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Contracts - Entire Agreement Clauses

Torts - Where Barred by Contract

Limitations - Must be Pled

Civil Procedure - Pleadings - Limitations Must be Pled

Singh v Trump (Ont CA, 2016)

In this case the Court of Appeal discussed when an 'all agreement' clause in a contract precludes a tort claim for behaviour in relation to the contract, and - additionally - that a limitation defence must be expressly pleaded for it to be applied by the court:
[110] Unless inapplicable, unenforceable, or otherwise invalid, contractual provisions such as entire agreement clauses may limit a party’s right to sue in tort: BG Checo International Ltd. v. British Colombia Hydro & Power Authority, 1993 CanLII 145 (SCC), [1993] 1 S.C.R. 12, at p. 30. That is because duties based in tort “must yield to the parties’ superior right to arrange their rights and duties in a different way”: BG Checo, at p. 27.

[111] In Tercon Contractors Ltd v. British Colombia (Transportation and Highways), 2010 SCC 4 (CanLII), [2010] 1 S.C.R. 69, Binnie J. (dissenting but supported by a unanimous court on this point) set out the following analytic approach to be used in deciding whether to enforce such clauses, at paras. 122-23:
The first issue, of course, is whether as a matter of interpretation the exclusion clause even applies to the circumstances established in evidence. This will depend on the Court’s assessment of the intention of the parties as expressed in the contract. If the exclusion clause does not apply, there is obviously no need to proceed further with this analysis. If the exclusion clause applies, the second issue is whether the exclusion clause was unconscionable at the time the contract was made, “as might arise from situations of unequal bargaining power between the parties” (Hunter, at p. 462). This second issue has to do with contract formation, not breach.

If the exclusion clause is held to be valid and applicable, the Court may undertake a third enquiry, namely whether the Court should nevertheless refuse to enforce the valid exclusion clause because of the existence of an overriding public policy, proof of which lies on the party seeking to avoid enforcement of the clause, that outweighs the very strong public interest in the enforcement of contracts.
.....

[112] In his reasons the motions judge referenced Tercon and the analytical approach described therein. His analysis and application to the facts of this case, however, are contained in their entirety in para. 239 of his reasons:
[T]he entire agreement and other exculpatory provisions included in the Disclosure Documents or Statements apply and stands in the way of the success of the Plaintiffs’ misrepresentation claims. As a matter of interpretation the clauses apply, and there is no unconscionability or public policy reason to justify not enforcing the exculpatory provisions.
[113] In my view, the motions judge erred in concluding, without analysis, that it was not unconscionable to enforce the exculpatory provisions. Unconscionability provides that despite the general principle that parties should be held to the bargains that they have made, there are some parties that must be protected and some bargains that should not be enforced: see A. Swan and J. Adamski, Canadian Contract Law, 3d ed. (Markham, Ont.: Lexis Nexis, 2012) at para. 9.99.

[114] In ABB Inc. v. Domtar Inc., 2007 SCC 50 (CanLII), [2007] 3 S.C.R. 461, at para. 82, LeBel and Deschamps JJ. described the doctrine of unconscionability in the context of limitation clauses, a type of clause similar in nature to exclusion or entire agreement clauses:
Under the doctrine of unconscionability, a limitation of liability clause will be unenforceable where one party to the contract has abused its negotiating power to take undue advantage of the other. This doctrine is generally applied in the context of a consumer contract or contract of adhesion.
[115] In Zippy Print Enterprises Ltd. v. Pawliuk (1994), 100 B.C.L.R. (3d) 55, the British Columbia Court of Appeal declined to enforce an entire agreement clause to preclude a claim based on a misrepresentation made to a franchisee. The franchisor had made misleading statements about estimated gross sales, expenses, and profits to induce the franchisee to enter an agreement. In rejecting the enforcement of these clauses, Lambert J.A. expressed the following view, at para. 45:
A general exclusion clause will not override a specific representation on a point of substance which was intended to induce the making of the agreement unless the intended effect of the exclusion clause can be shown to have been brought home to the party to whom the representation was made by being specifically drawn to the attention of that party, or by being specifically acknowledged by that party, or in some other way.
.....

[130] The motions judge found that Mrs. Lee’s negligent misrepresentation claim was barred by the Limitations Act. He did so despite the fact that the defendants had not pled the Limitations Act and had not sought to amend their pleading to include such a plea. Although they raised the issue in oral submissions, the defendants had not raised it in the factum filed on the summary judgment motions.

[131] In his reasons the motions judge neither refers to the fact that it was not pleaded nor does he explain why, in the absence of such a plea, he should nonetheless invoke the Act.

[132] This court has consistently held that “[t]he expiry of a limitation period is a defence to an action that must be pleaded in a statement of defence”: Collins v. Cortez, 2014 ONCA 685 (CanLII), [2014] O.J. No. 4753, at para. 10, per van Rensburg J.A. (citing S. (W.E.) v. P. (M.M.) (2000), 2000 CanLII 16831 (ON CA), 50 O.R. (3d) 70 (C.A.), at paras. 37-38, leave to appeal to S.C.C. refused, [2001] 149 O.A.C. 397). This requirement is embodied in rule 25.07(4) of the Rules of Civil Procedure, which Ontario courts have consistently held “applies to pleadings relating to limitations that might bar an action”: S. (W.E.) v. P. (M.M.), at para. 37. Rule 25.07(4) provides as follows:
In a defence, a party shall plead any matter on which the party intends to rely to defeat the claim of the opposite party and which, if not specifically pleaded, might take the opposite party by surprise or raise an issue that has not been raised in the opposite party’s pleading.
[133] Justice Cronk explained the rationale behind the requirement that a party specifically plead a limitation period defence in Hav-A-Kar Leasing Ltd. v. Vekselshtein, 2012 ONCA 826 (CanLII), 225 A.C.W.S. (3d) 237, at para. 69:
The failure to raise substantive responses to a plaintiff's claims until trial or, worse, until the close of trial, is contrary to the spirit and requirements of the Rules of Civil Procedure and the goal of fair contest that underlies those Rules. Such a failure also undermines the important principle that the parties to a civil lawsuit are entitled to have their differences resolved on the basis of the issues joined in the pleadings.
[134] In S. (W.E.) v. P. (M.M.), MacPherson J.A. confirmed that Ontario courts “have consistently held that rule 25.07(4) applies to pleadings relating to limitations that might bar an action”: at para. 37. He went on to explain that even though in that case the trial judge had given counsel time to prepare submissions on the issue after he raised it during closing arguments, it did not remove the potential prejudice to P:
If S had raised the issue in his pleadings, P might have tried to settle, or even have abandoned, her counterclaim. Either decision might have had costs consequences. Another potential source of prejudice arises from the fact that counsel for P might have adopted different tactics at trial. In particular, counsel might have called different or additional evidence to support an argument that the discoverability principle applied (at para. 38).
[135] MacPherson J.A. also noted that at no time during trial, including during closing arguments when the trial judge raised the limitation issue, did S seek to amend his pleadings. Nor did he seek such an amendment during the appeal hearing.

[136] In my view, the defendants’ failure, in this case, to plead a Limitations Act defence or even to seek an amendment to their pleading to do so is, as it was in S. (W.E.) v. P. (M.M.), fatal.


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