Discoverability

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: stop arguing common law discovery

The Divisional Court decision in Rooplal v. Fodor holds that the Limitations Act’s discovery provisions determine discoverability, not common law principles.  16 years after the Limitations Act came into force, this is a point that still needs making.

The motion judge had found the plaintiff’s proceeding timely, and the Divisional Court upheld her decision:

[4]               On the issue of discoverability, the parties relied on ostensibly conflicting lines of jurisprudence from the Court of Appeal for Ontario. On the one hand, were the cases decided before the Limitations Act had entered into force, finding that the limitation period begins to run when the material facts on which the claim is based have been discovered or ought to have been discovered by the plaintiff’s exercise of reasonable diligence (July v. Neal (1986), 1986 CanLII 149 (ON CA), 32 D.L.R. (4th) 463; Johnson v. Wunderlich (1986), 1986 CanLII 2618 (ON CA), 34 D.L.R. (4th) 120; Hier v. Allstate Insurance Co. of Canada (1988), 1988 CanLII 4741 (ON CA), 51 D.L.R. (4th) 1; and Chambo v. Musseau (1993), 1993 CanLII 8680 (ON CA), 15 O.R. (3d) 305. The other line of authority involves cases decided after the Limitations Act had entered into force, which, as explained in the Superior Court’s decision in Chahine v. Grybas, 2014 ONSC 4698, provided that the limitation period does not begin until the plaintiff makes an indemnification demand and the responding insurer fails to satisfy the claim (Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, 109 O.R. (3d) 652; and Schmitz v. Lombard General Insurance Company of Canada, 2014 ONCA 88, 118 O.R. (3d) 694, leave to appeal refused, [2014] S.C.C.A. No. 143). The defendants argued that the July line of cases sets out the proper discoverability analysis, while the plaintiff argued that the Markel line of cases sets out the proper analysis.

 [5]               The Motions judge ultimately determined that she was bound by the Markel line of authorities rather than the July line of cases because, while the latter is predicated on the common law principles of discoverability set out by the Supreme Court of Canada in Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147, the discoverability provisions in the Limitations Act govern the analysis in the present case rather than the common law principles before the Court of Appeal in the July line of cases.

 

Ontario: Court of Appeal holds s. 51(1) of the SABS is subject to discoverability

Is the limitation period in (the repealed) s. 281.1(1) of the Insurance Act and s. 51(1) of the Statutory Accident Benefits Schedule subject to discoverability? Yes, held the Court of Appeal in Tomec v. Economical Mutual Insurance Company.

Section 51(1) provided that “A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.”

Economical argued that the refusal to pay a benefit is a specific event that isn’t tied to the cause of action and therefore isn’t subject to discoverability. The court rejected this argument and found that the refusal to pay a benefit is an element of the cause of action:

[35]      I would not give effect to this argument. It is contrary to the admonition from the Supreme Court in Pioneer at para. 36 that:

In determining whether a limitation period runs from the accrual of a cause of action or knowledge of the injury, such that discoverability applies, substance, not form, is to prevail: even where the statute does not explicitly state that the limitation period runs from ‘the accrual of the cause of action’, discoverability will apply if it is evident that the operation of a limitation period is, in substance, conditioned upon accrual of a cause of action or knowledge of an injury.

[36]      The refusal to pay a benefit is clearly tied to the appellant’s cause of action. Absent a refusal to pay the benefit sought, there cannot be a claim made for mediation or an evaluation. Thus, the refusal to pay a benefit and the ability to make a claim are inextricably intertwined in the cause of action. The refusal cannot be stripped out of the cause of action and treated as if it is independent from it.

[37]      This distinguishes the case at bar from the situations in Ryan and Levesque. In both those cases, the courts were considering limitation periods that were wholly independent from the cause of action. The commencement of the limitation period was tied to the date of the deceased’s death. In contrast, the applicable limitation period in this case is tied to the accrual of the cause of action.

My only quibble is with the court’s discussion of the cause of action. What does it mean to be “tied” to a cause of action? A cause of action arises from certain factual elements (for example, the five elements of negligent misrepresentation, or the one element of a breach of contract). It’s imprecise to discuss a fact being “inextricably intertwined in the cause of action”; it’s either an element of the cause of action or it isn’t.

The decisions also has a rare example of an absurdity analysis in the context of limitation provision interpretation:

[46]      Statutes are to be interpreted in a manner that does not lead to absurd results. An interpretation is absurd if it “leads to ridiculous or frivolous consequences, if it is extremely unreasonable or inequitable, if it is illogical or incoherent, or if it is incompatible with other provisions or with the object of the legislative enactment”: Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, 36 O.R. (3d) 418, at para. 27.

