REASONS FOR DECISION

Overview

[1] The Appellants, Blake Vince, Karen Vince, and 971082 Ontario Limited, appeal the July 9, 2020 judgment of Carey J. awarding the Respondent, 1352194 Ontario Inc., $25,000 on an unpaid invoice. The Appellants also seek leave to appeal the costs order of $49,554.80, made on August 21, 2020.

[2] The trial judge rejected the Appellants’ limitation defence and found that the Respondent’s claim was not statute-barred because the limitation period was suspended while the parties were engaged in settlement discussions.

[3] The Appellants appeal on the basis that the trial judge misapprehended the evidence. In particular, they submit that the limitation period had expired prior to the time period during which the parties were engaged in discussions.

[4] For the reasons detailed below, the appeal is granted.

Factual Background

[5] The Appellants, Blake and Karen Vince, are spouses and are the sole shareholders of 971082 Ontario Limited, the company that owned the property where they resided.

[6] The Respondent, 1352194 Ontario Inc., is a professional corporation doing business as “LGL Consulting”. LGL Consulting provides professional engineering services and investigative and forensic engineering. The principal of the company is Lou Lecce.

[7] In 2011, the Appellants were having work done on the foundation of their home when an underground methane pocket was pierced, causing an infiltration. The house became uninhabitable as a result. The Appellants’ home insurance did not cover the loss.

[8] The Appellants brought an action against the contractor, the consulting engineer, and the Municipality of Chatham-Kent. They retained the Respondent to conduct a forensic engineering investigation and provide a report. Mr. Lecce estimated that it would cost $8,000 to $10,000 for the initial report.

[9] On Mr. Lecce’s recommendation, the Appellants retained Jeffrey Hewitt as their lawyer in the methane litigation.

[10] The Respondent delivered a report on July 13, 2012, shortly before a scheduled mediation. As of that date, the Appellants had paid the Respondent $16,452.20. At the mediation, the Appellants asked the Mr. Lecce how much more he expected to bill them. Mr. Lecce stated that he had not tabulated his hours and did not know. For the purposes of calculating an appropriate settlement of the methane litigation, the Appellants estimated the amount at $20,000, which they believed to be more than sufficient.

[11] In November 2012, the methane litigation was settled for $300,000.

[12] On January 8, 2013, Mr. Lecce called Ms. Vince and informed her that the final cost of the report was $40,934.25, including HST. The Respondent had prepared, but did not deliver, an invoice in that amount dated January 7, 2013, bearing interest at an annual rate of 24% if the account was not paid in 30 days. On January 13, 2013, the Appellants advised Mr. Lecce by email that they found the amount excessive and requested that he issue an invoice for $20,000.

[13] In March 2013, the Respondent sought Mr. Hewitt’s assistance in having the Appellants pay the outstanding invoice. After that point, Mr. Hewitt communicated sporadically with the Appellants in November 2014 and October 2015, as further detailed below.

[14] In November 2015, Mr. Hewitt sent the actual invoice for $40,934.25 to the Appellants.

[15] On January 19, 2016, the Respondent brought this claim against the Appellants.

Issues

[16] This appeal raises the following issues:

(a) Did the trial judge misapprehend the evidence or make a palpable and overriding error in finding that the Respondent’s claim was not statute-barred?

(b) Should the costs order be set aside?

Analysis

Standard of Review

[17] The parties agree that the applicable standard of review on the limitations issue is palpable and overriding error. A “palpable” error is an error that is plainly seen. An “overriding” error is an error that is sufficiently significant to vitiate the challenged findings of fact: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 1, 6. An example of a palpable error is a finding made in the absence of evidence or misapprehension of relevant evidence: Waxman v. Waxman (2004) 2004 39040 (ON CA), 186 O.A.C. 201, at para. 296.

Did the Trial Judge Err in Finding That the Claim Was Not Statute-Barred?

[18] The Appellants submit that the trial judge made a palpable and overriding error in finding that the Respondent’s claim was not statute-barred because the limitation period began to run, at the latest, by March 2013. The Appellants submit that the trial judge misapprehended the evidence when he found that the parties’ correspondence suspended the commencement of the limitation period.

[19] The Respondent submits that the trial judge made no palpable and overriding error and that his findings of fact on the limitation issue are entitled to deference.

The Applicable Principles

[20] Under s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, (“Limitations Act”), a claim is statute-barred unless a proceeding is commenced in respect of the claim within two years from the date on which the claim is discovered.

[21] Subsection 5(1) of the Limitations Act provides that 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).

[22] Under s. 5(2) of the Limitations Act, “[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.” The plaintiff thus bears the burden of demonstrating that they could not have discovered the claim on the day the act or omission took place.

