July 2020 – Under the Limit

Ontario: there has never been a limitation period for a breach of treaty claim

Restoule v. Canada (Attorney General) is a wonderful decision for anyone who, like me, has the misfortune of being steeped (too long) in limitations law. It considers whether the Former Act applied to a claim for the breach of a treaty. In so doing, it engages with some of the more anachronistic aspects of the former scheme, including esoterica like forms of action, and the distinction between a simple contract and a specialty.

The decision is thorough and well-reasoned, which makes it unfortunate that it’s likely to have a rather narrow impact on the limitations scheme (to put it generously). It’s entirely possible that this is the last time these provisions of the Former Act will ever be litigated (except perhaps in the Court of Appeal), and so it’s something of a historical limitations moment.

Ontario argued that a breach of treaty claim is an action upon a speciality (s. 45(1)(b)), an action for simple contract (s. 45(1)(g)), or an action on account (s. 46), and subject to the limitation periods applicable to those forms of action.

The plaintiffs argued that no limitation in the Former Act applied to the claims. The court agreed.

First, a preliminary word about a distinction that appears to have been missed (but was ultimately of no consequence). Consider this paragraph:

[114] Although modern limitation statutes (i.e. the Limitations Act, 2002) have moved away from the strict classification of causes of action for the determination of limitation periods, the 1990 Act represents a more traditional regime where different limitation periods are assigned to specific, some say “ancient” causes of action.[90] This means that whether and when a limitation period applies varies depending on the cause of action. If there is no applicable statutory limitation period applicable to a cause of action, a proceeding may be commenced at any time.[91]

Different limitation periods didn’t apply to causes of action under the Former Act, but to the common law forms of action. These are different things.

Forms of action determined the procedure for making a claim, not, like a cause of action, the substantive right that entitled a party to relief. For example, s. 45(1)(e) of the Former Act prescribed a six-year limitation period commencing when the cause of action arose for “an action for an escape” (an action brought by a judgment creditor against a sheriff for the escape of a judgement debtor in his custody). The “action for an escape”, just like “an action upon a bond, or other specialty”, refers to the form of action; the cause of action would be advanced through the form of action.

Accordingly, the limitations analysis under the Former Act always began by “classifying the action”–determining which form of action included the cause of action being advanced. You needed to know the form of action to know the applicable limitation period. Mostly this required nothing more than knowing that s. 45(1)(g) applied to any cause of action sounding in tort or contract and was therefore subject to a six-year limitation period. It’s only when you delved into the more obscure forms of action that things got tricky. It could be an absurdly confusing scheme, but because limitation periods were so long it generally wasn’t an issue.

You can forgive the Court for misapprehending this distinction (though perhaps not Ontario). The forerunner of the Former Act was enacted in 1910 and by that time the forms of action were already long abolished and irrelevant except in the context of limitations law (the United Kingdom had abolished the forms of action by 1873).

Now, for the court’s reasoning.

The court rejected the specialty argument. A “specialty” is a quirky and anachronistic category of contract that has, as far as I know, ceased to have any relevance since the coming into force of the Limitations Act. The court found that the Treaties in question had none of the elements of a specialty, or indeed, a simple contract, in a well-reasoned, thorough (and, from my perspective, entirely correct) analysis. You’ll find it at paras. 122-174

The court also rejected the “action of account” analysis. What intrigues me about this aspect of the decision is that no party appears to have engaged seriously with what this form of action is for. As it happens, I was reviewing its history recently for a paper I’m writing and so I have on hand this passage from The Law Reform Commission’s 1967 report on the limitation of actions:

The actions of account expressly referred to in section 46 probably are only those which would have been brought at common law and do not include equitable actions of account. Section 46 was originally enacted to remove the exception of merchants’ accounts contained in section 3 of The Limitation Act, 1623. Section 3 provided, inter alia, that all common law actions of account, except merchants’ accounts, must be brought within six years after the cause of action arose. When section 46 first became law, it clearly only referred to merchants’ accounts. Owing to minor changes in punctuation and wording, the section now is ungrammatical and appears on the surface to apply to all actions of account, although it is unlikely that the changes were intended to produce the latter result

Given this history, it seems that Ontario’s s. 46 argument ought to have been a non-starter, unless you characterise Ontario as a merchant for the purpose of a treaty. In any event, the court found that the plaintiffs were not seeking an accounting.

