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Limitations Act - Objective Knowledge of s.5(1)(a) Elements [s.5(1)(b)]

. Van Allen v Vos

In Van Allen v Vos (Ont CA, 2014) the Court of Appeal made the following useful comments on the issue of limitations discoverability where a plaintiff had failed for years to review partnership accounts which misallocated expenses to his detriment. On the issue of s.5(1((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"], the court applies appellate deference to a fact-finding as follows:
[19] ... Finally, the trial judge rejected the appellant’s claim that the respondent’s action was out of time. The limitation period commences on the date the respondent knew or ought to have known that the profits were being misallocated. The respondent here did not know – or have reason to know – of the misallocation until his action was well within the two-year limitation period.
The Court continues on the discoverability delay issue:
[20] The appellant advances four grounds of appeal.

[21] First, he says the trial judge erred in determining that the limitation period for the respondent’s action had not expired. The alleged breach of the agreement was discoverable at the outset, and the requirements of the Limitations Act, 2002 S.O. 2002, c. 24, cannot be rendered inoperative by “blind indifference” to a prospective claim.

[22] Second, the appellant submits that the doctrine of laches precludes the respondent’s claim. The respondent effectively acquiesced in the profit allocation formula, and it would be unfair to now retroactively amend the formula in his favor.

[23] Third, there was a meeting of minds regarding the profit allocation formula in 1997. The conduct of the parties represented their shared understanding, and the respondent is estopped from arguing otherwise.

....


[29] I now turn to the grounds of appeal.

[30] The appellant’s first three arguments rest on a common premise, namely, that the respondent knew or ought to have known that Lorraine was not allocating the profits in accordance with the terms of the 2004 agreement. The respondent’s failure to raise objections to the profit-sharing within a reasonable time defeats his claim.[31] In my view, this premise is unfounded.

[32] The issue of whether the respondent knew of the misallocation is one of fact, and the trial judge’s finding cannot be reversed absent a palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 10. The question of whether the respondent ought to have known of the error is one of mixed fact and law. Such questions lie along a law-fact spectrum. Where a matter is closer to the “fact end” of the spectrum – as it is here – appellate courts should be wary of interfering with a trial judge’s findings absent some extricable error in principle: Housen, at para. 36.

[33] The appellant locates no error in the trial judge’s findings with regard to the respondent’s subjective and objective knowledge. The judge found, consistent with the evidence, that the respondent did not know that the associate’s expense was being treated as a shared expense until October 2009. The method of allocating partnership profits is not apparent on the face of the financial statements, as these statements contain only net figures for each partner’s allocation. Moreover, the respondent had no reason to believe that the profit-sharing was based on anything other than an “eat what you kill” arrangement. In these circumstances, the respondent was entitled to rely on the clear wording of the 2004 agreement.

[34] That the respondent did not know and could not have reasonably known of the misallocation is fatal to the appellant’s first three arguments. On the issue of the limitation period, the appellant submits, as he did at trial, that the respondent would have discovered the error had he retained his accountant to review the documentation supporting the financial statements. The observation, even if true, is immaterial. It is reasonable discoverability – rather than the mere possibility of discovery – that triggers a limitation period: Lawless v. Anderson, 2011 ONCA 102, at para. 22. To preclude the respondent from recovery because of his failure to review the underlying financial statements would, in the circumstances of this case, hold him to an unreasonably high standard.

[35] The same is true for the appellant’s laches and estoppel arguments. The doctrine of laches provides a defence to an equitable claim where the plaintiff’s delay in bringing a claim constitutes acquiescence or results in circumstances that make prosecution of the action unreasonable: M. (K.) v. M. (H.), 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6, at pp. 77-78. However, a plaintiff cannot acquiesce without knowledge of the facts giving rise to her claim: ibid., at p. 78. The respondent here lacked this requisite knowledge.