[23] The Court of Appeal for Ontario has stated that “appropriate” in s. 5(1)(a)(iv) means legally appropriate. It does not allow a party to delay the commencement of proceedings for tactical or other reasons beyond two years from the date the claim is fully ripened: Unicorr Limited v. Minuk Construction, 2016 ONSC 7350, at para. 82, quoting Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218, 109 O.R. (3d) 652, at para. 34.

[24] When dealing with unpaid invoices, courts have applied the factors set out in s. 5(1) to find that the limitation period on an unpaid invoice begins to run once a reasonable period of time for its payment has elapsed: see e.g., Collins Barrow Toronto LLP v. Augusta Industries Inc., 2017 ONCA 883; Deloitte & Touche LLP v. Kuiper, 2015 ONSC 7770; and T. Hamilton and Son Roofing Inc. v. Markham (City), 2018 ONSC 2665.

[25] Section 11 of the Limitations Act provides for the suspension of the limitation period where the parties have agreed to have an independent third party resolve the claim or assist them in resolving it. The trial judge correctly found that Mr. Hewitt was not an independent third party within the meaning of s. 11.

The Trial Judge’s Findings

[26] The trial judge found that the Respondent’s claim was not statute-barred because the parties’ ongoing settlement discussions suspended the commencement of the limitations period. In his view, the limitations period did not begin to run until “late 2014” when the Appellants rejected the Respondent’s offer to resolve the invoice for $25,000.

[27] The trial judge’s findings on the limitation issue were contained in para. 33 of the decision, which states:

At the same time, the evidence is convincing that Mr. Hewitt saw himself as trying to negotiate a settlement of this issue. At one point, he apologizes for the passage of over a year in 2014/2015 in his communication with the Vinces. In that communication, he points out some personal issues in Mr. Lecce’s life and his hope to resolve the matter. There were offers exchanged to the point that LGL agreed to reduce its account to $30,000 and then $25,000. There was no time limit for acceptance put on any of the offers. It was shortly after the last offer that the Vinces indicated, likely on legal advice, that the statute of limitations was being invoked and the time for advancing a claim had expired. In my view, it was reasonable for LGL and Mr. Hewitt to conclude that up until that point when the offer was rejected, the parties had been in settlement negotiations and it would have been unreasonable to commence litigation. Only then did the “clock” start running. Given rejection of LGL’s last offer in late 2014 and the commencement of this claim in January 2016, I have concluded that the action was not statute barred.

[28] In my view, this paragraph reflects the trial judge’s misapprehension of the evidence because there was no basis on which to suspend the commencement of the limitations period. The misapprehension is evident from the chronology of events, as detailed below:

On January 8, 2013, the Respondent called Ms. Vince to inform her of the outstanding invoice for $40,934.25.
On January 13, 2013, the Appellants advised the Respondent by email that they found the amount excessive and asked him to reduce the invoice to $20,000.
On March 24, 2013, Ms. Vince followed up by email asking for the Respondent’s response.
In March 2013, Mr. Lecce engaged Mr. Hewitt to handle the matter on his behalf. Mr. Hewitt was the Appellants’ lawyer in the methane litigation and was also Mr. Lecce’s friend. Mr. Lecce and Mr. Hewitt discussed the possibility of commencing a court action to recover on the invoice, as discussed below.
On November 19, 2014, Mr. Hewitt emailed the Appellants for the first time, asking that they contact him regarding the Respondent’s unpaid invoice.
On November 20, 2014, Ms. Vince emailed Mr. Hewitt stating that the Appellants had not received a final invoice and that she believed the ball was in the Respondent’s court.
As of March 2015, two years had elapsed since Mr. Lecce engaged Mr. Hewitt to collect the Respondent’s 2013 account.
On October 27, 2015, Mr. Hewitt emailed Ms. Vince and offered to settle the account for $25,000 plus HST.
On November 11, 2015, Ms. Vince responded to Mr. Hewitt’s email and noted the expiry of the limitation period.
On November 29, 2015, Mr. Hewitt emailed the original invoice for $40,934.25 to the Appellants.

[29] I find that the limitation period expired, at the latest, by March 2015, two years after Mr. Lecce engaged Mr. Hewitt to collect on the invoice and discussed the prospect of commencing a legal action. This is more than 60 days after the invoice was rendered and more than 60 days after the Appellants refused to pay the invoice.

[30] It is clear from the above chronology that no settlement discussions took place between January 2013, when the Appellants requested that the Respondent reduce the invoice to $20,000, and October 27, 2015, when Mr. Hewitt made the $25,000 offer. The Respondent had not responded to the Appellants’ January 2013 email and no further offers were made or rejected until October 2015. The communications that took place before the limitation period expired could not have had the effect of suspending the limitation period. This is because, while the Appellants had offered to settle for $20,000 in January 2013, the Respondent made no counter-offer until March 27, 2015.