[47]      Here, the decisions below thrust the appellant into a Kafkaesque regulatory regime. A hard limitation period would bar the appellant from claiming enhanced benefits, before she was even eligible for those benefits. However, if the appellant had not claimed any benefits until she obtained CAT status in 2015, she would not be caught by the limitation period: Machaj v. RBC General Insurance Company, 2016 ONCA 257, at para. 6. Alternatively, if the appellant had coincidentally obtained CAT status before 2012, the hard limitation period would not bar her claim for enhanced benefits.
[48]      This outcome is absurd. There is no principled reason for barring the appellant’s claim for enhanced benefits in the first scenario but allowing the claim in the second and third scenario. To do so would effectively penalize the appellant for accessing benefits she is statutorily entitled to, or for developing CAT status too late.

Ontario: Court of Appeal on the limitation of continuing oppressive conduct

The Court of Appeal decision in Zhao v. Li considers the limitation of continuing oppressive conduct.  It holds sensibly that discrete oppressive acts give rise to discrete claims (subject to discrete limitation periods):

[28]      Maurice stands for the proposition that where what is complained of is a series of singular discrete acts of oppression over a period of time, claims arising from the acts committed or discoverable within two years of the action are not statute barred, even if the series of acts commenced, and claims for earlier oppressive acts in the series were discoverable, more than two years prior to the commencement of the action. A later oppressive act, even if based on or in furtherance of earlier oppressive acts, gives rise to a new cause of action because it is new oppressive conduct: at paras. 3 and 50-54.

 [29]      Although not expressly stated in Maurice, it follows that claims arising from singular discrete acts of oppression (in a series of such acts) that are discoverable more than two years before an action are statute barred. As a result, a series of singular discrete acts of oppression that stretches over a period of time may result in some claims for oppression arising from earlier acts in the series being statute barred while claims arising from later acts in the series are not.
            (ii)        Is this a case alleging singular discrete oppressive acts?

[30]      In my view, the approach in Maurice applies because, as was the case there, what is alleged here are singular discrete oppressive acts, rather than “ongoing oppression”. I reach that conclusion for the following reasons.

[31]      A failure to distribute profits is the alleged act that underpins the profits distribution claim. It is said to have occurred beginning in June 2010. A different act, an unauthorized transfer or sale of the business without at the time of sale accounting for the proceeds, is the alleged act that underpins the sale claim. That act is said to have occurred sometime before September 3, 2011. A still different act, the unauthorized dissolution of the Corporation, is the alleged act that underpins the corporate dissolution claim. It occurred in October 2011.
[32]      These are each singular discrete oppressive acts, because they are different acts occurring at different times and because none of them is dependent upon either of the others having happened for oppression to be said to have occurred. If the respondent had failed to distribute profits but neither transferred the business nor dissolved the Corporation, the appellant would, upon discovery, have had an oppression claim for failure to distribute profits. Similarly, if the respondent had only sold the business and kept sale proceeds, or if he had only dissolved the Corporation, the appellant would still have an oppression claim for these singular discrete acts, even if none of the others occurred. As Maurice points out, conduct may consist of singular discrete acts of oppression even where  the later oppressive conduct was based on or in furtherance of the earlier oppressive conduct: at paras. 3 and 48-54.

[36]     […] The limitation period is not extended for acts of oppression that are actionable in themselves simply because a later singular discrete act of oppression occurs. As Maurice provides: “Courts must be careful not to convert singular oppressive acts into ongoing oppression claims in an effort to extend limitation periods. To do so would create a special rule for oppression remedy claims”: at para. 49.

[37]      Nor is the limitation period extended because a complainant hopes that the oppression will be remedied: Maurice, at paras. 46-49.

There is perhaps an easier of way of approaching the issue.   If there is a discrete cause of action, there is a discrete claim.  If oppressive conduct gives rise to multiple causes of action, there are also multiple claims; this is regardless of the period over which the conduct occurs.  The basic limitation period will apply to each claim independent of the others.  This analysis applies equally to any misconduct that is continuing.

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: an alternative resolution process that didn’t impact on the limitation period

Soleimani v. Rolland Levesque provides an example of an alternative resolution process that doesn’t render a proceeding an inappropriate remedy pursuant to s. 5(1)(a)(iv) of the Limitations Act.

Th action involved claims between neighbouring property owners arising out of alleged contamination of the plaintiffs’ property by hydrocarbons flowing from the defendant’s property.  Following the discovery of the contamination, the plaintiffs notified the Ministry of the Environment (MOE), which  became involved in addressing the contamination.