[36] With regard to estoppel, the appellant cites this court’s decision in Shelanu Inc. v. Print Three Franchising Corp. (2003), 2003 CanLII 52151 (ON CA), 64 O.R. (3d) 533 (C.A.), at para. 54, for the proposition that “[w]here the parties have, by their subsequent course of conduct, amended the written agreement so that it no longer represents the intention of the parties, the court will refuse to enforce the written agreement”. That principle has no application here. In Shelanu, the intention of the parties could be inferred from their course of conduct. No such inference can be drawn where, as here, one party is entirely unaware of the relevant conduct: Lauren International, Inc. v. Reichert, 2008 ONCA 382, 237 O.A.C. 94, at paras. 31-33.
. Fennell v. Deol

In this MVA case, Fennell v. Deol (Ont CA, 2016), the Court of Appeal considers the role of due diligence in the application of the main two-year limitation period:
[20] The basic two-year limitation period begins to run on the day the claim was discovered. The date of discovery is the earlier of the two dates under s. 5(1) – when (a) the person with the claim had knowledge of, or (b) a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have had knowledge of, the matters referred to in s. 5(1)(a)(i) to (iv). If either of these dates is more than two years before the claim was issued, the claim is statute-barred.

[21] Section 5(1)(a) considers when the person with the claim had actual knowledge of the material facts underlying the claim. Unless the contrary is proved, under s. 5(2), the person is presumed to have known of the matters in s. 5(1)(a)(i) through (iv) on the date of the events giving rise to the claim.

[22] I pause here to note that, in the present case the key consideration was when Fennell knew or a reasonable person with his abilities and in his circumstances ought to have known that the impairments from his injuries sustained in the accident were permanent and serious.

[23] Due diligence is not referred to in the Limitations Act, 2002. It is, however, a principle that underlies and informs limitation periods, through s. 5(1)(b). As Hourigan J.A. noted in Longo v. MacLaren Art Centre Inc., 2014 ONCA 526 (CanLII), 323 O.A.C. 246, at para. 42, a plaintiff is required to act with due diligence in determining if he has a claim, and a limitation period is not tolled while a plaintiff sits idle and takes no steps to investigate the matters referred to in s. 5(1)(a).

[24] Due diligence is part of the evaluation of s. 5(1)(b). In deciding when a person in the plaintiff’s circumstances and with his abilities ought reasonably to have discovered the elements of the claim, it is relevant to consider what reasonable steps the plaintiff ought to have taken. Again, whether a party acts with due diligence is a relevant consideration, but it is not a separate basis for determining whether a limitation period has expired.
. Galota v. Festival Hall Developments Limited

In Galota v. Festival Hall Developments Limited (Ont CA, 2016) the Court of Appeal considers principles applicable to determining whether a plaintiff exercised investigative diligence in light of the s.5(1)(b) rule that the limitation starts to toll "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" that they had a claim and that an action was the appropriate means to pursue it:
[15] Three points about these provisions are relevant to the submissions on appeal:

• Section 5(1)(b) codifies the common law rule of discoverability. If s. 5(1)(b) applies, the two year limitation period will run from a date later than the date the plaintiff was injured.

• Under s. 5(1)(b), a plaintiff “first ought to have known” of the claim when the plaintiff has enough evidence or information to support an allegation of negligence, including facts about an act or omission that may give rise to a cause of action against a possible tortfeasor: Zapfe v. Barns (2003), 2003 CanLII 52159 (ON CA), 66 O.R. (3d) 397 (C.A.), at paras. 32-33; Burtch v. Barnes Estate (2006), 2006 CanLII 12955 (ON CA), 80 O.R. (3d) 365, at para. 24. The plaintiff cannot delay the start of the limitation period until he or she knows with certainty that a defendant’s act or omission caused the injury or damage: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526 (CanLII), 323 O.A.C. 246, at para. 44.

• The rebuttable presumption in s. 5(2) means that a plaintiff has the onus of showing that the rule of discoverability in s. 5(1)(b) applies: Fennell v. Deol, 2016 ONCA 249 (CanLII), at para. 26.

.....