Ontario: confusion in the Court of Appeal on the historical limitation of demand obligations

The Court of Appeal decision in Michel v. Spirit Financial Inc. includes the following paragraph that compels me to pedantry:

[14] The trial judge made a finding of fact that all the advances made by Michel to Kramer and Spirit were loans. The loans were advanced from 2000 to 2009, during which time the Limitations Act, R.S.O. 1990, c. L.15 was largely replaced by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. On January 1, 2004 the basic limitation period for demand loans was changed from six years from the date of the loan to two years from the date of the demand: Hare v. Hare, 2006 CanLII 41650 (ON CA), 83 O.R. (3d) 766 (C.A.), at para. 11 and Limitations Act, 2002, at s. 5.

Here are the issues:

The Limitations Act didn’t change the limitation of demand loans when it came into force on January 1, 2004. Section 5(3) wasn’t present in the initial version of the Limitations Act, which didn’t address the discovery of a claim arising from demand obligations at all.The Court cites Hare, but Hare actually holds that, under the version of the Limitations Act in force when it was decided, a demand obligation was actionable as of the funds being advanced and not the date of the demand. This was manageable under the Former Act, which applied a six-year limitation period, but it’s problematic with a two-year limitation period. This caused the Legislature to amend the Limitations Act in 2008 to add s. 5(3), which makes presumptive discovery of a claim arising from a demand loan the date of the demand for repayment.
Frankly, it’s surprising that the Court would misstate the development of the law so materially.

It’s misleading to say that the Limitations Act “largely” replaced the Former Act. The Limitations Act and the RPLA together entirely replaced the Former Act. To be fair, the RPLA is Part I of the Former Act repackaged, and in that sense the Limitations Act only partially replaced the Former Act. Nevertheless, this statement suggests that some part of the Former Act remains in force. It doesn’t.

Ontario: the dangers of arguing a particular step would have caused discovery

I often see defendants argue that if a plaintiff had undertaken a certain step, discovery would have occurred on an earlier date. Without evidence that the plaintiff taking this step on a specific date would have resulted in the plaintiff learning on another specific date the facts necessary for discovery, this argument is purely hypothetical and can’t succeed. The court in Ledoux v. Lee makes the point:

40. Uber also argued that Mr. Ledoux’s lawyer should have served Co-operators with a formal notice of his claim against Mr. Lee after getting the police report. Mr. Giugaru contended that this is a standard practice because it allows a plaintiff to claim pre-judgement interest from the date of the notice. Had Mr. Ledoux’s counsel put Co-Operators on formal notice of a potential claim, he argued, the insurer might have advised the plaintiff of the coverage issue and disclosed Mr. Lee’s activity as an Uber driver.

41. This argument is speculative. I could not conclude, on the evidence before me, that it is standard practice for plaintiff’s counsel in MVA claims to formally notify the defendant motorist’s insurer of a potential claim. Even if I had been able to, I could not infer that a formal notice letter to Co-Operators would have yielded information about its position on coverage. Mr. Ledoux’s lawyers were in communication with Co-Operators from September 2017 forward, providing it with a copy of the police report and Mr. Ledoux’s hospital record. There is no evidence that, in the course of this correspondence, the adjuster ever so much as hinted that it might deny coverage or disclosed that Mr. Lee was participating in the gig economy, even though it notified the insured of its denial of coverage on this basis two weeks after the accident.

