Court of Appeal for Ontario
Date: May 23, 2018 Docket: C63324
Feldman, Pepall and Huscroft JJ.A.
Between
Har Jo Management Services Canada Ltd. Plaintiff (Appellant)
and
The Regional Municipality of York Defendant (Respondent)
Counsel
Shane Rayman and Conner Harris, for the appellant
Frank Sperduti and Andrew Baker, for the respondent
Heard: January 10, 2018
On appeal from the judgment of Justice J. Christopher Corkery of the Superior Court of Justice, dated January 12, 2017.
Feldman J.A.:
Introduction
[1] The appellant's property was damaged by flooding following two significant rainfalls on May 21 and May 28, 2013. The floodwaters came from adjacent land that the respondent municipality had expropriated in 2009 for a construction project. In 2011, the appellant instituted a proceeding before the Ontario Municipal Board ("OMB") claiming damages for injurious affection in respect of that expropriation.
[2] Following the flooding, on June 3, 2013, the appellant's lawyer wrote a claim letter stating that the respondent's construction activities resulted in the flooding and consequent damage to the appellant's property, and indicating that the source of the flooding had to be understood without delay. In its response of June 28, 2013, the respondent advised that the flooding was not caused by its construction activities, but that there was a blocked catch basin on the appellant's property that the appellant should arrange to flush.
[3] The appellant instituted the within action on June 29, 2015, two years following the receipt of the June 28, 2013 letter (June 28, 2015 was a Sunday). The respondent pleaded that the action was statute-barred and brought a motion for summary judgment. The motion judge agreed, on the basis that the appellant's claim was discoverable when the flooding occurred in May 2013.
[4] I would allow the appeal.
[5] In analyzing when the appellant knew or ought to have known that it had a claim for damages against the respondent, the motion judge failed to consider when the appellant knew or ought to have known that an action in Superior Court was the appropriate means to seek a remedy. In that context, he failed to consider the effect of the statutory scheme that grants the OMB (now the Local Planning Appeal Tribunal) exclusive jurisdiction over damages for injurious affection and to consider the evidence of the appellant's lawyer that she began an action in Superior Court out of an abundance of caution, in the event that the flooding was not caused by the respondent's construction but was still the fault of the respondent.
Background Facts
[6] In 2009, the respondent expropriated some lands adjacent to the appellant's property on Davis Drive in Newmarket, and began construction there. That construction was ongoing in 2013.
[7] In January 2011, the appellant brought an Amended Notice of Arbitration under the Expropriations Act, R.S.O. 1990, c. E.26, seeking damages for injurious affection based on the expropriation and the construction. No response was filed by the respondent and that proceeding remains outstanding.
[8] On May 21 and May 28, 2013, Newmarket experienced significant rainfall, leading to flooding on the appellant's property. On June 3, the appellant's lawyer wrote to the respondent claiming the construction caused the flooding. She also stated that the appellant could delay retaining an engineer to investigate the cause of the flooding if the respondent was taking steps to understand the problem and correct the deficiencies. The appellant's lawyer further advised that the appellant would make a claim with respect to the damage resulting from the construction and a claim under s. 21 of the Expropriations Act. She stated that the claim was in addition to the injurious affection claim already outstanding from January 2011.
[9] By a responding letter dated June 14, 2013, the adjuster for the respondent's insurer indicated that its investigation was ongoing, that the cause of the flooding had yet to be determined, and that it would advise of the respondent's position on liability once it had completed the investigation. In a follow-up letter of June 28, 2013, the adjuster advised that its investigation, using a video of the sewer, showed a blocked catch basin located on the appellant's property. The letter recommended the appellant flush the line, but made no statement regarding liability or causation.
[10] The appellant brought this action on June 29, 2015, exactly two years after the letter of June 28, 2013 (accounting for the fact that June 28, 2015 was a Sunday). The respondent filed a statement of defence, which pleaded that the action was statute-barred and, on that basis, it brought the motion for summary judgment under appeal.
