CITATION: Nicholson v. McDougall, 2017 ONSC 7000
DIVISIONAL COURT FILE NO.: 89/17 DATE: 20171122
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
NATASHA NICHOLSON and MICHAEL MCDOUGALL
Matt W. Mulholland and A. Tabrizi, for the Appellants
Appellants
– and –
PAUL WOLANSKI
Debra Eveleigh, for the Respondent
Respondent
HEARD at Toronto: November 22, 2017
matheson J. (Orally)
[1] This is an appeal from the January 26, 2017 decision of Deputy Judge Ferreira of the Small Claims Court. The decision under appeal arises from a trial of an issue, specifically the issue of the appellants’ limitation period defence.
[2] The underlying action relates to a residential real estate transaction from 2009 in which the respondent on this appeal (the plaintiff in the action) purchased the appellants’ condominium.
[3] Generally, the dispute relates to whether the property included two parking spots or just one.
[4] The purchase and sale transaction took place in 2009. Various documents from the transaction state that one parking spot or two came with the condominium and there are documents that show that the topic was the subject of some inquiries.
[5] As a practical matter, the respondent was permitted to use two parking spots after he closed the purchase of the condominium. He was permitted to do so until 2013 when he was given notice that he was no longer permitted to use the second parking spot. At that time, the respondent made a claim against his title insurance and the evidence shows that his claim was subrogated to the title insurer. This action was commenced thereafter, within two years of the 2013 notice date but five or six years after the closing of the transaction in 2009.
[6] Among other defences to the claim, the appellants asserted that the claim was statute barred because it was not commenced within two years of the respondent’s discovery of his claim as required under the Limitations Act, 2002, S.O. 2002, c 24, Sch. B (the “Limitations Act”).
[7] A trial of the limitation period issue was ordered in advance of the trial of the remaining issues. That trial of an issue was based on written evidence. Three affidavits were filed:
(1) an affidavit of the appellant Natasha Nicholson, filed by the appellants;
(2) an affidavit of Michael Goldrich, President of Goldview Property Management Ltd., filed by the appellants; and,
(3) an affidavit of Mitchell Goldberg, a lawyer within the specialty claims department of LawPRO, filed by the respondent.
[8] No direct evidence was filed from the respondent, the respondent’s real estate agent or the respondent’s real estate lawyer.
[9] The Goldberg affidavit filed by the respondent is unusual, as declared by the affiant himself. Mr. Goldberg attested that his entire knowledge was from a review of the LawPRO claims file regarding the respondent’s claim for compensation. He attested that he was providing “legal arguments in affidavit form” further to a court order to outline “arguments” in that way, and that he would not normally do so. His affidavit includes very brief conclusory hearsay from the claim file about what the respondent indicated on his claim was his belief at the time of sale.
[10] The parties agree that there is no indication that the Deputy Judge relied on this unusual affidavit in her decision. That is also my conclusion based on a review of the Reasons for Decision. As such, the unusual nature of this affidavit becomes less important.
[11] Essentially, no evidence was tendered by the respondent in response to the appellants’ limitation defence despite the focus of that defence being the respondent’s knowledge of matters relevant to the commencement of the limitation period.
[12] The Deputy Judge dismissed the limitations defence. In doing so, the Deputy Judge went through some of the evidence, including some of the documents that indicated there were two parking spots and the June 2013 notice, and the use of the second spot. The Deputy Judge concluded that since this action was commenced within two years of the date of the notice, the limitation period did not defeat the claim.
[13] The Deputy Judge made no express finding of when the respondent discovered his claim for purposes of the Limitation Act but before me the parties agreed that it is implicit that it is the date of the 2013 notice, if not such earlier date as might fall within the two year period.
[14] In her Reasons for Decision, the Deputy Judge also considered certain other matters in support of her dismissal of the limitations defence. The Deputy Judge took into account that the plaintiff was not a solicitor, although counsel before me agreed that there was no evidence to that affect, and that the plaintiff was not a real estate agent although counsel before me agreed that there was no evidence to that affect. The Deputy Judge also took into account the fact that the seller has been friend of the buyer.
[15] The Deputy Judge acknowledged that there was “confusion over the number of spots” and indicated that it was “unclear” why the respondent’s solicitor, the respondent’s real estate agent or the seller did not point out that there were contradictions in that regard.
[16] There is no reference in the Reasons for Decision to the required statutory framework, which is set out in s. 5 of the Limitations Act. Briefly, section 5(1) the Act prescribes that a claim is discovered on the earlier of the date on which the person knew certain things or the date on which a reasonable person first ought to have known those things. Subsection (2), which is especially significant here, provides that 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” [my emphasis].