Ontario: notice to the crown doesn’t toll the limitation period

Francis v. Ontario is a remainder that giving notice under the Proceedings Against the Crown Act (now replaced by the Crown Liability and Proceedings Act, which has similar notice requirements in s. 18) doesn’t toll the limitation period:

[273] I agree with Ontario’s submission that that the limitation period in this proceeding was not tolled as soon as Mr. Francis filed the notice of his claim. It continued to run against claimants until the Statement of Claim was issued. Under s. 7(1) of the Proceedings Against the Crown Act, a claimant must serve notice of the claim at least 60 days before commencing a claim against the Crown (Ontario). However, the notice itself does not effect the limitation period, and there is nothing in the Act that suggests that the notice has this effect. Indeed, what is in the Act suggests the opposite, i.e., that the giving of the notice does not end the running of the limitation period.

[274] In one circumstance, the delivery of the notice may extend the limitation period, but the notice does not toll the limitation period, which continues to run and to bar claims. An extension of the limitation period is provided for in s. 7(2) of Act which states:

Limitation period extended

(2) Where a notice of a claim is served under subsection (1) before the expiration of the limitation period applying to the commencement of an action for the claim and the sixty-day period referred to in subsection (1) expires after the expiration of the limitation period, the limitation period is extended to the end of seven days after the expiration of the sixty-day period.

[275] Section 7(2) does not apply in the circumstances of the immediate case.

Ontario: the limitation of uninsured motorist proceedings

Sarokin v. Zhang has a comprehensive summary of the limitation of uninsured motorist proceedings. It’s a good resource if you practice in the area:

[28]              Section 265 (1) of the Insurance Act (Ontario) sets out the mandatory provisions for uninsured automobile coverage to be contained in all Ontario automobile insurance policies:

265 (1) Every contract evidenced by a motor vehicle liability policy shall provide for payment of all sums that,

(a) a person insured under the contract is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injuries resulting from an accident involving an automobile;

(b) any person is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injury to or the death of a person insured under the contract resulting from an accident involving an automobile; and

(c) a person insured under the contract is legally entitled to recover from the identified owner or driver of an uninsured automobile as damages for accidental damage to the insured automobile or its contents, or to both the insured automobile and its contents, resulting from an accident involving an automobile,

subject to the terms, conditions, provisions, exclusions and limits as are prescribed by the regulations.

[29]              Regulation 676 under the Insurance Act sets out the applicable terms, conditions, provisions, exclusions and limits to payments under an automobile insurance policy pursuant to s. 265(1) of the Insurance Act. Section 6 of Regulation 676 sets out the mandatory notice provisions for claims made under s. 265(1) of the Insurance Act:

(1) A person entitled to make a claim in respect of the bodily injury or death of a person insured under the contract shall do so in accordance with this section.

(2) The claimant shall give the insurer written notice of the claim within thirty days after the accident or as soon as is practicable after that date.

(3) The claimant shall give the insurer, within ninety days after the accident or as soon as is practicable after that date, such proof as is reasonably possible in the circumstances of the accident, the resulting loss and the claim.

(4) The claimant shall provide the insurer upon request with a certificate of the medical or psychological advisor of the person insured under the contract stating the cause of the injury or death and, if applicable, the nature of the injury and the expected duration of any disability.

[30]              The applicable limitation periods for claims under s. 265(1) are set out in section 8 of Regulation 676:

(1) No person is entitled to bring an action to recover an amount provided for under the contract, as required by subsection 265 (1) of the Act, unless the requirements of this Schedule with respect to the claim have been complied with.

(2) An action or proceeding against an insurer in respect of loss or damage to the insured automobile or its contents shall be commenced within one year after the loss or damage occurs.

(3) An action or proceeding against an insurer in respect of bodily injury or death, or in respect of loss or damage to property other than the insured automobile or its contents, shall be commenced within two years after the cause of action arises.

