Court of Appeal for Ontario

Date: 20210120 Docket: C67782

Feldman, van Rensburg and Thorburn JJ.A.

BETWEEN

Peter Kaynes Appellant (Plaintiff)

and

BP p.l.c. Respondent (Defendant)

Counsel: Eli Karp and Hadi Davarinia, for the appellant Laura K. Fric, Kevin O’Brien and Karin Sachar, for the respondent

Heard: July 16, 2020, by video conference

On appeal from the order of Justice Paul M. Perell of the Superior Court of Justice, dated November 8, 2019, with reasons reported at 2019 ONSC 6464.

Feldman J.A.:

[1] The appellant has been attempting to bring a Canadian class action against the respondent BP p.l.c. (“BP”) on behalf of Canadian shareholders, based on securities misrepresentations BP made about the safety of its drilling operations in the Gulf of Mexico prior to the Deepwater Horizon explosion in 2010. The appellant has faced numerous procedural and jurisdictional roadblocks. This appeal is from an order that strikes out the latest amendment to his statement of claim and essentially ends the litigation.

[2] The appellant’s 2019 amendment, which claims fraudulent misrepresentation for the first time, was struck out as statute-barred pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, on a motion by BP under r. 21.01(1)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. As a consequence, the appellant became disqualified as a representative plaintiff for the class, because the claims that remained extant and that were allowed to proceed covered a time period that did not include his claim.

[3] This appeal raises two key issues: 1) what are the elements of a “claim” for fraudulent misrepresentation, within the meaning of the Limitations Act, that must be discoverable in order to commence the two-year limitation period? and 2) are there circumstances where an amendment to a statement of claim can be dismissed as statute-barred on a motion brought under r. 21.01(1)(a)?

[4] For the reasons discussed below, I agree that it is plain and obvious that the appellant’s new claim for fraudulent misrepresentation is statute-barred and that it was appropriate to determine that issue on a r. 21.01(1)(a) motion, given the particular pleadings in this case. Accordingly, I would dismiss the appeal.

Factual Background and Judicial History

A. The Parties

[5] BP is a U.K. petroleum company whose securities trade on international stock exchanges.

[6] The appellant is a resident of Ontario. On or before August 12, 2008, while he was a resident of Alberta, he purchased BP shares over the New York Stock Exchange.

B. The Proposed Class Action

[7] This action emerged from BP’s Deepwater Horizon explosion on April 20, 2010. In broad terms, the appellant alleges that in its securities filings, BP made 14 misrepresentations about its operational safety and ability to respond to an oil disaster, which had the effect of artificially inflating its share price. Following the Deepwater Horizon explosion on April 20, 2010, BP publicly corrected these misrepresentations between April 21, 2010 and May 29, 2010, leading to a significant drop in BP’s share price. In his current statement of claim, the appellant seeks to certify a class action on behalf of Canadian residents who acquired equity securities in BP on the secondary market from February 22, 2008 to April 23, 2010.

[8] The appellant has filed five different statements of claim in Canada during the life of this action: a 2012 Alberta Claim, a 2012 Ontario Claim, a 2013 Ontario Claim, a 2017 Ontario Claim and, most recently, a 2019 Ontario Claim. The important features of each Claim are discussed below.

C. 2012 Alberta Claim

[9] On April 20, 2012, the first iteration of this proposed class action was filed in Alberta. The appellant was a member of the proposed class and was added as a plaintiff on May 25, 2012. That claim advanced two causes of action: (1) statutory secondary market misrepresentation under Alberta’s Securities Act and (2) common law negligent misrepresentation.

[10] The 2012 Alberta Claim never got off the ground. Under Alberta’s Rules of Court, leave is required to serve a defendant outside of Canada. Leave was denied on two separate occasions, September 18, 2012 and November 14, 2012, on the basis that the plaintiffs had failed to establish that the claim had a real and substantial connection to Alberta.

D. 2012 Ontario Claim

[11] The appellant did not appeal the November 14, 2012 Alberta court decision denying leave for service ex juris. Instead, on November 15, 2012, he commenced a similar action in Ontario that advanced two causes of action: (1) the statutory cause of action for secondary market misrepresentation provided for in Part XXIII.1, s. 138.3 of Ontario’s Securities Act, R.S.O. 1990, c. S.5, and other equivalent provincial securities legislation and (2) common law negligent misrepresentation.

[12] BP challenged Ontario’s jurisdiction over this matter.

E. 2013 Ontario Claim

[13] On August 9, 2013, while BP’s jurisdiction challenge was pending, the appellant filed a fresh as amended statement of claim that effectively withdrew the common law negligent misrepresentation cause of action.

[14] On October 9, 2013, BP’s jurisdictional challenge was initially dismissed. However, on appeal, on August 14, 2014, this court in Kaynes v. BP, PLC, 2014 ONCA 580, 122 O.R. (3d), leave to appeal refused, [2014] S.C.C.A. No. 452, allowed BP’s appeal on the basis of forum non conveniens and stayed the claim of Canadians who had purchased BP shares on foreign exchanges. Only a truncated proposed class action on behalf of shareholders who had purchased their shares on the Toronto Stock Exchange was allowed to proceed.

F. Related U.S. Litigation

[15] While the Ontario jurisdiction battle was ongoing, other litigation against BP was progressing in the U.S. Most significantly for the purposes of this appeal, on September 4, 2014, the District Court for the Eastern District of Louisiana held that BP had acted with conscious disregard of known risks and was primarily responsible for the oil spill and guilty of gross negligence and willful misconduct.