[17] The Deputy Judge makes no reference to the presumption of knowledge, which is a significant component of the discovery test under the statute, or how the reverse onus that it creates was discharged by the respondent in circumstances where the respondent put forward no direct evidence of his knowledge or his agents’ knowledge.
Issues
[18] The appellants raise two issues on this appeal:
(1) whether the Deputy Judge erred in determining that the respondent did not discover the claim until June 23 notice date, and if so, when the respondent discovered the claim; and
(2) when a reasonable person with the abilities and in the circumstances the plaintiff ought to have discovered the claim under s. 5 of the Limitations Act.
[19] Focusing on the first issue, which is the main issue on this appeal, the appellants submit in particular that the Deputy Judge erred in law by failing to apply the presumption in s. 5(2) of the Limitations Act and its shift of the burden of proof onto the respondent.
Jurisdiction
[20] The jurisdiction for this appeal arises from s. 31 of the Courts of Justice Act, R.S.O. 1990, c C.43. It is agreed before me that the appellants have the right of appeal of the decision regarding the limitations period defence because it is final.
Standard of Review
[21] The standard of review that applies is as set out by the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33:
(1) on questions of law, the standard is correctness (at para. 8);
(2) on questions of fact, the standard is palpable and overriding error (at para. 10); and
(3) on questions of mixed fact and law, there is a spectrum: where there is an extricable legal principle, the standard of review is correctness, however, with respect to the application of the correct legal principles to the evidence, the standard of review is palpable and overriding error (at para. 36).
[22] With respect to findings of fact, an appellate court will not interfere with the trial judge’s findings of fact unless it can plainly identify the imputed error and that error is shown to have affected the result.
[23] The parties agree that the standard of review from Housen v. Nikolaisen applies to this case but disagree about the nature of the decision and issues under appeal. The appellants submit that the primary complaint about the Deputy Judge’s decision is an error of law and subject to the correctness standard. That primary complaint is the failure to comply with the reversal of onus under s. 5(2) of the Limitations Act. In the alternative, the appellants submit that the Deputy Judge made a reviewable error of mixed fact and law with an extricable legal principle, which is the same of error with respect to s. 5(2). The respondent submits that the issues on this appeal are entirely mixed fact and law and therefore the subject of the palpable and overriding standard of review.
[24] As I set out below, I conclude that the Deputy Judge did make an error of law, which is extricable, and therefore subject to the correctness standard.
[25] Before discussing the central arguments, I am going to deal briefly with some arguments from the facta that were not the focus of the oral argument because they do relate to the evidence that was before the Deputy Judge. The appellants relied on provisions of the Rules of Civil Procedure to undermine the admissibility of certain affidavit evidence that contains hearsay. I have proceeded on the basis, as submitted by the respondent, that these requirements do not apply, relying on subrule 1.02(1) of the Rules of Civil Procedure. In addition, the respondent emphasizes that there are relaxed rules of evidence for the Small Claims Court under s. 27 of the Courts of Justice Act as found by the Divisional Court in Central Burner Service Inc. v. Texaco Can Inc., 1989 CarswellOnt 1427 (Div. Ct.). I agree with that submission. I further agree with the respondent’s submission that the Deputy Judge did not err in her admission of evidence that was before her. As I say, none of these arguments were the focus of great attention today.
Section 5 of the Limitations Act
[26] I then move to the main issue on the appeal. There is no issue that the Limitations Act applies. The date on which a claim is discovered must be determined under s. 5, and the limitation period runs from that date. The Act requires that the action be commenced within two years of that date.
[27] The appellants submit that the date that this claim was discovered was in 2009 and the claim, commenced in 2015, is well out of time. The respondent submits that the Deputy Judge was right in concluding that the notice in 2013 was the relevant date and the claim was therefore commenced within the required two year period.
[28] As I mentioned earlier in these reasons for decision, the structure of s. 5 is that s. 5(1) demarcates certain events the knowledge of which determines the discoverability date and subsection (2) imposes a presumption of knowledge and shift of the burden of proof on to the plaintiff (here, the respondent).
[29] Focusing on s. 5(1), there is no issue that the acts or omissions that are the subject of this claim occurred in 2009 when the purchase and sale of the condominium took place. We then move to s. 5(2) which imposes a presumption that the claim was known to the respondent in 2009 unless the contrary is proved as required under that subsection.
[30] There is no issue that the presumption applies here and that the burden of proof shifts to the respondent.
[31] There is no reference to s. 5 at all, or any of its detailed requirements, in the Reasons for Decision. I agree with the respondent that this omission from the Reasons for Decision is not sufficient to grant this appeal. The Deputy Judge could have implicitly applied s. 5, including the presumption in s. 5(2), without expressly referring to it. To assess whether the Deputy Judge did so and therefore complied with the Limitations Act requirements, I begin with the law regarding s. 5(2) and then I will move to how it applies in this case.
