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Limitations Act - Discoverability - Occurence of Damages [s.5(1)(a)(i)]. Georgian Properties Corporation v. Robins Appleby LLP
In Georgian Properties Corporation v. Robins Appleby LLP (Ont CA, 2022) the Court of Appeal considered a limitations discoverability issue [when a 'loss' occured under Limitations Act s.5(1)(a)(i)] in a lawsuit by the appellant developer against their lawyers for negligent drafting of business paperwork:[34] We accept Georgian Properties’ position that the motion judge erred in law in holding it had suffered a loss when TSCC 2051 failed to make payments under the debt instruments.
[35] The injury, loss or damage at issue under s. 5(1)(a)(i) of the Act must be caused by or contributed to by an act or omission of the defendant in the action: s. 5(1)(b) and (c) of the Act.
[36] In an action for solicitor negligence, the question whether injury, loss, or damage has occurred within the meaning of s. 5(1)(a)(i) will not generally turn on compliance by third parties with their obligations under documents or instruments prepared by the solicitor. The fact that the mortgages in this case were fully secured illustrates the point. Had the mortgages in this case been valid and fully enforceable, Georgian Properties could have recovered the full amount owing to it by enforcing its security. No loss would have occurred even though the mortgages had remained unpaid for many years.[3]
[37] In a solicitor negligence case such as this, the question of whether injury, loss or damage has occurred must turn on matters such as the validity and enforceability of the documents and instruments that were prepared.
[38] However, even assuming the respondent lawyers’ position that injury, loss or damage occurred when the debt instruments were given is correct, we are satisfied that the motion judge’s erroneous finding that Georgian Properties was suffering a loss when TSCC 2051 failed to pay skewed his analysis of when Georgian Properties ought to have discovered its injury, loss or damage.
[39] It is well-established that the question when a party has, or ought to have, discovered a claim under s. 5 of the Act requires a fact-based analysis dependent on the circumstances of each case: Kaynes v. BP p.l.c., 2021 ONCA 36, at para. 56; Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851, 113 O.R. (3d) 401, at paras. 71-2; Lipson v. Cassels Brock & Blackwell LLP, 2013 ONCA 165, 114 O.R. (3d) 481, at paras. 76-77, 84.
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[45] In general, the mere fact that allegations are made in a proceeding that could trigger a claim for solicitor negligence if successful should not automatically signify that the requirements of s. 5(1) of the Act are met and that the party with the potential claim must immediately commence action against the solicitor(s). Further investigation and assessment may be required. To hold otherwise could lead to costly and unnecessary litigation. . Baig v. Mississauga
In Baig v. Mississauga (Ont CA, 2020) the Court of Appeal applies the limitations principle that knowledge of the extent of an injury is not necessary to trigger discoverability:[10] The motion judge made no error. As this court held in Liu v. Wong, 2016 ONCA 366, leave to appeal refused [2016] S.C.C.A. No. 264, at para. 7: “the law is quite well established that it is knowledge of the material facts necessary to support the cause of action that triggers the commencement of the litigation period. Knowledge of the extent of the damages is not necessary.” . Gillham v. Lake of Bays (Township)
In Gillham v. Lake of Bays (Township) (Ont CA, 2018) the Court of Appeal case the court canvasses general principles of discoverability under limitations law:[20] The overarching question in the discoverability analysis under s. 5 of the Act is whether the claimant knew or reasonably should have known, exercising reasonable diligence, the material facts stipulated under s. 5(1)(a) that give rise to a claim: Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851 (CanLII), 113 O.R. (3d) 401, at para. 32. Section 1 of the Act defines a claim as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”. Section 2(1) provides that the Act “applies to claims pursued in court proceedings” (with certain enumerated exceptions that do not apply here).
[21] Knowledge of the claim includes knowledge of the identity of a potential defendant, although it is not necessary for a claimant to know with certainty a potential defendant’s responsibility for an act or omission that caused or contributed to the loss. As this court observed in Longo v. MacLaren Art Centre, 2014 ONCA 526 (CanLII), 323 O.A.C. 246, at para. 44: “All that is required is that the plaintiff has prima facie grounds to infer that the acts or omissions were caused by the identified parties.”
