November 2019 – Under the Limit

The Supreme Court on the application of common law discovery

In Pioneer v. Godfrey, the Supreme Court considered the application of common law discovery to statutory limitation periods. It is now the leading case on the subject.

The Court held that the common law discovery rule applies only when a limitation period runs from the accrual of a cause of action, or “some other event that can occur only when the plaintiff has knowledge of his or her injury”.

It doesn’t apply when a statutory limitation period runs from an event unrelated to the accrual of the cause of action. This is because legislature displaces the discovery rule when linking the limitation period to an event unrelated to the plaintiff’s cause of action.

In determining whether a limitation period runs from the accrual of a cause of action, substance prevails. Even where a statute doesn’t explicitly state that a limitation period runs from accrual, the discovery rule applies if the limitation period in substance commences on accrual .

Thus s. 36(4) of the Competition Act, which the appeal concerned, is subject to discoverability:

[44] The text of s. 36(4)(a)(i) provides that no action may be brought under s. 36(1)(a) after two years from a day on which conduct contrary to Part VI occurred. From this, it is clear that the event triggering this particular limitation period is an element of the underlying cause of action. That is, the limitation period in s. 36(4)(a)(i) is triggered by the occurrence of an element of the underlying cause of action — specifically, conduct contrary to Part VI of the Competition Act. Therefore, it is subject to discoverability (Fanshawe College of Applied Arts and Technology v. AU Optronics Corp., 2016 ONCA 621 (CanLII), 132 O.R. (3d) 81, at para. 18).

Justice Côté dissented. When a limitation period commences on the occurrence of an element of a cause of action rather than the cause of action’s accrual, it does not necessarily follow that the discovery rule applies. This is because the occurrence of the an element may not depend on the plaintiff’s knowledge:

[151]                     Conversely, “the occurrence of an element of the underlying cause of action” (Brown J.’s reasons, at para. 44) will not always fit within either category outlined above at para. 149. It may be that the occurrence of such an event does in fact depend on the state of the plaintiff’s knowledge, but unlike the accrual of a cause of action, this does not invariably follow as a matter of logical necessity. In Peixeiro, for example, this Court held that the point at which damages are sustained — a constituent element of (among other things) the tort of negligence — depends on when the plaintiff actually has knowledge of his or her injury. Knowledge will not form part of every element of the cause of action in negligence, however. A breach of a standard of care, for example, may occur years or even decades before the plaintiff first learns about it. Although such a breach is a prerequisite to a successful claim in negligence, it is also something that takes place without any regard to the plaintiff’s state of mind.

[153]                     With this in mind, I am respectfully of the view that my colleague’s approach is undermined by the well-settled principle that the discoverability rule is fundamentally a rule of statutory interpretation. The fact that a limitation period begins running upon the occurrence of anelement (and not upon the accrual or arising) of the plaintiff’s cause of action is not, on its own, indicative of any legislative intent regarding the applicability of the discoverability rule. As I have already indicated, my colleague’s conclusion is the same as the one reached by the Court of Appeal in this case and by the Ontario Court of Appeal in Fanshawe: in such circumstances, according to him, discoverability applies automatically. This, however, creates an arbitrary distinction between triggering events that are related to the cause of action and those that are not, despite the fact that both may occur independently of the plaintiff’s state of mind. How can it fairly be said that the legislature intended the discoverability rule to apply to one and not the other? Although knowledge is necessary for a cause of action to fully accrue to the plaintiff, it does not follow that an element of the cause of action also occurs only when the plaintiff has knowledge thereof.

[154]                     A preferable approach is instead one that considers each statutory limitation clause on its own terms, recognizing that a triggering event that relates to a cause of action can, but need not, be dependent upon the plaintiff’s state of mind. This approach is faithful to this Court’s jurisprudence, and respectful of the notion of discoverability as an interpretative tool and not a general rule that allows clear statutory wording to be disregarded. For my part, I would reaffirm the approach laid out in Fehr without any modification.

Thus discoverability doesn’t apply to the s. 36(4) limitation period:

[157]                     The wording of the limitation period set out in s. 36(4)(a)(i) provides ample support for the proposition that the two-year period commences independently of when the plaintiff first learns of the wrongdoing. Rather than having the limitation period commence upon the accrual of the cause of action (as was the case in Central Trust and M. (K.)), Parliament decided that it would instead commence on “a day on which the conduct was engaged in” — which, contrary to the position taken by my colleague, is not “wording to [the same] effect” as “accrual of the cause of action” (paras. 37 and 41). There is simply no link between this triggering event and the plaintiff’s state of mind; it is, in short, an “event which clearly occurs without regard to the injured party’s knowledge”. The Certification Judge’s reading of this provision led him to the same conclusion (para. 54 (CanLII)). It was the existence of conflicting jurisprudence on this point that caused him “not [to be] satisfied that it is plain and obvious that the discoverability principle can never apply to the limitation period in s. 36(4)” (para. 58).

