an absolute two-year limitation period, while simultaneously providing that the same claims are subject to an absolute 15 year limitation period. The legislature cannot have intended to say “X” and “not-X” at the same time.

[38]           While there have been differing views expressed regarding the effect of section 18 in relation to section 5(2), a recent decision of the Court of Appeal suggests that the principle of discoverability does in fact apply to claims for contribution and indemnity, although the Court did not expressly deal with that issue in its reasons. In Fennell v. Deol,[7] a driver in a four vehicle accident had commenced a personal injury claim against one of the other drivers (“Shergill”) on August 16, 2012. On October 20, 2014, Shergill served a statement of defence and cross-claim, asserting a claim for contribution and indemnity against a third driver involved in the accident. Shergill’s claim for contribution and indemnity was commenced more than two years from the date he was served with the original statement of claim. The Court of Appeal noted that the two-year limitation period presumptively ran from the date Shergill was served with the statement of claim. Nevertheless, because Shergill neither knew nor ought to have known of the facts necessary for his cross-claim prior to October 20, 2012, his cross-claim was timely for purposes of the Act.

[39]           Further support for this approach to section 18 is provided by comments made by Simmons J.A. in Placzek v. Green,[8] where she observed that, when read in combination with section 4 and section 15, section 18 “establishes the date of service of the injured party’s statement of claim as the presumed commencement date for the basic two-year limitation period in the actual commencement date for the ultimate 15 year limitation period with respect to contribution and indemnity claims.” The use of the word “presumed” is significant, since it suggests that the combined effect of section 18 and section 5 (2) is to create a rebuttable presumption, capable of being displaced by lack of actual knowledge.

[40]           In short, I conclude that the principle of discoverability does apply to claims for contribution and indemnity under the Act.

In Marjadsingh v. Toronto Transit Commission v. Kahlon, Master Jolley took a similar approach:

[17]           While most cases have found that the limitation period for contribution claims is not extended by the discovery principle, the court requires more than a tallying up of the number of decisions for and against that proposition to make such a determination.

[18]           The two divergent lines of authority are found in Miaskowski v Persaud2015 ONSC 1654 (CanLII) on the one hand and Demide v. Canada2015 ONSC 3000 (CanLII) on the other. In Miaskowski, the court held that the discoverability principle does not apply to section 18 of the Limitations Act, 2002.Demide took the contrary position.

[19]           The preamble to subsection 18(1) of the Limitations Act, 2002 states that the section is “for the purposes of subsection 5(2) and section 15”.  Subsection 5(2) legislates a presumption about when a party had knowledge of the events giving rise to a claim. It provides that a party is presumed to know the elements in subsection 5(1) on the date they occurred (the “presumed discovery date”).  Subsection 18(1) then deals with the presumed discovery date for contribution claims. It provides that the presumed discovery date for a claim for contribution is the date when the party first had knowledge or was aware it was being sued, i.e. the date it was served with the claim. In either case, the purpose of the section is to set a presumed discovery date.

[21]           Two earlier Court of Appeal decisions that discussed subsection 18(1) spoke in terms of the limitation period being “presumed” to run from service to the statement of claim. (Waterloo Region District School Board v. CRD Construction Ltd.2010 ONCA 838 (CanLII) at paragraphs 23-24; Placzek v. Green2009 ONCA 83 (CanLII), [2009] O.J. No. 326 at paragraph 24 (C.A.)). They did not directly address whether the presumption was conclusive or rebuttable.

[22]           As a policy matter, the courts accept that parties should not be deprived of their right to sue before they know, or reasonably should know, they have a claim. I would find it as problematic to deprive a third party who did not and could not have discovered its claim for contribution and indemnity within two years of the claim being served on it as it would be to deprive a plaintiff of the right to pursue a claim that it did not or could not discovered within the two year presumptive limitation period, unless the legislation clearly dictated that result.