[22] While neither the extent nor the type of loss need be known, the claimant must know that some non-trivial loss has occurred, and that a proceeding would be a legally appropriate means to seek to remedy it: Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218 (CanLII), 109 O.R. (3d) 652, at para. 34. The common law acknowledges that trivial damages do not trigger a limitation period, since a prudent plaintiff would not bring an action to recover a trivial loss: Grey Condominium Corp. No. 27 v. Blue Mountain Resorts Limited (2007), 2007 CanLII 5368 (ON SC), 277 D.L.R. (4th) 644 (Ont. S.C.J.), aff’d 2008 ONCA 384 (CanLII), 90 O.R. (3d) 321, at para. 58. . Liu v Wong
In Liu v Wong (Ont CA, 2016) the Court of Appeal clarified that discoverability relates to the discovering of the material facts which makes up the cause of action, not the magnitude nor type of the damages:[6] Section 4 of the Limitations Act, 2002 provides that “a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered”. Section 5(1) sets out the circumstances in which a claim will be taken to have been “discovered”. Section 5(2) provides that the claimant is presumed to know the matters giving rise to discoverability – unless the contrary is shown –“on the day the act or omission on which the claim is based took place”.
[7] Mr. Liu claims that he did not know he had a cause of action – a claim – until he received the doctor’s report following the tort claim assessment respecting the car accident in which he first injured his knee, on October 19, 2012. The report did not address any injury related to his treatment by Dr. Wong. However, the law is quite well established that it is knowledge of the material facts necessary to support the cause of action that triggers the commencement of the litigation period. Knowledge of the extent of the damages is not necessary. As the Supreme Court of Canada has said in Peixero v. Haberman, [1997] 3 S.C.R [Page 557], at para. 18:[O]nce the plaintiff knows that some damage has occurred and has identified the torfeasor, the cause of action has accrued. Neither the extent of damage nor the type of damage need be known. To hold otherwise would inject too much uncertainty in the cases where the full scope of the damages may not be ascertained for an extended time beyond the general limitation period. [8] In Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851 (CanLII), at para 32, this Court affirmed these principles in stating that “a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered by the plaintiff by the exercise of reasonable diligence.”
[9] This is precisely the analysis the motion judge carried out here. On Mr. Liu’s own evidence, it is clear that he was fully aware that he had problems with his knee immediately following – if not during – the removal of the staples by Dr. Wong in September 2012. He says he thought that Dr. Wong had “botched the job”, that he experienced sharp pain and called an ambulance later that same evening. He told the attending physician during a follow-up appointment on September 16, that Dr. Wong had caused the injury to his knee. . Clarke v. Sun Life Assurance Company of Canada
In the long-term disability case of Clarke v. Sun Life Assurance Company of Canada (Ont CA, 2020) the Court of Appeal considered s.5(1)(a) sub-clause (1) [the discoverability issue of "the day on which the person with the claim first knew, ... (i) that the injury, loss or damage had occurred":[15] The motion judge started her analysis under the Limitations Act, 2002 by considering the date the injury, loss or damage occurred: ss. 5(1)(a)(i) and (b). The motion judge did not accept Sun Life’s submission that the February 24, 2014 letter marked the time at which Ms. Clarke first knew that an injury, loss or damage had occurred. She described the letter as “equivocal” and noted that it “did not use the language of refusal or denial”: at para. 21. She concluded that it was “not clear that the words used by the Sun Life letter of February 24, 2014 [were] a denial of disability benefits that amounted to ‘injury, loss or damage’”: at para. 23. She ultimately found, at para. 30, that the limitation period commenced with the denial communicated to Ms. Clarke by Sun Life on June 19, 2017, notwithstanding that that letter also did not use language of denial.
[16] With respect, the motion judge erred in law by failing to apply the principle stated by this court in Pepper v. Sanmina-Sci Systems (Canada) Inc., 2017 ONCA 730, [2018] I.L.R. I-5996, at para. 1, that an insured has a cause of action for breach of contract against her insurer when the insurer stops paying long-term disability benefits. In its February 24, 2014 letter, Sun Life informed Ms. Clarke that her disability benefits terminated as of April 25, 2013, which was the date the “Own Occupation” benefits period ended. Sun Life went on to state that it would not pay “Any Occupation” benefits. Accordingly, by February 24, 2014, a “loss, injury or damage” had occurred that would have been known to a reasonable person with the abilities and in the circumstances of Ms. Clarke: Limitations Act, 2002, ss. 5(1)(a)(i) and (b).
