Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220307 DOCKET: C68529

Doherty, Miller and Sossin JJ.A.

BETWEEN

Thermal Exchange Service Inc. Plaintiff (Respondent)

and

Metropolitan Toronto Condominium Corporation No. 1289 Defendant (Appellant)

Counsel: Robert B. Cohen, for the appellant Neal H. Roth, for the respondent

Heard: October 25, 2021 by video conference

On appeal from the judgment of Justice Andra Pollak of the Superior Court of Justice, dated July 7, 2020, with reasons reported at 2020 ONSC 2977.

Reasons for Decision

[1] This appeal concerns the application of s. 5(1)(a)(iv) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and specifically, when the respondent Thermal Exchange Service Inc. (“Thermal Exchange”) knew that a proceeding would be an appropriate means to seek to remedy a loss resulting from the appellant Metropolitan Condo Corp.’s (the “Condo Corp”) non-payment of its invoices. It is a question that can only be answered in the specific context of the parties’ legal relationship and their business dealings.

[2] From 2002 to 2015, Thermal Exchange serviced the HVAC units in the Condo Corp.’s building at 168 Simcoe St. in Toronto. The Condo Corp. does not dispute that the work was done at its request, or that it was done satisfactorily. Neither does it dispute that many of Thermal Exchange’s invoices were not paid. Its sole defence at trial was that Thermal Exchange brought this action out of time, and the action is now barred by the Limitations Act.

[3] Thermal Exchange’s understanding was that it was contracting with the Condo Corp. rather than the individual unit owners. At trial, the Condo Corp. conceded the contractual relationship, and accepted that but for the limitations defence, it would be liable to pay the invoices. However, at all relevant times the Condo Corp.’s property manager operated on a different understanding, which was only communicated to Thermal Exchange in 2016: that the Condo Corp. was not ultimately liable for paying the invoices, and was only obligated to pay if and when it was able to collect payment from the unit owners on whose behalf the work was done.

[4] In August 2017, Thermal Exchange brought the action.

[5] Following a hybrid summary trial, the trial judge held that Thermal Exchange had brought the action as soon as it knew that an action would be an appropriate means to remedy the Condo Corp.’s non-payment, even though many of the unpaid invoices had been issued many years before the action was brought – some going back as far as 2008. The action was therefore not barred by the Limitations Act. The trial judge found the Condo Corp. owed $86,055.49 to Thermal Exchange, arising from invoices issued between 2008 and 2015. For the reasons that follow, the Condo Corp.’s appeal is dismissed.

Background

[6] Thermal Exchange received work orders from the Condo Corp.’s property manager, Helen Da Ponte, performed the work she requested, and invoiced the Condo Corp. Each of Thermal Exchange’s invoices stated that payment was due within 30 days from the date of the invoice. However, the Condo Corp. typically made payment much later than this – often 300 days later. Thermal Exchange continued to provide services on request and tender fresh invoices.

[7] The trial judge found that Thermal Exchange was operating on the basis that the Condo Corp. had “one running account, and whenever funds were received, they were credited to that one account”. This finding is central to the trial judge’s conclusion. The Condo Corp. challenges the finding as a palpable error. As we explain below, we do not agree.

[8] There was conflicting evidence as to Thermal Exchange’s billing practices. From 2008 forward, Thermal Exchange stopped sending individual invoices to the Condo Corp. for each work order, and began sending a single, semi-annual “batch invoice”. Mr. Pintaric, the president of Thermal Exchange, testified this was done at the request of the property manager, Ms. Da Ponte. Ms. Da Ponte answered that not only was this not at her request, it created additional work for her, as it required her to assign the correct work orders to their respective unit owners. The trial judge made no findings as to who initiated the change in billing practice, but as stated above, found that the indebtedness of the Condo Corp. was in the nature of a running account.

[9] At trial, Mr. Pintaric and Ms. Da Ponte each testified as to different understandings of how the Condo Corp. processed the invoices. Mr. Pintaric’s assumption was that the Condo Corp. paid the invoices out of its operating budget, and then sought reimbursement from the unit owners on whose behalf the work was done. But he had no knowledge of the Condo Corp.’s internal affairs. Ms. Da Ponte’s evidence was that the Condo Corp. received the invoices from Thermal Exchange and in turn invoiced the owner of the unit for which the work had been done. If the Condo Corp. received payment from the unit owner, it would in turn pay Thermal Exchange; if it didn’t, it wouldn’t.

[10] As mentioned earlier, Ms. Da Ponte’s understanding of the nature of the Condo Corp.’s contractual obligation to Thermal Exchange was mistaken. Thermal Exchange first became aware of it on November 4, 2016, when Ms. Da Ponte advised Mr. Pintaric via email that the Condo Corp. was not responsible for paying the invoices, and that “the invoices are charge-backs to the unit owners for payment once they receive the copy of the invoice.”