[31]              The leading case with respect the application of the Limitations Act to claims under OPCF 44R is Schmitz v. Lombard General Insurance Company of Canada, 2014 ONCA 86. Following its decision in Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218, the Court of Appeal held that the limitation period for claims under OPCF 44R starts to run on the day after a demand for indemnity is made:

“[20] ….Once a legally valid claim for indemnification under the OPCF 44R is asserted, the underinsured coverage insurer is under a legal obligation to respond to it. To paraphrase and adapt Sharpe J.A.’s observations, at para. 27 of Markel, the claimant for indemnity under the OPCF 44R “suffers a loss from the moment [the insurer] can be said to have failed to satisfy its legal obligation [under the OPCF 44R]”. Thus, the claimant suffers a loss “caused by” the underinsured [page700] coverage insurer’s omission in failing to satisfy the claim for indemnity the day after the demand for indemnification is made.” (Schmitz at paras. 20 and 26)

[32]              Unlike the claim of an injured party against a tortfeasor, the cause of action for an insured’s claim against his or her own insurer for the insurer’s failure to indemnify pursuant to the unidentified motorist endorsement is for breach of contract which does not arise until the insurer breaches its insurance contract to indemnify by failing or refusing to pay the insured’s claim (Jones v. Doe et al, 2018 ONSC 4780 at paras. 25-26; Chahine v. Grybas, 2014 ONSC 4698 at paras. 34-35; Tucker v. Unknown Persons, 2015 NLCA 21 at paras. 38-39).

[33]              In Schmitz, the Court of Appeal rejected the insurer’s submission that the definition of discoverability in s. 17 of OPCF 44R applies, holding that both ss. 4-5 of the Limitations Act apply to determine the commencement of the limitation period for an OPCF 44R claim (Schmitz at para. 16). The Court of Appeal also held that insurers are not prejudiced as they could require that insureds provide timely notice pursuant to other provisions in OPCF 44R and other insurance contracts (Schmitz at para. 22). The Court of Appeal also rejected the insurer’s arguments that the limitation period should begin to run on the day a claimant accumulates a body of evidence that would permit it a reasonable chance of persuading a Judge that his or her claims will exceed the limits of their policy and that starting the limitation period when a demand for indemnification is made does not limit when the demand could or should be made such that an insured does not need to wait until the outcome of the trial is known (Schmitz at paras. 23-24).

[34]              Markel arose from a loss transfer claim made by one insurer against another seeking indemnification for statutory accident benefits paid to an insured. The Court of Appeal held that the earliest the limitation period can start to run is the date the first party insurer demands indemnification from the second party insurer (Markel at para. 36). However, the Court also held that a claim cannot be delayed for tactical or other reasons and must be commenced when it is “legally appropriate”:

“[34] This brings me to the question of when it would be “appropriate” to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5(1)(a)(iv) states that a claim is “discovered” only when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.” (Markel at para. 34)

[35]              These issues were considered more recently by Justice LeMay in Howell v. Jatheeskumar, 2016 ONSC 1381, a case decided in the context of an OPCF 44R claim similar to the present case. In Howell, plaintiff’s counsel sent a third party notice letter to the defendant’s presumptive insurer 7.5 months after the accident. Plaintiff’s counsel did not follow up with the presumptive insurer for 2 years and 4 months. At that time, the presumptive insurer advised that it was not the defendant’s insurer. Five months later, the plaintiff brought a motion to add the plaintiff’s own automobile insurer, TD.

[36]              LeMay J. held that that there were 3 possible outcomes. The court could determine that: i.) there was insufficient due diligence on the part of the Plaintiff and no other reason to extend the time limits thereby defeating any claim the plaintiff may have to extend the time limits as a result of the principles of discoverability; ii.) there was a triable issue about the issues of discovery and whether the claim was timely as a result of the application of the discoverability principles which could include whether there was any other statute under which the limitations period could be extended; or iii.) on the materials filed there was clearly an issue of discoverability that made the claim timely (Howell at para. 35).

[37]              LeMay J. concluded that it was clear from Schmitz and Markel that there were good arguments available to the plaintiff to defeat any limitations defence advanced by TD:

37  In this case, the Plaintiff has a reasonable argument that the claim against TD General Insurance was not discoverable until August of 2015. However, there may be issues relating to the Plaintiff’s due diligence that TD General Insurance may wish to raise. As a result, I am prepared to find that this claim falls at least into the second category, that there was a triable issue about discovery. As a result, the claim should be amended.