[158]                     I acknowledge that the “discoverability rule has been applied by this Court even to statutes of limitation in which plain construction of the language used would appear to exclude the operation of the rule” (Peixeiro, at para. 38). However, a consideration of the context surrounding s. 36(4)(a)(i) lends further support to the conclusion that the discoverability rule does not apply.

[159]                     First, the cause of action in s. 36(1)(a) is based on two essential elements: (i) the defendant engaging in conduct contrary to any provision of Part VI, and (ii) the plaintiff suffering loss or damage as a result of such conduct. It is only upon the occurrence of both events that the plaintiff can commence proceedings on the basis of this statutory cause of action. Cognizant of this, and of the fact that conspiracies of this nature take place in secret, Parliament decided that the limitation period would not begin when the plaintiff actually sustained loss or damage, but rather when the defendant engaged in the prohibited conduct. It is important to keep in mind that the point at which the conduct is engaged in necessarily precedes the point at which a claimant will suffer loss or damage as a result of such conduct. I would also note that the offence under s. 45 is complete as soon as an unlawful agreement is made, meaning that the “conduct” is “engaged in” even if the agreement is not actually implemented or prices do not actually increase. It follows as a direct consequence of this legislative choice that the limitation period can in fact expire before the plaintiff is in a position to commence proceedings under s. 36(1)(a).

[160]                     Second, s. 36(4)(a)(ii) provides a mechanism for the plaintiff to advance a claim that may be barred by s. 36(4)(a)(i): even if two years have expired from the day on which the prohibited conduct was engaged in, the limitation period will restart on the day on which criminal proceedings relating to the impugned conduct are finally disposed of. While s. 36(4)(a)(ii) applies only where the alleged conduct contrary to Part VI is the subject of criminal prosecution, it nevertheless provides an indication that Parliament was aware of the strictness of s. 36(4)(a)(i) and chose to enact this provision as the only means of relieving against it.

[161]                     Third, and unlike claims subject to the general limitation period in British Columbia’s Limitation Act, S.B.C. 2012, c. 13, s. 21, Parliament has not subjected claims under s. 36(1)(a) to any ultimate limitation period. Interpreting s. 36(4)(a)(i) as commencing only when the underlying conduct becomes discoverable will therefore have the effect of leaving defendants at risk of lawsuit indefinitely. As Paul-Erik Veel helpfully observes, the result would be that “companies could face claims decades later, well after the employees involved in the alleged conspiracy may have left and documents lost, without any ability to defend themselves” (Waiting forever for the axe to drop? Discoverability and the limitation period for Competition Act claims, Lenczner Slaght, August 12, 2016 (online)). This runs contrary to the certainty and evidentiary rationales that underlie the law of limitations.

[162]                     Fourth, the two-year limitation period was enacted by Parliament at a time when limitation periods were comparatively much longer. For example, the provincial limitations statutes that were in force at the time in Ontario and British Columbia set out a general limitation period of six years (The Limitations Act, R.S.O. 1970, c. 246, s. 45(1); Statute of Limitations, R.S.B.C. 1960, c. 370, s. 3). The relatively short limitation period at issue here, which commences even before the cause of action fully crystalizes, provides a further indication of the premium that Parliament placed on granting repose to defendants and encouraging diligence by potential plaintiffs.

I find Justice Côté’s reasoning more persuasive. I say that with the qualification that I am not as conversant with common law discovery jurisprudence as I am with codified discovery jurisprudence.

That said, I am sufficiently conversant to recognise a curious fiction that underlies the court’s competing arguments. For the most part, courts apply common law discovery to limitation periods that predate the rule.

Take for example the limitation period in s. 38(3) of the Trustee Act, which commences on death. It predates the 1997 Supreme Court decision in Peixeiro which determined that discoverability was of general application. Thus in 2000, the Court of Appeal in Waschkowski noted that “Until the later decision of the Supreme Court of Canada in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, 151 D.L.R. (4th) 429, it was not clear whether the discoverability rule applied to all limitation provisions, or whether its application depended on the actual wording of the statutory limitation”

Section 38(3) dates from 1990. It’s possible, but doubtful, that the legislature drafted s. 38(3) as a response to, say, the early SCC discoverability decisions like 1986’s Central Trust. However, it’s beyond doubt that the Legislature did not draft the limitation periods in the former Limitations Act mindful of the discoverability rule. Some of those limitation periods were centuries old before discoverability was even a glimmer in the Legislature’s eye.

Similarly, it’s not clear to me how Parliament could have intended discoverability to apply to s. 36 of the Competition Act when that provision appears to have been enacted in 1985, a year before Central Trust.

