COURT OF APPEAL FOR ONTARIO

CITATION: Longo v. MacLaren Art Centre, 2014 ONCA 526

DATE: 20140708

DOCKET: C58003

Feldman, Rouleau and Hourigan JJ.A.

BETWEEN

James Longo and Molly Longo and Dino Deluca and Grant Vogeli and Celia Martin, Martin Johnson and Geoffrey Goad

Plaintiffs

(Appellants)

and

MacLaren Art Centre

Defendant

(Respondent)

John J. Adair, for the appellants

Arnold B. Schwisberg, for the respondent

Heard: April 3, 2014

On appeal from the order of Justice Guy P. DiTomaso of the Superior Court of Justice, dated November 6, 2013, with reasons reported at 2013 ONSC 6902.

Hourigan J.A.:

[1] This appeal arises from extensive damage to a plaster sculpture entitled Walking Man, which is attributed to the sculptor Auguste Rodin and is owned by the appellants. It was on loan to the respondent MacLaren Art Centre (“MacLaren”) during the relevant period. The appellants, Dino Deluca and Grant Vogeli, claim damages from MacLaren for Walking Man’s destruction.

[2] MacLaren brought a motion for summary judgment, submitting that the claim should be dismissed because the appellants had not established liability on the part of MacLaren or that it had suffered damages, and the claim was statute barred. MacLaren also sought judgment on its counterclaim for storage costs.

[3] Justice DiTomaso granted the motion for summary judgment, finding that the claim was statute barred, and granted judgment on the counterclaim.

[4] The appellants appeal, submitting that the motion judge erred in finding that the limitation period began to run at a point when they had no knowledge of the nature and extent of the damage to Walking Man and whom, if anyone, was responsible for the damage.

[5] For the reasons that follow, I would allow the appeal and set aside the motion judge’s order dismissing the appellants’ action and awarding the respondent judgment on its counterclaim.

FACTS

[6] The appellants purchased Walking Man in 1998. They planned to donate it ultimately to MacLaren if the piece could be certified as authentic by the Canadian Cultural Property and Export Review Board (“CCPERB”). By donating the certified piece to McLaren, the appellants would receive a significant tax credit.

[7] In February 2000, the parties entered into a loan agreement that was intended to govern their relationship from the time that the sculpture was shipped to MacLaren until the donation was made.

[8] Walking Man was shipped to MacLaren in 2000 and was exhibited once in September 2001. It was then stored by MacLaren at a storage facility in Gatineau, Quebec operated by Exhibit Transportation Services (“ETS”), an agency of the government of Canada.

[9] Questions from the CCPERB regarding the provenance and authenticity of Walking Man resulted in delays in the certification process. Ultimately, the inability of the appellants to provide the CCPERB with necessary information led the appellants to withdraw their application for certification.

[10] On June 14, 2004, MacLaren wrote to the appellants advising that, due to severe financial constraints, it could not continue to carry the cost of insurance and storage fees for Walking Man and other plasters on loan to them. The appellants’ agent, Martin Johnson, responded to that letter and listed information and documents that the appellants required as part of the return process. There is a dispute between the parties regarding whether MacLaren was obliged to provide the requested information and documentation and whether it, in fact, did so. In any event, Walking Man was not returned to the appellants.

[11] In November 2004, as a result of issues raised by the Musée Rodin in France, the French authorities commenced legal proceedings in Ontario to determine the provenance and authenticity of various works attributed to Rodin on loan to MacLaren, including Walking Man. Pursuant to an order of Justice Forget of the Superior Court, MacLaren was enjoined from moving or disposing of the Rodin works in order to facilitate their inspection by an expert.

[12] The court order authorized MacLaren’s employees to unpack and repack Walking Man for the purpose of the inspection, which took place in December 2004. During the course of the inspection, which was described by the motion judge as being invasive, some pieces came off the sculpture.

[13] Walking Man remained impounded at ETS until November 2006, when MacLaren was permitted to move the sculpture. The appellants took no steps to reclaim Walking Man. MacLaren contacted the appellants and advised that they would ship the sculptures to Toronto, prepare condition reports, and complete their return.