[11] The appellant's lawyer filed an affidavit on the motion. She was not cross-examined. She explained in the affidavit that she acts for the appellant on both the underlying action and an injurious affection claim before the OMB in respect of the damage caused to the appellant's property by the respondent's expropriation of Davis Drive, and its ongoing construction there. She then described the flooding in May 2013, and her client's attempts over the following year to contact the respondent to ascertain its responsibility for the flooding damage. Her view was that the respondent still had not addressed either the cause of the damage or its responsibility for it. The respondent had recommended the appellant report to its insurer, which it has done.
[12] The lawyer then described her correspondence with the respondent, pointing out that her letter asked the respondent to cooperate and determine the source and cause of the flooding. In response, the adjuster for the respondent's insurer said it was investigating, but in its final letter of June 28, 2013, she was of the view that it neither identified the cause of the flooding nor the respondent's position on liability. Further, despite repeated requests from the appellant, the respondent continued to refuse to show the appellant the video of its inspection, provide its investigation reports, or advise what position on liability it would take.
[13] Paragraph 28 of the affidavit explains plainly the decision by the appellant's lawyer to issue the Notice of Action in Superior Court:
While I did not believe that the Region denied liability in the June 28, 2013 letter nor was the cause of the flooding determined as at June 28, 2013, I nevertheless issued the Notice of Action out of an abundance of caution, to preserve Har Jo's rights against the Region in the event that the damages were caused by factors unrelated to the construction activities and were found not to meet the definition of injurious affection pursuant to the [Expropriation Act].
The Motion Judge's Reasons
[14] The motion judge began from the premise that the appellant's claim against the respondent is based on the allegation that the respondent's construction on Davis Drive caused the flooding on its property. He drew that conclusion from the letter the appellant's lawyer wrote to the respondent on June 3, 2013, which asserts that the construction work caused the flooding and states that the appellant would be making a claim for the damage from the construction "in addition to a separate claim for injurious affection."
[15] On the motion, the respondent argued that the letter demonstrated that the appellant knew the constituent elements of its claim as of the date the letter was sent.
[16] The appellant argued, relying on Crombie Property Holdings Limited v. McColl-Frontenac Inc. (Texaco Canada Limited), 2017 ONCA 16, 406 D.L.R. (4th) 252, that it had only a suspicion regarding the cause of the flooding, not actual knowledge. The motion judge rejected the appellant's position. He found that the appellant had "sufficient information to make out a prima facie case against the [respondent]" on June 3, 2013, based on the content of the demand letter, stating:
The particulars [the appellant] knew about the construction enabled it to form an opinion that the [respondent]'s conduct caused or contributed to the flooding and the damages that flowed from the flooding. While ultimately expert opinion may be required for an ultimate determination, it was not necessary for the [appellant] to determine it had a prima facie case.
[17] The motion judge went on to hold that if he was mistaken on the finding of sufficient knowledge on June 3, 2013, then the appellant also failed to lead evidence of any steps it took either before or after June 28, 2013 to meet its "positive obligation" to determine the cause of the flooding. He concluded that the appellant had not rebutted the presumption contained in s. 5(2) of the Limitations Act, 2002 that it knew it had a claim on the date the flooding occurred.
Issues on the Appeal
[18] The appellant raises the following three issues on appeal:
Did the motion judge err in law or misapprehend the evidence by finding that the appellant had sufficient knowledge regarding the cause of the flooding on June 3, 2013, to commence an action against the respondent in Superior Court for damages that were not properly damages for injurious affection, and therefore not within the exclusive jurisdiction of the OMB?
Did the motion judge err in law by finding that the appellant had an ongoing duty, up to the date it commenced the action, to discover the cause of the damage?
Is the effect of recent case law from this court to postpone the commencement of the limitation period until the OMB determines its jurisdiction over the claim?
Analysis
(1) Did the motion judge err by finding that on June 3, 2013, the appellant had sufficient knowledge regarding the cause of the flooding to commence an action for damages in Superior Court?
[19] The basic two-year limitation period set out in s. 4 of the Limitations Act, 2002 begins to run on the day the claim was discovered. The date of discovery is governed by s. 5(1), which states that 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).
[20] Therefore, a claim is discovered on the earlier of two dates: the day on which a plaintiff either knew or ought to have known the constitutive elements of the claim and that a proceeding in Superior Court would be an appropriate means to seek a remedy.