So, the court really isn’t arguing about what Parliament intended subjectively, because Parliament didn’t know that discoverability was going to be a rule of general application. Instead, the court is trying to rationalise common law discovery with limitation periods drafted before the rule existed. I think Justice Côté’s approach is the soundest conceptually.

In that regard, I note another problem with the majority’s analysis. If a limitation period commences on the occurrence of an event that forms part of a cause of action, and if discoverability applies, it would be possible to discover the event before the cause of action accrues. The limitation period would commence before there is a legal basis for an action. This wouldn’t happen with s. 36(4), but insofar as the majority is setting out a rule, it’s one with problematic implications.

There are two other noteworthy aspects of the decision:

First, the decision includes what is now the leading consideration of fraudulent concealment. Importantly, the court clarifies that the doctrine does not require a “special relationship between the parties” as its conventional formulation suggests:

[53] While it is therefore clear that equitable fraud can be established in cases where a special relationship subsists between the parties, Lord Evershed, M.R. did not limit its establishment to such circumstances, nor did he purport to define exhaustively the circumstances in which it would or would not apply (see T.P. v. A.P., 1988 ABCA 352 (CanLII), 92 A.R. 122, at para. 10). Indeed, he expressly refused to do so: “[w]hat is covered by equitable fraud is a matter which Lord Hardwicke did not attempt to define two hundred years ago, and I certainly shall not attempt to do so now” (Kitchen, at p. 249, emphasis added).

[54] When, then, does fraudulent concealment arise so as to delay the running of a limitation period? Recalling that it is a form of equitable fraud, it becomes readily apparent that what matters is not whether there is a special relationship between the parties, but whether it would be, for any reason, unconscionable for the defendant to rely on the advantage gained by having concealed the existence of a cause of action. This was the Court’s point in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19 (CanLII), [2002] S.C.R. 678, at para. 39:

[Equitable fraud] “… refers to transactions falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained” (p. 37). Fraud in the “wider sense” of a ground for equitable relief “is so infinite in its varieties that the Courts have not attempted to define it”, but “all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken” [Emphasis added.]

It follows that the concern which drives the application of the doctrine of equitable fraud is not limited to the unconscionability of taking advantage of a special relationship with the plaintiff. Nor is the doctrine’s application limited, as my colleague suggests, to cases where there is something “tantamount to or commensurate with” a special relationship between the plaintiff and the defendant (paras. 171 and 173-74). While a special relationship is a means by which a defendant might conceal the existence of a cause of action, equitable fraud may also be established by pointing to other forms of unconscionable behaviour, such as (for example) “some abuse of a confidential position, some intentional imposition, or some deliberate concealment of facts” (M. (K.), at p. 57, citing Halsbury’s Laws of England (4th ed. 1979), vol. 28, para. 919). In short, the inquiry is not into the relationship within which the conduct occurred, but into the unconscionability of the conduct itself.

Second, the majority formulates discoverability as applying when “a limitation period runs from the accrual of cause of action or knowledge of the injury”. The language “knowledge of the injury” comes from Peixero, which takes it from the MB CA decision in Fehr, where it appears without any explanation. I don’t know what it means. Is it a reference to a circumstance where a wrong isn’t actionable unless it causes an injury that rises above a threshold? I struggle to think of other scenarios where knowledge of an injury causes time to run, but knowledge of the cause of action wouldn’t.

It’s odd to me that the majority thought this would be so self-evident that no explanation was required. At risk of a little (inexcusable) immodesty, the majority and the dissent cite the my text book: this is good indication that if I don’t know what it means, I’m not sure the court could reasonably assume it’s common knowledge.

Ontario: whose knowledge binds a corporation?

Whose knowledge binds a corporation for the purpose of a s. 5 discovery analysis?

The Superior Court decision in 1511419 Ontario Inc. v. KPMG considers this issue:

[91]           The Defendants dispute that the Minutes of the Board are in fact the “best evidence” of what the Board knew in or around the time of the January 2012 Transaction.

[92]           They submit that a full meeting of the Board is not required for a corporation to acquire knowledge that it would otherwise obtain through its directing minds such as officers or directors: DBDC Spadina Ltd. v. Walton, 2018 ONCA 60 (CanLII), 419 D.L.R. (4th) 409, at paras. 59-60, leave to appeal to S.C.C. allowed, 2018 CarswellOnt 19181; Canadian Dredge and Dock Company Limited v. R., 1985 CanLII 32 (SCC), [1985] 1 S.C.R. 662, at pp. 679-685, 707-709, 713-714, and 717-718.

[93]           They further go on to submit that it is also not clear what was recorded in the Board or Audit Committee Minutes, and overall the Minutes are not reliable.

[94]           Cash Store responds by submitting that, as a matter of law, the directing mind of a public corporation is its board of directors, acting as a collective: Stern v. Imasco Ltd. (1999), 1999 CanLII 14934 (ON SC), 1 B.L.R. (3d) 198 (Ont. S.C.), at paras. 98-113.