[14] On November 22, 2006, Walking Man was shipped to a storage facility in Toronto operated by Pacific Art Services Ltd. (“Pacart”). Art conservator Susan Maltby opened the crate on September 14, 2007 for inspection. It was evident that Walking Man had suffered extensive damage. The parties are in agreement that the damage occurred sometime between the inspection in December 2004 and when it was unpacked at Pacart in September 2007.

[15] On the summary judgment motion, Hanne Fynbo, a former employee of MacLaren, swore an affidavit wherein she testified that, following Ms. Maltby’s inspection, a telephone call took place between John Lister, Interim-Executive Director of MacLaren and Mr. Johnson, “in which damages to Walking Man were brought to Mr. Johnson’s attention”. Mr. Johnson testified that he had no recollection of whether any such conversation took place. Mr. Lister did not provide evidence on the motion.

[16] In September 2007, MacLaren suggested that the appellants retain William Moore, the former Executive Director of MacLaren, to assist in the return of the sculptures.

[17] On October 19, 2007, Ms. Fynbo sent an email to Diane Baker, an insurance agent that the appellants were working with to obtain insurance on the sculptures. Ms. Fynbo responded to a series of questions that Ms. Baker had posed regarding the works. In one of her responses, she stated that an unidentified work had been “received from Italy in poor condition and it has deteriorated”.

[18] Mr. Johnson was copied on the October 19, 2007 email. He testified that he did not recall receiving the email, but it would have caused him to make inquiries regarding the condition of Walking Man. Mr. Johnson formally retained Mr. Moore on November 1, 2007 to facilitate a return of the works.

[19] Mr. Moore sent an email to Ms. Fynbo on November 9, 2007. His evidence was that, at some point between October 19, 2007 and November 2007, Ms. Fynbo told him that Walking Man had been damaged but she did not tell him the extent of the damage, how it occurred, and whom, if anyone, was responsible for the damage.

[20] In an undated letter, which the parties agree was sent at some point in November 2007, Mr. Johnson wrote to the owners of Walking Man indicating that he understood from Mr. Moore that there was “some concern regarding the condition of Walking Man and damage the work had sustained over the years”. Mr. Johnson informed the other owners that he had asked for a comprehensive report regarding the damage.

[21] Mr. Moore’s inspection of Walking Man had to be coordinated through MacLaren. The inspection was carried out on January 10, 2008. The inspection revealed extensive damage to the sculpture. The appellants take the position that the damage is so severe that Walking Man is worthless.

[22] The appellants commenced an action against MacLaren on November 19, 2009 seeking $500,000 in damages for negligence, breach of contract, and bailment. The respondent defended the action and counterclaimed for storage costs.

[23] Five other plaintiffs commenced parallel actions at the same time. These other plaintiffs had owned sculptures that were attributable to Auguste Rodin and that were also allegedly damaged by MacLaren. These other actions were consolidated with the appellants’ claim. The motion judge had indicated that consolidating these claims was an “error”, as only Walking Man was damaged. His order is confined only to Mr. Deluca and Mr. Vogeli in dismissing their action and finding them liable for Walking Man’s storage costs.

SUMMARY JUDGMENT MOTON

[24] The respondent brought a motion for summary judgment. Its position on the motion was that the claim was commenced after the expiry of the limitation period, that the appellants had not established that its handling of the sculpture fell below the standard of care, and that the appellants had not proven that they had suffered any damages.

[25] The motion judge’s conclusion on the issue of when the appellants became aware of the damage to Walking Man was stated at para. 94:

For the following reasons, I respectively disagree with the position of the Plaintiffs and find that as of October 19, 2007, Mr. Johnson knew or ought to reasonably have known of the damage to Walking Man. Further, as of November 9, 2007, Mr. Moore knew or ought to reasonably have known of the damage to Walking Man. This knowledge of either or both Mr. Johnson or Mr. Moore is imputed to the Plaintiffs. In addition, I find that Mr. Vogeli had knowledge of the claim given his abilities and circumstances where he first ought to have known of the claim in October of 2007 well before October 2009. He drafted and issued the Statement of Claim on November 19, 2009.

