COURT OF APPEAL FOR ONTARIO DATE: 20210422 DOCKET: C67707 & C67710
van Rensburg, Pardu and Huscroft JJ.A.
BETWEEN
Fercan Developments Inc. and GRVN Group Inc. Plaintiffs/Responding Parties (Respondents)
and
Attorney General of Canada, Her Majesty the Queen in Right of Ontario on Behalf of the Ontario Provincial Police, and Stuart Hayhurst Defendants/Moving Parties (Appellants)
Counsel: Judie Im and Baaba Forson, for the appellants, Ontario Provincial Police and Stuart Hayhurst Joël Robichaud and James Schneider, for the appellant, The Attorney General of Canada William Friedman, Patrick Bakos, Judy G. Hamilton, Brian H. Greenspan and Naomi M. Lutes, for the respondents, Fercan Developments Inc. and GRVN Group Inc.
Heard: in writing, with supplementary submissions in writing
On appeal from the judgment of Justice Heather McArthur of the Superior Court of Justice, dated October 10, 2019, with reasons reported at 2019 ONSC 5780.
REASONS FOR DECISION
[1] The sole issue on these appeals is whether the motion judge erred when she concluded, in applying s. 5(1)(a)(iv) of the Limitations Act, 2002, S.O. 2002, c. 24, Schedule B (the “Limitations Act”), that the limitation period had not expired for the respondents’ claims against the appellants, and she refused to dismiss their claims asserted in the consolidated action as statute-barred.
[2] For the reasons that follow, we dismiss the appeals.
FACTS
[3] The respondents, Fercan Development Inc. (“Fercan”) and GRVN Group Inc. (“GRVN”), brought actions in the Superior Court against the appellants, the Attorney General of Canada (the “AGC”), Her Majesty the Queen in Right of Ontario on Behalf of the Ontario Provincial Police and Detective Constable (“DC”) Stuart Hayhurst (together, the “OPP Defendants”), claiming malicious prosecution, negligent investigation, misfeasance in public office and civil conspiracy.
[4] The actions arose out of the appellants’ unsuccessful attempts to obtain forfeiture of certain properties of the respondents which housed large scale marihuana grow operations, and the net proceeds of those properties. As the motion judge observed, “[t]he facts leading to [the] summary judgment motion have spawned significant litigation over the course of almost a decade. There have been numerous judicial decisions detailing the various twists and turns this matter has taken over the years”.
[5] The motion judge set out much of the relevant chronology in her reasons. It is sufficient here to provide only the following brief outline:
The AGC brought an application for forfeiture under the Controlled Drugs and Substances Act, S.C. 1996, c. 19 (the “criminal forfeiture application”). DC Hayhurst, an OPP officer, swore affidavits in support of the criminal forfeiture application and he testified at the hearing.
On September 11, 2013, West J. of the Ontario Court of Justice dismissed the criminal forfeiture application. West J. stated, among other things, that “the evidence overwhelmingly leads to the conclusion that Fercan and GRVN, or the directing minds of those corporations, are innocent of any complicity or collusion”.
DC Hayhurst referred the matter to the Attorney General of Ontario (the “AGO”), which commenced forfeiture proceedings under the Civil Remedies Act, S.O. 2001, c. 28 (the “civil forfeiture application”). On April 23, 2014, the AGO was unsuccessful in its motion to preserve the proceeds of the respondents’ properties for the civil forfeiture application. Leave to appeal this decision was refused on June 26, 2014.
On June 25, 2014, West J. granted the respondents’ application for costs of the criminal forfeiture application, concluding that there had been a “marked and unacceptable departure from the reasonable standard expected of the Crown”, and that, in “the unique circumstances of this case”, costs should be awarded. On January 21, 2015, he ordered the AGC to pay the respondents costs of $570,000.
On April 14, 2016 this court dismissed an appeal of the costs order of West J., upholding his findings of Crown misconduct, and concluding that the Crown had “exercised the coercive power of the state and forced the respondents to participate in a lengthy and onerous proceeding to defend their legitimate property interests” and had launched “a completely meritless application”: R. v. Fercan Developments Inc., 2016 ONCA 269, 130 O.R. (3d) 321, at paras. 125, 128.
The respondents commenced an action against the AGC on May 31, 2016, and against the OPP Defendants on September 19, 2016. [1] The two actions were consolidated in January 2017.
