In Ontario, claims must be commenced within two years after the cause of action is (or ought to have been) discovered. While this sounds simple, the actual date on which the limitations clock starts to run has been the subject of endless debate and litigation, as the courts have been asked to weigh in on the issue over and over again.
The Ontario Court of Appeal recently held that the limitations clock starts when the mere existence of the claim is known, not when the extent of the damages crystalizes. The court arrived at this conclusion by analyzing the “appropriate means” test in the Ontario Limitations Act.
In Dass v. Kay, 2021 ONCA 565, the Ontario Court of Appeal was tasked with reviewing a summary judgment decision which dismissed a claim for being statute-barred by the two-year time period set out in the Ontario Limitations Act. The appellant, Dass, was the principal of two corporations and the respondent Kay, was a mortgage broker and principal of the respondent mortgage brokerage. In 2015, Dass’s brother contracted with the Respondents for financing a $6 million purchase of a commercial property in Toronto. The loan application was submitted to Roynat Capital (“Roynat”), an affiliate of Scotiabank, and listed Dass and one of his corporations as guarantors (the “Drew Road Application”). Dass was unaware of this and had not consented to his inclusion in the application, which was ultimately denied.
Dass learned of the Drew Road Application and the Respondents’ involvement in July of 2015 when he sought financing from Roynat for a different commercial property (the “Wolfedale Application”). The Wolfedale Application was also denied.
In August of 2015 Dass sent a letter to his lawyer complaining of his fraudulent inclusion in the Drew Road Application. He feared that it could potentially harm his reputation in the eyes of Roynat and was concerned about the financial losses it could inflict on his business. Dass questioned whether he could pursue criminal charges against his brother and the respondent mortgage brokerage. His lawyer advised him that any action would not likely be successful due to a lack of evidence.
At around the same time, Dass applied for a loan with Scotiabank to refinance another property (the “Dixie Road Application”) and he brought the Wolfedale Application to Scotiabank when Roynat denied it. Ultimately, both applications were unsuccessful and Dass had to seek funding through other lenders at higher interest rates than those offered by Roynat and Scotiabank. In January 2018, Dass sought to refinance the Wolfedale property with Scotiabank and Roynat at which time he learned he had been blacklisted, due to his involvement in the Drew Road Application.
Dass sued his brother and the mortgage brokerage in April 2018, seeking damages for reputational and commercial harm suffered as a result of the Drew Road Application. The Respondents brought a motion for summary judgment seeking a dismissal on the basis that the action had been brought outside of the two-year limitation period. The motion judge found that, by August 2015, Dass was aware of all the material facts required to advance his claim, and thus had brought his claim outside of the two-year limit.
The decision turned on the interpretation of section 5(1)(a)(iv), of the Limitations Act, which considers when an action becomes the “appropriate means” to remedy an issue. In its analysis, the court held that “appropriate” means the time that it is legally appropriate to bring a proceeding, not the most advantageous time. This does not include an evaluation of whether the proceeding will succeed.
The Court of Appeal agreed with the motions judge that the email Dass sent to his lawyer showed that he had requisite knowledge that the Respondents were liable, thus starting the limitation clock in August of 2015. The court also held that Dass’ reliance on his counsel did not have any effect on the limitations clock. The limitations period cannot be delayed in situations where a person knows they have been wronged or suffered damage but doubt they can get evidence or prove their claim so as to justify bringing an action. To find otherwise, would have the effect of reducing the certainty that the Limitations Act is intended to provide.
The Court emphasized the important distinction of “damage” versus “damages”. While “damages” refers to the sum of money payable by way of compensation, “damage” is injury inflicted by the tort. One only needs to know they have suffered “damage” (and not their exact “damages”), for the limitation clock to begin to run. In other words, while it is necessary to be aware of a loss for a claim to be discoverable, knowledge of the exact extent and monetary value of that loss is not necessary.
This case provides greater clarity to the “appropriate means” test provided for by the Limitations Act. Even if evidence to prove a claim does not yet exist, this will not be enough to delay the limitation clock. As such, when the mere existence of a claim becomes discoverable, it is wise to take immediate action or risk the claim becoming statute-barred.
Author: Daniel Waldman, Lawyer
The author would like to thank Cassie Wasserman, Student-at-Law, for her assistance with this article.