[26] The motion judge concluded that the limitation clock began to run on October 19, 2007 as a consequence of Ms. Fynbo’s email. That conclusion was premised on the fact that Mr. Johnson had been made aware of the damage to Walking Man in his conversation with Mr. Lister in September 2007. With respect to that crucial conversation the motion judge found, at para. 97:

Mr. Johnson knew that Walking Man was damaged because he had a prior conversation with John Lister in late September 2007. John Lister was MacLaren’s interim executive director. In that conversation, it was brought to Mr. Johnson’s attention the damage to Walking Man that was noted by Ms. Maltby during her inspection on September 14, 2007. Although Mr. Johnson could not remember this conversation, Ms. Fynbo clearly did. In her affidavit at para. 34 she deposes that Mr. Lister informed her of that very discussion and it was at this time after Ms. Maltby conducted her inspection on September 14, 2007 and at the time of the discussion with Mr. Lister that the Plaintiffs through Mr. Johnson would have been advised of damage to Walking Man.

[27] The motion judge went on to find, at para. 99, that Mr. Moore would also have known about the damage to Walking Man at least by November 9, 2007. This finding is based on the motion judge’s conclusion that Mr. Johnson had knowledge of the damage at this point and would have discussed it with Mr. Moore.

[28] The motion judge next considered the knowledge of Grant Vogeli, an appellant who is also a commercial litigator. Mr. Vogeli drafted the statement of claim. Paragraph 12 of the statement of claim originally read, “Mr. Moore discovered that Walking Man had been severely damages [sic] in September 2007”. Mr. Vogeli subsequently amended the claim to remove the words “in September 2007”.

[29] The motion judge found, at para. 110, that Mr. Vogeli is “imputed to have the knowledge of Mr. Johnson and Mr. Moore”. He further found, at para. 114, that “an experienced commercial litigator and art owner in the circumstances of Mr. Vogeli should not have waited for October 18, 2009 to arrive without issuing the Statement of Claim”.

[30] The motion judge concluded, at para. 125, that the appellants had the requisite evidence to base a claim against MacLaren as of October 19, 2007:

In our case, there is ample evidence on which the Plaintiffs could base a claim against MacLaren. They knew as of October 19, 2007 that Walking Man was damaged and that Walking Man had been in the possession and control of MacLaren. The limitation clock started to run against MacLaren. The Plaintiffs did not need to obtain an expert opinion before determining if they had a cause of action against MacLaren. Further, the Plaintiffs could not stop the limitation period from running while they waited for an expert report – in this case, Mr. Moore’s report in January 2008.

[31] Given his conclusion that the claim was statute barred, the motion judge declined to consider the issues of liability and damages.

[32] With respect to the counterclaim, the motion judge noted that, while the appellants took issue with the storage costs as being higher than market rates, they provided no evidence of what they contend the proper rate should be for storage of the sculpture. He went on to consider the evidence tendered by the respondent and awarded the respondent $8,522 on its counterclaim.

[33] In an endorsement dated December 13, 2013, the motion judge awarded costs to the respondent in the amount of $119,153.32.

POSITIONS OF THE PARTIES

[34] The appellants submit that the motion judge erred in finding that the requirements of s. 5(1) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, were satisfied more than two years before the statement of claim was issued. They further submit that MacLaren is not entitled to rely upon the limitation period because it concealed the cause of action from the appellants. In the alternative, they submit that the motion judge erred in finding that he had a full appreciation of the evidence necessary to grant summary judgment. In addition, they argue that they have as strong prima facie case on the merits.

[35] With respect to the counterclaim, the appellants submit that the motion judge erred in finding that they had frustrated the return of Walking Man and in failing to find that the respondent had acted unreasonably. The appellants also argue that the motion judge erred in relying upon the evidence tendered by the respondent regarding the quantum of damages.

