COURT FILE NO.: CV-11-429634
DATE: 20120106
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Antonio Ferrara, Cesan Mechanical Limited and 973976 Ontario Limited (Plaintiffs/Responding Parties/Moving Parties by Cross-Motion and Lorenzetti, Wolfe Barristers and Solicitors, and Stephen A. Schwartz (Defendants/Moving Parties/Responding Parties by Cross-Motion)
BEFORE: Justice Beth Allen
COUNSEL: Ronald Birken, for the Plaintiffs
Michael Kestenberg, for the Defendants
HEARD: December 21, 2012
ENDORSEMENT
OVERVIEW
[1] The background to this proceeding extends over several years and involves a somewhat complicated land deal and various court proceedings. Many of the historical details do not bear directly on the issue the court is asked to determine. I will attempt to provide a high level summary of the factual background which is substantially not in dispute.
[2] The defendant solicitors bring a Rule 20 motion for summary judgment on the grounds that the plaintiffs’ claim in solicitor’s negligence is statute-barred by the Limitations Act, 2002, c. L-24 as amended (“the Act”). The plaintiffs, through the individual plaintiff Antonio Ferrara (“Ferrara”), were previously represented by the defendant solicitor Stephen A. Schwartz (“Schwartz”) in relation to the real estate transactions underlying this motion. The plaintiffs bring a cross-motion seeking an order that the limitation period did not commence until they discovered their solicitor’s negligence.
[3] The defendants submit there are no issues requiring a trial as to the plaintiffs’ claim being statute-barred as exceeding the two-year limitation period provided under s. 4 of the Act. Section 4 provides a party is precluded from bringing a claim outside the two-year period. The limitation period begins to run from the date the claim is first discovered. Section 5 provides:
- (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).
[4] The defendants argue the plaintiffs knew or ought to have known by September 19, 2006 all the facts upon which to base their claim. That was the date on which a law suit was launched against the plaintiffs and others in negligence for errors in the preparation of a statement of adjustments in a real estate transaction. The plaintiffs’ claim was not issued until June 11, 2011.
[5] The plaintiffs submit the facts reveal their claim was commenced in time. They argue the operative date for the commencement of the limitation period was July 2, 2009, the date of issue of an Order of this court in relation to litigation pertaining to the land transactions. The court ruled against the defendants, who included the plaintiffs in the proceeding before me, which Order was upheld on appeal. The plaintiffs argue it was only with the court’s July 2, 2009 Order that they discovered their claim in negligence against the defendant solicitors, particularly Schwartz. Ferrara asserts all along he had accepted and relied upon Schwartz’s representations that he (Schwartz) had not made an error in the statement of adjustments.
RULE 20 MOTIONS AND LIMITATION PERIODS
[6] The principles governing burdens of proof and discoverability are well settled.
[7] Section 5(1)(a) contains a subjective test that focuses on the plaintiff’s actual knowledge of the types of facts enumerated under that provision. The second test under s. 5(1)(b) is objective and requires the plaintiff’s knowledge to be assessed in relation to the standard of the steps a reasonable person would take to obtain knowledge of a claim.
[8] Section 5(2) extends the time for triggering of the limitation period until the point at which the party making the claim discovers they have a cause of action. Such a determination is fact driven, to be decided based on the particular circumstances of each case. [Gaudet et al. v. Levy et al, 1984 2047 (ON SC), [1984] O.J. No. 3312 577, at p. 582 (Ont. H.C.J.)]. The burden is on the plaintiff under s. 5(2) to rebut the presumption they knew they had a claim on the day of the incident. Courts have held the plaintiff has the evidentiary burden to prove the claim was issued within the limitation period. [Findlay v. Holmes, 1998 5488 (ON CA), [1998] O.J. No. 2796 (Ont. C.A.), at para 25; McSween v. Louis, 2000 5744 (ON CA), [2000] O.J. No. 2076, at para. 37 (Ont. C.A.)].
[9] The activation of the limitation period does not have to wait until the plaintiff knows the legal significance of the facts of their case but rather when the plaintiff believes a meritorious claim exists. Applied to a case of solicitor’s negligence, it is not necessary to have a final judicial determination regarding the solicitor’s error to trigger the limitation period for the claim against the solicitor. The limitation period in such a case begins to run when the plaintiff knew or ought to have known there was a problem arising from the solicitor’s actions. [Kenderry–Esprit(Receiver of) v. Burgess, MacDonald, Martin and Younger, 53 O.R. (3d) 58, at para. 21, (Ont. S.C.J.; Indcondo Building Corp. v. Steeles-Jane Properties Inc., 2001 CarswellOnt 2904, at para. 14, (Ont. S.C.J.); and Isailovic v. Voyjvodic, 2011 ONSC 5854 (, at para. 36 (Ont. S.C.J.)].