SUMMARY JUDGMENT MOTION
[6] The appellants moved for summary judgment to dismiss the actions. The issue was whether the respondents’ claims against the appellants were discovered, or ought reasonably to have been discovered, within the meaning of ss. 5(1)(a) and (b) of the Limitations Act, more than two years before each action was commenced. The appellants argued that the two-year limitation period ran from September 11, 2013, the date that West J. dismissed the AGC’s criminal forfeiture application.
[7] The respondents filed an affidavit in response to the motions. The principal of Fercan, after setting out the chronology of the proceedings, stated that it was not until this court upheld the finding of West J. of a marked and unacceptable departure from the reasonable standards expected from the prosecution, that it appeared there would be finality to the numerous interrelated proceedings and that it would be appropriate for Fercan to bring a claim for damages against the various government entities resulting from the forfeiture proceedings. There was no cross-examination on the affidavit.
[8] The motion judge concluded that the first three elements of the discoverability test, pursuant to ss. 5(1)(a)(i), (ii) and (iii) of the Limitations Act, were met as of September 11, 2013, findings that are not challenged on appeal. It was at that point that the respondents knew they had suffered injury, loss or damage that had been caused by the acts or omissions of the appellants. The motion judge observed that the respondents at that time “were aware that they were innocent third-parties who had been forced to defend their legitimate property interests in a meritless application in onerous and lengthy proceedings” and that “[t]hey also knew, or ought to have known, that the criminal forfeiture proceedings had terminated in their favour”.
[9] The motion judge turned to consider s. 5(1)(a)(iv): when did the respondents know, or when ought they reasonably to have known “that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”?
[10] The motion judge concluded that, pursuant to s. 5(1)(a)(iv), it was not appropriate to commence proceedings until, at the earliest, June 26, 2014, when the civil forfeiture proceedings came to an end. This meant that the action against the AGC on May 31, 2016 was not statute-barred. The motion judge went on to find that it was not appropriate to commence proceedings, and the respondents’ claims against all appellants were not discovered, until April 14, 2016, when this court upheld the costs order of West J. This meant that the action against the OPP Defendants, which was commenced on September 19, 2016, was also commenced within the applicable limitation period.
THE APPEALS
1. Standard of Review
[11] Whether a limitation period expired before an action was commenced is a question of mixed fact and law, and subject to review on appeal based on a “palpable and overriding error”: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, 323 O.A.C. 246, at para. 38; Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922, 124 O.R. (3d) 171, at para. 40. This is the case whether the determination is made at trial or in a motion for summary judgment: Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 31, leave to appeal refused, [2017] S.C.C.A. No. 85. Findings of fact by the court below are subject to review on a palpable and overriding error standard. A “palpable and overriding error” is “an obvious error that is sufficiently significant to vitiate the challenged finding of fact”: Longo, at para. 39. However, where there is an extricable error of principle, the standard of review is correctness: Housen v. Nikolaisen, 2002 SCC 33, [2002] S.C.R. 235, at paras. 8, 36.
[12] Contrary to the appellants’ arguments, this is not a case that involves the interpretation of a statutory provision, namely s. 5(1)(a)(iv) of the Limitations Act, where the standard of review is correctness. Nor, as we explain, is there any demonstrated error of law or principle in the trial judge’s analysis, or any palpable and overriding error in her findings of fact or her application of the legal test to such findings.
2. The Legal Test
[13] The motion judge applied the correct legal framework. Citing Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725, 142 O.R. (3d) 561, she recognized that determining whether an action is statute-barred or declaring when a claim was discovered requires the court to make specific findings of fact about each element set out in s. 5 of the Limitations Act, and she went on to make such factual findings.
[14] After concluding that the first three elements of the discoverability test under ss. 5(1)(a)(i), (ii) and (iii) were met as of September 11, 2013, the motion judge addressed s. 5(1)(a)(iv). In doing so, she cited the relevant jurisprudence from this court, noting that the determination under s. 5(1)(a)(iv) is a fact-specific exercise (407 ETR Concession Company Limited v. Day, 2016 ONCA 709, 133 O.R. (3d) 762, at para. 34, leave to appeal refused, [2016] S.C.C.A. No. 509) and that the issue was whether the limitation period should be “suspended because a proceeding would be premature” (Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325, 135 O.R. (3d) 321, at para. 27). The motion judge recognized that s. 5(1)(a)(iv) reflects that parties should be discouraged from rushing to litigation, while delay for tactical reasons would not suspend the running of the limitation period: Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, 109 O.R. (3d) 652, at para. 34.