[11] There was conflicting evidence at trial as to what arrangements, if any, had been made between Thermal Exchange and Ms. Da Ponte regarding payment. The evidence of Mr. Pintaric was that he had several conversations with Ms. Da Ponte about the non-payment of invoices, and she would invariably tell him that she was terribly busy and unable to attend to the matter immediately, but was “working on” the invoices. The trial judge found that the assurances that she was “working on it” led Thermal Exchange “to the reasonable belief that [its] problem could and would be remedied without the need to have a recourse to the courts.” Prior to the November 4 email, Mr. Pintaric had believed – reasonably in the view of the trial judge – that payment was more or less a matter of encouraging Ms. Da Ponte to do her job and complete whatever paperwork was needed at her end. There had been no refusal to pay and no suggestion of inability to pay.

[12] The trial judge accepted Mr. Pintaric’s evidence that by October 2015, he thought a demand letter from his lawyer might stir Ms. Da Ponte to process the invoices. In November 2016, Ms. Da Ponte unexpectedly informed Thermal Exchange that the Condo Corp. was not responsible for payment. In December 2016, Ms. Da Ponte made a concerted effort to bring the account up to date, mailing demand letters to each unit owner with a copy of the Thermal Exchange invoices for work specific to that unit. The Condo Corp. was able to recover a substantial sum from the unit owners from this effort, which it paid to Thermal Exchange.

[13] On August 17, 2017 Thermal Exchange filed its statement of claim, seeking damages for services supplied, breach of agreement, and unjust enrichment in the amount of $122,105.34. By the time of trial, the amount outstanding had been reduced to $86,055.49.

[14] The central issue at trial was discoverability: specifically, when Thermal Exchange first determined that a proceeding would be an appropriate means to remedy its claim, per s. 5(1)(a)(iv) of the Limitations Act.

[15] The trial judge concluded, relying upon Presley v. Van Dusen, 2019 ONCA 66, 144 O.R. (3d) 305, that Thermal Exchange would not have known a proceeding was an appropriate means to seek a remedy until October 2015, when it realized it would have to instruct its counsel to commence legal proceedings:

…the assurances made by the property manager and the superintendent of the [Condo Corp.] that they were “working on it” did lead the Plaintiff to the reasonable belief that his problems could and would be remedied without the need to have a recourse to the courts… I find that the Plaintiff did not know and that a person in its situation would not reasonably have known that a proceeding would be an appropriate means to seek a remedy until the time when he realized that [the Plaintiff] would have to instruct counsel for the Plaintiff to commence legal proceedings against the [Condo Corp.].

[16] Since the civil action was commenced within two years of the demand letter, the trial judge held, the limitations defence failed.

Issues on appeal

[17] The appellant submits that the trial judge:

1. Erred in her application of the legal principles in Presley v. Van Dusen;
2. Erred in finding that the claim was first discoverable as of the date of the demand letter in October 2015;
3. Erred in finding that the running account suspended the commencement of the limitation period;
4. Applied the wrong standard to Thermal Exchange to rebut the presumption; and
5. Erred in not considering the defence of laches.

Analysis

(1) The application of s. 5(1)(a)(iv) of the Limitations Act

[18] The Limitations Act provides:

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). 2002, c. 24, Sched. B, s. 5 (1).

5 (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. 2002, c. 24, Sched. B, s. 5 (2).

[19] The trial judge held that Thermal Exchange was obligated, pursuant to s. 5(2) of the Limitations Act, to rebut the statutory presumption that that the claim was discovered on the date that the act or omission on which the claim is based took place. To rebut the presumption, a plaintiff must establish that its claim was not discovered until some other date, employing the four cumulative criteria listed in s. 5(1)(a).

[20] The trial judge found that the first three criteria of discoverability were satisfied as of the date Thermal Exchange first became aware that its invoices were unpaid. This would be 30 days after the invoices were rendered. For the trial judge, the only remaining issue was therefore when Thermal Exchange knew that “a proceeding would be an appropriate means to seek to remedy [the loss]”. She concluded that this was the date that Thermal Exchange instructed its lawyer to send the demand letter in October 2015.

[21] Significantly, the trial judge found that the nature of the commercial relationship between the parties was that there was a single running account, and whenever Thermal received funds from the Condo Corp, it was credited to that account. The trial judge accepted the evidence of Mr. Pontaric that he sincerely believed the Condo Corp. had been dealing with him in good faith and that Ms. Da Ponte’s statements that she was “working on it”, meant that his invoices would eventually be paid. He did not realize until her email of November 4, 2015 that she was, on behalf of the Condo Corp., taking the position that payment by Condo Corp. would be contingent on payment by the unit owner.

[22] The Condo Corp. argued on appeal that the trial judge erred in holding that the Ms. Da Ponte’s assurances were analogous to the class of cases summarized in Presley v. Van Dusen, drawing on Presidential MSH Corp. v. Marr, Foster & Co. LLP, 2017 ONCA 325, 135 O.R. (3d) 321, where a plaintiff postpones bringing an action because of assurances by a defendant – who has a superior understanding of the problem – that the defendant can remedy the matter, such that litigation would not be necessary. The Condo Corp. argues that this case is nothing like Van Dusen, given that: (1) Thermal Exchange was not relying on the Condo Corp. to fix a mechanical problem beyond the expertise of Thermal Exchange; (2) the Condo Corp. never promised unequivocally to pay the invoices, but was simply stringing a creditor along; and (3) Thermal Exchange waited substantially longer to begin a proceeding than the plaintiff in Van Dusen did.

