ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-12-453043

DATE: 20151109

BETWEEN:

CANADA MORTGAGE AND HOUSING CORPORATION
Plaintiff

– and –

IRA HOWARD GREENSPOON
Defendant

Christopher Stanek for the Plaintiff

Allan D. Powell for the Defendant

HEARD: October 26, 2015

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

[1] Pursuant to the National Housing Act, R.S.C. 1985, c. N-11, a Crown agency, Canada Mortgage and Housing Corporation (“CMHC”), provides mortgage default insurance to approved lenders. Between 2004 and 2007, CMHC paid the Royal Bank of Canada, the Bank of Montreal, and the Bank of Nova Scotia, $760,437.97 in mortgage default insurance after seven residential mortgage loans went into default. In this action, commenced in 2012, CMHC seeks to recover from Ira Howard Greenspoon, the money it paid to the approved lenders.

[2] In 2012, CMHC sued Mr. Greenspoon, the lawyer who acted on the purchase and mortgage loan transactions for the approved lenders. Pursuant to s. 10 of the National Housing Act, CMHC’s claim is a subrogated solicitor’s negligence claim. CMHC alleges that Mr. Greenspoon was negligent in failing to disclose material facts to the approved lenders before they advanced the CMHC insured loans. It is alleged that had Mr. Greenspoon not been negligent, then the mortgage loans would never have been made.

[3] Mr. Greenspoon brings a summary judgment motion to have the professional negligence action dismissed as statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24.

[4] For the reasons that follow, I grant Mr. Greenspoon’s summary judgment motion. In my opinion, CMHC ought to have discovered the subrogated solicitor’s negligence claim around the time (between 2004 and 2007) when it paid the insurance proceeds to the approved lenders. The limitation period would have run its course between 2006 and 2009. The CMHC’s 2012 action is statute-barred.

B. FACTUAL AND PROCEDURAL BACKGROUND

[5] Pursuant to s. 8 of the National Housing Act, CMHC’s mandate is to insure housing loans for the purpose of indemnifying approved lenders in the event of default by borrowers.

[6] The approved lender administers the mortgage loan, and, in the event of a default, the lender enforces its remedies on the mortgage security. Once all legal remedies are exhausted, including a judgment on the covenant, the lender may claim for a deficiency loss under the loan insurance. Subsection 10(2) of the Act provides that if CMHC makes a payment to an approved lender, it is subrogated to all rights and interests of the lender. The subsection provides that CMHC may maintain an action in its own name in respect of those rights and interests.

[7] Seven mortgage transactions are the subject-matter of CMHC’s action against Mr. Greenspoon, who is a real estate lawyer practicing in Toronto. Mr. Greenspoon acted for the borrower and the approved lender on each of seven residential mortgage transactions. CMHC issued mortgage loan insurance to the lenders. In each case, after the closing of the transaction, the mortgage went into default, and the approved lender suffered a loss after completing power of sale proceedings.

[8] Each lender made claims under CMHC’s insurance. The following chart sets out the details of the mortgage loans and the details of CMHC’s payments:

Date of Agreement of Purchase and Sale

Borrower Property
Purchase Price Lender
Amount of Loan Date of Default

Deficiency
[Total – $760,437.97]

Date of CMHC Payment

November 7, 2003

Santiago
3 Sutherland Ave.
$297,500.00
Bank of Montreal
$284,808.51
February 1, 2004

$87,982.19

September 21, 2004

April 12, 2004

Sealey
65 Snively St.
$575,000
Royal Bank of Canada
September 28, 2004

$195,034.20

September 26, 2005

May 28, 2004

Khan/Landru
29 Verne Cres.
$298,500.00
Royal Bank of Canada
$282,672.71
June 16, 2006

$112,297.00

June 25, 2007

July 20, 2004

Tucciarone
1204 – 61 Centre Ct
$258,000
Royal Bank of Canada
$244,297.74
October 25, 2004

$89,303.69

June 29, 2005

August 19, 2004

Petrovic
3394 Snowball Rd.
$275,000
Bank of Nova Scotia
$260,405.75
February 1, 2005

$62,692.66

January 13, 2006

August 20, 2004

Owuso
110 Christena Cres.
Royal Bank of Canada
$374,109.35
November 17, 2004

$163,630.75

November 16, 2005

February 28, 2005

Evans
39 Admiral Road
$229,000.00
Royal Bank of Canada
July 10, 2006

$49,497.48

July 18, 2007

[9] Around the time when it paid the lenders, the CMHC investigated each of the seven transactions. As a matter of business practice, after a mortgage default and payment on insurance, if CMHC suspects a borrower has made a misrepresentation to obtain the mortgage financing, CMHC classifies the mortgage as “RFFI;” i.e. “Referred for Further Investigation”.