[95]           I do not propose to determine this dispute on this motion. I am prepared to accept that the Board Minutes are, at the very least, some evidence of what Cash Store knew at the relevant time periods.

Surprisingly, this significant limitations question remains to my knowledge unanswered. It seems to me that the answer will be, as it usually is in the context of discovery arguments, “it depends on the facts”.

However, I am also mindful of the policy implications of the issue. It’s problematic to deem the knowledge of directing minds to be the knowledge of a corporation for discovery purposes. If an employee discovers a claim, and that discovery does not bind the corporation, the employee could determine when the limitation period commences by determining when to disclose her knowledge of the discovery matters to a directing mind. This risks encouraging corporations to sit on their rights until they consider it most advantageous to exercise them. A directing mind of a corporation might advise an employee to refrain from disclosing any fraud allegations until confident in the success of a claim arising from them. This would be antithetical to the basic purpose of the limitations scheme to encourage the diligent and timely prosecution of claims.

Lastly, the decision is a warning against asking the court to decide a too-complicated limitations defence on summary judgment:

[113] I cannot determine this matter in a fair and just manner by way of summary judgment. A review of the aforementioned affidavits and voluminous yet limited record do not provide the adequate context to determine the limitation period dispute. Particularly, I have no meaningful understanding as to the interaction between the parties in and around the time of the January 2012 Transaction that would assist me in determining the limitation issue. I also have no meaningful understanding of the assistance, or lack thereof, the Defendants rendered to Cash Store before, during, or after the January 2012 Transaction closed. The actions involve a complicated factual matrix involving professional negligence and a significant damages claim. In my view, the usual rule enunciated by Nordheimer J.A. in Mason should be followed. A full evidentiary record including viva voce evidence of the parties is required to achieve a fair and just result.

Ontario: the timing of amendments, and some words on laches

The Superior Court in Barker v. Barker is perhaps the most extreme example of an eleventh-hour motion to amend to plead discoverability. The plaintiffs moved in the third week of trial to amend their Statement of Claim to plead reliance on ss. 5 and 16 of the Limitations Act in response to the defendants’ limitations defence (the decision is silent on why the plaintiffs chose to amend their Statement of Claim rather than file a Reply). Justice Morgan didn’t find that the delay was fatal to the motion:

[8] Whether or not the motion to amend would have been better brought before trial began rather than in its third week, what is clear is that the limitations issues, including as the Court of Appeal says, the application of section 16(1)(h.2) and the doctrine of discoverability, come as no surprise to the Defendants. They knew these issues were raised by the Plaintiffs in the 2017 motion before Perell J. Plaintiffs’ counsel has reproduced in their motion record copies of the factums from the 2017 motion, where these issues were argued for many paragraphs by both sides. As indicated above, the Defendants all knew that the 2018 judgment of the Court of Appeal had specifically reserved these issues for a later date, mentioning the trial itself as the likely time for canvassing section 16(1)(h.2) and discoverability.

[9] Although mid-trial pleadings amendments are not encouraged as a matter of case management, Rule 26.02(c) provides that a pleading may be amended at any time, without limitation, with leave of the court. Moreover, the amendment rule is written in mandatory language. Rule 26.01 provides that, “On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.” Accordingly, a party seeking to prevent a pleading from being amended “must establish a link between the non-compensable prejudice and the amendment. It must show that the prejudice arises from the amendment”: Iroquois Falls Power Corp. v Jacobs Canada Inc., 2009 ONCA 517 (CanLII), at para 20.

The decision is also noteworthy for its consideration of the role of discoverability in a laches analysis. It is impossible to assess the impact of delay in suing without knowing when the plaintiff first ought to have known of the claim:

[25]           Embedded in this argument is the idea that different questions would be asked in an equitable laches case than in a statutory limitation case. More specifically, it assumes that discoverability, which is an integral part of a limitation period analysis both at common law and under statute, is not at issue in a laches analysis. That sounds somewhat plausible at first blush – after all, the equitable doctrine of laches is, like all doctrines of equity, related to but different in nuance from limitation periods as its nearest relative at law. Limitation periods are hard numerical rules while laches is a principle that requires a weighing of the competing equities: Manitoba Metis Federation Inc. v Canada (Attorney General), 2013 SCC 14 (CanLII), [2013] 1 SCR 623, at paras 145-6. That difference, however, is not always as substantive as it may appear.

[26]           Almost a century ago, English legal scholar John Brunyate stated, “since delay by a plaintiff who has been ignorant of his right of action will not amount to laches, we should expect that…time will not run until the plaintiff is aware of his right of action.” Limitation of Actions in Equity (London: Stevens & Sons, 1932), c. 2, cited approvingly in M(K) v M(H), 1992 CanLII 31 (SCC), [1992] 3 SCR 6. We need not delve into legal history to see that that logic makes sense. It would be impossible to evaluate the equities of a delay in bringing an action without knowing when the Plaintiff first realized he or she had been wronged.