[15] The appellants argue that the motion judge’s decision significantly expands the application of the “appropriate means” element of the discoverability test under s. 5(1)(a)(iv) beyond any previous jurisprudence from this court, and that it injects uncertainty into the law of limitations. They contend that the motion judge relied on irrelevant factors, and that she ought to have restricted her analysis to a consideration of whether the respondents were pursuing an alternative means of remedying their alleged losses, such that it was not yet appropriate for them to commence an action in respect of those losses.
[16] We disagree. Contrary to the submissions of the appellants, the motion judge properly recognized that there were not simply two categories of cases in which it might not be legally appropriate to start a proceeding despite the claim having been discovered, within the meaning of s. 5(1)(a)(i)-(iii): Nasr, at para. 51. The motion judge did not err when she considered all of the relevant circumstances and not simply whether the forfeiture proceedings provided an alternative means for the respondents to remedy their alleged losses. She was required to consider the “nature of the injury, loss or damage” under s. 5(1)(a)(iv), as well as, under s. 5(1)(b), using a “modified objective” test, what a reasonable person with the abilities and in the circumstances of the respondents ought to have known: Presidential, at para. 18; Service Mold + Aerospace Inc. v. Khalaf, 2019 ONCA 369, 146 O.R. (3d) 135, at para. 32. While previous cases can assist in identifying certain general principles, whether a proceeding would have been an appropriate means to seek to remedy a claimant’s damage, injury or loss will turn on the facts of each case and the abilities and circumstances of the particular claimant: Presidential, at para. 19; ETR Concession Company, at para. 34.
3. Application of the Test to the Facts
[17] As already noted, the motion judge first found that the respondents knew or ought to have known that an action would be an “appropriate means” under s. 5(1)(a)(iv) in the circumstances of this case, at the earliest, on June 26, 2014, when the civil forfeiture proceedings came to an end (which meant that the action against the AGC was not statute-barred). The motion judge went on to conclude the respondents did not know, nor ought to have known, that an action would be an appropriate means until April 14, 2016, when this court upheld the costs order of West J. (which meant that the action against the OPP Defendants was also commenced within the applicable limitation period).
[18] We are not persuaded that any palpable and overriding error has been demonstrated by the appellants in respect of either date.
A. The June 26, 2014 date
[19] In concluding that the time for commencement of an action against the AGC began to run “at the earliest” on June 26, 2014, the motion judge relied on the civil forfeiture proceedings that were commenced and pursued by the appellants against the respondents. She observed that the appellants, in undertaking such proceedings, were pursuing a process that, if successful, could have left the respondents with little to no loss to claim. We agree with the motion judge’s observation that it is important not to conflate the considerations under the first three elements of the discoverability test with the appropriate means element set out in s. 5(1)(a)(iv). The question is not, as the appellants suggest, whether an action could have been brought by the respondents, but when it was appropriate to do so. While knowledge of the extent of a plaintiff’s damages is not required under (i) to (iii), the motion judge was entitled to take into consideration the ongoing forfeiture proceedings that the parties were engaged in, when determining under s. 5(1)(a)(iv) whether it was appropriate for the respondents to bring an action. She concluded that, in the particular circumstances, it would have been premature to require the respondents to launch a lawsuit, as they were embroiled in the civil forfeiture application, a related matter brought against them “by the state with all of its resources”, which could have rendered their lawsuit non-viable and unworthy of pursuing.
[20] We see no error in the motion judge’s determination that it was premature for the respondents to commence their action until after the civil forfeiture proceedings were completed on June 26, 2014. She came to this conclusion after considering all of the relevant circumstances. The facts were unusual. Despite the fact that the AGC was unsuccessful in obtaining an order for criminal forfeiture and was subject to an order for costs that was critical of its conduct, the provincial authorities commenced civil forfeiture proceedings with the same objective – to seize the proceeds of sale of the respondents’ properties. DC Hayhurst was involved in both sets of proceedings. If the civil forfeiture proceedings had been successful, no doubt all of the appellants would have had a strong defence to any action that was commenced by the respondents. The conclusion, on this record, that it was premature for the respondents to pursue a civil action while they were continuing to oppose the forfeiture proceedings, reveals no error.
[21] Accordingly, in upholding the motion judge’s conclusions with respect to the June 26, 2014 date, we reject the AGC’s argument that the action against it was statute-barred.
B. The April 14, 2016 date
[22] The motion judge concluded that the actions against all of the appellants were commenced in time because the time only began to run under s. 5(1)(a)(iv) in respect of the claims against all appellants on April 14, 2016, when this court dismissed the appeal of the order of West J. awarding costs of the criminal forfeiture proceedings against the AGC.