In response to the defendant’s limitations defence, the plaintiffs argued that the MOE’s involvement was a reasonable means to attempt to remediate the damage, and a claim wasn’t an appropriate remedy for that damage until eight years later when expert investigation directed by the MOE (and funded by the defendant) determined the source of the contamination.

The court rejected this argument.  The MOE’s involvement was not part of a dispute resolution process or mechanism: the MOE acts at its own discretion, it has no power to award damages, and the there could be no certainty as to when its involvement would come to an end:

[45]           In considering whether the MOE’s interventions in this case constitute a legally appropriate means to remedy the plaintiffs’ damages it is necessary to recognize that the provisions of the EPA do not provide a dispute resolution process or mechanism.  The steps the MOE chooses to take are in the MOE’s discretion.  The MOE has no power to award damages or compensation to the plaintiffs.  Neither the previsions of the EPA nor the facts of this case allow the court to say with any certainty when the MOE’s involvement would come to an end so as to determine when the limitation period might commence.

[46]           Moreover the MOE intervention cannot result in a declaration of responsibility for the contamination nor can it award damages for stigma nor the full recovery of legal, engineering and other costs and expenses nor damages for other economic losses, all as claimed in the plaintiffs’ statement of claim.

[47]           On the other hand, I recognize that the MOE has substantial powers in the exercise of their discretion to require the defendants to investigate the cause of and remediate contamination on both the defendants’ and the plaintiffs’ lands and to direct that this be done at the defendants’ cost.

[48]           The EPA broadly empowers the MOE to make orders to clean up contamination and prevent the discharge of contaminants into the environment.  For instance, pursuant to section 17 of the EPA, the Director has the power to issue “remedial orders” where a person has caused or permitted a contaminant to be discharged into the natural environmental.  This section empowers the Director to order that person to repair the injury or damage:

Where any person causes or permits the discharge of a contaminant into the natural environment, so that land, water, property, animal life, plant life, or human health or safety is injured, damaged or endangered, the Director may order the person to,

a)            Repair the injury or damage;

b)           Prevent the injury or damage; or

c)            Where the discharge has damaged or endangered or is likely to damage or endanger existing water supplies, provide temporary or permanent alternate water supplies.

[49]           Pursuant to section 157.1 of the EPA, a provincial officer can also order a person who owns or who has management or control or property to take “preventive measures” to:

(a)           Prevent or reduce the risk of a discharge of a contaminant into the natural environment;

(b)         Prevent, decrease or eliminate an adverse affect that may result from:

(i)            The discharge of a contaminant from the undertaking, or

(ii)           The presence or discharge of a contaminant in, on or under the property.

[50]           In determining whether a court action is an appropriate remedy pursuant to s. 5(1)(a)(iv) of the Act, Laskin J.A. in ETR Concession instructed that the court should consider (a) the nature of the plaintiffs’ loss; (b) the circumstances of the plaintiffs, and (c) efficiency of the court.

[51]           This is an environmental claim.  The major dispute between the parties has been, at least until very recently, whether the pollutants are emanating from the defendants’ land onto the plaintiffs’ land or, as the defendants claim, from the plaintiffs’ land onto the defendants’ land.  On the facts of this case, there can be no doubt that the MOE’s interventions have provided a means to determine the source of the contamination and remedial orders have been made.

[52]           The plaintiffs submit that given their particular situation, the MOE interventions may substantially reduce the plaintiffs’ damages and therefore it would be inappropriate to require the plaintiffs to prematurely resort to court proceedings while the regulatory process under the EPA is ongoing.

[53]           In my view the principal difficulty with the plaintiffs’ position is that there is no reasonable basis to ascertain when the MOE’s involvement will end.  To date, it has gone on in excess of eight years with no end point in site.  I agree with the defendants’ submission that the EPA does not in any sense establish an alternative adjudication or dispute resolution process for contamination claims.  While the MOE has significant remedial powers to direct the investigation and remediation of ground water contamination, these powers are outside the land owners’ control and are discretionary in nature.  These powers do not include any right to award economic damages or to grant declaratory orders, which is a significant component of the relief sought in this action.

[54]           The plaintiffs have argued that the limitation period should not run until the causation question was resolved (within the last two years) concerning the direction of flow of the contaminants.  They suggest that prior to resolving that issue it would have been unreasonable to commence court proceedings.

[55]           The plaintiffs emphasize the benefits they have achieved by allowing the MOE to deal with the contamination.  Thanks to the MOE exercising its statutory powers to direct the investigation and remediation of the groundwater contamination, the plaintiffs have avoided the considerable engineering costs of investigating the problem, of obtaining experts’ reports and of soil removal and other remedial measures.  They have also avoided or lessened the litigation risk of a possible determination that the contamination emanated from their own property, rather than the defendants’ property.