[21] As is clear from the reasons of the motion judge, his analysis of the limitation issue focused on whether the appellant had sufficient knowledge of the cause of the flooding to commence an action against the respondent for damages. In my view, he erred in two ways: first in law, by not considering whether an action in Superior Court would be an appropriate means to seek a remedy; and second, by misapprehending the evidence of the appellant's lawyer, which explained why up until June 26, 2013, the appellant believed that a claim before the OMB would be an appropriate means to seek a remedy for the flooding damage.
[22] The motion judge noted that the appellant's position was always that the respondent's construction on the expropriated lands caused the flooding. And he observed that the Statement of Claim tracks the language of the June 3 letter to a large extent, which demonstrated that the appellant knew of its claim on that day.
[23] However, in making this finding, the motion judge failed to consider the affidavit of the appellant's lawyer, which explained that, to the extent that the damages from the flood properly formed part of a claim for damages for injurious affection under the Expropriations Act, they would be part of the appellant's existing OMB claim, and that she only commenced this action in Superior Court "out of an abundance of caution", in case it turned out that the flooding was not caused by the respondent's construction on Davis Drive, but by some other factors that did not meet the definition of injurious affection.
[24] This explanation is based on provisions of the Expropriations Act that provide for damages for injurious affection to landowners affected by an expropriation, and which give the OMB exclusive jurisdiction to award such damages. I refer to the definition of "injurious affection" in s. 1(1), the right to claim damages for injurious affection provided by ss. 21 and 26, and the exclusive jurisdiction of the OMB to adjudicate the claims under s. 29(1), as well as s. 36 of the Ontario Municipal Board Act, R.S.O. 1990, c. O.28.
[25] Specifically, s. 1(1) of the Expropriations Act defines injurious affection as follows:
"injurious affection" means,
a) where a statutory authority acquires part of the land of an owner,
(i) the reduction in market value thereby caused to the remaining land of the owner by the acquisition or by the construction of the works thereon or by the use of the works thereon or any combination of them, and
(ii) such personal and business damages, resulting from the construction or use, or both, of the works as the statutory authority would be liable for if the construction or use were not under the authority of a statute,
resulting from the construction and not the use of the works by the statutory authority, as the statutory authority would be liable for if the construction were not under the authority of a statute, and for the purposes of this clause, part of the lands of an owner shall be deemed to have been acquired where the owner from whom lands are acquired retains lands contiguous to those acquired or retains lands of which the use is enhanced by unified ownership with those acquired;
[26] Section 21 provides an affected landowner with a right to compensation from a statutory authority (here, the respondent municipality) for injurious affection:
A statutory authority shall compensate the owner of land for loss or damage caused by injurious affection.
[27] Where a statutory authority and landowner cannot come to an agreement regarding compensation for injurious affection, then under s. 26, either party may bring a claim before the OMB:
Where the statutory authority and the owner have not agreed upon the compensation payable under this Act and, in the case of injurious affection, section 22 has been complied with, or, in the case of expropriation, section 25 has been complied with, or the time for complying therewith has expired,
(a) the statutory authority or the owner may serve notice of negotiation upon the other of them and upon the board of negotiation stating that the authority or the owner, as the case may be, requires the compensation to be negotiated under section 27; or
(b) where the statutory authority and the owner have agreed to dispense with negotiation proceedings, the statutory authority or the owner may serve notice of arbitration upon the other of them and upon the Board to have the compensation determined by arbitration.
[28] Regarding the OMB's jurisdiction to adjudicate injurious affection claims brought before it, s. 29(1) provides:
The Board shall determine any compensation in respect of which a notice of arbitration has been served upon it under section 26 or 27, and, in the absence of agreement, determine any other matter required by this or any other Act to be determined by the Board.
[29] Section 36 of the Ontario Municipal Board Act clarifies that this jurisdiction is exclusive:
The Board has exclusive jurisdiction in all cases and in respect of all matters in which jurisdiction is conferred on it by this Act or by any other general or special Act.