[36] The respondent submits that the decision of the motion judge ought not to be interfered with absent a palpable and overriding error and that the motion judge committed no such error. The respondent argues that the motion judge correctly applied the law with respect to imputing knowledge of an agent to his principal and regarding the tests under the Limitations Act, 2002. The respondent also submits that it has a strong case on the merits.

ANALYSIS

(i) Standard of Review

[37] In Hryniak v. Mauldin, 2014 SCC 7, at paras. 81-84, the Supreme Court of Canada concluded that the exercise of powers under the new summary judgment rule attracts deference:

In my view, absent an error of law, the exercise of powers under the new summary judgment rule attracts deference. When the motion judge exercises her new fact-finding powers under Rule 20.04(2.1) and determines whether there is a genuine issue requiring a trial, this is a question of mixed fact and law. Where there is no extricable error in principle, findings of mixed fact and law, should not be overturned, absent palpable and overriding error, Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 36.

Similarly, the question of whether it is in the “interest of justice” for the motion judge to exercise the new fact-finding powers provided by Rule 20.04(2.1) depends on the relative evidence available at the summary judgment motion and at trial, the nature, size, complexity and cost of the dispute and other contextual factors. Such a decision is also a question of mixed fact and law which attracts deference.

Provided that it is not against the “interest of justice”, a motion judge’s decision to exercise the new powers is discretionary. Thus, unless the motion judge misdirected herself, or came to a decision that is so clearly wrong that it resulted in an injustice, her decision should not be disturbed.

Of course, where the motion judge applies an incorrect principle of law, or errs with regard to a purely legal question, such as the elements that must be proved for the plaintiff to make out her cause of action, the decision will be reviewed on a correctness standard (Housen v. Nikolaisen, at para. 8).

[38] The question of whether a limitation period expired prior to the issuance of a statement of claim is a question of mixed fact and law. Thus, the issue for determination on this appeal is whether the motion judge made a palpable and overriding error in concluding that the claim was statute barred.

[39] A palpable and overriding error is an obvious error that is sufficiently significant to vitiate the challenged finding of fact. The appellant must show that the error goes to the root of the challenged finding of fact such that the fact cannot safely stand in the face of the error: Waxman v. Waxman(2004), 2004 CanLII 39040 (ON CA), 186 O.A.C. 201, at p. 267 (C.A.), leave to appeal refused, [2004] S.C.C.A. No. 291.

(ii) [Limitations Act, 2002](https://www.canlii.org/en/on/laws/stat/so-2002-c-24-sch-b/latest/so-2002-c-24-sch-b.html)

[40] The relevant provisions of the Limitations Act, 2002 are 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).

[41] The items listed in s. 5(1)(a) are conjunctive. The limitation period does not begin to run until the putative plaintiff is actually aware of all of those matters or until a reasonable person, with the abilities and in the circumstances of the plaintiff, first ought to have known of all of those matters.

[42] A plaintiff is required to act with due diligence in determining if he has a claim. A limitation period will not be tolled while a plaintiff sits idle and takes no steps to investigate the matters referred to in s. 5(1)(a). While some action must be taken, the nature and extent of the required action will depend on all of the circumstances of the case, as this court noted in Soper v. Southcott (1998), 1998 CanLII 5359 (ON CA), 111 O.A.C. 339, at p. 345 (C.A.):

Limitation periods are not enacted to be ignored. The plaintiff is required to act with due diligence in acquiring facts in order to be fully apprised of the material facts upon which a negligence or malpractice claim can be based. This includes acting with diligence in requesting and receiving a medical opinion, if required, so as not to delay the commencement of the limitation period. In some cases, a medical opinion will be necessary to know whether to institute an action. In other cases, it will be possible to know material facts without a medical opinion, and the medical opinion itself will simply be required as evidence in the litigation. In the latter instances, the time of receipt of the medical opinion is immaterial to the commencement of the running of the limitation period.