[31] The settlement discussions that the trial judge relied upon to find that the limitation period was suspended did not take place before the expiry of the limitation period. The discussions only commenced on October 27, 2015, six months after the limitation period had expired. In finding that the commencement of the limitation period was suspended because the parties were engaged in settlement discussions, the trial judge misapprehended the evidence.

[32] The evidence also demonstrates that when Mr. Lecce engaged Mr. Hewitt to collect on the invoice in March 2015, they discussed and contemplated the commencement of a proceeding. Mr. Hewitt specifically told Mr. Lecce that he would not get involved if the amount was under $25,000 because he was a deputy judge of the Small Claims Court, and his involvement could lead to a potential conflict if a small claims proceeding was commenced.

[33] Because of the presumption that the limitation period began to run when the act or omission took place, the onus was on the Respondent to demonstrate that the limitation period began to run at a different time. He failed to discharge this burden. To the contrary, the evidence overwhelmingly demonstrated that the Respondent knew as of March 2013, at the latest, that the Vinces refused to pay his invoice for $40,000.

[34] The trial judge misapprehended the evidence in finding that the Appellants were dragging out settlement negotiations, when in fact, the Appellants attempted to get a response from the Respondent and heard nothing over extended periods of time.

[35] On appeal, the Respondent submits that the limitation period did not begin to run because the parties were never ad idem on the contract price for the Respondent’s services. The parties’ lack of agreement on the invoice amount could not postpone the commencement of the limitation period. Had the parties been ad idem, they would have been able to achieve a settlement.

[36] Similarly, I reject the Respondent’s argument that it was not reasonable for the Respondent to commence a proceeding until Ms. Vince invoked a limitation defence. If that were true, a party could never commence a proceeding until two years have passed. In January 2013, the Appellants made clear that they were not going to pay the full amount and offered to pay $20,000. The Appellant did not make a counter-offer until more than two years later. A party cannot forestall the commencement of the limitation period indefinitely by failing to engage in settlement discussions.

[37] Moreover, in the Statement of Claim the Respondent pleaded that the invoice was rendered on January 7, 2013, when Mr. Lecce first spoke to Ms. Vince and claimed 24 percent interest from February 2013. This demonstrates that the Respondent knew that he had a cause of action as early as February 2013, when the unpaid invoice was due.

[38] In Carmichael v. GlaxoSmithKline Inc., 2020 ONCA 447, 151 O.R. (3d) 609, at para. 125, the Court of Appeal held that a misapprehension of evidence justifies appellate intervention where the palpable and overriding error goes to the core of the outcome of the case. Based on my findings above, I conclude that this is such a case. The judgment is set aside.

Should the Costs Order be Set Aside?

[39] The trial judge awarded the Respondent $49,544.80 in costs on the basis that the Respondent was more successful at trial than their last offer to settle for $22,500, which was made a few weeks before trial pursuant to r. 49 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The Respondent was awarded $12,847.20 in partial indemnity costs to the date of the offer and $27,154.95 in substantial indemnity costs thereafter.

[40] At the hearing, leave to appeal the costs order was granted. Given the result of the appeal on the merits, both the judgment and the costs order are set aside.

[41] The Appellants submit that if the costs order is set aside, there should be no order as to costs of the trial.

Costs on the Appeal

[42] At the hearing of the appeal, counsel advised the court that they had agreed that the successful party should be entitled to costs between $15,000 and $20,000, all-inclusive. The range accounts for the fact that the Appellants had to pay fees to obtain transcripts, among other things. The Appellants are entitled to costs of the appeal, which I fix at $20,000.

Conclusion

[43] Accordingly, the appeal is granted. The judgment and the costs order are set aside.

[44] The Respondent shall pay costs of $20,000 to the Appellants within 30 days.

“Nishikawa J.”

“Hackland J.”

“Kristjanson J.”

Released: December 15, 2021

CITATION: 1352194 Ontario Inc. v. Vince, 2021 ONSC 8192

DIVISIONAL COURT FILE NO.: 059/21

DATE: 20211215

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Hackland, Kristjanson and Nishikawa JJ.

BETWEEN:

1352194 Ontario Inc.

Plaintiff/Respondent

and -

Blake Vince, Karen Vince and 971082 Ontario Limited

Defendants/Appellants

REASONS FOR JUDGMENT

Released: December 15, 2021

1352194 Ontario Inc. v. Vince, 2021 ONSC 8192

Case Summary

REASONS FOR DECISION

Overview

Factual Background

Issues

Analysis

Standard of Review

Did the Trial Judge Err in Finding That the Claim Was Not Statute-Barred?

The Applicable Principles

The Trial Judge’s Findings

Should the Costs Order be Set Aside?

Costs on the Appeal

Conclusion

Judges

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 4

Legal Tests 1

Legislation 2