[30] The effect of these provisions is to provide a process for compensation for damages for injurious affection, which includes reduced market value of lands affected by expropriation, as well as damages to the affected lands arising from the construction work done by the statutory authority on the expropriated lands.
[31] In Curactive Organic Skin Care Ltd. v. Ontario, 2012 ONCA 81, 105 L.C.R. 26, this court dismissed claims brought in a class proceeding because they were, in substance, claims for injurious affection beyond the jurisdiction of the Superior Court. The court held that the combination of the Expropriations Act and the Ontario Municipal Board Act confers exclusive jurisdiction over injurious affection claims on the OMB. The effect is that no matter the form of the claim, if it is, in substance, a claim for damages for injurious affection, it must be brought before the OMB and not to court.[1]
[32] Although the record in this case does not provide a full explanation of the progress or lack thereof of the injurious affection claim brought by the appellant in 2011, and any additional claim for damage caused by the flood, the affidavit of the lawyer for the appellant makes it clear that the appellant is first taking that route to compensation. Only if the OMB determines that the claim for damages is not properly before it because the respondent's construction did not cause the flooding, will the appellant seek its damages from the respondent in court in this action. Furthermore, the appellant's pleadings clearly include references to negligence and nuisance, which can properly form the basis for a claim in Superior Court, but not the OMB.
[33] If in fact the flooding damage was caused by the respondent's construction activities, there is no jurisdiction in the Superior Court to entertain such a claim. It is only if some other activity taken by the respondent or for which it is responsible caused the flood damage, that a claim is compensable through an action against the respondent in Superior Court.
[34] The first time there was a suggestion that the flooding may have been caused by something other than the construction was in the June 28, 2013 letter, which advised the appellant that the respondent's construction did not cause the flooding and that a blocked catch basin may be at fault. Therefore, it was only on that date that the appellant knew or ought to have known, in accordance with s. 5(1)(a)(iv) of the Limitations Act, 2002 that, "having regard to the nature of the injury, loss or damage, a [court] proceeding would be an appropriate means to seek to remedy it", and not a proceeding before the OMB.
[35] Therefore, because the motion judge failed to consider when the appellant had or ought reasonably to have had sufficient knowledge that a court proceeding would be an appropriate means to seek a remedy, he misapprehended the significance of the evidence of the lawyer, erred in law by failing to consider this evidence in relation to the "appropriate means" requirement of s. 5(1)(a), and ultimately in concluding that the action was commenced out of time.
[36] I would therefore set aside the decision of the motion judge and dismiss the motion for summary judgment.
(2) Did the motion judge err by finding that the appellant had an ongoing duty to discover the cause of the damage up to the date it commenced the action?
[37] The respondent argues that, even if the motion judge erred on the first issue, the action is statute-barred on the motion judge's alternative finding that the appellant did not rebut the presumption under s. 5(2) of the Limitations Act, 2002 by failing to exercise due diligence.
[38] In my view, the motion judge also erred in law on this alternative ground by holding that the appellant had to show it acted with due diligence after it had actual knowledge of its claim, in order to rebut the presumption in s. 5(2). Specifically, the motion judge said:
The plaintiff must put its best foot forward. If it takes the position that the limitation period had not commenced even after receipt of the June 28th letter and that it was not unreasonable for the plaintiff to await receipt of that letter, the plaintiff has led no evidence of steps it took to fulfill its positive duty to discover its claim after the letter.
Although I accept that the issue before the Court was whether or not the claim was discoverable prior to June 28th. In determining whether or not the plaintiff was taking reasonable steps to determine its claim, I may consider what it did before and after June 28th.
[39] In Fennell v. Deol, 2016 ONCA 249, 97 M.V.R. (6th) 1, at paras. 21 and 26, this court explained that s. 5(2) creates a presumption regarding when a person had actual knowledge of its claim under s. 5(1)(a), and that the presumption does not apply to the inquiry under s. 5(1)(b), which asks when the claim ought reasonably to have been discovered.
[40] A plaintiff rebuts the presumption under s. 5(2) by demonstrating when it gained actual knowledge of its claim (s. 5(1)(a)). A plaintiff need not show that it exercised due diligence in order to rebut that presumption, because due diligence is only relevant to the objective inquiry under s. 5(1)(b), not the inquiry into subjective knowledge under s. 5(1)(a): Fennell, at paras. 23-24.
