COURT OF APPEAL FOR ONTARIO

CITATION: Clarke v. Faust, 2016 ONCA 223

DATE: 20160322

DOCKET: C60208

Feldman, Juriansz and Brown JJ.A.

BETWEEN

Andrew Clarke and Gavin Clarke

Respondents (Appellants)

and

Joseph F. Faust

Moving party (Respondent)

Edward Goldentuler, for the appellants

Kerri P. Knudsen and Nicole A. Dowling, for the respondent

Heard: September 29, 2015

On appeal from the order of Justice Anne Mullins of the Superior Court of Justice, dated February 23, 2015.

Juriansz J.A.:

[1] The appellants’ action against their former solicitor for professional negligence was dismissed on summary judgment motion brought by the respondent. The motion judge found there was no genuine issue requiring a trial on whether the action was statute-barred. She found that it was. The appellants appeal to this court.

A. Background

[2] The appellants were injured in a motor vehicle collision on April 7, 2006. They retained the respondent, Joseph Faust, to represent them on their claims for accident benefits and tort damages. The respondent issued a statement of claim in respect of the collision on June 17, 2008, some nine weeks after the second anniversary of the collision.

[3] Prior to the filing of the statement of claim, the appellants had retained new counsel. After obtaining the file from the respondent, the new solicitor told the appellants that the statement of claim had not been issued within two years of the accident. However, he advised them this was not necessarily fatal to their claim because under the doctrine of discoverability, the claim might not have been commenced beyond the limitation period. He further advised that out of an abundance of caution the respondent should put his liability insurer on notice. Accordingly, he wrote to the respondent on July 2, 2008, putting him on notice of the missed limitation period. The respondent wrote back on July 14, 2008, taking the position that no limitation period had been missed because of the doctrine of discoverability.

[4] The appellants’ new solicitor passed away suddenly. Another solicitor from his firm (the appellants’ current lawyer) took over the file. This solicitor advised the appellants he was not concerned with the missed limitation period because the doctrine of discoverability would extend the period. The solicitor spoke with defence counsel in the motor vehicle action, taking the position that the doctrine of discoverability would apply to the motor vehicle claim as both plaintiffs had suffered soft tissue injuries and until they had obtained medical documentation, they could not have known whether their injuries met the threshold of serious and permanent impairment.

[5] The solicitor believed he had convinced defence counsel of this, and informed the appellants. He further informed them that the defendants’ statement of defence filed February 5, 2009 did not plead the missed limitation period as a defence. However, the defendants amended their statement of defence on March 18, 2009 to plead the missed limitation period.

[6] The plaintiffs commenced their professional negligence action against the respondent on December 22, 2010. The respondent pleaded the appellants’ professional negligence action against him was statute-barred because it was commenced more than two years after they knew or ought to have known they had a cause of action against him. The respondent moved for summary judgment dismissing the appellants’ claim against him.

B. Proceedings below

[7] Before the motion judge, the respondent argued the appellants should be presumed to have known of his negligence on April 7, 2008, the two-year anniversary of the motor vehicle accident. They ought to have commenced the claim within two years of that date. He submitted in the alternative that the appellants ought to have known of their loss on July 2, 2008, when their then solicitor alleged in writing that the respondent had missed the limitation period to issue the appellants’ motor vehicle claim.

[8] The appellants took the position they suffered no damage until March 18, 2009, when the defendants in the motor vehicle claim first pleaded the defence of a missed limitation period. Until then it was not apparent that the defendants would raise a limitation defence. The motion judge summarized their argument:

The essence of the argument advanced on behalf of Messrs. Clarke is that, until the defendants in the tort action pleaded a limitations defence, no damage had been caused to them as a result of his failure to have instituted the action within the two year period following the event of the collision. However much a wrong may have been committed, they contend, no damages could be said to flow. By this logic, the right to the claim was not discovered until the pleading was amended on March 18, 2009.

[9] The motion judge rejected the appellants’ position. On her reading of the Limitations Act, 2002, S.O. 2002, c.24, Sch. B, a limitation period could begin to run before the person with the claim sustained any damages. She commented: “The provisions of the [Limitations Act, 2002] to the extent the terms “injury, loss or damage” are used, cannot be taken to mean that damages in law must have been sustained to the knowledge of the claimant.” She adopted this view, pointing out that the phrase “injury, loss or damage” in s. 5(1) of the Act was disjunctive. Consequently, she concluded the appellants were “injured” by the respondent’s failure to commence the motor vehicle accident action within two years, though they may not have suffered any “damage” from that injury until the motor vehicle defendant pleaded the limitation defence. The motion judge granted the respondent’s motion for summary judgment.

C. Analysis

[10] The appellants’ main ground of appeal is that the motion judge erred in finding that the limitation period began to run before March 18, 2009 when the appellants say they first knew they had suffered some damages from the respondent’s “act or omission”. They also appeal the motion judge’s finding that discoverability had not been pleaded in the appellants’ statement of claim for the professional negligence action.

(1) When was the claim against the respondent discovered?

[11] The motion judge was mistaken in her understanding of the Act. She failed to consider the requirement of s. 5(1)(a)(iv) that a person with a claim know that a proceeding would be an appropriate means to seek to remedy the injury, loss or damage having regard to its nature. That provision requires, in my view, a person to have good reason to believe he or she has a legal claim for damages before knowing that commencing a proceeding would be an appropriate means to seek to remedy the injury, loss or damage.