[23]           The courts have accepted that subsection 18(1) can just as easily be read to include a discoverability period as read to mean a fixed limitation period (for instance, Hughes v. Dyck2016 ONSC 901 (CanLII) at para 37). Absent a determination by the Court of Appeal that section 18(1) is to be read as an absolute limitation period that is not subject to the principle of discoverability, I would interpret the section, as did Mr. Justice Leach, as providing a rebuttable presumption. I do not see this interpretation to undermine the principles of efficiency and certainty underlying the Limitations Act any more than does the recognition of the discoverability principle to a main claim. I find it to be consistent with the policy of not depriving parties of their claims before they are even aware of them. I adopt the following language from Demide:

88. As Justice Sharpe emphasized in Canaccord Capital Corp. v. Roscoe, [2013 ONCA 378] 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 that 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 providing 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 indicated by the legislation.

[24]           A number of the cases on this issue, including Miaskowski, have noted that it would be a “rare case” where a defendant would not know the parties against whom to claim contribution and indemnity within the limitation period. Those cases rely on that rarity as a basis for finding the limitation period to be absolute. If indeed it would be a “rare case”, then I would posit that the risk of wreaking havoc on a statutory regime by allowing the third party in those few cases to rebut the presumption is slight.

[25]           Miaskowski was influenced by the fact that subsection 18(1) does not refer to the presumption being rebuttable but uses deeming language to determine when the limitation period runs. Absent mention of the presumption being rebuttable, Perell, J. was of the view that the limitation period was absolute. The court in Demide also considered the fact that subsection 18(1) did not reference the limitation period being rebuttable. I agree with Mr. Justice Leach’s analysis at paragraph 87 in Demide that there was no need to provide for the rebuttal language in subsection 18(1) as it is already present in subsection 5(2).

[26]           Subsection 5(2) provides a presumed discovery date for non-contribution claims, the date of the occurrence.  Subsection 18(1) changes only the meaning of the presumed discovery date in subsection 5(2) to the date on which a claim was served, in the case of contribution claims. On my reading, I see nothing that would remove from subsection 5(2), and therefore subsection 18(1), the last part of the subsection, the ability of a party to “prove to the contrary” that the presumed discovery date was a different date. The ability to rebut the “presumed discovery date”, whether it be the date of the occurrence under subsection 5(2) or the date of service of the claim under section 18, remains intact.

[27]           As to section 15, it provides an ultimate limitation period whereby no proceeding shall be commenced in respect of a claim after the 15^thanniversary of the day on which the act or omission on which the claim is based took place. For contribution and indemnity claims, subsection 18(1) deems the date on which “the act or omission took place” to be the date of service of the claim on the third party, as opposed to the “act or omission” that set the litigation wheels in motion. I agree with Leach, J. that there would be no reason to reference section 15 in the preamble to subsection 18(1) if claims for contribution and indemnity were invariably barred two years after the date of service of the claim. The ultimate 15 year limitation period and the reference to section 15 would be redundant.

[28]           For these reasons, I find the limitation period in subsection 18(1) of the Limitations Act, 2002 to be rebuttable rather than conclusive.

I understand that Marjadsingh is under appeal. I am hopeful the Court of Appeal will uphold it and bring some certainty (and common sense) to the issue.

Ontario: No, s. 16(1)(a) is not a secret loophole

Since the early days of the Limitations Act, plaintiffs have ventured the not especially clever argument that by seeking only a declaration they can engage the exception in s. 16(1)(a) of the Limitations Act for a proceeding for a declaration if no consequential relief is sought.

As two recent decisions remind us, this strategy is transparent and ineffective.

In Skylark Holdings Limited v. Minhas, the defendants moved to dismiss the plaintiffs’ proceeding as statute-barred. In response, the plaintiffs moved to amend the statement of claim to limit the relief claimed to a declaratory judgment of legal and beneficial ownership of shares. In this way, the plaintiffs intended to engage s. 16(1)(a). The motion judge agreed with the plaintiffs and found that the court could make declare ownership without consequential relief.