[16] BP appealed this decision. However, on July 2, 2015, BP reached an agreement with the U.S. Department of Justice and five U.S. states to resolve nearly all claims outstanding against BP from the oil spill. Significantly, this settlement resulted in BP abandoning its appeal of the September 4, 2014 Louisiana District Court decision, which had found that BP engaged in willful misconduct.

G. The Appellant Unsuccessfully Pursues Claims in the U.S.

[17] In March 2015, after the Supreme Court of Canada denied the appellant’s application for leave to appeal this court’s jurisdiction decision, he commenced a proposed class action against BP in the United States District Court for the Southern District of Texas. He asserted a claim for pre-explosion misrepresentations based on Ontario’s Securities Act.

[18] In response, BP moved to dismiss the appellant’s U.S. action. On September 25, 2015, the Texas Court granted BP’s motion and dismissed the appellant’s action, in part because the claim was time-barred by the three-year limitation period under Ontario’s Securities Act.

[19] The appellant did not appeal that decision. Instead, on February 26, 2016, he brought a motion to lift the stay of his Canadian proceedings in Ontario.

H. Ontario Stay Lifted

[20] On July 29, 2016, this court in Kaynes v. BP, P.L.C., 2016 ONCA 601, 133 O.R. (3d) 29, leave to appeal to S.C.C. refused, 36127 (January 19, 2017), granted the motion to lift the stay, expressing no view on the limitations issues.

I. 2017 Ontario Claim

[21] On June 7, 2017, with the stay lifted, the appellant delivered his second fresh as amended statement of claim. The 2017 Claim advanced statutory misrepresentation claims solely on the basis of Ontario’s Securities Act. While it added new misrepresentation allegations not referred to in the 2012 or 2013 Claims, it did not revive the abandoned common law negligent misrepresentation cause of action. It also added for the first time, allegations that BP knew that its misrepresentations were false when it made them. For example, the 2017 Claim reads in part (emphasis added throughout):

On May 8, 2007, BP released its 2006 Sustainability Report, in which it represented that the OMS was a comprehensive Process Safety system that covered all aspects of its operations, and that it would apply to all of its operations because the OMS was the foundation for a safe, effective, and high-performing operation.

BP and its executive officers, including its then-CEO, knew that these representations (i.e., the OMS Misrepresentation) were false when made because BP had no intention of applying the OMS to all of its North American operations, and therefore the OMS did not cover all aspects of BP's operations. This representation supported BP's investment quality and share price.

On February 22, 2008, BP released its 2007 Annual Review, which is a core document. In the 2007 Annual Review, BP represented that with its new CEO, it was focused on three priorities: safety, people, and performance. BP further represented that it would implement the Process Safety recommendations from the Baker Report.

This core document contained the OMS Misrepresentation. At the time this statement was made, BP and its new CEO knew or ought to have known that BP did not intend to implement all of the Baker Report’s recommendations, including that its “integrated and comprehensive process safety management system” (i.e. the OMS) would not be implemented at all of BP’s U.S. operations.

On April 16, 2009, BP released its 2008 Sustainability Review and represented that the OMS was introduced and completed in the North America Gas, Gulf of Mexico, Columbia and the Endicott Field in Alaska.

This core document contained the OMS Misrepresentation. At the time it was made, BP knew that the OMS would not apply to every BP project site and that BP had migrated only one of seven sites in the Gulf of Mexico to the OMS.

This core document also contained the Omission. At the time the 2008 Sustainability Review, which touted BP's commitment to Process Safety, was released, BP and its management were well aware that a December 2008 internal strategy document had specifically identified numerous Process Safety “priority gaps” which increased the potential for and severity of Process Safety related incidents, but omitted to disclose this material fact.

On February 26, 2010, BP released its 2009 Annual Review, in which it represented that its OMS provided a common framework for all of its operations and set out formatted procedures on how to manage risks at each BP site.

This core document contained the OMS Misrepresentation. At the time this representation was made, BP knew that the OMS did not apply to each of BP’s sites, that the OMS did not provide a group-wide framework to identify and manage operational risks, that the OMS was not yet implemented in the Gulf of Mexico…

At different times during the Class Period, material facts about BP's Process Safety at the Deepwater Horizon and Macondo Well, OMS, and OSRP emerged within BP and were made known to its senior executives. BP, however, negligently or intentionally omitted these material facts from its disclosure documents.

[22] In response, BP challenged the timeliness of the statutory misrepresentation claims. On September 1, 2017, Perell J. in Kaynes v. BP, P.L.C., 2017 ONSC 5172, 74 B.L.R. (5th) 49, declared most of the misrepresentation claims statute-barred pursuant to s. 138.14 of Ontario’s Securities Act. That section creates an events-based limitation period and provides that no action for a misrepresentation shall be commenced later than three years after the date on which the misrepresentation was made.

[23] On April 5, 2018, this court in Kaynes v. BP, P.L.C., 2018 ONCA 337, 81 B.L.R. (5th) 6, dismissed the appeal from Perell J.’s decision.

[24] These decisions significantly reduced the scope of the proposed class action. Originally, the appellant had sought to advance statutory claims based on misrepresentations occurring from May 9, 2007 to April 23, 2010 (1,080 days). As a result of the s. 138.14 limitation decisions, however, the appellant’s proposed class period was reduced to February 27, 2010 to April 23, 2010 (55 days). Since the appellant acquired his BP shares on or before August 12, 2008, his personal statutory claims were all statute-barred.