[23] The motion judge recognized that West J.’s costs decision “directly and explicitly addressed the conduct of the federal Crown”, and that he had determined that the Crown’s conduct “exhibited a marked and substantial departure from the reasonable standards expected of the Crown”. Nevertheless, she observed that costs against the Crown in such proceedings are a “rare and extraordinary remedy”, that the AGC’s appeal specifically sought to attack the findings of Crown misconduct, that there was precedent for this court taking a very different view, and accordingly, that there was a clear risk that West J.’s findings of misconduct might be rejected on appeal, which would have seriously undermined any action brought by the respondents. The fact that there was another ongoing proceeding – the appeal of West J.’s costs decision – that could have impacted the viability of the respondents’ action was relevant to the application of s. 5(1)(a)(iv) in the circumstances of this case.
[24] The motion judge rejected the argument that the AGC’s appeal of the costs order was relevant only to the running of the limitation period against the AGC, and not against the OPP Defendants. She noted the connection between the OPP Defendants and the AGC in advancing the criminal forfeiture application. We do not agree with the appellants’ contention that she erred in treating the OPP Defendants and the AGC as if they were one entity. Instead, she properly referred to the substantial similarities between the claims advanced against all of the appellants, and the specific allegations of misconduct against the OPP Defendants in the course of the criminal forfeiture proceedings. She concluded that the conduct and actions of DC Hayhurst were at issue in both the criminal forfeiture costs decision and the civil litigation, and that this court’s decision on the costs appeal could have impacted the viability of an action against the OPP Defendants.
[25] We see no palpable and overriding error in the motion judge’s conclusion that the time began to run under s. 5(1)(a)(iv) in respect of the claims against all appellants on April 14, 2016, when this court released its decision dismissing the appeal from West J.’s costs order. Again, the circumstances were highly unusual. The same parties were already involved in litigation commenced and pursued by the appellants, in which the appellants’ alleged misconduct had taken centre stage. In pursuing the appeal, the AGC did not accept and sought to overturn the findings of West J., ensuring that whether or not there was prosecutorial misconduct remained a live issue until it was determined by this court. As the motion judge reasonably observed, there was a clear risk of a successful appeal, which would have impacted the viability of an action based on the same allegations of prosecutorial misconduct.
[26] As for the claims against the OPP Defendants, they are without question intertwined with the claims against the AGC in the now consolidated action. The actions of DC Hayhurst, who is alleged to have been directly involved in the criminal forfeiture proceedings and to have taken the lead in initiating the civil forfeiture proceedings, were part of the misconduct found by West J. in awarding costs against the AGC.
[27] After assessing the claims against all parties, it was open to the motion judge to conclude, as she did, that a successful appeal of the costs decision would have undermined the claims against all of the appellants, including the OPP Defendants. This was not, as the appellants contend, a tactical decision on the part of the respondents, as in Markel, or simply a question of a plaintiff waiting until the end of other proceedings that might improve their chances of success in a civil action, as in Sosnowski v. MacEwen Petroleum Inc., 2019 ONCA 1005, 441 D.L.R. (4th) 393. Rather, as in Winmill v. Woodstock (Police Services Board), 2017 ONCA 962, 138 O.R. (3d) 641, at para. 31, leave to appeal refused, [2018] S.C.C.A. No. 39, the result of the proceedings in which the parties were already involved, including the determination by this court of the prosecutorial misconduct allegations, would have been a “crucial, bordering on determinative factor” in whether the respondents had a civil claim to pursue.
[28] Accordingly, in upholding the motion judge’s conclusions with respect to the April 14, 2016 date, we reject the appellants’ arguments that the claims against them asserted in the now consolidated action are statute-barred.
DISPOSITION
[29] For these reasons, the appeals are dismissed. The respondents are entitled to their costs of the appeals against the appellants.
[30] If the parties are unable to agree on the amount and/or allocation of such costs, the court will receive written submissions limited to three pages each (in addition to the respondents’ costs outline), as follows: from the respondents within 20 days of these reasons, and from the appellants within 15 days thereafter, with reply submissions, if any, within ten days of receipt of the submissions from both respondents. Written costs submissions are to be sent to the court electronically at the following email address: coa.e-file@ontario.ca.
“K. van Rensburg J.A.”
“G. Pardu J.A.”
“Grant Huscroft J.A.”
[1] On June 15, 2016 the respondents had served the OPP Defendants with a Notice of Claim under s. 7 of the Proceedings Against the Crown Act, R.S.O. 1990, c. P.27, as amended.