The Divisional Court granted the defendants’ appeal. It followed the Court of Appeal’s recent decision in Alguire, delivered after the motion judge’s decision, and assessed the essential nature of the plaintiffs’ relief. It concluded that the plaintiffs were attempting an “end run” around the limitation period:

[8]                This case was only decided after the motions judge made his decision and it is therefore not surprising that the motions judge did not conduct his analysis in accordance with the directions set out in the Court of Appeal’s decision. This was an error of law. To decide whether s. 16 (1)(a) is being used to circumvent an application limitation period, the motions judge was required to assess the essential nature of what the respondent is seeking. In this case, the respondent claims to be entitled to a five per cent interest in 2012111 Ontario Inc. as a result of the fulfillment of the 2002 agreement. Any entitlement that it has today flows from a contract – the meaning and enforceability of which is in dispute – but any cause of action that the respondent may have in respect of the 2002 contract is statute barred.

[9]               To overcome this difficulty, the respondent seeks to use the device of a declaration to do an end run around the applicable limitation period.

[10]           Moreover, were the respondent to obtain the declaration, the circumstances are akin to those found by Madam Justice Harvison Young in para. 16 of Bailey v. Canada (Attorney General), 2008 CanLII 53128 (ON SC). It is readily apparent from the record that the declaration sought will be ineffective without further mandatory relief directed to the corporation or a shareholder to implement the shareholding interest if possible. A determination that the respondent is entitled to a five per cent interest does not say from whom and by what means the shareholding interest is to be implemented. Therefore, a declaration of entitlement alone is of no avail without further consequential relief which brings it outside s. 16 (1)(a) of the Limitations Act 2002.

Similarly, in Van Halteren v. De Boer Tool Inc., the Superior Court looked at the pith and substance of relief sought in regards of shares and determined that it was consequential:

[6] Section 16.1 (1) of the Limitations Act, 2002 provides that there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought. The present claim, however, does not fall under that exception. The pith and substance of the claim is damages or a property interest in shares to compensate for $500,000 advanced to the defendant. No shares actually exist. It would be impossible for the court to make a declaration of rights with respect to shares that cannot be identified. The only meaningful remedy for the plaintiff would be in the nature of consequential relief. Accordingly the applicable prescription is the general limitation of two years after the cause of action is discovered or discoverable.

As an aside, the curious thing about s. 16(1)(a) is that it’s arguably unnecessary. The Limitations Act applies to “claims” pursued in court proceedings, which are defined in s.1 as remedying loss resulting from wrongful conduct. If a plaintiff doesn’t seek consequential relief, like damages, then the plaintiff isn’t pursuing a claim, and if there is no claim the Limitations Act doesn’t apply.

Ontario: Rebutting presumptive discovery is the plaintiff’s burden

The Court of Appeal decision in O’Brien-Glabb v. National Bank of Canada states the principle that the plaintiff bears the onus of establishing the inappropriateness of a proceeding as part of a discovery argument:

[13] We agree with the appellant that it was the respondent who bore the onus of leading evidence to establish on a balance of probabilities that a proceeding was not appropriate in 2010 (see: Miaskowski (Litigation guardian of) v. Persaud, 2015 ONCA 758(CanLII) at para 27; Fennell v. Deol, 2016 ONCA 249 (CanLII) at para16; and Galota v. Festival Hall Developments Ltd., 2016 ONCA 585 (CanLII) at para 15).

Even a vague familiarity with the operation of s. 5 of the Limitations Act means this principle is self-evident, but it’s nevertheless helpful to have it stated explicitly.

Ontario: Does the limitations act apply to Notices of Objection?

In the Wall Estate, the court held that the Limitations Act does not apply to a claim asserted in a beneficiary’s Notice of Objection to Accounts:

[1] The discreet issue for consideration at this motion is as follows: Can an estate trustee move to strike a beneficiary’s Notice of Objection to Accounts in the face of the estate trustee’s Application to Pass Accounts, based on the Limitations Act, 2002, or laches or acquiescence? For reasons that follow, I am satisfied that the beneficiary, Elizabeth Wall, is not barred from filing an objection to the accounts for the entire period under administration.