[32] As found by the Ontario Court of Appeal in Authorson (Litigation Guardian of) v. Canada (Attorney General), 2007 ONCA 501, at para. 137, “the plaintiff bears the burden of demonstrating that the cause of action was not discoverable.” In response to the suggestion that the defendant should bear the burden, the Court observed that “on an issue like discoverability (what did the plaintiff know about the claim, and when, and what steps did the plaintiff take to pursue it) it would be at best difficult for the [the defendant] to establish these factors, and at worst unlikely that the party could do so”.
[33] The appellants also provided an example of the application of s. 5(2) in Sealed Air (Canada) Co. v. ABB Inc., 2012 ONSC 1746 in which the court noted at para. 12 that:
…the effect of subsection 5(2) is to place on the plaintiff the onus of showing that the plaintiff neither knew nor ought to have known that the plaintiff had the claim against the opposite party which the plaintiff proposed to make.
[34] The court went on to emphasis, at para. 19, that under s. 5(2),
…the plaintiff has the onus of showing that the plaintiff and its agents lacked the requisite knowledge as of [the relevant date in that case] and ought to have known the requisite facts as of that date.
[35] Here, there is no question that there is no first-hand evidence from the respondent or his agents.
[36] The respondent relies on evidence put forward by the appellants and submits that there was adequate evidence before the Deputy Judge to support her decision. More specifically, the respondent submits that there was an amble evidentiary record to permit the Deputy Judge to fulfill the s. 5 analysis, including the need for the respondent to rebut the s. 5(2) presumption.
[37] In that regard, the respondent especially relies on a number of documents that describe the property as having two parking spots at around the time of the real estate transaction in 2009 and the fact that the respondent was permitted to use the second parking spot until he was given notice in 2013. There are some other aspects of the evidence that I have considered but those are the most significant ones. The respondent accepts that there was contrary evidence put forward by the appellants in support of the appellants’ position, but submits that it was open to the trial judge to weigh and disregard that evidence, even though the Reasons for Decision do not indicate that that took place.
[38] While I agree that the trial judge did not need to expressly set out the s. 5 test and that her Reasons for Decision should be read generously, I conclude that she erred in law in failing to apply s. 5(2) of the Act. I do so because the Reasons for Decision are inconsistent with the proper application of that mandatory presumption.
[39] The trial judge expressly acknowledged that there was “confusion” over the number of parking spots in the documentation put forward from 2009. Yet, at no point did she confront the absence of any direct evidence from the respondent or his agents, which was key given his burden to prove that he did not know about the matters referred to in s. 5(1) of the Limitations Act in 2009.
[40] Further, the trial judge said that it was “unclear” why the respondent’s lawyer and the respondent’s real estate agent had not pointed out the contradictions to the respondent, but the Deputy Judge failed to address the impact of that missing evidence, which would fall on the respondent, not the appellants, given the presumption and shift of burden under s. 5(2). This error is exacerbated in a case where there is no direct evidence from the respondent or his agents despite the presumption and shift of burden.
[41] I therefore conclude that the Deputy Judge made an inextricable error of law in failing to properly apply s. 5(2) of Limitations Act. The palpable and overriding standard would apply as well, but I need not address it given my ruling above.
[42] Therefore, and despite the able argument of respondent’s counsel, I grant the appeal.
[43] Moving to the subject of remedy, the appellants urge that I decide the limitation period defence in their favour now and dismiss the action. The respondent submits that it is appropriate, if I find that the Deputy Judge made an error in law, to send it back for a fresh consideration. I agree with the respondent that that is the more appropriate course of action. As both parties submit in that instance, I am going to send it back to be determined at the trial of the action together with the other defences that remain outstanding.
[44] In accordance with the agreement of counsel, there shall be an order of costs to the appellants in the amount of $5,000.00.
[45] I have endorsed the Appeal Book and Compendium as follows: “Appeal granted. The issue that was subject of the trial of an issue and this appeal is remitted back to the Small Claims Court to be decided along with the other defences that are going to trial. Costs to the appellants fixed at $5,000.00.”
___________________________ MATHESON J.
Date of Reasons for Judgment: November 22, 2017
Date of Release: November 24, 2017
CITATION: Nicholson v. McDougall, 2017 ONSC 7000
DIVISIONAL COURT FILE NO.: 89/17 DATE: 20171122
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
NATASHA NICHOLSON and MICHAEL MCDOUGALL
Appellants
– and –
PAUL WOLANSKI
Respondent
ORAL REASONS FOR JUDGMENT
MATHESON J.
Date of Reasons for Judgment: November 22, 2017
Date of Release: November 24, 2017