[41] Here, by holding that the appellant failed to show that it took reasonable steps to investigate its claim after it knew of its claim on June 28, 2013, the motion judge's error went one step further.
[42] A claim is discovered on the earlier of two dates: when the plaintiff actually knew of its claim, or when a reasonable person, with the plaintiff's abilities and in its circumstances, would have discovered the claim. If a plaintiff fails to exercise the diligence a reasonable person would, the claim is potentially discoverable earlier than the date the plaintiff had actual knowledge of the claim. Due diligence is therefore only relevant to the period of time preceding a plaintiff's actual knowledge of its claim, not the period after. Once a claim has been discovered, there is no ongoing duty on a plaintiff to further investigate the claim. Once the plaintiff has knowledge of its claim, then the limitation clock has begun running, and all the plaintiff is required to do is commence an action before the limitation period expires.
(3) Application of 407 ETR Concession Company Limited v. Day and Presidential MSH Corporation v. Marr Foster & Co. LLP to the issue of the commencement of the limitation period?
[43] The appellant argued for the first time in oral argument that the recent decisions of this court in 407 ETR Concession Company Limited v. Day, 2016 ONCA 709, 133 O.R. (3d) 762 and Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325, 135 O.R. (3d) 321 apply, with the effect that the limitation period for this action will not begin to run until the OMB determines whether it has exclusive jurisdiction over the claim for damage arising from the flooding.
[44] Case law suggests that in circumstances similar to those in this case, plaintiffs have often commenced two proceedings, one before the OMB and one in the Superior Court. Defendants may then seek a stay of the court proceeding pending a determination of jurisdiction by the OMB, or even dismissal of the court claim if it is clearly a claim for injurious affection: see e.g. Montana Equipment Ltd. v. Robert B. Somerville Company et al, 2017 ONSC 3092; Great Land (Westwood) Inc. v. York (Regional Municipality), 2016 ONSC 5975, 3 L.C.R. (2d) 1; and Curactive Organic Skin Care Ltd. v. Ontario, 2011 ONSC 2041, 120 L.C.R. 238, aff'd 2012 ONCA 81, 105 L.C.R. 26.
[45] The appellant's argument is that this court's decisions in 407 ETR and Presidential MSH negate the need to start two proceedings in respect of claims that may potentially be characterized as claims for injurious affection, as the limitation period would not begin to run until the OMB decided its jurisdiction over the claims.
[46] Because I have concluded that the appellant's claim is not statute-barred in any event, it is not necessary to decide whether the 407 ETR and Presidential MSH cases apply to postpone the commencement of the limitation period. As the issue was only raised by the appellant in oral argument on the appeal, and the court did not receive full written submissions, the appropriate course is to leave the issue undecided and not address it on this appeal.
Result
[47] I would allow the appeal, set aside the dismissal of the action, and dismiss the motion for summary judgment. I would award costs of the appeal to the appellant fixed in the amount of $16,000 inclusive of disbursements and HST. I would also award costs of the motion to the appellant. If the parties are not able to agree on the amount, they may make brief written submissions (maximum two pages) within three weeks of the release of these reasons.
Released: May 23, 2018
"K. Feldman J.A."
"I Agree. S.E. Pepall J.A."
"I Agree. Grant Huscroft J.A."
Footnote
[1] Although the OMB has been continued as the Local Planning Appeal Tribunal under s. 2(1) of the Local Planning Appeal Tribunal Act, 2017, S.O. 2017, c. 23, Sch. 1, which came into force April 3, 2018, claims for injurious affection under the Expropriation Act remain within the exclusive jurisdiction of the new Tribunal by the virtue of ss. 2(2) and 11(1) of the Local Planning Appeal Tribunal Act. Subsection 2(2) of that Act provides that any reference to the OMB in any Act or regulation is deemed to be a reference to the Tribunal, while s. 11(1) confers the Tribunal with exclusive jurisdiction to adjudicate matters within its jurisdiction.