Marjorie Wall died in 2005. The objector was Elizabeth Wall, her daughter and beneficiary of the estate. Marjorie left the bulk of her estate to her two children in trust until they attained the age of 60 years. Both children were under 60 at the time of Marjorie’s death. The trustee had absolute discretion to pay funds to the children during their lifetime prior to reaching 60. If they didn’t reach 60, the will provided that the estate’s residue was to be divided amongst nieces and nephews. Elizabeth was 54 at the time of the application, so she had a vested interested in the discretionary trust and a contingent interest in the residue of the estate.

In response to her objection, the trustee took the position that he was not required to address it because it was time-barred, either by the Limitations Act or equity.

The court disagreed. Relying on the decision in Armitage, the court reasoned that if a passing of accounts doesn’t fit the definition of a “claim” in the Limitations Act, neither does a Notice of Objection:

[31] Based on the facts in Armitage, Hourigan J.A. found that the passing of accounts does not fit within the definition of a claim within the Limitations Act, 2002. In my view, if the passing of accounts does not constitute a claim, I am not satisfied that a Notice of Objection is a claim. In filing a Notice of Objection, the beneficiary is seeking answers to questions about steps taken by the estate trustee during the currency of an administration of an estate. Answers to those questions may assist the beneficiary in consenting to the passing of accounts without the necessity of a formal hearing. An absence of consent will require a formal hearing. A formal hearing will assist the court in determining if the fees sought and investment steps taken are appropriate under all the circumstances.

[32] The objections taken at their highest may result in a reduction or loss of compensation for the estate trustee or other remedies. In this case, if the objections are successful to any extent, no additional funds would be payable immediately to Elizabeth as beneficiary of the discretionary trust. The corpus of the estate would be enlarged, increasing the funds available for the discretionary trust, and ultimately, could increase the amount available to be paid to Elizabeth, but only if she survives to age 60. On the facts here, I am not satisfied that the Notice of Objection rises to the level of a “claim” as contemplated by the Limitations Act, 2002.

This reasoning is problematic. The threshold question is whether the Notice of Objection contains a “claim”. If so, as the Limitations Act applies to all claims pursued in court proceedings, it would limit the claim pursued in the Notice of Objection. Section 1 of the Limitations Act defines “claim”: “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. Accordingly, answering the threshold question requires assessing whether the elements that comprise a claim—wrongful conduct and resulting damage—are present.

In Armitage, the Court of Appeal found that an attorney for property’s application to pass accounts was not a “claim”. The application did not seek a remedy for any damage, but rather court approval of the attorney’s conduct.

The decision Wall does not quote the definition of “claim” and does not explicitly consider its elements. Rather, it reasons that if the application to pass accounts in Armitage was not a “claim”, then neither was the Notice of Objection. This is not a sound limitations analysis.

Indeed, the decision certainly gives the impression that the Notice of Objection was “claim”. In it, Elizabeth alleged that the trustee had wrongfully carried out his duties resulting in a diminution of the funds available to her; in other words, she sought to remedy damage resulting from wrongful conduct.

It may be that the court arrived at the correct decision, but from a limitations perspective it’s a very dubious decision.

Update!

Leigh Sands kindly brought to my attention Iaboni Estate v. Iaboni in which an application judge considered a limitations defence raised in response to a notice of objection without any suggestion that this is an unsettled area of the law:

Did the limitation periods expire, such that the claims made in his Notice of Objection are out of time?

[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.

The Court of Appeal upheld the decision:

[10] We are not persuaded that the motions judge made any error. The appellant consented to the passing of accounts from the time of the appointment of BNS, and has not appealed that aspect of the order. Even if the appellant were able to identify errors with respect to the abuse of process and Limitations Act claims, the motions judge’s findings of fact on the merits are fatal to the appeal. She made findings that the appellant had not substantiated his suspicions with respect to the discharge of mortgage, the share certificate, or general dissipation of funds. She also found the evidence of the respondent Norma to be credible and reliable. Those findings are entitled to deference and are dispositive of the appeal.

It is certainly arguable that this decision is determinative of the issue, even if the court determined it without analysis or acknowledgement that it is the subject of debate.

However, Matthew Furrow, who is a far greater authority on these issues than me, disagrees. He notes that really, all the Court held was that the facts were dispositive of the appeal, and not the limitations analysis. I think he’s right, which means uncertainty remains.