[27]           In fact, the weighing of equities in a laches analysis specifically involves asking whether the claimant has acquiesced in the delay, which in turn involves evidence of the claimant’s state of mind and level of knowledge of the facts on which the cause of action is premised: Manitoba Metis Federation, at para 147. One can’t acquiesce in something one hasn’t discovered. It is little surprise, therefore, that the Supreme Court of Canada has indicated that the equitable doctrine of laches essentially mirrors the common law doctrine of discoverability: “It is not enough that the plaintiff knows of the facts that support a claim in equity; she must also know that the facts give rise to that claim”: M(K), supra, citing Re Howlett, [1949] Ch. 767.

[28]           The Supreme Court in M(K) has specifically confirmed with respect to discoverability and laches that “both doctrines share the common requirement of knowledge on the part of the plaintiff.” The indicia of that knowledge – what did the Plaintiff know with respect to the alleged wrongs and his legal rights and when did he know it – will be the subject of discovery under both rules. It defies logic and the nature of the two very similar legal principles to say that a Defendant knew full well he had to discover on the issue of laches, but that he is greatly disadvantaged to now learn that he also had to discover on the issue of discoverability. The information sought and the questions asked will be virtually the same.

This analysis came in the context of a rather astonishing (and unsuccessful) argument by the Crown. It denied having notice that discoverability was in issue despite having asked questions about discoverability on examination for discovery. The Crown explained this contradiction by throwing a junior under the bus: apparently, the junior went rogue and asked the discoverability questions without instructions:

[19]           Turning to the discoverability doctrine, Defendants’ counsel contend that they have not had an opportunity to examine the Plaintiffs for discovery on the discoverability issue. They submit that at this late date, with the trial already underway, the motion to amend must either be dismissed outright or granted together with an adjournment of the trial so that further discovery can be conducted. Otherwise, they say, they are made to essentially defend a trial by ambush.

[20]           Counsel for the Plaintiffs responds with some incredulity. Plaintiffs’ motion record contains over a thousand pages of discovery transcripts in which the discoverability issue was explored with various Plaintiffs by Defendants’ counsel. Plaintiffs’ counsel point out that Defendants’ counsel canvassed everything from the dates that the Plaintiffs first contacted their present counsel, to previous complaints and law suits brought by any number of Plaintiffs, to the Plaintiffs’ awareness of and access to duty counsel while at Oak Ridge in the 1970s, to the letter writing campaigns engaged in by several of the Plaintiffs over the decades seeking to put a stop to the kind of acts in issue in this litigation. In addition, in the affidavits sworn by each of the Plaintiffs for the 2017 motion, and which by agreement of the parties now form part of the trial record, the Plaintiffs each provide information on the dawn of this case and how and when they personally became involved or realized that they could engage in a legal action.

[21]           Counsel for the government of Ontario at discoveries asked a number of the Plaintiffs for undertakings with respect to these issues, and followed up on those requests by sending Plaintiffs’ counsel an undertakings chart listing and describing each of the outstanding answers. The chart divided the outstanding undertakings into three categories, listing each of the undertakings as going to either “Liability”, “Damages”, or “Discoverability”. The label of this third category was not a Freudian slip; a perusal of the undertakings falling under this heading reveals precisely the kind of questions one would ask in order to unearth the opposing side’s discoverability position. Various Plaintiffs responded by indicating when in the past they learned about, and with whom and when in the past they had spoken about, the prospect of a law suit relating to their Oak Ridge experiences.

[22]           It is not surprising that Defendants’ counsel asked these questions. Discoverability, as Perell J. and the Court of Appeal pointed out, has long been an issue to be addressed in the case.

[23]           Defendants’ counsel responds by conceding that all of those questions were indeed asked, but says that they were for the most part meant to address the issue of laches as it pertains to the equitable claim of breach of fiduciary duties. It is the Defendants’ position that discoverability under the Act or at common law is a response to a defense which places an onus on the Plaintiff, and so it did not have to be canvassed at discoveries (or addressed at trial) if the Plaintiff did not specifically plead it.

[24]           At the same time, it is the Defendants’ position that with respect to the claim of breach of fiduciary duties the doctrine of discoverability does not apply either at common law or under the pre-Act limitations statutes in force in Ontario, but that the equitable doctrine of laches applies. Defendants’ counsel concedes that the onus is on the Defendant to establish the unfair delay on which the laches principle is premised. Accordingly, counsel for the Defendants explains that in their view, discoverability does not have to be explored in pre-trial examinations if the Plaintiff has not bothered to plead it, but laches has to be explored because it is clearly relevant and the Plaintiff need not plead it.