[10] The January 1, 2010 amendment to Rule 20 gives the court broader authority than allowed under the predecessor Rule to weigh evidence, evaluate the credibility of witnesses, and/or draw any reasonable inference from the evidence. The test under Rule 20.04(2)(a) is whether there is “genuine issue requiring a trial”. In a recently decided case, the Ontario Court of Appeal established a test to assist in evaluating which cases may be disposed of without a trial and which may require a trier of fact to assess the evidence. The Court held:
We find the passages set out in Housen, at paras. 14 and 18, such as “total familiarity with the case as a whole”, “extensive exposure to the evidence” and “familiarity with the case as a whole”, provide guidance as to when it is appropriate for the motion judge to exercise the powers in Rule 20.04(2.1). In deciding if these powers should be used to weed out a claim as having no chance of success or be used to resolve all or part of an action, the motion judge must ask the following question: can the full appreciation of the evidence and the issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial?
We think this “full appreciation test” provides a useful benchmark for deciding whether or
not a trial is required in the interest of justice.
[Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, at paras. 50 and 51, (Ont. C. A.)].
[11] The court must ask whether the motion record on its own is adequate to allow the court a “full appreciation” of the evidence and issues required to arrive at judgment or whether a trial is needed to dispose of the matter.
[12] The established principles that govern summary judgment motions are not inconsistent with the full appreciation test and remain applicable after the release of Combined Air.
[13] Where a defendant moves for summary judgment in relation to a statutory limitation period, the plaintiff must adduce through affidavits evidence of material facts showing a genuine issue as to the operation of the limitation period to bar the claim. That is, the plaintiff has the onus to demonstrate there are factual issues as to when the cause of action arose. Often quoted from the case law is that the resisting party must “put their best foot forward” and “lead trump” in advancing their case. [1061590 Ontario Limited v. Ontario Jockey Club (1995), 1995 1686 (ON CA), 21 O.R. (3d) 547 at 557 (Ont. C.A.)].
[14] If the defendant satisfies the court there are no such issues of fact required to be tried, the defendant will succeed in obtaining summary judgment. [Soper v. Southcott, [1998] O.J. No. 2700, at para. 14, (Ont. C.A.)]. The court is entitled to assume the evidence contained in the record is all the evidence the parties would rely on if the matter proceeded to trial. [1061590 Ontario Limited v. Ontario Jockey Club, supra, and Dawson v. Rexcraft Storage and Warehouse Inc. (1998), 1998 4831 (ON CA), 164 D.L.R. (4th) 257 at 265, (Ont. C.A.)].
[15] Therefore, on a motion for summary judgment brought by a defendant relying on a limitations defence, the plaintiff seeking to defeat the operation of the limitation period has the onus to rebut the presumption that the limitation period is operative by showing through the record that there is a genuine issue as to when a claim arose.
OVERVIEW OF PREVIOUS LITIGATION
[16] To gain an appreciation of the issue of when Ferrara knew or ought to have known of Schwartz’s negligence requires at least a high level recounting of some pertinent facts about the disputes that arose over the land transactions.
[17] Behind the litigation is the purchase of property (“the Property”) held in trust by King Line Investments (“King Line”). The plaintiff Cesan Mechanical Limited (“Cesan”), with other co-tenants, owned shares in the Property.
[18] Pursuant to an agreement, if a third party made an offer to purchase the Property, any co-tenant had the right to match that offer and purchase the Property. If more than one co-tenant made matching offers, those co-tenants purchased the Property on a proportionate basis.
[19] In July 2004, Cesan made a matching offer to a third party offer which it assigned to the corporate plaintiff 973976 Ontario Limited (“973”), (“the 973 Offer”). Ferrara is the principal and owner of the corporate plaintiffs. In August 2004, another co-tenant made a matching offer which was assigned to Gaston Investments (“the Gaston Offer”). There were two matching offers in each transaction so the 973 Offer and the Gaston Offer were proportionate offers to purchase a 50% interest in the Property.
