In Andrews v. Pattison, the Ontario Court of Appeal upheld a summary motion decision involving section 5(1)(a) of the Limitations Act, 2002, SO 2002, c 24, Sch B (the “Limitations Act”).

Ms. Gorton was diagnosed with terminal lung cancer in the spring of 2013. She passed away in April 2014. Prior to her passing, she was treated by the respondent doctor between 2008 and 2013. The doctor ordered a chest x-ray in late 2008. No anomalies were discovered. No other chest x-rays were requisitioned until May 2013. It was the x-ray of May 2013 that led to the cancer diagnosis.

The appellants issued a statement of claim on April 11, 2016, against the respondent doctor. At the summary motion, the appellants asserted that the limitation period did commence until they obtained expert reports on the standard of care and causation in 2015. However, the motion judge held that the appellants’ claim was discoverable no later than February 6, 2014, when they met with a medical malpractice lawyer. By that date, the appellants had obtained the complete medical records of Ms. Gorton and expressed concern about whether an earlier x-ray might have led to a better outcome.

It was held that the appellants had actual knowledge of the potential claim against the respondent doctor on February 6, 2014. The claim issued on April 11, 2016, was therefore out of time. The action was summarily dismissed as statute barred under section 5(1)(a) the “Limitations Act”.

The Court held that the determination of when a potential plaintiff has sufficient material facts on which a plausible inference of liability on the defendant’s part can be drawn “is not to be conflated with the question of the discovery of the merits of the potential action.” Both the Court of Appeal and the motion judge recognized that the Limitations Act “does not distinguish between meritorious and non-meritorious claims.” In other words, knowing the strength of a potential action is not determinative of when the limitation period for that action will commence.

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Discoverability, Due Diligence, and the Impact of the Covid-Adjusted Limitation Period

In McAuley v. Canada Post Corporation, 2021 ONSC 4528 (Ont. S.C.J.)., Justice Boswell clarified the rules of discoverability, due diligence, and the impact of the suspension of all limitation periods ordered in the midst of the Covid-19 pandemic. In a motion to amend a claim to add additional parties past the expiry of the presumed date of discovery, Boswell J. ruled in favour of the opposing parties, who argued that the plaintiff had failed to act with due diligence to discover the claim against them. When addressing the Covid-adjusted limitation period, which suspended all limitation periods from March 16, 2020 to September 14, 2020, Justice Boswell stated it simply: “those days do not get counted in the calculation of the limitation period”.

The plaintiff in this action suffered a broken ankle after a slip and fall on a municipal sidewalk in Huntsville in December 2017. The sidewalk was adjacent to a Canada Post Corporation (“CPC”) building. The plaintiff initially commenced an action against the municipality only in April 2018.  Immediately following the fall, it had been brought to the plaintiff’s attention that an eavestrough on the side of the CPC building was not properly maintained. Photographs of the faulty eavestrough were taken by the plaintiff’s wife around that time; however, the plaintiff failed to mention this to his counsel until November 2018.  Thereafter, CPC was put on notice and the plaintiff was advised of the use of a property manager for the premises, JLL. By early February 2019, plaintiff’s counsel was advised that JLL had subcontracted its tasks to Heritage Property Services (“Heritage”), who had retained Always Handy Property Management Ltd. (“Always Handy”) to act as the winter maintenance contractor.

On March 6, 2019, the plaintiff commenced a second action against CPC. The municipality and Heritage were added as third parties, and Always Handy was added as a fourth party, along with JLL. Following documentary disclosure between January 10 and March 13, 2020, the plaintiff sought to amend the claim to add the municipality, JLL, Heritage, and Always Handy as defendants to the main action. The plaintiff claimed it was not until that time that he was alerted to the contractual obligations of the third and fourth parties. The motion was initiated on January 28, 2021, and was opposed by both Heritage and Always Handy on the basis that the limitation period had expired.

In this case, the court found that the actual date of discovery was when the plaintiff’s lawyer was advised of the involvement of Heritage and Always Handy in February 2019. It was further determined that the plaintiff’s failure to notify his counsel of the faulty eavestrough until 11 months after his injury amounted to a lack of due diligence. The court found that a reasonable person in the plaintiff’s circumstances would have provided this information soon after retaining counsel in early 2018. Had the plaintiff done so, the chain of events would have led to a discovery of the claim against Heritage and Always Handy by April 30, 2018.