[29]           Interestingly, counsel for the Defendants conceded in argument that examinations on the issue of discoverability were in fact conducted with respect to 7 of the 28 Plaintiffs. Defendants’ counsel’s explanation for this is that, apparently, a very diligent young lawyer for the government of Ontario conducted the discoveries on those individual Plaintiffs, and was foresightful enough to pose questions exploring the discoverability issue. As for the rest of the individual Plaintiffs, other lawyers on the Defendants’ counsel team conducted those discoveries and the discoverability questions were not asked. Accordingly, the Defendants are not seeking to eliminate the doctrine of discoverability from the analysis of the limitation period with respect to 7 of the 28 Plaintiffs, but are seeking to eliminate it with respect to the remaining 21 Plaintiffs.

[30]            With respect, this position is not tenable. In the first place, counsel for Ontario asked for undertakings regarding discoverability from 13 of the Plaintiffs. If only 7 Plaintiffs were questioned about discoverability, how is it that undertakings were extracted from 6 more of them? Perhaps others on the Defendants’ counsel team were more foresightful and diligent than they have been given credit for.

[31]           But that is only part of the point. If the Defendants’ position is to be taken seriously, the young lawyer who supposedly on his or her own asked about facts going to the discoverability issue would have been fishing for information that, in the Defendants’ view, he or she had no right to ask about. Not surprisingly, Plaintiffs’ counsel did not object to this line of questioning and provided answers that now satisfy the Defendants such that they are not discounting the discoverability doctrine with respect to those 7 deponents. What was wrongful from the Defendants’ point of view when it was done has suddenly become rightful now that it helps explain some of the discoverability questions which the Defendants did in fact explore with the Plaintiffs.

[32]           Furthermore, if one lawyer on the Defendants’ team knew about the discoverability doctrine, they all knew about the discoverability doctrine. In order to put an opponent on notice in litigation, one conveys the notice to opposing counsel – any number of them or any one of them will do. If one member of a law firm of record has notice, or one member of the Ministry of the Attorney General is aware of an issue in the action, they all are presumed to have notice and be aware of the issue. The young lawyer who asked discoverability questions is not being presented as a rogue acting beyond his retainer; quite the opposite. He is being presented as a perhaps more thorough or diligent version of all the other Defendants’ lawyers.

Ontario: the limitation of indefinitely available internet defamation

At issue in Torgerson et al. v. Nijem was the limitation of a claim arising from internet defamation where the impugned words remain available indefinitely. The plaintiff argued that each day the words remain available gives rise to a new cause of action, a new claim, and a new limitation period. Justice Schabas rejected this argument: “When a plaintiff becomes aware of a specific posting on a website, time begins to run for the purpose of applying limitation periods. To hold otherwise, and allow plaintiffs to wait indefinitely to sue simply because the libel remains available, would render limitations defences meaningless and have serious implications for freedom of expression.”. The decision is well-reasoned and persuasive; I have no quibbles. This is the analysis:

[12]           Section 4 of the Limitations Act, 2002 creates a general limitation period of two years from “the day on which the claim was discovered.” Section 5(2) of the Act creates a presumption that the claim is discovered when the act or omission took place, “unless the contrary is proved.” Here, the defendant’s action in publishing the defamatory statements took place on January 18 and 19, 2016, and the plaintiff became aware of them within days, and no later than the end of January, 2016. The defendant therefore submits that it is plain and obvious that the action cannot succeed as the plaintiff did not commence this action until April 23, 2018, more than two years after the actions of the defendant were known, or “discovered”, by the plaintiff.

[13]           The plaintiff, however, relies on the “multiple publication” rule, that each publication of a defamatory communication is a separate and distinct libel, subject to its own limitation period. In the context of an electronic communication or publication on the internet, the argument goes, every time a person accesses or downloads the information there is a new claim and a new limitation period applies. In my view, the plaintiff’s position misunderstands the “multiple publication” rule and how it has been applied to the internet.

[14]           The “multiple publication” rule dates back to the somewhat infamous case of Duke of Brunswick v. Harmer (1849), 14 Q.B. 185, in which a cause of action arose after the Duke dispatched his manservant to purchase a back issue of a newspaper from the publisher in order to sue for a libel first published 17 years earlier. This, it was held, constituted a republication by the newspaper, allowing the plaintiff to avoid the limitation period. The “multiple publication” rule established in that case has been subject to criticism, especially in light of the development of the internet. American courts have rejected it, adopting a “single publication rule” in which limitation periods begin to run from the date of first publication: see, e.g., Firth v. State of New York, 775 N.E.2d 463 (NY Ct App 2002); Canatella v. Van de Kamp, 486 F. 3d 1128 (9^th Cir. 2007). And the British have now adopted a somewhat similar approach in s. 8 of the Defamation Act 2013, (U.K.) 2013, c. 26.