[20] The ensuing litigation arises from disputes in relation to an agreement between King Line and 973 to reduce the land transfer tax on 973’s purchase of the Property. King Line and 973 agreed that on the statement of adjustments King Line would credit 973 with an amount equal to six times the value of one unit of the co-tenancy as a rollover credit on the basis that the six units belonging to the 973 offerors would be rolled over from King Line to the 973 offerors, the purchaser company.
[21] The rollover credit was calculated by dividing the total purchase price for the Property of about $14,000,000 (less adjustments for commissions and taxes), by the number of units which calculated the value of each co-tenancy unit. The per-unit value was multiplied by six to arrive at the value of the units held by the 973 offerors, that amount being about $500,000. Hence the value of units held by 973 was about $3,000,000 ($500,000 X 6). Therefore the amount to be paid by 973 on the purchase was to be reduced by a rollover credit of $3,000,000.
[22] The 973 and Gaston Offers were scheduled to close in February 2005. However, Greenbelt legislation was enacted which adversely affected development potential on the land. As a consequence, both 973 and Gaston refused to close and in May 2005 King Line brought an action (“the King Line Breach of Contract Action) against 973 and Gaston.
[23] The King Line Breach of Contract Action was settled by Minutes of Settlement in June 2005. The Minutes of Settlement is a key feature in the dispute.
[24] Under the Minutes of Settlement it was agreed that 973 would complete the entire purchase of the Property in two transactions: the 50% interest that was the subject of the 973 Offer would be on the same terms as the February 2005 purchase, including the rollover credit of $500,000 per unit calculated from the original purchase price of $14,000,000 (“the First Transaction”) and the 50% interest that was the subject of the Gaston Offer would be for a purchase price of $5,000,000 (“the Second Transaction”).
[25] Counsel T, retained by 973 to review the Minutes of Settlement, met with Schwartz and Ferrara several times to ensure the parties’ intentions as to the purchase price and the rollover credit were reflected in the agreement. In counsel T’s view the intentions were met. For use in completing the First Transaction, in July 2005 Schwartz sent counsel for King Line a revised statement of adjustments, using the purchase of $14,000,000 and including the rollover credit of $500.000 per unit.
[26] In August 2005, Schwartz received correspondence from King Line’s litigation counsel indicating that the calculation of the rollover credit on the revised statements of adjustments was inaccurate. His opinion was that the rollover credit per unit ought to have been about $400,000 and not $500,000 based on the fact 973 paid a purchase price of about $12,000,000 and not $14,000.000.
[27] On September 19, 2006, King Line commenced an action against 973 and King Line’s real estate solicitors retained in relation to the First Transaction for negligence in preparing or reviewing the statement of adjustments. (“the King Line Deficiency Action).
[28] The defendants argue the limitation period runs from at least September 19, 2006, the date King Line commenced the Deficiency Action.
[29] On November 21, 2006, 973 retained litigation counsel #1 in the Deficiency Action seeking damages and disputing King Line’s entitlement to relief. King Line’s reply alleged the statement of adjustments used in the First Transaction was inaccurately prepared by 973’s solicitors.
[30] On July 3, 2008, 973 retained litigation counsel #2 to continue the defence of the King Line Deficiency Action and to commence an action against King Line’s real estate solicitors in the First Transaction, and against King Line’s litigation counsel in the King Line Deficiency Action, Gaston and King Line claiming conspiracy and that King Line is not entitled to relief.
[31] The trial of the Deficiency Action began on June 22, 2009 before Belobaba, J for which 973 retained litigation counsel #3. Schwartz and Ferrara testified on behalf of 973 at the trial. The question at trial was whether there was an intention that the rollover credit be a term in the agreement on the First Transaction. Belobaba, J. released his decision on July 2, 2009 finding in King Line’s favour that the rollover was not a term of First Transaction. Belobaba, J.’s decision was upheld by the Court of Appeal on May 12, 2010.
[32] The plaintiffs say the limitation period was triggered on July 2, 2009 by Belobaba, J.’s decision and therefore their statement of claim filed on June 28, 2011 is not statute barred.
PARTIES’ ARGUMENTS AND THE COURTS’ ANALYSIS
The Limitations Issue
[33] The trigger point for the limitation period is when the plaintiff knew or ought to have known they had a cause of action against the defendant.