J. 2019 Ontario Claim

[25] The appellant delivered another amended statement of claim on September 4, 2019. This 2019 Claim is the first Claim to expressly advance a cause of action for fraudulent misrepresentation. The 2019 Claim repeats the 14 alleged misrepresentations made by BP between May 2007 and April 2010, but further pleads that some of the misrepresentations were made by BP with “knowledge of the falsities contained therein or with a reckless disregard to learning the accuracy of the representation”. It also added an “Appendix A” with particulars of the fraudulent misrepresentation allegations.

K. BP Challenges the Timeliness of the Fraudulent Misrepresentation Claim

[26] The order under appeal was made on BP’s motion under r. 21.01(1)(a) for an order declaring the fraudulent misrepresentation claims statute-barred pursuant to the Limitations Act. In the alternative, BP requested that the pleadings be struck as an abuse of process. BP also sought to dismiss the balance of the appellant’s action because his claims fell outside the class period and no suitable representative plaintiff had been proposed.

[27] The appellant resisted the motion on two bases. Procedurally, he argued that a limitations issue cannot be determined on a r. 21.01(1)(a) motion when discoverability is in issue. Substantively, he submitted that it was not plain and obvious that his claim was statute-barred.

L. Motion Judge’s Decision

[28] The motion judge granted BP’s motion and dismissed the action. He held that all common law misrepresentation claims, whether negligent or fraudulent, were discovered when BP made corrective disclosures between March and June 2010. By that time, the appellant had discovered that he had suffered a loss due to an act of misrepresentation by BP and that a proceeding was an appropriate way to seek a remedy. Therefore, the Ontario action that was brought in November 2012 was commenced too late to advance those claims.

[29] Alternatively, the motion judge found that the appellant would have discovered BP’s fraudulent intent in 2010 when Canadians and Americans in the U.S. were advancing claims based on scienter – that is, that BP had fraudulently misrepresented its securities to secondary market purchasers. Scienter was a necessary component of such claims and had to be asserted in order to bring them. [1] The motion judge concluded from the existence of such actions in the U.S. courts that “[b]y 2010, a reasonable person with the abilities and in the circumstances of Mr. Kaynes would have discovered that his cause of action in fraudulent misrepresentation had accrued and that having regard to the nature of the injury, loss or damage, a proceeding would be [] appropriate.”

[30] The motion judge rejected the appellant’s position that the fraudulent misrepresentation claim in the 2019 amended statement of claim was an alternative theory of liability arising from facts he had asserted in his prior pleadings, including the 2017 amended statement of claim, rather than a new cause of action. The motion judge found that “the essential material facts of the fraudulent misrepresentation claim were not pleaded in the earlier pleadings.”

[31] Finally, the motion judge was satisfied that in the circumstances of this case, it was appropriate to determine the limitation issue on a r. 21.01(1)(a) motion. He agreed with the appellant that only in the rarest of cases should a court rule on a limitation issue before a statement of defence is filed, since it is possible that the plaintiff could assert additional facts in the statement of claim or reply that would alter the conclusion that a limitation period had expired. Nevertheless, he held that he could determine the limitation issue in this case under the exception articulated by this court in Beardsley v. Ontario (2001), 57 O.R. (3d) 1 (C.A.) which held, at para. 21, that a limitation issue can be decided under r. 21.01(1)(a) before a statement of defence is filed “where it is plain and obvious from a review of a statement of claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired.”

Issues

[32] This appeal raises four issues:

1. Did the motion judge err by finding that the common law claims for negligent and fraudulent misrepresentation were discoverable by June 2010, once BP effectively acknowledged through its corrective disclosure that its statements contained misrepresentations? Or, is one of the factual elements of a claim for fraudulent misrepresentation that a plaintiff must have discovered under s. 5(1)(a) of the Limitations Act, the fact that the defendant knew that the misrepresentation was false?
2. Did the motion judge err by finding that because of allegations of scienter in the U.S. actions, it was plain and obvious that the appellant knew or ought reasonably to have known that he had a claim in fraudulent misrepresentation more than two years before the 2019 amendment?
3. Did the motion judge err by failing to find that the effect of pleading in 2017 that BP knew its representations were false when it made them, was to make the appellant’s pleading of fraudulent misrepresentation in the 2019 amendment merely a request for a new remedy but not a new claim that was statute-barred?
4. Did the motion judge err by proceeding on a motion under r. 21.01(1)(a) to decide a limitation issue?

[33] As I will expand on below, I would answer these questions as follows:

1. The motion judge erred in his discovery analysis. A claim for fraudulent misrepresentation is only discovered under s. 5 of the Limitations Act if the plaintiff knows, or ought to have known, that the defendant knew that the misrepresentation was false.
2. In the context of this motion, the motion judge improperly relied on U.S. scienter pleadings to make a factual finding about discoverability.
3. The fraudulent misrepresentation claim in the 2019 amended statement of claim is a new, statute-barred claim.
4. The motion judge did not err in deciding the limitations issue in this case under a r. 21.01(1)(a) motion because, due to the particular pleadings of this case, there were no disputed material facts at issue.

Analysis

A. Standard of Review

[34] As this is an appeal from an order on a r. 21.01(1)(a) motion, I agree with both parties’ positions that the standard of review requires this court to determine whether the motion judge was correct to find that the appellant’s claim for fraudulent misrepresentation in its 2019 amended statement of claim is statute-barred.

Issue 1: Is one of the elements of a claim for fraudulent misrepresentation that a plaintiff must have discovered under s. 5(1)(a) of the Limitations Act, the fact that the defendant knew that the misrepresentation was false?