[56]           In effect, the plaintiffs can be said, in retrospect, to have made a wise economic choice in leaving the contamination issue in the hands of the MOE.  However this was manifestly a tactical decision made by the plaintiffs to avoid the costs and litigation risks of investigating their claim and establishing their case on liability and damages.  They chose to stand back for some four years prior to commencing this action to allow the MOE to move matters forward.  The case law is clear that tactical decisions will not toll the limitation period, see Markel and Presidential MSR.  As Mew J. observed in J.C. v. Farant at para 87:

Another recent decision, Gravelle (CodePro Manufacturing) v. Denis Grigoras Law Office, 2018 ONCA 396 (CanLII), reinforced the principle that a tactical decision to delay the commencement of proceedings will not, absent other factors – such as the pursuit of alternative means to resolve the very claim that I the subject matter of the action – delay the running of time.  At para. 6, the Court of Appeal stated:

 The appellant decided for tactical reasons not to bring his action against the respondents until the arbitration proceedings were completed.  He was entitled to make this choice, but he must live with the consequences of it.

[59]           In my view this position is untenable and inconsistent with the appellate case law binding on this court.  The circumstances triggering the running of the limitation cannot be a moving target incapable of being ascertained with the level of reasonable certainty required.  This would create a situation in which the plaintiffs essentially determine when the limitation period commences.

[61]           In my opinion the approach advocated by the plaintiffs and the intervenors ignores the requirement that the appropriate means exception in sub-section 5(1)(a)(iv) of the Act be restricted to factual situations in which the alternate avenue of redress is legally appropriate in the sense that the courts must not be required to interpret the parties’ communications or negotiations or, be required to analyze the significance of the technical findings of ongoing engineering studies and importantly, there needs to be a fixed end point.

Reconsidering mistakes of law and discoverability

Samuel Beswick, a Harvard legal scholar, studies the impact a mistake of law has on the discovery of a claim.  In Under the Limit‘s first guest post, he makes a compelling argument for reconsidering how Canadian limitations law might alter its approach to mistakes of law in the discovery analysis.

Mistake of law as a basis for extending the limitation period?

Common law countries have long determined that discoverability governs limitation on actions “grounded on” mistake (as the former Alberta statute put it) or that seek “relief from the consequences of” mistake (as the English Limitation Act provides). Back when the law of unjust enrichment was thought to allow restitution only for mistakes of fact, discoverability provisions had not much to do with mistakes of law. Now that the mistake-of-law bar has been abandoned, it is apt to ask: when can a mistake of law be discovered?

In England, this problem has driven multi-billion-pound-sterling unjust enrichment litigation, spurring private law scholars and confounding courts. The answer that the English courts have given, succinctly put in FII Test Claimants v HMRC, is that:

[372] … [I]n the case of a point of law which is being actively disputed in current litigation the true position is only discoverable … when the point has been authoritatively resolved by a final court.

I have recently sought to show that England’s answer to the discoverability of mistakes of law is arbitrary, jurisprudentially strained, internally inconsistent, and effects bad policy.

What’s remarkable (albeit it hasn’t to date been remarked on) is that this doctrine is also totally contradictory to Canadian precedent on this issue. The position in Canada, summarized in Hill v Alberta, is that:

[9] … Discoverability refers to facts, not law. Error or ignorance of the law, or uncertainty of the law, does not postpone any limitation period.

In Canada, time runs on mistake-of-law claims whether or not a claimant has discovered their mistake. This causes other problems, which I have endeavoured to draw out in a recent paper.

There is, however, a middle ground between England’s “authoritative judgment” understanding of limitation on mistakes of law and Canada’s “exception” to the discoverability principle, a full account of which will be appearing in the LQR. The short answer, though, is this: mistakes as to the law should be considered discoverable once a claimant is in a position to plead them in a statement of claim. Discoverability is not about finding out one’s legal position from a court. It is about having adequate time to be able to plead one’s case to a court.

 

Ontario: the codification of the discovery rule is not semantics (blog pedantry)

The decision in Loy-English v. Fournier requires some gentle criticism for its description of the limitations scheme:

[40]           Before turning to the evidence, I will just mention that counsel for the intervenor provided me with a useful review and critique of much recent jurisprudence. I have not found it necessary to address the argument that there is a difference between the time when a cause of action accrues at common law and the day when a claim is discovered under the Act.  I need not seek to resolve what counsel identifies as inconsistency in the jurisprudence and failure of courts to recognize the extent to which the Act has changed the common law.