[34] Ferrara does not succeed in satisfying the knowledge requirements of s. 5(1) of the Act by asserting only facts of his subjective knowledge, that he had no actual knowledge that he had a claim against Schwartz until July 2, 2009. To meet the objective element of the test he has to show that he took the steps a reasonable person in his place would take to obtain knowledge of a potential claim.
[35] As noted earlier, s. 5(1)(a) focuses on the plaintiff’s actual knowledge. The second test under s. 5(1)(b) is objective and requires the plaintiff’s knowledge to be assessed in relation to the standard of the steps a reasonable person would take to obtain the knowledge.
[36] Section 5(2) allows the time to be extended until such time the plaintiff discovers they have a cause of action. To benefit from an extension of time, however, the plaintiff must overcome the presumption they knew they had a claim on the day of the incident. Ferrara therefore has to establish through the evidentiary record facts to prove the statement of claim was issued within the limitation period. To succeed in doing so on a summary judgment motion, Ferrara must put his best evidentiary foot forward since the court is entitled to rely solely on the motion record for its determination.
[37] These determinations are fact driven dependent on the particular circumstances before the court.
[38] Ferrara presents a number of arguments to support his contention he did not and could not have had knowledge he had a cause of action in negligence against Schwartz until Belobaba, J. released his decision. Most of his arguments are based in his subjective knowledge.
[39] The error in the statement of adjustments, which Schwartz helped to prepare, was first revealed by King Line’s litigation counsel in August 2005 and that issue was the subject matter of discussions with lawyers and subsequent litigation counsel in which Ferrara was involved before July 2009.
[40] In response to those facts, Ferrara asserts he relied on Schwartz’s representations that he did not make a mistake. Ferrara contends that it was reasonable for him to accept his lawyer’s word at face value in view of their lengthy lawyer/client relationship and Schwartz’s continued involvement in the litigation process in absence of any suggestion throughout that he might have made an error. This is especially true, Ferrara contends, in view of his unsophisticated immigrant background.
[41] The focus of Ferrara’s position is on his subjective knowledge. The court is not concerned so much with what Ferrara says he knew about the potential for a claim against Schwartz. The concern is what a reasonable person in Ferrara’s circumstances would do.
[42] I agree with the defendants there were various points in time and occurrences before July 2009 which would cause a reasonable person to believe they had a claim against their lawyer.
[43] I accept the defendants’ position that on an objective standard a reasonable person in Ferrara’s position would have been alerted to a possible claim against Schwartz with the issuance of the claim in the King Line Breach of Contract action on September 19, 2006. After all, the central issue in that action was the negligence of King Line’s real estate in preparing the statement of adjustments which was prepared with Schwartz’s involvement. Ferrara knew at that time the material facts on which their current claim against Schwartz is based. [Indcondo Building Corp. v. Steeles-Jane Properties Inc, supra, at para. 11].
[44] Courts have held where a claimant may not appreciate the legal significance of the facts does not postpone the commencement of the limitation period if they knew, or ought to have known, the existence of material facts of their cause of action.; error or ignorance of the law, or the legal consequences of the facts, does not postpone the running of the limitation period. [Lawless v. Anderson, 2010 ONSC 2723, para. 24, (Ont. S.C.J.)].
[45] Further, Ferrara had previously been involved with Schwartz and counsel T in discussions about the Minutes of Settlement and whether the parties’ intentions in the agreement were properly expressed. I find when the law suit was launched against one of the solicitors involved in the settlement a reasonable person would have been alive to a possible claim against their own lawyer. As well, Schwartz had reviewed the August 2005 correspondence from King Line’s litigation counsel with Ferrara. As a result Ferrara should have reasonably understood that King Line was claiming that Schwartz’s interpretation of the Minutes of Settlement to include the rollover credit was inaccurate.
[46] Kenderry held the commencement of litigation involving the interpretation of a document drafted by a solicitor is sufficient knowledge of a solicitor’s potential error to start the running of the limitation period for the plaintiff’s claim against that solicitor. [Kenderry, supra, at para. 21].
[47] On the submission about Ferrara’s level of sophistication, I find that position does not hold much weight. Ferrara had the benefit of having retained a real estate solicitor and three litigation lawyers before July 2009. I find an unsophisticated client faced with their solicitor having been involved in a transaction in which negligence has been alleged, would reasonably have sought the advice of counsel. In any event, as held in Lawless, supra, the fact Ferrara might not have appreciated the significance of the facts, does not delay the running of the limitation period.