[17] I note that in reaching her conclusion on s. 5(1)(a)(i), the motion judge relied on the decision of the Divisional Court in Western Life Assurance Company v. Penttila, 2019 ONSC 14, 144 O.R. (3d) 198. The motion judge appears to have misapplied Western Life Assurance on the issue of when an insured knows that a loss, injury or damage has occurred. As that decision clearly stated, at para. 17, the parties agreed that for the purposes of s. 5(1)(a)(i) the insured knew that a loss had occurred on the date her benefits came to an end, which is the governing principle as stated in Pepper. . Pickering Square Inc. v. Trillium College Inc.
In Pickering Square Inc. v. Trillium College Inc. (Ont CA, 20) the Court of Appeal extensively considered principles applicable to deciding when a limitation period runs in a situation of continuing breach of contract:(2) When does the limitation period run in the context of a continuing breach?
[18] Trillium argues that its breach of the covenant to operate its business continuously was complete on October 1, 2008, the first day it failed to resume occupation of the leased premises and operate its business, and that each subsequent day that it failed to operate its business was not a separate breach but, instead, an instance of additional damages.
[19] Trillium submits that a continuing breach of contract requires a succession or repetition of separate acts, whereas this is a case of a single act with continuing consequences. Although s. 16.08 of the lease quantifies the damages payable for every day Trillium failed to carry on business, it does not give rise to a separate cause of action each and every day the failure continued. Consequently, Pickering’s claim is statute-barred because it should have been brought within two years of the October 1, 2008 breach – on or before October 1, 2010.
[20] I would reject this submission.
[21] For purposes of s. 5(1) of the Limitations Act, a claim is discovered once a plaintiff knew or ought to have known of sufficient facts on which to base the claim. Under s. 5(2), a claimant is presumed to discover his or her claim on the day the act or omission giving rise to the claim occurs, unless the contrary is proven.
[22] In order to determine the discovery date for the claim, the nature of the breach must first be determined.
[23] Breaches of contract commonly involve a failure to perform a single obligation due at a specific time. This sort of breach is sometimes called a “once-and-for-all” breach: it occurs once and ordinarily gives rise to a claim from the date of the breach – the date performance of the obligation was due. Trillium’s breach of s. 16.08 does not fall into this category because its obligation to operate its business was ongoing rather than single and time-specific.
[24] A second form of breach of contract involves a failure to perform an obligation scheduled to be performed periodically – for example, a requirement to make quarterly deliveries or payments. A failure to perform any such obligation ordinarily gives rise to a breach and a claim as from the date of each individual breach: see e.g. Smith v. Empire Life Insurance Co. (1996), 1996 CanLII 8134 (ON SC), 19 CCEL (2d) 171 (Ont. Gen. Div.), leave to appeal refused, [1996] O.J. No. 3113 (C.A.). That is not this case.
[25] As the motion judge found, this case falls into a third category of breach: breach of a continuing obligation under a contract. Trillium breached its covenant to operate its business continuously – “at all times” – for the duration of the lease.
[26] The concept of a continuing breach is not novel. It was outlined by Dixon J. (as he then was) in Larking v. Great Western (Nepean) Gravel Ltd. (in Liquidation) (1940), 64 C.L.R. 221 (HCA), at p. 236:If a covenantor undertakes that he will do a definite act and omits to do it within the time allowed for the purpose, he has broken his covenant finally and his continued failure to do the act is nothing but a failure to remedy his past breach and not the commission of any further breach of his covenant. His duty is not considered as persisting and, so to speak, being for ever renewed until he actually does that which he promised. On the other hand, if his covenant is to maintain a state or condition of affairs, as, for instance, maintaining a building in repair, keeping the insurance of a life on foot, or affording a particular kind of lateral or vertical support to a tenement, then a further breach arises in every successive moment of time during which the state or condition is not as promised, during which, to pursue the examples, the building is out of repair, the life uninsured, or the particular support unprovided.
The distinction may be difficult of application in a given case, but it must be regarded as one depending upon the meaning of the covenant. It is well illustrated by the construction given to the ordinary covenant that premises will be insured and kept insured against fire. Such a covenant is interpreted as imposing a continuing obligation to see that the premises are insured, so that the covenant cannot be broken once for all, but, on the contrary, failure to insure involves a continuing breach until the omission is made good. See the discussion in J.W. Carter, Carter’s Breach of Contract (Lexis Nexis-Butterworths 2011), at ch. 11-64. See also Bridgesoft Systems Corp. v. British Columbia, 2000 BCCA 313, 74 B.C.L.R. (3d) 212.