[41]           I will just observe that in the seminal decision of Peixiero v. Haberman, the Supreme Court of Canada endorsing the principle of discoverability in connection with Ontario’s motor vehicle regime uses language suggesting a cause of action under Ontario law only “accrues” when it is possible to determine that the injuries exceed the threshold.[18]  In Lawless v. Anderson our Court of Appeal declared that “the principle of discoverability provides that a cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence.” The court went on to define “cause of action” as “the fact or facts which give a person a right to judicial redress or relief against another.”[19]  Arguably, the effect of the Act is to identify discoverability as a constituent component of a cause of action in Ontario but this is largely a question of semantics.

[42]           The important point is the rationale underlying the discoverability principle. A limitation statute should not be construed to run before the plaintiff could reasonably know that she had a viable cause of action.  It is this rationale that is codified in s. 5 of the Act.  Whether the cause of action can be said to have arisen at an earlier date, knowledge that there is a cause of action and a legal proceeding is an appropriate avenue for relief is a component of discoverability.  All four statutory components are necessary to trigger the running of the limitation period.

  1. It’s not arguable that the Limitations Act makes discoverability a constituent element of a cause of action, nor is the argument one of semantics.  At common law, the discoverability rule relates to the accrual of a cause of action, not the elements of a cause of action.  The rule provides that a cause of action accrues when the plaintiff discovers its material elements.  Section 5 of Limitations Act contains a codified discoverability rule that applies to “claims”, a defined term, not causes of action.  It also doesn’t make discoverability an element of a cause of action or “claim”, but determinative of when discovery occurs.  This isn’t at all an issue of semantics.  “Claims” and causes of action are not interchangeable, a point made recently by the Court of Appeal.
  2. It is not so that the Limitations Act prevents time from running before a plaintiff can reasonably know that she has a viable cause of action.  Knowledge of the elements of a cause of action will not result in discovery of a “claim” under the Limitations Act.  This is because the s. 5(1)(a)(iv) discovery matter—the appropriateness of a proceeding as a remedy—is not an element of any cause of action, and also because discovery requires knowledge of damage, and damage is not an element of any cause of action based on conduct that is actionable per se (like breach of contract).

Ontario: Court of Appeal emphasises that discovery is contextual

The Court of Appeal’s decision in Fehr v. Sun Life Assurance Company of Canada is noteworthy for it its emphasis on the contextual nature of the discovery analysis:

[173]   However, when it came to assessing the limitation period defences applicable to the individual plaintiffs, the motions judge did not engage in a detailed examination of these idiosyncrasies. In particular, he did not consider the impact of each plaintiff’s circumstances and experiences on the critical issue of when each plaintiff discovered his or her claim or knew or ought to have known of the requisite facts grounding their claim. He failed to engage in an individualized and contextual analysis, and, instead, applied a broad presumption as to when they ought to have known of certain alleged misrepresentations.

[174]   An individualized and contextual analysis was necessary in this case for the very reason that misrepresentation claims are not generally amenable to class actions: people receive, process, and act upon written and verbal statements in different ways. Their behaviour varies depending upon a variety of factors, including their own particular circumstances, what specific representations and information they received and from whom, how they understood or processed those representations and information, the extent to which they relied upon them, and their own wishes and intentions.

[175]   An individualized and contextual analysis was particularly important in this case because, among other things: (a) there is a relationship of vulnerability between insurer and insured; (b) many of the plaintiffs are unsophisticated with respect to the insurance industry; (c) the insurance policies are complicated and not easily understood; (d) misrepresentations were made to some consumers and not others; (e) some or all of these misrepresentations were made by individuals on whom the plaintiffs might reasonably rely; (f) there is no evidence that the insurer expressly corrected the misrepresentations; and (g) the insurer may have reinforced or made further misrepresentations, to some or all of the plaintiffs, during the life of the policies.

Ontario: The knowledge required for discovery

This is a post purely to indulge my pedantry.  In Reece v. Toronto (Police Services Board), the Court of Appeal said this about discovery:

[5]         The motion judge correctly found that discoverability for the purpose of limitations is based upon knowledge of the facts necessary to support a claim and does not require knowledge of the law that supports the claim.

This isn’t quite right.  Discoverability for the purpose of limitations–what other purpose to does the principle have?–is codified in s. 5 of the Limitations Act and requires knowledge of the four discovery matters.  The facts necessary to support a claim are, pursuant to the definition in the s. 1 of the Limitations Act, but only two: wrongful conduct and resulting loss.  The existence of a claim and the discovery of a claim are different issues.