The Limitations Act was enacted in 2002 and was proclaimed in force as of January 1, 2004. We probably do not exaggerate when we suggest that no Ontario statute claims as much prominence as the Act. It is continually discussed in the jurisprudence and any time a lawyer considers whether to advise a client to commence or defend an action, the lawyer considers the effect of the Act. The Act has a basic limitation period of 2 years from discovery and an absolute limitation period of 15 years regardless of discovery.
Section 5 of the Act sets out the discovery rules as follows:
5 (1) 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).
5 (2) 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.
Many decisions deal with the first 3 subsections in section 5(1)(a) (i.e. on the facts, when did innocent party know that the damage had occurred and know that it was caused by a known person?). Further, under section 5(1)(b), although a party may not actually know the information set out above, the party is presumed to know if a reasonable person with the same abilities and in the same circumstances would have known. Hence, in simplistic terms, the test is: when did the innocent party know or when should the innocent party ought to have known of the damages and the person who caused them?
However, section 5(1)(a) does not just have 3 subsections; it has a 4th. Under section 5(1)(a)(iv) (the “Proceedings Section“), the innocent party must know that, realising the nature of the injury or damage, a proceeding (e.g. an action) would be an appropriate means to seek a remedy. Just because an innocent party knows sufficient facts to give rise to an action, does not mean that it is reasonable for the innocent party to commence an action at that time.
That was the issue in Presley v. Van Dusen, a 2019 decision of the Ontario Court of Appeal. As we discuss this case, think “warranty.”
A contractor installed a septic system in 2010. In spring 2011, the owners complained of an odour from the system. The contractor appeared to fix the problem by replacing a failed sewage pump. In spring 2012, the same smell reappeared. The contractor advised the owners that the cause was an unusually wet year and that other property owners had the same problem. In spring 2013, the owners encountered both the smell and an effluent problem. The contractor advised that the problems could be remedied with a load of sand to a portion of the septic bed and assured the owners that he would return to perform that work. He attempted to do so in fall 2013, but the owners were not home and he was unable to access the site. He failed to attend in spring 2014 because of excessive mud. He promised to attend in winter 2014, but then failed to do so. In spring 2015, the owners complained to the local health unit, leading to an inspection by the system supplier and the contractor. In June 2015, the health unit condemned the system.
The owners sued the contractor and the health unit in Small Claims Court in August 2015. The Small Claims Court judge dismissed the action, holding that, by spring 2013, the owners knew or ought to have known of the damage and knew that it had been caused by an act or omission of the contractor and, perhaps, the health unit. The owners unsuccessfully appealed to the Divisional Court and then appealed to the Ontario Court of Appeal – all for damages of less than $25,000. We have to admire the owners’ tenacity or, more probably, the tenacity of their lawyer.
The Small Claims Court judge, for whatever reason, felt that it was unnecessary to make any determination under the Proceedings Section after finding that, by spring 2013, the owners knew of all the facts referred to in section 5(1)(a). This was an error in law.
The Proceedings Section serves to deter needless litigation. If a proceeding is inappropriate, the start date for the commencement of the limitation period is postponed beyond the date on which the constitutive elements of the claim are discovered. Said otherwise, just because you know you can sue does not mean that you should sue. In that regard,
- an action against an expert professional may be inappropriate if the claim arose out of the professional’s alleged wrongdoing, but may be resolved by the professional himself.
- an action may be inappropriate if the plaintiff is relying on the superior knowledge and expertise of the defendant. This 2nd principle applies to members of traditional or non-traditional professions or to non-professionals (e.g. franchisor-franchisee, investment advisor-investor, etc.). Of course, the plaintiff must still reasonably believe that the defendant is engaged in good faith efforts to right the wrong it caused.
The Court agreed that ongoing investigations or negotiations do not postpone the commencement of the limitation period after it is known that a proceeding is appropriate and the only issue is whether the claim should be settled. That, however, was not the situation in this case.
The Court held that it was reasonable for the owners to rely on the contractor’s expert knowledge and assurances, which led the owners to reasonably believe that the problem could and would be remedied without cost and without any need for recourse to the courts. Accordingly, the limitation period against the contractor did not commence until 2015 and the action was started in time.
The health unit argued that it was not involved in any of the remediation discussions before the owners first contacted it and that, therefore, the action against it was properly statute barred. The Court disagreed. The action against the contractor was not an appropriate remedy until the owners realised that the septic system problems were more serious than the contractor led them to believe and were not going to be remedied. Accordingly, the owners could not have known that a proceeding was appropriate against the health unit at an earlier date. It would make no sense for the owners to commence an action against the health unit when they reasonably believed that the contractor was going to fix a fixable problem.
Since you, our readers, are unlikely to be septic system installers, how does this case apply to you? Again, think warranty. The owner/general knows, within the warranty period, of a problem with a sub’s installation. They can sue immediately or wait, relying on the sub’s expertise and its acknowledgement of, and attempts to fix, the problem.
This conclusion is nice in theory, but we would not advise the owner/general to rely on it. We prefer an action to be commenced within 2 years of the problem arising so that limitation issues are not a consideration in the action.
Image courtesy of Melodi2.
Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.