38  The Plaintiff is not required to plead any discoverability issues at this stage (see Collins v. Cortez, supra at paragraph 15). Instead, if TD General Insurance raises a Limitations Act issue in its defence, then the Plaintiff will be required to plead the relevant facts on discoverability in reply to TD’s defence. (Howell at paras. 37-38)

Ontario: failing the litigation finger test

Reimer v. Toronto (City) is an example of failing to make out the litigation finger test. The plaintiff in a slip and fall action named “John Doe Maintenance Company” as a defendant and sought leave to correct it to the name of the actual maintenance company. However, she didn’t plead the particulars of the maintenance company’s alleged negligence with sufficient detail so that the company would know on reading the pleading that it was the intended defendant. It’s a warning not to presume that the court will grant misnomer relief in regards of a John Doe in all circumstances. These are the material paragraphs:

[14]           I accept that this is a situation where the plaintiff may be able to rely on the doctrine of misnomer. The plaintiff has named a defendant as John Doe Maintenance Company and it is permissible, if properly pleaded, for that one defendant named by pseudonym to stand in place of more than one person.

[15]           In my view, however, the key principle to be considered on this motion is described by Justice MacLeod in Loy-English as follows:

To be a misnomer, the plaintiff must clearly have intended to sue the proposed defendant. The pleading must be drafted with sufficient particularity that an objective and generous reading of the pleading would demonstrate that the “litigation finger” is pointing at the proposed defendant. To put this another way, the pleading must be sufficiently clear that a properly informed defendant reading the allegation would be able to recognize that he or she was the target of the allegation. The allegation must be clear and definite on its face and not held together through a series of assumptions about what the person reading the statement of claim might know.

[16]           Certainly, the plaintiff has identified the correct date and location of the accident at the beginning of her statement of claim. The proposed defendants were responsible for general sidewalk maintenance and sidewalk snow removal at that location on that date. At first glance, this appears to point the litigation finger at the proposed defendants.

[17]           However, the John Doe Maintenance Company defendant is not separately described, specified or identified in the initial pleading.[1] The plaintiff’s allegations of negligence are lumped together as applicable to all of the named defendants. The claim has not been drafted to particularize the specific rolls played by any of the unidentified persons. See Loy-English at paragraph 21b. This lack of particularity militates against a finding of misnomer.

[18]           The conclusion that the plaintiff’s claims are partly directed at Maple and Royal becomes even less obvious as the circumstances of the plaintiff’s accident are further particularized in the statement of claim. The location of the plaintiff’s accident is broadly defined as “at or near the intersection of Kennedy Road and Sheppard Avenue East”. The further particulars in the statement of claim state that the plaintiff fell twice. First, on the “sidewalk” when she stepped off the bus and then a second time when she “violently” fell on the “roadway” causing her to sustain personal injuries. It is not at all clear from the language of the pleading that the plaintiff was injured when she first fell on the sidewalk when exiting the bus. The roadway fall clearly suggests resulting injuries, but the roadway was the responsibility of Crupi and not the proposed defendants. The fact that this distinction is made in paragraph 4 of the statement of claim, but not elsewhere, leads to the conclusion, from reading the statement of claim, that the plaintiff’s injuries arose from the fall on the roadway and not the sidewalk.

[19]           In my view, the proposed defendants, when reading the statement of claim as a whole, would more likely conclude that the identity of the John Doe Maintenance Company defendant was Crupi alone and did not also include Maple and Royal. A fair reading of the statement of claim would not lead to the conclusion that the plaintiff must have meant Maple and Royal.

[20]           I have therefore concluded that the plaintiff has not satisfied her onus to show that Maple and Royal should be substituted for the defendant John Doe Maintenance Company on the basis of misnomer.