[23] We do not agree that the trial judge erred in her analysis. There is nothing in the reasoning in Van Dusen that would restrict its application to comparative expertise over mechanical problems. The salient aspect is that the defendant created a problem, the remedy for which was beyond the reach of the plaintiff’s understanding, and led the plaintiff to rely on it for the remedy. Analogous to the situation in Van Dusen, the Condo Corp. created a barrier to Thermal Exchange receiving payment (it would not pay unless it first received payment from the unit owners, and was not taking any steps to getting the unit owners to pay), prevented Thermal Exchange from understanding the nature of the problem, and led Thermal Exchange to believe that it would take care of the problem.

[24] The second and third points of purported differentiation with Van Dusen have little traction given the trial judge’s finding that the juridical relation between Thermal Exchange and the Condo Corp. was that of a running account. In the context of a running account, it is significant that the Condo Corp. gave Thermal Exchange no reason to believe it was disputing the invoices, and that the delays in payment were the result of other demands on the property manager’s time. Given that the indebtedness was incurred in the course of a running account, the temporal period is of less significance than it was in circumstances such as in Van Dusen.

(2) Date of the demand letter

[25] The Condo Corp. argues that the trial judge erred in finding that the limitation period started in October 2015, when Thermal Exchange instructed its solicitor to send a demand letter threatening legal action. The Condo Corp. argues that this date was chosen randomly by the trial judge, and is inconsistent with the evidence of Mr. Pintaric as to when he actually believed he could sue, and when a reasonable person in the situation of Thermal Exchange would have known that the commencement of a proceeding would be appropriate. We agree that the trial judge erred in finding that the limitation period began to run when Mr. Pintaric instructed his lawyer to send the demand letter. Nevertheless, and as we explain below, this conclusion does not assist the Condo Corp. as we find that the limitation period began to run after this date.

[26] Mr. Pintaric’s evidence was that the threat of litigation was more or less idle – it did not reflect a conviction that an action was appropriate, but was a means to encourage Ms. Da Ponte to reprioritize her time in favour of processing the Thermal Exchange invoices. On his evidence, it was not until the November 4, 2016 email from Ms. Da Ponte, in which she first communicated the position that the Condo Corp. was not obligated to pay, that he first became aware of the nature of the problem he was facing, and became conscious that a proceeding would be an appropriate means to seek to remedy that problem. From the evidence on the record, supported by the trial judge’s finding that the Condo Corp. was maintaining a running account, the “time when he realized that [he] would have to instruct counsel for the Plaintiff to commence legal proceedings” was not the time he first met with counsel, nor when the demand letter was issued, but only when Ms. Da Ponte advised in the email of November 4, 2016 that the Condo Corp.’s position was that it had no obligation to pay the invoices. The action was commenced within two years of this date and the limitations defence therefore fails.

(3) The running account

[27] The Condo Corp. argues that the trial judge’s finding that the account was a running account was a palpable and overriding error, contradicted by an Excel spreadsheet jointly tendered by the parties as an exhibit. The spreadsheet documents for each invoice rendered from December 31, 2008 to June 30, 2017, the invoice number, the amount, and whether payment had been received. The Condo Corp. submits that the spreadsheet contradicts the argument that there was a running account, as it demonstrates that payments were attributed to particular invoices.

[28] The spreadsheet was not tendered as an accounting record of either party, although both parties agreed to its accuracy in terms of stating the accounts that were rendered and the payments that were made. It is not evidence of how Thermal Exchange understood the nature of the Condo Corp.’s account with it, and therefore does not contradict the trial judge’s finding. The trial judge’s finding that the Condo Corp. had a running account with Thermal Exchange was supported by the evidence of Mr. Pintaric and the practice of batch invoicing. The finding was open to her and we would not disturb it.

(4) Did the trial judge apply the wrong standard?

[29] The Condo Corp. submits that the trial judge erred in law by applying the wrong standard for Thermal Exchange to meet to rebut the presumption under s. 5(2). The trial judge described the onus as “very low”. The Condo Corp. points to case law from this Court which characterizes the onus as “relatively low”.

[30] Nothing in this litigation turns on the distinction between these two modifiers.

(5) Laches

[31] The trial judge did not address the Condo Corp.’s defence of laches. However, the argument could not have succeeded given the trial judge’s factual findings with respect to the Limitations Act defence. She found that it was reasonable for a person in the position of Thermal to rely on the assurances of the property manager and hold off commencing an action. Having made that finding, a laches defence was not available.

Disposition

[32] The appeal is dismissed. If the parties cannot agree on costs, they may make brief written submissions not exceeding 3 pages each, in addition to a bill of costs, within 14 days of the release of these reasons.

“Doherty J.A.”

“B.W. Miller J.A.”

“Sossin J.A.”