[27] Trillium’s argument that breach of its covenant to operate its business continuously established a complete cause of action as of October 1, 2008 overlooks the consequences of its breach. In the face of Trillium’s action – a serious breach or repudiation of the lease – Pickering had an option. It could either cancel the lease or affirm it and require performance: see Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd., 1971 CanLII 123 (SCC), [1971] S.C.R. 562, at p. 570; TNG Acquisition Inc. (Re), 2011 ONCA 535, 107 O.R. (3d) 304, at para. 33.
[28] The election to cancel a contract as a result of a serious breach or repudiation brings a contract to an end and relieves the parties of any further obligations under it. The contract is not void ab initio: the innocent party may sue for damages for breach of the contract.
[29] By contrast, if the innocent party elects to affirm the contract despite the serious breach or repudiation, the contract remains in effect and the parties are required to perform their obligations under it. The innocent party retains the right to sue for past and future breaches: Guarantee Co. of North America v. Gordon Capital Corp., 1999 CanLII 664 (SCC), [1999] 3 S.C.R. 423, at para. 40.
[30] Pickering elected not to cancel the lease following Trillium’s October 1, 2008 breach. It affirmed the lease and, as a result, the parties were required to perform their obligations under it as they fell due.
[31] Trillium could have resumed performance of its obligations at any time prior to the end of the term of the lease by carrying on its business at the leased premises in accordance with the terms of the covenant. Had it done so, Pickering would have been required to accept Trillium’s performance and would have been unable to terminate the lease in the absence of a further serious breach or repudiation. Trillium would have been liable for damages from the date of its October 1, 2008 breach until the date it resumed the performance of its covenant obligations, but would not have incurred liability for breach of the lease beyond that date.
[32] Trillium chose not to resume its obligations at any point prior to the expiry of the lease. In these circumstances, when did the two-year limitation period begin to run?[33] It is clear that a cause of action accrues once damage has been incurred, even if the nature or the extent of the damages is not known: Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 18; Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156, 347 D.L.R. (4th) 657, at para. 61.
[34] But accrual of a cause of action is not determinative for limitation purposes in the context of a continuing breach of contract and an election by the innocent party to affirm the contract. The motion judge properly concluded that a fresh cause of action accrued every day that breach continued – every day that Trillium failed to carry on its business in accordance with the covenant.
[35] Nothing in Highway Properties precludes this approach. Laskin J.’s statement, at p. 576, that “the election to insist on the lease or to refuse further performance (and thus bring it to an end) goes simply to the measure and range of damages” does not speak to a situation of continuing breach or the application of the Limitations Act.[36] I agree with the motion judge that the proper approach to the calculation of the limitation period in the context of a continuing breach is set out in H.G. Beale, ed., Chitty on Contracts, 29th edn. (London, UK: Sweet & Maxwell, 2004), at para. 28-035 (the position is unchanged in the 32nd edition):[T]he breach may be a continuing one, e.g. of a covenant to keep in repair. In such a case the claimant will succeed in respect of so much of the series of breaches or the continuing breach as occurred within the [relevant limitation period] before action brought. If the breach consists in a failure to act, it may be held to continue die in diem until the obligation is performed or becomes impossible of performance or until the innocent part elects to treat the continued non-performance as a repudiation of the contract. … [Footnotes omitted.] [37] The accrual of fresh causes of action has consequences for the innocent party as well as the party in breach of the contract. It sets the clock running for a new two-year limitation period. Pickering’s election to affirm rather than cancel the lease does not have the effect of postponing the date for discovery of the breach until expiry of the lease.
[38] The limitation period in this case applied on a “rolling” basis, a concept discussed in Goorbarry v. Bank of Nova Scotia, 2011 ONCA 793 at paras. 11-13 and Wilson’s Truck Lines Ltd. v. Pilot Insurance Co. (1996), 1996 CanLII 1012 (ON CA), 31 O.R. (3d) 127 (C.A.) at para 58. The two-year limitation period commenced each day a fresh cause of action accrued and ran two years from that date. Thus, Pickering was entitled to claim damages for breach of the covenant for the period going back two years from the commencement of its action on February 16, 2012 – the period that ran from February 16, 2010 until the lease expired on May 31, 2011.
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