The determined discovery date of the claim meant that the expiry of the limitation period should have occurred on April 30, 2020. However, all limitation periods in Ontario were suspended during that time, due to the Order made by the provincial government under s. 7.1(2) of the Emergency Management and Civil Protection Act, R.S.O. 1990, c. E.9., Reg. 73/20 (“Reg. 73/20”). As aforementioned, Reg. 73/20 was in force from March 16 to September 14, 2020. The plaintiff argued, and the court agreed, that the impact of Reg. 73/20 was to extend the running of the limitation period by 183 days. The court stated that “all limitation periods subject to the regulation were extended by roughly six months”.

Heritage argued that this was the incorrect interpretation of Reg. 73/20; however, the court noted that Heritage had failed to articulate why this was incorrect, other than to suggest that the revocation of the regulation effectively revoked any benefit it otherwise may have conferred. This was, clearly, not accepted by the court. Had an alternative opposing argument been advanced that acknowledged the suspension of limitation periods during the 183 days (i.e. that all limitation periods which would have elapsed during this time expired on the date the regulation was revoked), the outcome on this issue may have been different.

Regardless, Heritage and Always Handy were successful in opposing the plaintiff’s motion to add them to the main action, due to the expiry of the limitation period. As JLL and the municipality did not oppose the plaintiff’s motion, an order was granted to add them as defendants to the main action.

This case serves as an excellent example of the obligations imposed on a plaintiff to exercise diligence and keep their counsel informed of all information of which they become aware. As well, the case, importantly, clarifies that all limitation periods subject to Reg. 73/20 were extended by 183 days.

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On July 29, 2021, the Supreme Court of Canada clarified the common law discoverability rule and the applicable standard to determine when a plaintiff has the requisite knowledge to discover a claim. The Court of Appeal of New Brunswick had previously left the state of the law rather unstable when broadening the limitation period for a negligence action. This previous decision had significantly increased the length of time permitted for a plaintiff to discover a negligence claim by extending the discoverability of a claim as far as requiring the delivery of an expert report indicating negligence. The court strongly disagreed with the standard instilled by the Court of Appeal and reinstated the decision emitted at first instance by the motion judge that the claim was statute-barred. The Supreme Court expressed that “a plausible inference of liability was sufficient” to meet the standard. Importantly, it also noted that the common law discoverability rule can be expressly ousted from the legislation. In this case, it was not excluded and in fact, clearly embedded within the legislative framework and was to serve as an interpretative tool.

New-Brunswick company, Atcon Group, upon applying for loans, required guarantees from the Province of New Brunswick. The Province agreed to the issuance of guarantees solely based on the condition that the company’s assets be reviewed by an independent auditing firm, Grant Thornton LLP. Grant Thornton confirmed that the company’s books were representative of their current financial circumstances and the Province thereafter issued $50 million in loan guarantees. Shortly after, Atcon Group ran out of working capital and defaulted on the loans issued by the Bank of Nova Scotia. The Province subsequently retained an additional auditing firm, RSM Ritcher Inc., to assess Atcon Group’s financial position. This latter report indicated that the assessment completed by Grant Thornton LLP was erroneous and the financial statements as prepared by the Atcon Group overstated their assets and was inconsistent with the Generally Accepted Principles of Accounting. The Province of New Brunswick, a year and a half later, commenced an action against Grant Thornton LLP alleging negligence. Denying the allegations, Grant Thornton LLP moved for summary judgement claiming that the action exceeded the limitation period as permitted under s.5(1)(a) of the Limitation of Actions Act. The trial judge had determined that the action was not commenced within the permitted 2-year timeframe and that the Province ought to have known that they had a potential cause of action prior to the deliverance of the subsequent report. The decision was appealed by the Province of New Brunswick and surprisingly, the Court of Appeal widely expanded the standard by articulating that the two-year limitation was to start when the plaintiff discovered, they, in fact, had a claim rather than the plausibility of one. In the case of a negligence claim, the Court of Appeal took a surprising direction, inconsistent with the previous application of the discoverability rule. It had established that the limitation period would start when the plaintiff would have knowledge or ought to know that the “defendant was under a relevant duty of care and its loss-causing act or omission fell below the applicable standard of care”.

The Supreme Court opined that the NBCA erred in their analysis and raised the discoverability rule to a far too high standard approaching certainty and potentially resulting in the “indefinite postponement of the limitation period”. Justice Moldaver illustrates that a claim is discovered when the plaintiff “has knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn”. In his words, “in order to properly set the standard, two distinct inquiries are required”. Firstly, it must be determined whether “the state of the plaintiff’s knowledge is to be assessed in the same manner as the common law rule of discoverability”. In other words, is the common law rule excluded from the legislative framework? If not ousted, the “rule is triggered when the plaintiff discovers or ought to have discovered the material facts upon which the claim is based”. The latter part of the analysis moves on to considering the degree of knowledge required to lead to the discovery of the claim. The plaintiff should know or should reasonably expect that the claim exists. The Supreme Court notes that the requisite standard is “not certainty of liability or perfect knowledge” as the Court of Appeal had proposed, rather, the “plausible inference of liability is sufficient”.