[43] The Soper case, which was cited by the motion judge, was decided under the previous legislation but is entirely consistent with the current legislation. The plaintiff must act reasonably in investigating and determining whether he or she has a claim. A consideration of whether the plaintiff has acted reasonably will include an analysis of not only the nature of the potential claim, but also the particular circumstances of the plaintiff.

[44] Certainty of a potential defendant’s responsibility for an act or omission that caused or contributed to the loss is not a requirement. All that is required is that the plaintiff has prima facie grounds to infer that the acts or omissions were caused by the identified parties. The establishment of prima facie grounds may or may not necessitate obtaining an expert report: Kowal v. Shyiak, 2012 ONCA 512.

(iii) Application of Legal Principles

[45] In my view, the crucial factual finding on this appeal is the motion judge’s finding regarding the September 2007 telephone call between Mr. Johnson and Mr. Lister. As noted above, the motion judge concluded, based on the affidavit evidence of Ms. Fynbo, that, during that phone call, information regarding damage to Walking Man was conveyed to Mr. Johnson.

[46] Given the motion judge’s finding regarding the September telephone call, Ms. Fynbo’s evidence is of particular importance. It is clear that the statement in her affidavit regarding the phone call is hearsay. The respondent chose not to provide evidence from Mr. Lister and offered no explanation as to why his evidence was unavailable. While determining a case based on hearsay is troublesome, it is permissible pursuant to rule 20.02(1).

[47] The motion judge was permitted to rely upon hearsay, but he could not make a finding that was based on a misapprehension of the evidence. In my view, the motion judge erred in concluding that Ms. Fynbo clearly remembered the telephone call.

[48] In reaching that conclusion, the motion judge referred to Ms. Fynbo’s cross-examination wherein she conceded that she could not recall the details of the alleged conversation, including the extent and cause of the damage. However, he ignored her testimony wherein she conceded that she could not recall a specific conversation with Mr. Lister in which he informed her that he had had a conversation with Mr. Johnson. The highest she could put the matter was that she and Mr. Lister “must have” had such a conversation. Therefore, the trial judge’s conclusion that Ms. Fynbo “clearly” remembered the conversation was a palpable error.

[49] This error qualifies as an overriding error because it permeates the balance of the motion judge’s analysis. Based on that finding, he concluded that, despite the fact that the October 19, 2007 email did not include any reference to Walking Man, it must have been understood to reference that work because “at that point in time, no one was talking about any other piece of art with damage, deterioration, or condition problems”. Clearly that conclusion is based on his finding that Mr. Johnson had been told about the damage the previous month.

[50] The motion judge goes on to find that Mr. Moore was retained just days after October 19, 2007 and that “the reason for Mr. Moore’s retainer was about the damage to Walking Man”. He further finds that “it is reasonable to conclude that even before the formal commencement of the formal retainer on November 1, 2007 Mr. Johnson and Mr. Moore would have discussed the damage to Walking Man as Mr. Moore’s inspection of that piece was the very basis of his retainer”.

[51] The findings relevant to Mr. Moore are also premised on the finding that Mr. Johnson was aware of damage to Walking Man based on the September 2007 phone call. I note as well that the conclusion that Mr. Moore was retained to inspect the damage to Walking Man is unfounded on the record. In fact, the unchallenged evidence of Mr. Moore and Mr. Johnson was that Mr. Moore was retained to facilitate the return of the sculptures.

[52] When the finding regarding the September 2007 telephone call is removed from the analysis, the actions of the appellants are seen in a new light. Based on the available evidence before the motion judge, all that the appellants knew, as of October 19, 2007, as a consequence of Ms. Fynbo’s email, was that one of the works had been “received from Italy in poor condition and it has deteriorated”. Although Mr. Johnson did not recall receiving the email, he fairly stated that it would have caused him to make inquiries.

[53] At some point after the email was sent, Ms. Fynbo conveyed to Mr. Moore that Walking Man had suffered damage. In November, Mr. Johnson conveyed that information to the owners and around that time he instructed Mr. Moore to inspect the sculpture.