[20] Festival Hall accepts that the motion judge correctly stated the test for determining when Ms. Galota’s claim against Festival Hall was discoverable under s. 5(1)(b). It challenges his application of the test. Its simple submission is that the motion judge erred by finding Ms. Galota showed “no want of diligence” because she did nothing to investigate a claim against Festival Hall for at least three and half years after she was injured.

[21] Festival Hall points out that in several cases this court has held that a plaintiff relying on s. 5(1)(b) has a positive duty to exercise reasonable diligence in investigating a claim of negligence against a defendant. That duty cannot be met, Festival Hall contends, when a plaintiff takes no steps at all. Had Ms. Galota acted with reasonable diligence she would have discovered her claim against Festival Hall well before November 2009. See, for example: Zapfe; Soper v. Southcott, 1998 CanLII 5359 (ON CA), [1998] O.J. No. 2799 (C.A.); and Pepper v. Zellers Inc. (c.o.b. Zellers Pharmacy), 2006 CanLII 42355 (ON CA), [2006] O.J. No. 5042 (C.A.).

[22] The motion judge accepted that as Ms. Galota was relying on s. 5(1)(b), she was obliged to “investigate on a reasonable basis” a claim against Festival Hall. He said at para. 17 of his reasons:
I agree with the plaintiff that it would be inappropriate to name landlords as defendants in every case of an occupier’s liability claim against a tenant. On the other hand, to satisfy the third branch of the test under s. 5(1)(a), for the purposes of s. 5(1)(b) of the Limitations Act, the plaintiff must investigate on a reasonable basis with a view to determining the proper defendants to the claim. In this case, this would mean identifying the condition of the elevated dance floor as a basis for alleged liability and the persons apparently responsible for it. This requires a plaintiff to make reasonable investigation of her claim. It does not, however, require a pre-discovery discovery of an adverse party.
[23] But the important point, implicit in this paragraph and expressly made by my colleague van Rensburg J.A. in Fennell, is that a plaintiff’s failure to take reasonable steps to investigate a claim is not a stand-alone or independent ground to find a claim out of time. Instead, the reasonable steps a plaintiff ought to take is a relevant consideration in deciding when a claim is discoverable under s. 5(1)(b). Justice van Rensburg made this point at paras. 18 and 24 of her reasons in Fennell:
[18] While due diligence is a factor that informs the analysis of when a claim ought to have reasonably been discovered, lack of due diligence is not a separate and independent reason for dismissing a plaintiff’s claim as statute-barred.



[24] Due diligence is part of the evaluation of s. 5(1)(b). In deciding when a person in the plaintiff’s circumstances and with his abilities ought reasonably to have discovered the elements of the claim, it is relevant to consider what reasonable steps the plaintiff ought to have taken. Again, whether a party acts with due diligence is a relevant consideration, but it is not a separate basis for determining whether a limitation period has expired.
. Beniuk v. Leamington (Municipality)

In Beniuk v. Leamington (Municipality) (Ont CA, 2020) the Court of Appeal considered whether the subjective belief by a party as to the law applicable was adequate to trigger the time-extending provisions of s.5(1)(a)(iv) ['appropriate means'] [SS: I'll treat this as a s.5(1)(b) issue, although that provision is not mentioned]:
[70] While I can appreciate why the appellants may have thought they had a claim for injurious affection, it has always been a principle of limitations law that a plaintiff knows, or could by the exercise of reasonable diligence, determine what legal principles apply. See, for example, Boyce v. Toronto Police Services Board, 2011 ONSC 53, aff’d: 2012 ONCA 230, leave to appeal refused: [2012] S.C.C.A. No. 265, where Low J. stated, at para. 23:
Section 5(1)(a)(iv) does not import an idiosyncratic limitation period calibrated by the claimant’s familiarity with or ignorance of the law. The test is an objective one. While it is possible to envisage that a new kind of right might arise that has not been hitherto protected, thus making it arguable that a civil proceeding might not be seen objectively as an appropriate means to seek to remedy, a battery causing personal injury is a classic example of the kind of wrong that is appropriate for redress by court action. A citizen is presumed to know the law of the land. [Emphasis added.]
[71] See also Novak v. St. Demetrius (Ukrainian Catholic) Development Corporation, 2017 ONSC 3503, at para. 27, where Diamond J. noted that “[t]he provisions of the [Limitations Act] do not mention, directly or indirectly, a plaintiff’s decision to commence a proceeding in the wrong forum as having the effect of preserving or tolling a limitation period.” In Novak, the plaintiff had failed to adduce evidence in support of her obligation to rebut the statutory presumption that she knew or ought to have known a legal proceeding was the appropriate means to remedy her loss or damage.