I. The Limitation Period Runs From the Date a “Claim” is Discovered

[35] Under s. 4 of the Limitations Act, a proceeding may not be commenced more than two years after the claim is discovered. A claim is defined in s. 1 as:

a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.

[36] Under s. 5(1)(a) of the Limitations Act, a claim is discovered when the person first knew (or reasonably ought to have known) the following four elements: (i) the occurrence of the injury, loss or damage, (ii) that it was caused by or contributed to by an act or omission, (iii) that the act or omission was by the defendant, and (iv) based on the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek a remedy. Under s. 2(1), the Limitations Act applies to “claims pursued in court proceedings.”

[37] As a number of commentators and judges have discussed, unlike the former Limitations Act, R.S.O. 1990, c. L.15, the current Limitations Act does not refer to a cause of action as the starting point for the commencement of the limitation period. Rather, the commencement of the limitation period is based on the discoverability of a “claim”, and a claim is discovered when the plaintiff discovers the generic elements of a claim that are set out in s. 5(1)(a), or reasonably ought to have discovered them (s. 5(1)(b)): see, for example: Hare v. Hare (2006), 83 O.R. (3d) 766 (C.A.), at para. 29, per Gillese J.A., and paras. 61, 75, per Juriansz J.A., dissenting; Placzek v. Green, 2009 ONCA 83, 307 D.L.R. (4th) 441, at para. 25; Apotex Inc. v. Nordion (Canada) Inc., 2019 ONCA 23, 431 D.L.R. (4th) 262, at paras. 84-86; Daniel Zacks, “Claims, Not Causes of Action: The Misapprehension of Limitations Principles” (2018) 48 Adv. Q. 168; Stephen Cavanagh, “‘Appropriate means’ in s. 5(1)(a)(iv) of the Limitations Act, 2002” (2019) 39th Annual Civil Litigation Conference.

[38] Nevertheless, numerous Ontario judgments that have considered when a claim is discovered under the Limitations Act have done so with reference to when the cause of action arose. See, for example: Hamilton (City) v. Metcalfe & Mansfield Capital Corp., 2012 ONCA 156, 290 O.A.C. 42, at paras. 14, 35; Liu v. Wong, 2016 ONCA 366, at paras. 7-8, leave to appeal refused, [2016] S.C.C.A. No. 264; Colin v. Tan, 2016 ONSC 1187, 81 C.P.C. (7th) 130, at para. 63; Unicorr Limited v. Minuk Construction & Engineering Limited, 2016 ONSC 7350, 82 R.P.R. (5th) 47, aff’d 2017 ONCA 757; T.W. Marsh Well Drilling & Service Inc. v. Ashburn, 2017 ONSC 2531 (Div. Ct.), at para. 14. Academic treatises have done the same. For example, in the authoritative text, The Law of Limitations, the authors treat “claim” as encompassing a cause of action: Justice Graeme Mew, Debra Rolph & Daniel Zacks, The Law of Limitations, 3rd ed. (Toronto: LexisNexis, 2016). At § 3.2-3.3 they state:

Traditionally, a cause of action accrued and hence, a limitation period started to run, when all of the elements of a wrong existed, such that an action could be brought.

The commencement was expressed in terms of the accrual of the cause of action, but has recently been modified in many cases to instead reflect the time when a claim was first discovered by the person with the claim, i.e., when a plaintiff became aware of the cause of action and remedy available.

[39] Additionally, in the discussion of discoverability principles under s. 5 of the Limitations Act, at § 3.107, the authors state: “Another issue that arises is whether section 5 applies to all causes of action, or just to those governed by the basic limitation period.”

[40] I agree that the Limitation Act’s introduction of discovery of a “claim” as the triggering mechanism for the commencement of the limitation period has not done away with any role for causes of action. As I will explain, under s. 5(1)(a)(ii) of the Limitations Act, one of the matters that is required for the discovery of a “claim” is: “that the injury, loss or damage was caused by or contributed to by an act or omission” (emphasis added). Because a claim necessarily involves seeking a legal remedy in a court proceeding, the act or omission that must be discovered is one that will give rise to a legal remedy, i.e., a cause of action. In the case of a fraudulent misrepresentation, the act or omission is a knowing misrepresentation.

II. The Significance of the Removal of “Cause of Action”

[41] The Supreme Court of Canada introduced the general applicability of discoverability for limitation purposes into the interpretation and application of limitation statutes in its decisions in Kamloops (City) v. Nielsen, [1984] 2 S.C.R. 2 and Central & Eastern Trust Co. v. Rafuse, [1986] 2 S.C.R. 147. The common law discoverability rule provided that a plaintiff’s cause of action would be discovered for the purposes of a limitation period when “the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence”: Rafuse, at p. 224. The rule was developed to avoid the injustice of precluding an action before a person is able to raise it: Peixeiro v. Haberman, [1997] 3 S.C.R. 549, at para. 36. [2]

[42] Ontario’s new Limitations Act makes discoverability a statutory requirement. It incorporates discoverability into the date for commencement of the limitation period, but refers to the discoverability of a “claim” rather than a cause of action, based on the recommendation of the Limitations Act Consultation Group to the Attorney General contained in Recommendations for a New Limitations Act (Toronto: Ministry of the Attorney General of Ontario, 1991). The report explains the proposed change as follows, at p. 17:

The term claim is used throughout the recommendations in place of “cause of action” primarily to mark the departure from a limitations system where different causes of action are subject to different starting points and periods of different duration. Otherwise, “claim” is not substantially different from “cause of action”.

