Ontario’s “appropriate means” test for limitation periods after Grant Thornton v. New Brunswick
As we recently wrote, the Supreme Court of Canada’s recent decision on limitation periods in Grant Thornton v New Brunswick, 2021 SCC 31 (CanLII), left open the question of how Ontario courts would apply the “appropriate means” test in section 5(1)(a)(iv) of the Limitations Act, 2002, which was not at issue in Grant Thornton (which involved New Brunswick’s otherwise similar limitations statute).
Pursuant to section 5(1) of the Ontario Limitations Act, 2002, a plaintiff need not know the exact act or omission by a defendant that caused the loss in order to start the running of the limitation period. What the plaintiff needs to know is (a) that an incident occurred that resulted in a loss; (b) that the defendant did or failed to do something to cause that loss; and (c) that, having regard to the nature of the injury, loss, or damage, a court proceeding is an appropriate means to seek a remedy.
The last factor in section 5(1)(a)(iv) is commonly referred to as the “appropriate means” due to its reference to the day on which the person with the claim first knew that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.
In Dass v Kay, 2021 ONCA 565 (CanLII), released a short time after Grant Thornton, the Court of Appeal for Ontario addressed the principles governing discoverability of claims and provided some further guidance on how to assess the appropriateness of bringing a proceeding.
In early 2015, the respondent mortgage brokerage was asked by the brother of the individual appellant to secure financing for the purchase of a commercial property valued at $6 million in Toronto. The mortgage brokerage submitted an application for financing to a lender which listed the individual appellant (“P.D.”) as a guarantor and represented that one of his corporations would be the tenant.
P.D., however, knew nothing about the mortgage application submitted by the brokerage at his brother’s request. He had never agreed to guarantee the loan, was not involved in any way with the purchase, had no intention of leasing the property, and had not authorized the disclosure of the financial statements for the purported tenant. The brother was ultimately unsuccessful with the mortgage application.
In July 2015, P.D. learned about the mortgage application that had been made during his own negotiations with the lender for the purchase of another commercial property. His mortgage application was refused, and he was subsequently blacklisted by the lender when its financing was due for renewal.
On August 21, 2015, P.D. sent an email to his lawyer, copying the mortgage brokerage and others, in which he complained that the refusal was the result of “improper action” by the brokerage and his brother that harmed his reputation in the eyes of the lender. He expressed concern that he could lose millions of dollars in business as a result and asked his lawyer’s opinion as to whether he could pursue criminal charges against his brother and the brokerage.
On April 27, 2018, P.D. and his numbered companies issued a statement of claim seeking damages for the reputational and commercial harm suffered as result of the mortgage broker’s submission of the mortgage application. The respondents brought a motion for summary judgment on the basis that the appellants’ claim was statute-barred, having been brought outside the two-year limitation period established by s. 4 of the Limitations Act, 2002.
The motion judge found that the appellants had the requisite knowledge to commence the claim more than two years prior to the statement of claim being issued, and that the claims were therefore statute-barred. In particular, the motion judge found that the appellants:
- knew on July 24, 2015 of the unauthorized use of their information in the application;
- knew on July 27, 2015 of the respondent brokerage’s involvement; and
- had concluded, by August 21, 2015, that P would suffer financial loss as a result of the application, as evidenced by the email to counsel on that date.
On appeal, the appellants argued that the motion judge erred by rejecting the proposition that an assessment of the appropriateness of litigation, within the meaning of section 5(1)(a)(iv), includes an assessment of the prospect of the success of litigation, particularly where the party has relied on an assessment of merits by legal counsel.
Ontario courts have previously recognized two main classes of matters that would delay the start of the limitation period due to the “appropriate means” factor, namely (i) where the plaintiff continued to rely on the defendant’s superior knowledge and expertise while the limitation period would have otherwise been running; or (ii) situations where an alternative dispute resolution process offered an adequate remedy that had not run its course. Ontario courts have held that these factors can extend a limitation period under section 5(1)(a)(iv) in certain case-specific circumstances.
In the case at hand, what the appellants were seeking to do was to expand the class of matters to include a situation where the plaintiff had a relied on the opinion of the prospects of success of litigation.
The Court of Appeal rejected this argument, relying on the framework established in Sosnowski v MacEwan Petroleum Inc, 2019 ONCA 1005, which affirmed that the word “appropriate” means that it is “legally appropriate” to bring a proceeding, rather than that it is practically advantageous. In Sosnowksi, the Court of Appeal affirmed that “legally appropriate” would not apply to a situation where a plaintiff chose to not commence a proceeding at an earlier time because the claim was difficult to prove. A plaintiff who has relied on the advice of their independent legal counsel regarding whether to bring a claim cannot be considered to be in the same position as a plaintiff who has relied on the assessment of the situation provided by the very defendants named in the action.
The Court of Appeal also addressed the distinction between the concepts of “damage” and damages” in its analysis and how it relates to the commencement of the limitation period, relying on the definition provided by the Nova Scotia Court of Appeal in Smith v Union of Icelandic Fish Producers Ltd., 2005 NSCA 145 (CanLII). “Damage” refers to the injury inflicted by the tort or breach of contract, while “damages” refers to the sum of money payable by way of compensation. The limitation period does not commence only when one can determine what damages (money) a plaintiff would be entitled to as a remedy, but rather the point at which the plaintiff discovers that commencing a proceeding would be the appropriate means of remedying a loss or damage sustained.
The appeal was dismissed accordingly. The main takeaway from the case is that the Court of Appeal specifically rejected the notion that the date of discoverability regarding the appropriateness of bringing a proceeding can be delayed until such time that a plaintiff is in the position to marshal the evidence to successfully prove the claim and is sure that the claim will result in monetary recovery. In other words, the determination as to whether litigation is an appropriate means does not require an assessment of the prospects of success. A PDF version is available to download here.
(This blog is provided for educational purposes only, and does not necessarily reflect the views of Gardiner Roberts LLP).