[10] The criterion for a RFFI are: (a) a lender report of suspected fraudulent, false or misleading information in relation to an insured mortgage loan; (b) the presence of badges of fraud or misrepresentations; (c) notice of a suspected misrepresentation from law enforcement, media, a regulatory body, or another source; (d) few mortgage payments made by the borrower before default; and (e) a large percentage drop in property value from purchase price to default value.

[11] Each of the seven loans in which Mr. Greenspoon acted were identified as RFFI because of suspected misrepresentations about the debtor’s employment or about the value of the property.

[12] CMHC’s RFFI reviews, which occurred between 2005 and 2007, revealed that:

• On the Santiago (3 Sutherland Ave.) transaction, which was reviewed on March 29, 2006, it was noted: (1) that there were irregularities with the mortgagor’s employment; (2) there were only two monthly payments before the default; (3) the value of the property dropped 26% from $297,500.00 to $215,000.00 in only eight months with no apparent explanation; (4) the transaction appeared to be a private sale with a $10,000.00 deposit but the purchase agreement did not specify to whom the deposit should be paid; (5) the default appraisal noted that the property was listed in June 2002 for $360,000.00 with no sale but it was later reported sold in 2004 for $575,000.00, which the appraiser stated was high for the market; and (6) the purchase agreement indicated that a $50,000.00 deposit was paid to the lawyer yet there was a realtor involved so the deposit should have gone to the realtor.

• On the Sealey (65 Snively St.) transaction, which was reviewed on November 3, 2005, it was noted that there were irregularities with the Notice of Assessment, suggesting it had been altered to inflate the borrower’s income.

• On the Khan/Landru (29 Verne Cres.) transaction, which was reviewed on November 23, 2007, it was noted: (1) that there was no employment letter or proof of down payment; and (2) the property appraisal obtained after default suggested that the property characteristics and value had been misrepresented.

• On the Tucciarone (1204-61 Town Centre Ct.) transaction, which was reviewed on July 15, 2005 and September 26, 2005, it was noted that: (1) the borrower was 20 years old with a salary of $85,000; (2) the property was overvalued; (3) the transaction closed within one day of approval of the mortgage default insurance; (4) there were two employment records for two different employees for the same time period; (5) there were concerns with the pay stubs; (6) there was an MLS listing on the file, but the transaction appeared to be a private sale; (7) the $10,000.00 deposit in the purchase agreement did not specify to whom it would be paid; and (8) the appraisal report obtained after default stated the property was listed on MLS on July 19, 2004 but expired unsold on September 2, 2004; however, a sale was registered on title on August 24, 2004 for $258,000.00.

• On the Petrovic (3394 Snowball Rd.) transaction, which was reviewed on November 21, 2005 and in August 2006, it was noted: (1) the default occurred after only three payments; (2) the borrower could not be located; and (3) the vendor on the agreement was never shown on the registered title.

• On the Owuso (110 Christena Cres.) transaction, which was reviewed on September 16, 2004 and October 16, 2005, it was noted that: (1) the property was overvalued; (2) the employment was false; (3) there were concerns with the pay stubs; (4) the transaction closed within one day of approval of the mortgage default insurance; and (5) there were concerns with the proof of down payment because the statement had the same file account number as on another file.

• On the Evans (39 Admiral Rd.) transaction, which was reviewed on October 5, 2007, it was noted that: (1) the property characteristics had been misrepresented; and (2) there were concerns with respect to the employment income.