[43] Accordingly, there is nothing in the Consultation Group’s report that demands treating “claim” for limitations purposes as unconnected to a plaintiff’s particular cause of action. Indeed, attempting to do so would fit uncomfortably with basic civil procedure, as causes of action have not become extinct for pleading purposes. A pleading may be struck out if it discloses “no reasonable cause of action”: r. 21.01(1)(b).

[44] It seems to me therefore, that the first issue is what is the relationship between discovering a claim for the purposes of the Limitations Act, and having the factual information necessary to assert a cause of action in an originating pleading? Does a person who seeks to commence a timely proceeding for a claim to obtain a remedy based on a legal right to seek that remedy, i.e., a cause of action, need to have discovered facts to substantiate each element of the particular cause of action in order to have discovered their claim to a remedy, within the meaning of the Limitations Act? In my view, the answer is yes.

[45] An examination of the language used in r. 25.06, the rule that governs the contents of a pleading, is instructive. Instead of using cause of action as in r. 21.01(1)(b), r. 25.06 uses “claim”, a term not defined in the Rules of Civil Procedure, and defence. Rule 25.06(1) requires a pleading to contain “the material facts on which the party relies for the claim or defence”. And, where conditions of mind such as fraud and misrepresentation are alleged, r. 25.06(8) requires that full particulars must be pleaded except that knowledge may be alleged as a fact.

[46] Therefore, while the rule uses the term claim, the contents of a proper initiating pleading asserting a claim for a remedy contemplated by the rule will include the legal elements to support a claim, i.e., a cause of action.

[47] Similarly, while the Limitations Act no longer uses the term cause of action, for the reason explained by the Attorney General’s Consultation Group, both the definition of claim and the components listed in s. 5(1)(a) that have to be discovered before the limitation period commences to run in respect of a claim, still require the discovery of the elements of a cause of action that will give rise to a legal remedy.

[48] I refer, in particular, to the definition of claim, which is defined to mean a claim to remedy an injury, loss or damage resulting from an act or omission, and the requirement in s. 5(1)(a)(ii) to discover the act or omission as one of the discoverability elements. Because only a wrongful act or omission gives the affected person the right to a remedy in a court proceeding, discovery of the act or omission must include discovery of the wrongful aspect of it that gives rise to the legal right to the particular remedy being claimed. And under s. 5(1)(a)(iv), for the limitation period to commence, a proceeding must be an appropriate means to seek a remedy. That will only be the case when the claimant is able to plead a cause of action that gives rise to a remedy.

[49] The fact that the act or omission must be wrongful is confirmed by the language of s. 18(1) that deals with contribution and indemnity, where the defendant of a claim is referred to as an “alleged wrongdoer”. That section provides:

For the purposes of subsection 5 (2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place.

[50] All of the above indicates that, although the Limitations Act no longer uses the term “cause of action”, the purpose of removing that language was to signal a departure from establishing different limitation periods for different causes of action, but not to undermine the basic structure of the civil procedure process, where a proceeding to obtain a remedy at law must include all of the components of the cause of action that would entitle the claimant to that remedy. The Limitations Act and the Rules of Civil Procedure must work harmoniously together. It would have taken clear and explicit language to indicate that the Legislature intended otherwise. There is no such language in the Limitations Act, nor would there be any purpose in doing so.

[51] In my view, the focus of the analysis should not be on the removal of the specific reference to a cause of action, but instead, on the purpose of introducing the claim concept. That concept includes the definition of claim as well as the four discoverability components. The Legislature introduced the concept of a claim in the Limitations Act to provide a universal framework for discoverability that transcends the requirements for particular causes of action. The introduction of this concept, however, did not make the particular causes of action pursued in a legal proceeding irrelevant for the s. 5 discovery analysis.

[52] To that end, in addition to an act or omission that will give rise to a remedy, for limitations purposes, the Limitations Act also requires that certain common factors must be discovered before the limitation period will begin to run, even though all of those factors may not be required to establish any particular cause of action and the right to a remedy for that cause of action.

[53] For example, the most significant common factor for a claim is loss or damage. Consequently, for causes of action such as breach of contract where loss or damage is not required, no claim arises for limitation purposes and the limitation period does not commence until loss or damage is suffered and the person discovers that they suffered loss or damage: see, for example, Apotex Inc., at paras. 84-86. That does not mean, however, that a plaintiff is precluded from issuing a statement of claim for breach of contract before suffering damage, because for pleading purposes, the cause of action does not require damage.

[54] The other new significant common factor for discovery of a claim is in s. 5(1)(a)(iv), which states:

that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.

[55] This is another extra component for the discovery of a claim that is not part of any cause of action.

[56] Of course, it is always a question of fact at what point a claimant had or ought to have had sufficient knowledge of each of the factors to trigger the commencement of the limitation period. The claimant need not know to a certainty that the defendant will be found liable – that is the issue to be determined by the trier of fact. As this court stated in Lawless v. Anderson, 2011 ONCA 102, 276 O.A.C. 75, at para. 23:

Determining whether a person has discovered a claim is a fact-based analysis. The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant. If the plaintiff does, then the claim has been “discovered”, and the limitation begins to run: see Soper v. Southcott (1998), 39 O.R. (3d) 737 (C.A.) and McSween v. Louis (2000), 132 O.A.C. 304 (C.A.). [3]

[57] In summary, the Limitations Act uses the discovery of a claim as the triggering mechanism for the commencement of the limitation period. Discovery of a claim includes components that may not be requirements of any particular cause of action, such as injury, loss or damage (s. 5(1)(a)(i)), and that having regard to the nature of the injury loss or damage, a proceeding would be an appropriate means to remedy it (s. 5(1)(a)(iv)).