[72] In this case, not only would the appellants be presumed to know that there might be a forum issue, they were specifically put on notice of the fact. While the evidence on the motion addressed the merits of the appellants’ claims, there was no explanation of why the appellants had concluded, before they received the OMB decision, that their claim was only a claim for “injurious affection” (notwithstanding that they had been put on notice of the jurisdiction issue in the respondent’s Reply), or why they had not adopted the approach referred to in Har Jo of commencing a court action at the same time, if there was any doubt.

[73] Rather, the appellants’ position in the court below, as on appeal, was that while they pursued the OMB proceeding, which, if successful, would have disposed of its claims, then as a matter of principle, a civil action was not “legally appropriate” under s. 5(1)(a)(iv) until such proceeding had run its course.

[74] As I have already observed, 407 ETR does not stand for the general principle that it will always be appropriate to wait until another process has run its course before commencing a civil action in respect of a claim which has otherwise been “discovered” under s. 5(1)(a)(i), (ii) and (iii). It is incumbent on a party asserting that it was reasonable to pursue a claim in another forum to explain why this approach was reasonable. That is what occurred, and was ultimately successful, in the 407 ETR case.

[75] While one of the principles recognized in connection with s. 5(1)(a)(iv) is the deterrence of unnecessary litigation, a plaintiff is not entitled in all cases to pursue one route, and to expect the limitation period to be tolled in respect of any other claim it may have in respect of its loss or damage. Said another way, s. 5(1)(a)(iv) does not permit a party to engage in litigation in stages for the same wrong. An example is Lilydale Cooperative Limited v. Meyn Canada Inc., 2019 ONCA 761, 439 D.L.R. (4th) 385, where this court considered the submission that a limitation period in respect of a third party claim in Ontario was suspended while the defendant was seeking to establish that Alberta was the correct forum for the litigation. Feldman J.A. rejected the argument that it was not legally appropriate to commence a legal proceeding while another resolution process that might resolve the matter was ongoing. She held that such an interpretation of “appropriate” was inconsistent with the purpose of the Limitations Act and could extend the limitation period well beyond the two-year threshold in an uncertain and unpredictable manner. There were also no significant savings to be achieved by not commencing the third party claim until the forum challenge was complete.

[76] At para. 26 of his reasons, the motion judge indicated that he agreed with the Municipality’s submission that the law does not provide for postponing or suspending the limitation period simply because a plaintiff brought its claim in the wrong forum. He found that the appellants’ counsel knew of the forum issue by January 5, 2010, at the latest, when the Municipality raised the issue in its Reply to the OMB proceeding. At para. 27, however, the motion judge concluded that a reasonable person with the abilities and in the circumstances of the appellants ought to have discovered the claim on February 28, 2009, upon receipt of the expert report suggesting damage to the property was connected to the traffic on the nearby roadway.

[77] In light of his conclusion at para. 26, and taking into consideration s. 5(1)(a)(iv), the motion judge ought to have concluded that the appellants discovered their claim on January 5, 2010, when they were put on notice of the forum issue. However, that would not have saved the claim from the limitations defence. The action was commenced only in January 2018, well outside of the two-year period limitation period.

[78] Accordingly, subject to my conclusion on Issue 3 below, the appellants’ civil action is largely statute-barred.



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