[13] After the RFFI reviews, time passed without CMHC taking any action. But events were occurring with respect to the seven mortgage loans. Unknown to CMHC, on August 9, 2010, the Law Society of Upper Canada issued a Notice of Application under s. 34 (1) of the Law Society Act, R.S.O. 1990, c. L.8 for a determination of whether Mr. Greenspoon had engaged in professional misconduct. The application alleged that Mr. Greenspoon had knowingly participated or assisted in mortgage fraud with respect to 15 properties, including the seven properties for which there was mortgage insurance from CMHC.

[14] The CMHC, however, remained unaware of the Law Society proceedings until February 9, 2012, when Mr. Greenspoon himself happened to phone CMHC’s legal department about a lifting and re-filing of a writ of seizure and sale.

[15] As a result of the telephone call, CMHC’s lawyer conducted an internet Google search of Mr. Greenspoon and discovered that Mr. Greenspoon had been the subject of Law Society disciplinary proceedings. CMHC, through its lawyers, then requested access to the Law Society’s file of the disciplinary proceeding.

[16] CMHC obtained the Law Society file, and it learned that during the Law Society hearing, Mr. Greenspoon had admitted that he was negligent, but he had denied that he had knowingly participated in fraud. The Law Society Hearing Panel found that Mr. Greenspoon: (1) had acted for multiple parties in the transactions without disclosure or consent from his lender clients; (2) had failed to disclose material facts to his lender clients; (3) had failed to make reasonable inquiries regarding the unusual features of the transactions; and (4) had failed to review or follow express lender instructions. The Hearing Panel concluded that Mr. Greenspoon was professionally negligent and that he had failed to be on guard against being duped by unscrupulous clients and should have known that he was participating in fraudulent conduct. The Hearing Panel concluded that although negligent, Mr. Greenspoon he had not knowingly participated in fraudulent conduct.

[17] After receiving and reviewing the Law Society’s file, CMHC reviewed its own records and identified seven files that had been part of the Law Society proceeding. CMHC’s investigation of the files revealed that:

• On the Santiago (3 Sutherland Ave.) transaction, Mr. Greenspoon did not disclose: (1) unconfirmed deposits from the purchaser; (2) a vendor paying for the purchaser’s transaction costs; and (3) the payment of sale proceeds to an unrelated third party.

• On the Sealey (65 Snively St.) transaction, Mr. Greenspoon did not disclose: (1) unconfirmed deposits from the purchaser; and (2) the payment of sale proceeds to an unrelated third party.

• On the Khan/Landru (29 Verne Cres.) transaction, Mr. Greenspoon did not disclose: (1) unconfirmed deposits from the purchaser; (2) a vendor paying for the purchaser’s transaction costs; and (3) the purchaser not providing sufficient funds to close the transaction.

• On the Tucciarone (1204-61 Town Centre Ct.) transaction, Mr. Greenspoon did not disclose: (1) a significant escalation in price over a short period of time; (2) unconfirmed deposits from the purchaser; and (3) the purchaser not providing sufficient funds to close the transaction.

• On the Petrovic (3394 Snowball Rd.) transaction, Mr. Greenspoon did not disclose: (1) a significant escalation in price over a short period of time; (2) unconfirmed deposits from the purchaser; (3) a vendor paying for the purchaser’s transaction costs; and (4) the purchaser not providing sufficient funds to close the transaction.

• On the Owuso (110 Christena Cres.) transaction, Mr. Greenspoon did not disclose: (1) unconfirmed deposits from the purchaser; (2) a vendor paying for the purchaser’s transaction costs; and (3) the purchaser not providing sufficient funds to close the transaction.

• On the Evans (39 Admiral Rd.) transaction, Mr. Greenspoon did not disclose: (1) unconfirmed deposits from the purchaser; and (2) the purchaser not providing sufficient funds to close the transaction.

[18] On May 7, 2012, CMHC commenced this action against Mr. Greenspoon. In the Statement of Claim, CMHC alleges it did not know of a potential cause of action against Mr. Greenspoon until February 9, 2012 when it learned of a Law Society proceeding against him. CMHC submits that until it examined the Law Society’s files, it could not have known; i.e., discovered, that there was a professional negligence claim against Mr. Greenspoon.