[15]           The multiple publication rule continues to find acceptance in Canada: see, e.g.,Carter v. B.C. Federation of Foster Parents Assn., 2005 BCCA 398 (CanLII); Shtaif v. Toronto Life Publishing Co. Ltd., 2014 ONCA 405 (CanLII). In this case it is not necessary to address the validity of the rule, other than to note that it may be seen as another way of expressing the “repetition rule”, where someone has chosen to repeat or re-publish a defamatory statement, as the law provides that every person who repeats a libel is liable as if he or she is the original speaker: see Downard, Libel (Lexis Nexis, 3^rd Ed., 2014) at paras. 5.32–5.44.

[16]           Another form of republication is found in Breeden v. Black, 2012 SCC 19 (CanLII), on which the plaintiff relies. Statements posted on the internet in the United States were read, downloaded and republished by newspapers in Ontario, creating a cause of action against the American defendants in Ontario, as the tort of defamation occurs when and where the words are read by a third party, and the republication in Ontario was foreseeable as a natural and probable consequence of the posting of the statements on the internet. This does not mean, however, that every time a person reads the defamatory words in those newspapers a new cause of action arises and limitation periods can be avoided. Applying the discoverability principle, a plaintiff must sue within two years of when he or she becomes aware of the defendant’s action in publishing the defamatory words, whether in print or on the internet.

[17]           The Ontario Court of Appeal considered republication and the multiple publication rule in Shtaif. There, the plaintiffs had not provided notice of their intention to sue over the print article within six weeks of becoming aware of it, as required by s. 5 of the Libel and Slander Act. However, they became aware of the internet publication later and did provide notice of it within the required time. The plaintiffs then sought to include their complaint about the print version in their action against the magazine, relying on s. 6 of the Act which permits adding other claims for libel against the defendant that occurred within the previous year.

[18]           The Court considered and rejected applying the single publication rule, as it would be inconsistent with s. 6 of the Act. The analysis in Shtaif must be seen in the context of that case, which dealt with separate publication in two different mediums – print and online. As the Court of Appeal observed more recently in John v Ballingall, at para. 35, Shtaif  “does not mean that each day of online publication grounds a new cause of action.”

[19]           In John v. Ballingall the plaintiff had missed the notice and limitation periods for publications by the media under the Libel and Slander Act, and argued that “for every day the defamatory words are published online, a new and distinct cause of action accrues and a new limitation period begins to run.” The Court of Appeal rejected that position, stating, at para. 35:

The appellant seeks to rely on an incorrect interpretation of the “multiple publication rule”. That concept provides that when an alleged libel is republished across different mediums, including the Internet, those republications are treated as distinct libels. In Shtaif, the court rejected the notion that the limitation period for a suit about an online magazine article starts to run when the plaintiff becomes aware of the printed version. This was the basis for the conflicting evidence on discoverability in Shtaif. This decision does not mean that each day of online publication grounds a new cause of action. The court in Vachon v. Canada Revenue Agency, 2015 ONSC 6096 (CanLII), expressly rejected this interpretation of Shtaif. I concur with Hackland J., who said, at para. 22:

The plaintiff argues that the alleged defamation should be taken as having been republished every day [while it] remained accessible on the internet … Shtaif does not support that proposition … any limitation period based on discoverability will run from the point where the internet defamation is discovered. [emphasis added]

[20]           The plaintiff seeks to distinguish John v. Ballingall on the basis that it only deals with notice periods under the Libel and Slander Act. While that was the context, the case also engaged the 3 month limitation period under the Libel and Slander Act, and the same reasoning must apply.   The Libel and Slander Act simply creates a shorter limitation period, together with a notice requirement, in recognition of the special position of the media, allowing it the opportunity to publish timely corrections to minimize damage and to prepare defences when facts remain fresh.

[21]           In my view, the Court of Appeal in John v. Ballingall clearly rejected the proposition that just because defamatory words remain online and are available to be downloaded and read indefinitely, there is continuous publication allowing limitation periods to be ignored. As the Court noted, the multiple publication rule applies when something is “republished across different mediums”. Such republications require specific acts by the publisher, or republisher, to further disseminate, or repeat, the libel, as was the case in Shtaif.

[22]           Furthermore, to give effect to the amendment in the Statement of Claim would create the potential for endless retriggering of limitation periods simply because the words remain on the internet. This would allow plaintiffs to sit on their rights until it suited them to take action, rather than sue when they become aware of the wrong. This would be unfair to defendants who would be subject to lawsuits indefinitely, and raises concerns about freedom of expression.

Ontario: the Court of Appeal on adding a new claim

In Klassen v. Beausoleil, the Court of Appeal provides a helpful summary of the analysis for determining whether proposed amendments assert a fundamentally new claim:

(1)         The test to be applied

[24]      I begin with the text of r. 26.01 of the Rules. It provides:

On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. [Emphasis added.]