[48] It does not behoove Ferrara on this motion to rely on an affidavit in which he baldly asserts simply that none of the lawyers told him he might have a claim against Schwartz. It is Ferrara who has the evidentiary burden here to rebut the presumption he knew he had a claim against Schwartz when the lawsuit was instituted in September 2006. Ferrara was required on a Rule 20 motion to lead with his best foot to rebut the presumption and not simply rely on bald assertions in an affidavit.
[49] There is also the fact that Ferrara and 973 brought a law suit against King Line’s lawyers for negligence. As the defendants point out, how can it be that the plaintiffs had sufficient savvy to sue an adverse lawyer, but did not know enough to sue their own lawyer?
Conclusion on the Limitation Issue
[50] The plaintiffs’ argument that they had to wait until the results of the law suit to know the facts necessary to institute their action is not supported by the facts or the law. As Kenderry, supra, held, in a solicitor’s negligence case, it is not necessary to await a final decision regarding a solicitor’s error to start the limitation period for a claim against the solicitor. [Kenderry, supra, at para. 21].
[51] I find the evidence supports a finding that the limitation period began to run from September 19, 2006 and therefore the statement of claim is statute-barred as having been issued beyond the two-year limitation period.
Abuse of Process
[52] The defendants also ask the court, in its inherent jurisdiction, to find the plaintiffs’ action against the defendant solicitors is an abuse of process.
[53] The court will exercise its authority to prevent actions from proceeding that will result in a multiplicity of proceedings or that will result in the re-litigation of issues already determined. The danger here is the possibility of inconsistent verdicts. Kenderry, supra, held this concern also exists, as with the case before me, where a person is attempting to raise an issue before the court that they should have raised in earlier proceedings but they elected not to do so. The idea here is that the party who is sought to be sued and who was not a party in previous proceedings can raise the doctrine of abuse of process to say if they are going to be sued, they should have been sued in the previous proceeding. [Kenderry, supra, paras. 30 and 31].
[54] I agree with the defendants this is a classic case where there is a danger the same issues of fact and law might be decided with a different outcome than was the case before Belobaba, J. It is possible that with the defendants not having been parties to the previous proceeding (and therefore were not bound by the earlier decision), the issues would have to be decided again. This leaves the door open to the potential for inconsistent determinations.
[55] I would also dismiss the plaintiffs’ action on the basis it would be an abuse of process.
DISPOSITION
[56] I grant the defendants’ motion and dismiss the cross-motion. The action is therefore dismissed.
COSTS
[57] Rule 57.01 of the Rules of Civil Procedure grants the court discretion to determine which party will be required to pay costs and the extent to which costs are required to be paid. The defendants were wholly successful as I granted their motion and dismissed the cross-motion, dismissing the underlying action. In accordance with the principle that costs should follow the cause, I award costs to the defendants. The question of the quantum of costs to each of the defendants is left to be determined.
[58] In arriving at an appropriate quantum, regard is to be had to the factors set out under Rule 57.01, being: the complexity of the proceeding; the importance of the issues; the conduct of any party that tended to unnecessarily lengthen or shorten the proceeding; whether any step in the process was improper or vexatious; and the experience of the parties.
[59] The defendants’ total bill on a partial indemnity scale inclusive of legal fees, disbursements and HST is $10,858.82. I do not find the fee rates excessive, nor do I find unreasonable the time expended by counsel preparing for the motion and preparing materials.
[60] Addressing the Rule 57.01 factors, the motion was just over a half-day in length. Counsel were conscientious about judicial economy in delivering their submissions. The issues were not particularly complex as the law is well settled on Rule 20 motions and limitation periods. In terms of the importance of the issues raised, I find cases of solicitors’ negligence by their nature are clearly important to the parties, perhaps from different perspectives.
[61] The plaintiffs seek partial indemnity costs of $12,446.89 on the cross-motion. The Court of Appeal set down the principle that the objective of a determination on costs is to fix an amount the unsuccessful party is required to pay that is fair and reasonable rather than an amount reflecting the actual costs of the successful party. [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.)].
[62] In the circumstances I fix costs at $12,500. The amount of costs awarded is fair and within the reasonable expectations of the parties and in accord with the principles set out by the Court of Appeal in Boucher. Costs are payable within 30 days of this Order.
ORDER
[63] Order accordingly.
Allen J.
Date: January 6, 2012