[19] In his Statement of Defence, Mr. Greenspoon admits that he owed a duty of care to the approved lenders, but he pleads that at all material times, he met the standard of care expected of him. He pleads that the lenders were the authors of the losses alleged in the Statement of Claim due to their own negligence in making the mortgage loans.

[20] In his Statement of Defence, Mr. Greenspoon pleads that the negligence claims of the lenders or the subrogated claim of CMHC are statute-barred as untimely under the Limitations Act, 2002.

C. DISCUSSION AND ANALYSIS

1. Summary Judgment Jurisdiction

[21] As a matter of procedure, rule 20.04(2)(a) of the Rules of Civil Procedure provides that the court shall grant summary judgment if: “the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.”

[22] With amendments to Rule 20 introduced in 2010, the powers of the court to grant summary judgment have been enhanced. Rule 20.04(2.1) states:

20.04 (2.1) In determining under clause (2)(a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.

[23] In Hryniak v. Mauldin, 2014 SCC No. 7, the Supreme Court of Canada held that on a motion for summary judgment under Rule 20, the court should first determine if there is a genuine issue requiring trial based only on the evidence in the motion record, without using the fact-finding powers enacted when Rule 20 was amended in 2010. The analysis of whether there is a genuine issue requiring a trial should be done by reviewing the factual record and granting a summary judgment if there is sufficient evidence to fairly and justly adjudicate the dispute and a summary judgment would be a timely, affordable and proportionate procedure.

[24] If, however, there appears to be a genuine issue requiring a trial, then the court should determine if the need for a trial can be avoided by using the powers under rules 20.04(2.1) and (2.2). As a matter of discretion, the motions judge may use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if their use will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[25] Hryniak v. Mauldin encourages the use of a summary judgment motion to resolve cases in an expeditious manner provided that the motion can achieve a fair and just adjudication. Speaking for the Supreme Court of Canada, Justice Karakatsanis opened her judgment by stating:

Ensuring access to justice is the greatest challenge to the rule of law in Canada today. Trials have become increasingly expensive and protracted. Most Canadians cannot afford to sue when they are wronged or defend themselves when they are sued, and cannot afford to go to trial. … Increasingly, there is recognition that a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system. This shift entails simplifying pre-trial procedures and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case. The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just.

[26] At para. 22 of her judgment in the companion case of Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, Justice Karakatsanis summarized the approach to determining when a summary judgment may or may not be granted; she stated:

Summary judgment may not be granted under Rule 20 where there is a genuine issue requiring a trial. As outlined in the companion Mauldin appeal, the motion judge should ask whether the matter can be resolved in a fair and just manner on a summary judgment motion. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. If there appears to be a genuine issue requiring a trial, based only on the record before her, the judge should then ask if the need for a trial can be avoided by using the new powers provided under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice.

[27] Justice Corbett provided a useful summary of the Hryniak v. Mauldin approach in Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, where he stated at paras. 33 and 34:

33. As I read Hryniak, the court on a motion for summary judgment should undertake the following analysis:

(1) The court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial;

(2) On the basis of this record, the court decides whether it can make the necessary findings of fact, apply the law to the facts, and thereby achieve a fair and just adjudication of the case on the merits;

(3) If the court cannot grant judgment on the motion, the court should:

(a) Decide those issues that can be decided in accordance with the principles described in (2), above;

(b) Identify the additional steps that will be required to complete the record to enable the court to decide any remaining issues;

(c) In the absence of compelling reasons to the contrary, the court should seize itself of the further steps required to bring the matter to a conclusion.

34. The Supreme Court is clear in rejecting the traditional trial as the measure of when a judge may obtain a "full appreciation" of a case necessary to grant judgment. Obviously greater procedural rigour should bring with it a greater immersion in a case, and consequently a more profound understanding of it. But the test is now whether the court's appreciation of the case is sufficient to rule on the merits fairly and justly without a trial, rather than the formal trial being the yardstick by which the requirements of fairness and justice are measured.