[25]      The rule is framed in mandatory terms: the court must allow the amendment, unless the responding party would suffer non-compensable prejudice, the proposed pleading is scandalous, frivolous or vexatious, or the proposed pleading fails to disclose a reasonable cause of action: 158844 Ontario Ltd v. State Farm Fire and Casualty Co., 2017 ONCA 42 (CanLII), 135 O.R. (3d) 681, at para. 25; Iroquois Falls Power Corp. v. Jacobs Canada Inc., 2009 ONCA 517 (CanLII), 264 O.A.C. 220, at paras. 15-16.

[26]      The expiry of a limitation period is one form of non-compensable prejudice. A party cannot circumvent the operation of a limitation period by amending their pleadings to add additional claims after the expiry of the relevant limitation period: Frohlick v. Pinkerton Canada Ltd, 2008 ONCA 3 (CanLII), 88 O.R. (3d) 401, at para. 24; 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848 (CanLII), 409 D.L.R. (4th) 382, at paras. 21-23; United Food and Commercial Workers Canada, Local 175 Region 6 v. Quality Meat Packers Holdings Limited, 2018 ONCA 671 (CanLII), at paras. 64; Davis v. East Side Mario’s Barrie, 2018 ONCA 410 (CanLII), at paras. 31-32. In this regard, the “addition of new statute-barred claims by way of an amendment is conceptually no different than issuing a new and separate Statement of Claim that advances a statute-barred claim” (emphasis added): Quality Meat Packers, at para. 64; citing Frohlick, at para. 24.

[27]      An amendment will be statute-barred if it seeks to assert a “new cause of action” after the expiry of the applicable limitation period: North Elgin, at paras. 19-23, 33; Quality Meat Packers, at para. 65. In this regard, the case law discloses a “factually oriented” approach to the concept of a “cause of action” – namely, “a factual situation the existence of which entitles one person to obtain from the court a remedy against another person”: North Elgin, at para. 19; Quality Meat Packers, at para. 65.

[28]      An amendment does not assert a new cause of action – and therefore is not impermissibly statute-barred – if the “original pleading … contains all the facts necessary to support the amendments … [such that] the amendments simply claim additional forms of relief, or clarify the relief sought, based on the same facts as originally pleaded”: Dee Ferraro, at paras. 4, 13-14; North Elgin Centre Inc., at paras. 20-21; East Side Mario’s Barrie, at paras. 31-32; Quality Meat Packers, at para. 65. Put somewhat differently, an amendment will be refused when it seeks to advance, after the expiry of a limitation period, a “fundamentally different claim” based on facts not originally pleaded: North Elgin, at para. 23.

[29]      The relevant principle is summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3rd ed. (Toronto: LexisNexis, 2017), at p. 186:

A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon [which] the original right of action is based.[2]

[30]      In the course of this exercise, it is important to bear in mind the general principle that, on this type of pleadings motion, it is necessary to read the original Statement of Claim generously and with some allowance for drafting deficiencies: Farmers Oil and Gas Inc. v. Ontario (Ministry of Natural Resources), 2016 ONSC 6359 (CanLII), 134 O.R. (3d) 390 (Div. Ct.), at para. 23.

[31]      Finally, the court may refuse an amendment where it would cause non-compensable prejudice. The prejudice must flow from the amendment and not some other source: Iroquois Falls, at para. 20. At some point the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party is presumed. In this event, the onus to rebut the presumed prejudice lies with the moving party: State Farm, at para. 25.

[32]      Alternatively, the responding party may resist the amendment by proving actual prejudice – i.e. by leading evidence that the responding party has lost an opportunity in the litigation that cannot be compensated by an adjournment or an award of costs as a consequence of the amendment. It is incumbent on the responding party to provide specific details of the alleged prejudice: State Farm, at para. 25.

[33]      Irrespective of the form of prejudice alleged, there must be a causal connection between the non-compensable prejudice and the amendment. The prejudice must flow from the amendment and not from some other source: State Farm, at para. 25.

[34]      Bearing in mind these principles, the framework to determine the issues raised by this appeal is as follows:

Are the proposed amendments to assert a claim to a 33% ownership interest the assertion of a “new cause of action”? If the proposed amendments are the assertion of a new cause of action, are the amendments statute-barred?
Irrespective of the above, is this a case where non-compensable prejudice will arise as a consequence of the amendments?

Ontario: contract repudiation and the commencement of time

The Court of Appeal decision in Hurst v. Hancock is a reminder that in a claim arising from anticipatory breach or repudiation of a contract, the limitation period may not commence until performance is due. There can no be no claim until there is a cause of action, and there will be no cause of action until claimant accepts the breach, or affirms the contract and performance is due.