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

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

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

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

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

Ontario: Limitations Act doesn’t apply to applications for attorney compensation

In April, I reported that in Armitage v. The Salvation Army, Justice Ray held wrongly that the limitation period for claiming compensation as a property attorney commences on the death of the person who granted the power of attorney.  I wrote that the Limitations Act doesn’t apply to such an application.  In December, the Court of Appeal agreed.

Armitage brought applications to pass her accounts as attorney for property and as estate trustee.  The Salvation Army filed notices of objection in both proceeding raising a limitations defence.  Justice Ray held that the death of the person who granted the power of attorney terminated the continuing power of attorney and was the commencement of the applicable limitation period.  The applications were accordingly timely.

Not so, I wrote.  While there may be sound policy reasons for limiting a claim for attorney’s compensation after the death of the grantor, no limitation period applies to such an application.  The application is not a “claim” within the meaning of the Limitations Act because it doesn’t seek to remedy loss resulting from an act or omission.  If it’s not a “claim”, the basic and ultimate limitation periods can’t apply.  In fairness to Justice Ray, we noted that neither party raised this point.

Armitage raised the point on appeal, and Justice Hourigan accepted it:

[19]      While I agree with the result reached by the application judge, I disagree with his conclusion that the Limitations Act, 2002had any application in the circumstances of this case. As I will discuss below, in my view, the Limitations Act, 2002 does not apply because compensation for an attorney for property through the passing of accounts process does not constitute a “claim” within the meaning of the Limitations Act, 2002.

[20]      It is useful to briefly consider the nature of compensation for attorneys for property and how the passing of accounts process works. An attorney for property is a fiduciary and has an obligation under s. 32(6) and 38(1) of the SDA to, among other things, keep accounts of all transactions involving the property.

[21]      The attorney for property may bring an application to the Superior Court to have his or her accounts approved. Through that process, the attorney for property may also seek court approval of compensation for his or her services. The responding parties to the application have an opportunity to file a notice of objection to the accounts, and to object to the compensation that the attorney for property proposes to take or has taken.

[22]      Where the attorney for property has not commenced an application for the passing of accounts, an interested party may bring an application under s. 42(1) of the SDA to compel the passing of accounts.

[23]      As noted by Matthew Furrow and Daniel Zacks in their very recent article “The Limitation of Applications to Pass Accounts” (2016) 46 Adv. Q. 2, historically in Ontario there was no statutory limitation period for the passing of accounts. The only bars were the equitable defences of laches and acquiescence. The question becomes whether the enactment of the Limitations Act, 2002changed the law and imposed the general two-year limitation period on claims for compensation for attorney for property.

[24]      At first blush it would appear that such claims might be captured by the general limitation period. The Limitations Act, 2002 was designed to comprehensively deal with all manner of civil claims, whether grounded in equity, law, or statute. There are specific carve outs in the legislation for claims that are not subject to the Act. It is arguable, therefore, that if compensation for attorneys for property was intended to be exempted from the general limitation period it would have been specifically exempted under the Limitations Act, 2002.

[25]      The difficulty with that argument is that the Limitations Act, 2002 applies only to the assertion of a “claim”, and a claim is defined in the Act as follows: “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.”

[26]      The appellant submits that the right under the SDA to seek compensation is a new statutory right and, as with all rights, where there is a right there must be a remedy. Further, the appellant argues that the respondent’s claim for compensation fits within the statutory definition of a claim. Counsel for the appellant submits that in seeking compensation at this time the respondent has suffered a loss because she chose not to seek self-help and take her compensation earlier. He goes on to argue that this loss is the result of the respondent’s omission in failing to claim compensation earlier.

[27]      I am unable to accede to this rather circular argument. The fact is that in seeking court approval of the passing of accounts, an attorney for property is not seeking redress for any loss, injury, or damage. Rather, he or she is seeking approval from the court of his or her actions in managing the property, including approval for compensation previously taken or now sought. A passing of accounts application is the opposite of remedial; it is a process that seeks a court order that no remedy is necessary with respect to the accounts: see Furrow and Zacks, at pp. 9-10. Thus, the passing of accounts does not fit within the first part of theLimitations Act, 2002 definition of claim.

[28]      An application for the passing of accounts also does not fit within the second part of the statutory definition of claim. Where the definition speaks of an act or omission, it must surely refer to an action taken or not taken by a third party that has the effect of causing loss, injury, or damage. It would be a strange result if a limitation period could not be triggered until the party asserting the claim took an action or omitted to do something.

[29]      The result, in my view, is that a passing of accounts under the SDA is not subject to the two-year general limitation period found in the Limitations Act, 2002.[1] The common law in that regard was not changed with the enactment of that legislation. Consequently, the only defences available are the equitable defences of laches and acquiescence, neither of which were asserted in the present case.

Obviously, I think this is sound reasoning (based as it is on a paper I wrote with my colleague Matthew Furrow).

Importantly, Justice Hourigan explicitly not does hold that the Limitations Act has no applicability to the passing of accounts process under the SDA:

[1] I do not mean to categorically provide that the Limitations Act, 2002 has no applicability to the passing of accounts process under the SDA. In particular, it may be that the filing by a beneficiary of a notice of objection after an attorney has sought a passing of accounts is a claim within the meaning of the Limitations Act, 2002. However, I leave this determination to another case where it arises directly on the facts.

In our paper, Matthew and I argue a notice of objection that asserts a claim within the meaning of the Limitations Act is subject to its limitation periods.  Send me a note if you’d like a copy.