[12] Since the motion judge proceeded on an incorrect understanding of the Act, it falls to this court to determine when the appellants first discovered they had a claim against the respondent.

[13] Section 4 of the Act provides: “Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.” A “claim” is defined to mean “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission”.

[14] Section 5 sets out the criteria that define the day on which a claim is discovered:

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).

(2) 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.

[15] Section 5(1)(a) sets out a subjective test addressing the knowledge of the person with a claim. Section 5(1)(b) sets out a modified objective test by addressing the knowledge of a reasonable person in the shoes of the appellants. A claim is discovered on the earlier of the date when the person subjectively knew of the matters set out in s. 5(1)(a) and the date a reasonable person would have known of them. Section 5(2) stipulates the presumption the person with the claim knew of the matters in s. 5(1)(a) on the day of the act or omission giving rise to the claim “unless the contrary is proved”.

[16] This case turns on the application of s. 5(1)(a)(iv). I will address the appellants’ subjective knowledge first. The question is when they would have first known that commencing a proceeding would be an appropriate means of seeking a remedy for their claim against the respondent considering the nature of the injury, loss or damage.

[17] Here, the appellants’ second solicitor informed them that their first solicitor had not initiated an action by the second anniversary of the motor vehicle accident. However, he advised them there may be no problem, but that he should write to the first solicitor notifying him of the potential limitation problem out of an abundance of caution. The appellants’ first solicitor, the respondent, in repeated correspondence, took the position he had not missed any limitation period. Then the appellants’ second solicitor passed away, and their third solicitor took over the file. He, too, advised them that the doctrine of discoverability applied in the motor vehicle action. Their third solicitor also advised them he believed he had persuaded the solicitor for the defendants in the motor vehicle action that this was the case. The defendants’ statement of defence filed February 5, 2009 did not plead any limitation defence.

[18] At that point the appellants knew that three lawyers were of the opinion that the doctrine of discoverability applied to their motor vehicle action. Their lawyer had advised that the defendants were persuaded of this and they had good reason to believe that was the case because the statement of defence did not plead the limitation defence.

[19] The amendment of the statement of defence on March 18, 2009 changed the situation. The defendants in the motor vehicle action, for the first time, took the position the limitation period had been missed.

[20] On these facts, I am satisfied the appellants had no reason to know that commencing a legal proceeding was appropriate before the amendment of the statement of defence.

[21] I am also satisfied the objective test in s. 5 (1)(b) is met. A reasonable person with the abilities and in the circumstances of the appellants would not have known it was appropriate to commence a legal proceeding before the amendment of the statement of defence in the motor vehicle action.

[22] Furthermore, the foregoing analysis is sufficient to displace the presumption in s. 5(2).

[23] On this analysis, the statement of claim in the professional negligence action, dated December 22, 2010, was filed well before the expiry of the limitation period and summary judgment should not have been granted.

[24] Before leaving the matter, I make two additional observations.

[25] First, it still has not been determined whether the appellants’ motor vehicle action is statute-barred. The doctrine of discoverability may well permit the motor vehicle tort action to proceed. If that is the case, the professional negligence action may in fact be premature. The circumstances are similar to those in Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851, 113 O.R. (3d) 401. In that case, Laskin J.A., for the majority, concluded that the appellants had not discovered their claim for damages against their former lawyer for professional negligence until the judgment in the underlying action was rendered.

[26] In this case, the appellants pleaded in the professional negligence action that they in fact have suffered some damages because their bargaining position in their efforts to settle the motor vehicle action has been compromised. I find this argument difficult to accept. If the respondent did not miss the limitation period in the motor vehicle action, he would not be responsible for any damages, whatever their nature. It may be that the limitation period in the professional negligence action will not begin to run until it is determined that the respondent missed the limitation period in the motor vehicle action. This is not a matter that we need to decide on this appeal of the motion judge’s decision granting summary judgment. If the limitation period for the professional negligence action has not yet begun to run, the motion judge should not have granted summary judgment.

[27] Second, the appellants might well have been able to establish that the respondent was estopped from pleading a limitation defence in the professional negligence action. It seems likely that the appellants, in failing to commence the professional negligence action within two years of the second anniversary of the motor vehicle accident, relied on the respondent’s expressed initial position that he had not missed the limitation period in the motor vehicle action. However, the appellants did not raise this issue and it is unnecessary to deal with it.

[28] In any event, on the analysis above, I conclude that the appellants’ claim against the respondent was not discovered before March 18, 2009, if at all.

(2) Was “discoverability” pleaded in the statement of claim?

[29] The motion judge set out an additional basis for granting the summary judgment motion. She found the appellants had not pleaded discoverability in their action against the respondent. However, I am of the view the statement of claim set out the material facts to support the application of the doctrine.

D. Disposition

[30] I would allow the appeal, set aside the motion judge’s judgment, and replace it with an order dismissing the respondent’s summary judgment motion.

[31] The appellants are entitled to costs of the motion and of the appeal. If the parties are unable to agree on those costs, they may file written submissions, not to exceed five typewritten pages, and no later than fifteen days following the release of these reasons.

Released: March 22, 2016 (KF)

“R.G. Juriansz J.A.”

“I agree K. Feldman J.A.”

“I agree David Brown J.A.”