[58] However, the second component, that the injury loss or damage was caused by an act or omission (s. 5(1)(a)(ii)), read together with the definition of claim, which is a claim to remedy the injury, loss or damage that occurred as a result of the act or omission (s. 1), and with the requirement that the claim must be pursued in a court proceeding (s. 2(1)), incorporates the requirement for a legally recognized basis to make the claim, known as a cause of action.

III. Application of Principles

[59] For fraudulent misrepresentation, the act or omission that the claimant must discover is that the misstatement that caused the damage was made with knowledge that the representation was false, an absence of belief in its truth or recklessness as to its truth: Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320, 135 O.R. (3d) 481, at para. 162, leave to appeal refused, [2017] S.C.C.A. No. 246. [4]

[60] In this case, the amended pleading in 2019 added a claim for fraudulent misrepresentation. Relying on the same 14 misstatements by BP that formed the basis of the original negligent misrepresentation claim and the statutory misrepresentation claim, the 2019 amendment claimed that documents were released by BP “with knowledge of the falsities contained therein or with a reckless disregard to learning the accuracy of the representation”. For the first time the appellant claimed damages based on fraud.

[61] The motion judge found that the claim for fraudulent misrepresentation was statute-barred. He based his conclusion on the following analysis:

…[A]round June 1, 2010, presumptively and also subjectively and objectively factually, Mr. Kaynes discovered he had a “claim” against BP. He subjectively knew that [BP’s] misconduct had caused him harm and he knew that court proceedings would be appropriate. For the purpose of the commencement of limitation periods, it was not necessary for Mr. Kaynes to put a cause of action name to his “claim”. Whatever way the statement of claim was later framed to name a cause of action, the “claim” to which the cause of action was connected had been discovered in 2010 and the limitation period clock was running.

In other words, having discovered a “claim” in 2010, Mr. Kaynes had two years to plead the misconduct connected to the claim by pleading the material facts of negligence, negligent misrepresentation, fraudulent, misrepresentation, an oppression remedy, nuisance, or whatever. For the purpose of commencing a proceeding, however he might label his claim as a cause of action in a statement of claim, the limitation period for the “claim” was running by June 1, 2010. As it happened, albeit late, in November 2012, Mr. Kaynes pleaded a cause of action for negligent misrepresentation in Ontario, and he gave his claim a cause of action name, but regardless of its name in accordance with the principles of the Limitations Act, 2002, the negligent misrepresentation claim was already statute barred. A fraudulent misrepresentation claim had it been pleaded in November 2012 in Ontario would also have been statute barred.

[62] From this passage, it appears that the motion judge’s analysis is that by 2010 the appellant had discovered all of his misrepresentation claims for the purposes of the Limitations Act, because he knew then that BP had made false statements. He characterized fraudulent and negligent misrepresentation claims as merely different labels that would apply to the appellant’s claim based on the same material facts.

[63] I would reject this analysis of the operation of the Limitations Act in respect of a claim for fraudulent misrepresentation as an error of law. In my view, the defendant’s knowledge that the misrepresentation was false, or at a minimum, its recklessness as to whether the misrepresentation was false, is a relevant material fact underlying any claim for fraudulent misrepresentation. If the motion judge’s approach were correct, it would mean in the case of a misrepresentation, that the claimant would be required to commence an action alleging fraud within two years of the misrepresentation, whether or not he knew or ought reasonably to have known of the defendant’s fraudulent intent, in order to preserve the limitation period for fraudulent misrepresentation. Of course, as well as being non-compliant with the pleadings rule, such a requirement would fly in the face of the well-established common law principle that a party must only plead fraud when they can substantiate the claim, or risk an award of substantial indemnity costs: Unisys Canada Inc. v. York Three Associates Inc. (2001), 150 O.A.C. 49 (C.A.), at para. 15; Catford v. Catford, 2013 ONCA 58, at para. 4.

IV. Conclusion: Issue 1

[64] In summary, under s. 5(1)(a)(ii) of the Limitations Act, one of the matters that is required for the discovery of a “claim” is: “that the injury, loss or damage was caused by or contributed to by an act or omission” (emphasis added). Because a claim necessarily involves a legal remedy, the act or omission that must be discovered is one that will give rise to a legal remedy, i.e., a cause of action.

[65] Therefore, in the case of a fraudulent misrepresentation, the act or omission is a knowing misrepresentation. It would make no sense to require a person to commence an action for fraudulent misrepresentation without the legal basis for doing so, in order to preserve the limitation period. That is neither the intent nor the effect of the Limitations Act. The motion judge erred by concluding otherwise.

Issue 2: Did the motion judge err by finding that because of allegations of *scienter* in the U.S. actions it was plain and obvious that the appellant knew or ought reasonably to have known that he had a claim in fraudulent misrepresentation more than two years before the 2019 amendment?

[66] The motion judge found, effectively in the alternative, that in any event, the appellant had discovered that BP knew its misstatements were false by 2010. The motion judge reasoned that because of related litigation in the U.S., where an action for misstatements in the securities disclosure context requires a pleading of “scienter”, i.e., knowing falsehood, that based on the pleading of “scienter”, the appellant ought to have known that BP knew its misrepresentations were false.