In all, the recognition that the standard for discoverability was set too high was rather welcomed by defence counsel. Unless expressly incorporated within the legislative framework, an expert report which specifically indicates the occurrence of negligence is not required to trigger the clock for the limitation period for a negligence action.

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The Ontario Court of Appeal in Lilydale Cooperative Limited v Meyn Canada Inc, 2019 ONCA 761, confirmed that pending decisions about jurisdictional issues will not extend the limitation period. This case follows along the same vein as other rulings that suggest that appeals, settlement discussions and the resolution of ancillary issues do not defer the start of the limitation period.

In this case, the plaintiff commenced a claim in both Alberta and Ontario against the same defendants, Meyn and EMK. Meyn sought to stay the action in Ontario on the grounds that Alberta was the most convenient forum. Ultimately, Meyn’s motion was dismissed and therefore, the Alberta action was discontinued.

Two years and eight months past the issuance of the original claim in Ontario, Meyn and EMK issued third party claims. One of the third party defendants brought a summary judgment motion to dismiss the action for being statute-barred. Meyn argued that it was not “legally appropriate” to commence a third party claim while another resolution process that may resolve the matter was ongoing. Meyn took the position that the forum issue must have been decided as a prerequisite to bringing any other claim; and the resolution of the forum issue would commence the limitation period.

The Court of Appeal disagreed and affirmed the lower court’s decision to grant the summary judgment motion. It was not “legally appropriate” for Meyn to wait for a jurisdictional dispute to be resolved before commencing its third party claim. While the risk of attornment was a legitimate concern, that concern did not affect discoverability of the third party claim or displace the duty to preserve the claim within limitation period. The court found that withholding the third party claim was a strategic decision, and such tactical choices could not serve to delay the start of the limitation period.

The court advised of other procedural routes that could have preserved the limitation period without prejudice to the forum motion, such as alerting the parties of a potential third party claim and seeking indulgence to a stand-still pending its resolution. Alternatively, the defendants could have issued the third party claim with an express reservation of its rights, and then argued at its forum motion that it did so only to preserve the limitation period and therefore has not attorned to Ontario’s jurisdiction.

It is clear through this ruling and so many others before it, that the Limitations Act, 2002, is a judicial lifeline that demands strict compliance, with little deference to technicalities. As soon as a claim is discovered, the clock begins to run. The seasoned litigator must therefore, preserve the claim under all costs.

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No Expiry Date on an Insurer’s Duty to Defend

by Samah Rahman

In Reeb v. The Guarantee Company of North America (2019 ONCA 862), the Ontario Court of Appeal confirms that an insurer’s duty to defend is an ongoing commitment – it does not expire during the life of a policy.

In this case, a 14-year old defendant was sued in another action in negligence for injuring the plaintiff, while playing with a BB gun at the defendant’s home. The defendant’s separated parents, along with the father’s current spouse, each had homeowner’s insurance policy. The mother’s insurer, RSA, took the position that the existence of concurrent policies implicated all three insurers to share equally in the defence costs. The other two insurers declined coverage alleging that the accident was intentional, and therefore, excluded under policy terms.

RSA brought an application for a declaration that: a) the other two insurers had a duty to defend, and b) the insurers had an obligation to pay an equal one-third share of ongoing defence costs. The court granted the application.

The insurers appealed on two grounds:

1. RSA’s application for contribution to the defence costs was statute-barred under the Limitations Act, 2002, because the application was brought two-years after the insurers refused to defend; and
2. RSA’s application exceeded the specific contractual limitation periods found in their respective insurance policies.

The Court of Appeal dismissed the appeal and upheld the lower court’s decision. On each issue the court said:

1. The duty to defend is an ongoing obligation to be applied on a “rolling” basis”; since RSA only seeks contribution on a going-forward basis, no limitation period attaches; and
2. The contractual limits found in the policy itself are not applicable. Insurance policies are not analogous to business agreements because policy holders are consumers.

This is a flagship case for insureds who seek to rely on the duty to defend owed to them by insurers. This duty is triggered as needed; it is not subject to the two year limitation period if the contributions are sought on a going-forward basis.

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