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- 12 February 2019

THE LATEST WORD

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Limitations - General

Apotex Inc. v. Nordion (Canada) Inc. (Ont CA, 2019)

Here the Court of Appeal conducts a general review of limitations law since the changes brought about by Limitations Act, 2002:
[73] After many years of attempts at reform, the LA 2002 brought about a sea- change in the law of limitation periods in Ontario. That change has spread to other Canadian jurisdictions and its impacts are still being felt as its implications are clarified. The statute replaced “a complex, obscure and confusing regime of multiple limitation periods with a simple and comprehensive scheme”: see Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44 (CanLII), 136 O.R. (3d) 202, at para. 29; msi Spergel Inc. v. I.F. Propco Holdings (Ontario) 36 Ltd., 2013 ONCA 550 (CanLII), 310 O.A.C. 282, at para. 61. It did away with a patchwork of different limitation periods, of various lengths, and put in place a uniform and considerably shorter limitation period of two years for most actions. It also codified the common law “discoverability” principle as the trigger for the commencement of the limitation period.

[74] The LA 2002 applies to “claims pursued in court proceedings” other than those enumerated in s. 2(1). A “claim” is defined in s. 1 as: “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”.

[75] Section 4 sets out the general two-year limitation period:
Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
[76] Thus, under the LA 2002, the limitation period runs when the claim is “discovered”.

[77] Section 5(1) provides that a claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

[78] As this court observed in Longo v. MacLaren Art Centre Inc., 2014 ONCA 526 (CanLII), 323 O.A.C. 246, at para. 41, the items listed in s. 5(1)(a) are conjunctive:
The limitation period does not begin to run until the putative plaintiff is actually aware of all of those matters or until a reasonable person, with the abilities and in the circumstances of the plaintiff, first ought to know of all of those matters.
See also Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16 (CanLII), 406 D.L.R. (4th) 252, at para. 35, leave to appeal refused, [2017] S.C.C.A. No. 85.

[79] To state an obvious point of importance in this case, the effect of ss. 5(1)(a)(i), (ii) and (iii) is that it is not sufficient that the plaintiff knows that he or she has suffered damage. The plaintiff must also know that the damage was caused by an act or omission of the defendant.

[80] Subsection 5(1)(a)(iv) adds an additional requirement not found in the former legislation: the person with the claim must know “that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”.

[81] Subsection 5(1)(a) has been described as a “subjective” test, because it looks to the claimant’s subjective knowledge. On the other hand, s. 5(1)(b) has been described as a “modified objective” test because it looks to what a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known: see Independence Plaza, at para. 74; Ferrera v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851 (CanLII), 113 O.R. (3d) 401, at para. 70; Presidential, at para. 18.

[82] Section 5(2) creates a statutory presumption that a claim is discovered on the day the relevant act or omission took place:
A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.
[83] To overcome this presumption, the plaintiff may point to evidence to establish that the claim was “discovered” on a date other than the date on which the “act or omission” took place. As this court observed in Morrison v. Barzo, 2018 ONCA 979 (CanLII), at para. 31: “The presumption is displaced by the court’s finding as to when the plaintiff subjectively knew he had a claim against the defendants”.

Commencement of the limitation period for breach of contract

[84] Before the reform of limitations law brought about by the LA 2002, the previous statute, the Limitations Act, R.S.O. 1990, c. L.15, looked to when the cause of action arose (an expression not used in the LA 2002) to determine the commencement of the limitation period. The “cause of action” for breach of contract accrued on the date of the breach and the limitation period began to run on that date: see Graeme Mew, Debra Rolph & Daniel Zacks, The Law of Limitations, 3d ed. (Toronto: LexisNexis, 2016) at §9.6; Robert Simpson Co. Ltd. et al v. Foundation Co. of Canada Ltd. et al (1982), 1982 CanLII 1750 (ON CA), 36 O.R. (2d) 97 (C.A.), at p. 105; Schwebel v. Telekes, 1967 CanLII 163 (ON CA), [1967] 1 O.R. 541 (C.A.), at p. 544.

[85] This was the case whether or not damages had yet been incurred. Damages are not an essential element of the cause of action for breach of contract: Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239 (CanLII), 140 O.R. (3d) 81, at para. 32.

[86] Under the LA 2002, the limitation period for breach of contract does not necessarily run from the date of the breach. As I have observed, in contrast to the former statute, the date of the “act or omission” – the breach of contract itself – is not the only factor to be considered in determining when a claim is discovered under the LA 2002. Instead, the date on which the plaintiff knew of the occurrence of the act or omission is only one factor to be determined. In addition to that factor, the person with the claim must also know that the “injury, loss or damage had occurred” (s. 5(1)(a)(i)), that it was caused or contributed to by the act or omission (the breach of contract) (s. 5(i)(a)(ii)), and that the act or omission was that of the defendant (s. 5(1)(a)(iii)).

[87] As a result of the presumption under s. 5(2), the limitation period begins to run on the date of the breach (being the date of the “act or omission”), unless it is proven that the person with the claim did not know of one or more of the matters set out in s. 5(1)(a), and that a reasonable person would not have known of those matters.

[88] A plaintiff with a claim for breach of contract may displace the presumption in s. 5(2) if, for example, they establish that they did not know that “the injury, loss or damage” had occurred or, if it had occurred, they did not know that it was caused by an act or omission of the defendant – the breach of contract. But it is well-settled that the person need not know the extent of the injury, loss or damage to trigger the commencement of the limitation period. It is enough that they know that some damage has occurred. In Hamilton (City) v. Metcalfe & Mansfield Capital Corp., 2012 ONCA 156 (CanLII), 290 O.A.C. 42, at paras. 59-61, this court adopted the common law rule expressed in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 18, that “some damage” is sufficient to start the running of the limitation period.

[89] To summarize, under the LA 2002, the limitation period does not begin to run until all of the factors enumerated in s. 5(1)(a) have been satisfied, unless a reasonable person ought to have known of their existence at an earlier date (s. 5(1)(b)). In breach of contract cases, those factors include knowledge that some injury, loss or damage was caused by or contributed to by the act or omission that is the breach of contract.

[90] I make two concluding observations before turning to the circumstances of this case.

[91] First, to determine when a claim is discovered in a breach of contract case, it is necessary to examine the terms of the contract and the nature of the alleged breach (the “act or omission”) on which the claim is based: see Mew, Rolph & Zacks, at §9.5, citing to NFC Acquisition L.P. v. Centennial 2000 Inc., 2010 ONSC 733, 67 B.L.R. 218, at paras. 29-30, affirmed in 2011 ONCA 43 (CanLII), 78 B.L.R. (4th) 11; Hopkins v. Stockman, 2013 SKCA 118 (CanLII), 427 Sask. R. 4, at para. 10. As van Rensburg J.A. noted in Morrison v. Barzo, at paras. 33, 49, the application of the test in s. 5(1)(a) requires the identification or definition of the claims at issue. This is a necessary starting point.

[92] Second, in many cases, the act or omission, causation, and the injury, loss or damage will occur simultaneously, and will be discovered simultaneously. But this will not always be the case. In some cases, discovery of the “act or omission” will not start the limitation period running unless injury, loss or damage has occurred and has been discovered (s. 5(1)(a)(i)).



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