[67] I agree with the appellant that this factual finding was not available to the motion judge on this r. 21.01(1)(a) motion. In the face of the “scienter” pleading, which was a requirement of the action in the U.S. actions, BP continued to deny knowledge until July 2015. The scienter pleading on its face was not determinative of the knowledge issue. A factual inquiry was required. It was not open to the motion judge to make that factual finding in the context of this motion, because there would be an issue whether a reasonable person in the appellant’s position ought to have known about BP’s fraud more than two years before he pleaded fraud, based on the U.S. pleading or other available information that the US plaintiffs may have had when they pleaded scienter.

Issue 3: Was the fraudulent misrepresentation claim in the 2019 amended statement of claim merely a claim for a new remedy based on facts already pleaded in the 2017 amended statement of claim and therefore not out of time?

[68] The appellant only expressly sought a remedy for fraudulent misrepresentation in his 2019 amended statement of claim. Nevertheless, he submits that the fraud claim is timely because his 2019 pleading of fraud is not a new claim but an alternative theory of liability based on facts pleaded in prior statements of claim, particularly in the 2017 amendment, filed June 7, 2017.

[69] In the 2017 amendment (which asserted only a claim for statutory misrepresentation), the appellant added some factual allegations, including that BP made the misrepresentations knowing they were false. He says that these additional allegations were timely in 2017 because they were pleaded within two years of his discovery of BP’s fraud on July 2, 2015, the date BP settled a number of actions in the U.S. and abandoned an appeal from a decision which found that BP had acted with “conscious disregard of known risks” and was guilty of gross negligence and willful misconduct.

[70] Even though the appellant did not add a claim of fraud or seek a remedy for fraudulent misrepresentation in the 2017 amended pleading, he submits that because he had already pleaded the element of knowledge of the fraud in the 2017 amendment in a timely fashion, the claim based on fraud in the 2019 amendment is not a new claim within the meaning of the Limitations Act, and it is not out of time.

[71] I would not give effect to this argument. The 2017 amended pleading states at para. 3 that the action seeks damages pursuant to ss. 138.3(1)(a) and 138.3(2)(a) of Ontario’s Securities Act. While the 2017 amended statement of claim pleaded in various paragraphs that BP “knew” or was “aware of” certain facts, the pleading of knowledge was entirely in the context of the statutory claims that were asserted in that pleading. Moreover, the 2017 amended claim does not plead all of the necessary material facts for a common law fraudulent misrepresentation claim, including reliance.

[72] The 2019 pleading claiming fraudulent misrepresentation is not simply an alternative theory of liability based on the same facts, or a claim for different relief based on the same factual matrix as what is pleaded in the 2017 amended claim. It is not a different or new legal characterization of the same wrong as the claim for statutory misrepresentation. This is underscored by his amendment to para. 3 which, after referring to the statutory claims asserted in the action states that the appellant “also advances a claim for common law fraud”. Rather, it asserts a “fundamentally different claim”: see 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848, 409 D.L.R. (4th) 382, at paras. 20-21, 36.

[73] I would therefore reject this ground of appeal.

Issue 4: Did the motion judge err by proceeding on a motion under r. 21.01(1)(a) of the Rules of Civil Procedure to determine whether a claim was statute-barred?

[74] There are a number of decisions of this court, decided since the enactment of the Limitations Act, that suggest that discoverability issues should rarely, if ever, be decided on a motion under r. 21.01(1)(a) unless pleadings are closed and the facts are undisputed: see: Beardsley, at para. 21; Tran v. University of Western Ontario, 2016 ONCA 978, 410 D.L.R. (4th) 527, at paras. 18-21; Salewski v. Lalonde, 2017 ONCA 515, 137 O.R. (3d) 762, at paras. 42-45; Clark v. Ontario (Attorney General), 2019 ONCA 311, 56 C.C.L.T. (4th) 1, at paras. 42, 46-48, leave to appeal to S.C.C. granted and appeal heard (on other issues) and reserved October 15, 2020, 38687.

[75] In this proposed class action proceeding, BP has not yet delivered a statement of defence because it is not required to do so until the appellant has obtained leave to assert his statutory claim under Part XXIII.1 of Ontario’s Securities Act: see: Vaeth v. North American Palladium Ltd., 2016 ONSC 5015, at paras. 13-15. Therefore, pleadings are not closed.

[76] While r. 21.01(1)(a) refers to the determination of a question of law, where the facts regarding discovery of the claim are undisputed so that the determination of the issue is “plain and obvious”, then whether the action is statute-barred is considered a question of law that can be determined on a r. 21.01(1)(a) motion.

[77] A recent example of this is an earlier appeal decision in this action, Kaynes v. BP, P.L.C., 2018 ONCA 337, 81 B.L.R. (5th) 6, where the court found that it was plain and obvious that some of the statutory claims, where the limitation period runs from the date the misrepresentation was made, were statute-barred. One of the arguments on that appeal was the same one made here, that the issue should not be decided on a r. 21 motion before a defence is filed and the facts are ascertained. In rejecting that submission, the court stated at para. 13:

The appellant submits that this case was not appropriate for determination as a Rule 21 motion. We disagree. In a case such as this where the parties agree that there are no material facts in dispute, it is an efficient use of court resources to determine limitations defences on a Rule 21 motion.

[78] Two other recent cases have discussed and applied the “no facts in issue” exception to the rule. In Davidoff v. Sobeys Ontario, 2019 ONCA 684, leave to appeal to S.C.C. refused, 38953 (April 9, 2020), the plaintiff issued a statement of claim on November 1, 2017, seeking to sue Sobeys Ontario for wrongful dismissal. Both parties agreed that the claim was discoverable by the date of the plaintiff’s termination of employment – October 6, 2015 – which made the claim presumptively statute-barred. The plaintiff argued, however, that a letter he had mailed to Sobeys and its legal counsel on September 29, 2017 was a notice of action, and therefore the action was timely.