[54] As of November 2007, it is not clear, based on the record before the motion judge, that the appellants were aware of all of the information enumerated in s. 5(1)(a). The question becomes whether a reasonable person with the abilities and in the circumstances of the appellants ought to have known of the matters referred to in s. 5(1)(a) in November 2007.

[55] While this is a question that can only be properly determined at trial, my own view is that a reasonable person, aware that concerns had been raised with respect to the condition of Walking Man, would have arranged for an inspection of the sculpture. Based on the evidence tendered at the motion, that is what the appellants did and there is no suggestion that they were dilatory in arranging that inspection. There was also no evidence before the motion judge that the damage was so obvious and well known that an inspection was unnecessary. The appellants needed to know if this was a conditioning problem or whether it was something more substantial. No doubt the information they gleaned regarding the extent of the damage would also help to determine whom, if anyone, might be responsible for the damage.

[56] In all of these circumstances, the motion judge erred in finding that the cause of action arose before the appellants had inspected Walking Man in January 2008. The root of that error was his finding that the appellants had been made aware of the damage to Walking Man in the September 2007 phone call.

[57] The fact that Mr. Vogeli is an experienced litigator does not affect the analysis. He issued the statement of claim before the expiry of the limitation period as he was required to do.

[58] Consequently, I would allow the appeal and set aside the order of the motion judge dismissing the action. Based on the evidence before him, the motion judge erred in concluding that there was no genuine issue requiring a trial as to whether the plaintiff’s action is statute barred. That issue can only be determined with the benefit of a fuller evidentiary record at trial.

(iv) Counterclaim

[59] The motion judge concluded that, based on the evidence before him, the total storage costs for Walking Man for the period between June 2004 and October 2013 were $8,522.55. In my view, the appellants have failed to establish any error on the part of the motion judge when he relied on the respondent’s evidence regarding the storage costs incurred.

[60] What is absent from the motion judge’s reasons is any legal analysis or findings of fact that establish the appellants’ liability for the costs. Implicit in his awarding judgment on the counterclaim is a finding that the appellants should have arranged to pick up the work. However, this was an area of significant conflict in the evidence.

[61] The appellants took the position that they acted reasonably in requesting certain information regarding Walking Man and that the respondent acted unreasonably in refusing to provide the requested information and in insisting on the execution of a release before the statue was returned. The respondent took the position that the appellants acted unreasonably in requesting information that they were not entitled to receive under the parties’ contract.

[62] There was no analysis in the motion judge’s endorsement regarding the conflicting evidence or any factual findings. Instead, the motion judge simply awarded judgment.

[63] Meaningful appellate review is not possible if the decision of the court below does not provide some insight into how the legal conclusion was reached and what facts were relied upon in reaching that conclusion: R. v. Sheppard, 2002 SCC 26, [2002] 1 S.C.R. 869, at paras. 24, 55; Crudo Creative Inc. v. Marin (2007), 2007 CanLII 60834 (ON SCDC), 90 O.R. (3d) 213 (Div. Ct.); and Barbieri v. Mastronardi, 2014 ONCA 416.

[64] In the case at bar, meaningful appellate review of the motion judge’s decision on the counterclaim is not possible. Accordingly, I would set aside the judgment on the counterclaim.

(v) Costs

[65] I would set aside the costs award of the motion judge and grant costs below to the appellants. If the parties cannot agree on the scale and/or quantum of costs, then the motion judge shall fix the costs.

[66] I would also award costs of the appeal to the appellants on the partial indemnity scale, which I would fix at $10,000, inclusive of fees, disbursements, and taxes.

DISPOSITION

[67] I would order as follows:

(a) the order of the motion judge dismissing the appellants’ claim and granting judgment on the counterclaim be set aside;

(b) the appellants be awarded their costs of the appeal, payable by the respondent, in the amount of $10,000; and

(c) the appellants be awarded their costs of the summary judgment motion on a scale and in an amount to be agreed upon by the parties, or failing agreement, to be fixed by the motion judge.

Released: “K.F.” July 8, 2014

“C.W. Hourigan J.A.” “I agree K. Feldman J.A.”

“I agree Paul Rouleau J.A.”