[79] After concluding that the letter did not constitute a notice of action, the court found that the limitation issue could be determined under r. 21.01(1)(a), since both parties agreed on the date that the claim became discoverable. Because the date of discovery was not in issue, the court applied the above-quoted reasoning from Kaynes v. BP, P.L.C. (2018).

[80] The other recent decision is Brozmanova v. Tarshis, 2018 ONCA 523, 81 C.C.L.I. (5th) 1, where the plaintiff’s claim pleaded the date when she learned about the fraudulent conduct of the defendant that was the subject of the claim. In that case, a statement of defence had been filed that challenged factual assertions in the statement of claim. The court suggested that a motion for summary judgment under r. 20 might have been the preferable procedure to use because the parties had joined issue on disputed facts. However, because the date of discovery of the claim was not one of the disputed facts, it was not improper for the defendant to have moved under r. 21.01(1)(a) to strike the claim as statute-barred.

[81] In establishing the main rule that a claim should not normally be struck out as statute-barred using r. 21.01(1)(a), the courts have noted that discoverability issues are factual and that the rule is intended for legal issues only where the facts are undisputed. It would therefore be unfair to a plaintiff where the facts are not admitted, to use this rule, which does not allow evidence to be filed except with leave or on consent. But where a plaintiff’s pleadings establish when the plaintiff discovered the claim, so that that issue is undisputed, then the courts have allowed r. 21.01(1)(a) to be used as an efficient method of striking out claims that have no chance of success, in accordance with the principle approved in Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45, at para. 19.

[82] Applying these principles to this case, the appellant pleaded in the 2019 draft reply document that it filed on the motion, a number of alternative dates which it says revealed that BP’s misconduct was fraudulent. The latest event date that the draft reply identifies is July 2, 2015, when BP settled a number of actions in the U.S. and abandoned an appeal of a decision that found that it had acted with “conscious disregard of known risks”. The appellant pleaded that up until that date, BP had fraudulently concealed that its misstatements were made knowingly between 2008 and 2010. By pleading this fact, the appellant has conceded the latest date when it discovered or reasonably could have discovered BP’s fraudulent conduct was July 2, 2015, more than two years before the 2019 amended statement of claim.

[83] Finally, the appellant’s alternative pleading in his 2019 draft reply, that BP “fraudulently concealed the fraudulent nature of the misrepresentation alleged until less than two years prior to the new amendments in September of 2019” does not alter this result. Nothing further is pleaded to support this conclusory statement. In Das v. George Weston Limited, 2018 ONCA 1053, 43 E.T.R. (4th), leave to appeal refused, [2019] S.C.C.A. No. 69, this court explained, at para. 74, that “while the material facts that are pleaded in the statement of claim are assumed to be true for purposes of a motion to strike, bald conclusory statements of fact and allegations of legal conclusions unsupported by material facts are not.” The motion judge was not bound to accept the appellant’s position that this fraud claim was only discovered in the preceding two years, since that position was pleaded without the support of any material facts.

[84] Accordingly, as the July 2015 date is not in dispute, it is plain and obvious that the appellant’s claim for fraudulent misrepresentation in the 2019 amended statement of claim is out of time and statute-barred. On that basis, I agree with the conclusion of the motion judge that the issue can be determined on a r. 21.01(1)(a) motion, and that the 2019 amended claim must be struck on that basis.

Result

[85] For these reasons, I would dismiss the appeal with costs to BP fixed at $20,000, as agreed to by the parties.

Released: January 20, 2021 (“K.F.”)

“K. Feldman J.A.”

“I agree. K. van Rensburg J.A.”

“I agree. Thorburn J.A.”

[1] In the U.S., investors rely on SEC Rule 10b-5, 17 C.F.R. s.240.10b-5, under s.10(b) of the Securities Exchange Act of 1934, to bring actions for misrepresentation in continuous disclosure. A plaintiff in a U.S. court must plead and prove scienter, namely an intent to deceive, manipulate or defraud: Ernst & Ernst v. Hochfelder, 425 U.S. 185 (U.S. Sup. Ct. 1976). See: Yip v. HSBC Holdings plc, 2017 ONSC 5332, at para. 69.

[2] Most recently, the Supreme Court of Canada discussed how the discoverability rule applies to extend the limitation period for causes of action granted by s. 36(1)(a) of the Competition Act, R.S.C., 1985, c. C-34, in Pioneer Corp. v. Godfrey, 2019 SCC 42, 437 D.L.R. (4th) 383.

[3] The Supreme Court of Canada has granted leave to appeal from the decision of the Court of Appeal of New Brunswick in Province of New Brunswick v. Grant Thornton, 2020 NBCA 18, 54 C.P.C. (8th) 271, leave to appeal granted, 39182 (August 13, 2020) on the issue of the extent of a plaintiff’s knowledge or discovery of the facts of negligent misstatement that will be sufficient to trigger the commencement of the limitation period.

[4] Section 5(2) incorporates a presumption that the claimant knew all the discoverability components of a claim in s. 5(1)(a) on the day the act or omission took place, unless the contrary is proved, while s. 5(1)(b) incorporates into the discoverability analysis, when a reasonable person with the abilities and in the circumstances of the claimant ought to have known all of the s. 5(1)(a) discoverability components of a claim. For fraudulent misrepresentation, that would include the knowledge of falsity component.