[28] Hryniak v. Mauldin does not alter the principle that the court will assume that the parties have placed before it, in some form, all of the evidence that will be available for trial. The court is entitled to assume that the parties have respectively advanced their best case and that the record contains all the evidence that the parties will respectively present at trial: Dawson v. Rexcraft Storage & Warehouse Inc., 1998 4831 (ON CA), [1998] O.J. No. 3240 (C.A.); Bluestone v. Enroute Restaurants Inc. (1994), 1994 814 (ON CA), 18 O.R (3d) 481 (Ont. C.A.); Canada (Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372 at para. 11. The onus is on the moving party to show that there is no genuine issue requiring a trial, but the responding party must present its best case or risk losing: Pizza Pizza Ltd. v. Gillespie (1990), 75 O.R. (2d) 255 (Gen. Div.); Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 1996 7979 (ON SC), 28 O.R. (3d) 423 (Gen. Div.), aff’d [1997] O.J. No. 3754 (C.A.).

2. Limitation Period Defences

[29] The Limitations Act, 2002, s. 4 prescribes a limitation period of two years from the date a claim is discovered unless some other period is specifically prescribed. 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". The discoverability principle, which is codified by sections 4 and 5 of the Act, governs the commencement of a limitation period and stipulates that a limitation period begins to run only after the plaintiff has the knowledge, or the means of acquiring the knowledge, of the existence of the facts that would support a claim for relief: Kamloops (City) v. Nielsen, 1984 21 (SCC), [1984] 2 S.C.R. 2; Central Trust Co. v. Rafuse, 1986 29 (SCC), [1986] 2 S.C.R. 147, [1986] S.C.J. No. 52; Peixeiro v. Haberman, 1997 325 (SCC), [1997] 3 S.C.R. 549, [1997] S.C.J. No. 31.

[30] Sections 4 and 5 of the Limitations Act, 2002 state:

Basic limitation period

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

Discovery

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).

Presumption

(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.

[31] In bringing a summary judgment motion, a defendant advancing a limitation period defence will rely on the statutory presumption in s. 5(2) of the Limitations Act, 2002 that unless the contrary is proven, the claimant is presumed to have known the elements for his or her claim on the day the events of the claim occurred. A plaintiff will attempt to rebut the statutory presumption by tendering evidence that he or she both subjectively and objectively did not discover the claim until sometime after the day the events of the claim occurred.

[32] Section 5(1) of the Act defines discovery by relation to “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).” The matters referred to in clause (a) include the identity of the wrongdoer, his or her wrongdoing, and knowledge that litigation would be an appropriate means to seek a remedy for the wrongdoing. Where it appears that a claim is statute-barred, to rebut the presumption of having discovered his or her claim when the wrongdoing occurred, the claimant must meet both a subjective and an objective standard test of non-discovery.

[33] The limitation period runs from when the prospective plaintiff has, or ought to have had, knowledge of a potential claim and the question is whether the prospective plaintiff knows enough facts to base a cause of action against the defendant, and, if so, then the claim has been discovered, and the limitation period begins to run: Lawless v. Anderson, 2011 ONCA 102 at para. 23; Soper v. Southcott (1998), 1998 5359 (ON CA), 39 O.R. (3d) 737 (C.A.); McSween v. Louis, 2000 5744 (ON CA), [2000] O.J. No. 2076 (C.A.); Central Trust Co. v. Rafuse, 1986 29 (SCC), [1986] 2 S.C.R. 147; Gaudet v. Levy (1984), 1984 2047 (ON SC), 47 O.R. (2d) 577 (H.C.J.) at p. 582.

[34] Discovery is a fact-based analysis that depends upon the particular cause of action and subjective or objective knowledge of the material facts of the cause of action. In Lawless v. Anderson, supra, the Court of Appeal stated at paras. 22-23:

22. The principle of discoverability provides that “a cause of action arises 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. ….

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 period begins to run: see Soper v. Southcott (1998), 1998 5359 (ON CA), 39 O.R. (3d) 737 (C.A.) and McSween v. Louis (2000), 2000 5744 (ON CA), 132 O.A.C. 304 (C.A.).

[35] Thus, when a limitation period defence is raised, the onus is on the plaintiff to show that its claim is not statute-barred and that he or she behaved as a reasonable person in the same or similar circumstances using reasonable diligence in discovering the facts relating to the limitation issue: Durham (Regional Municipality) v. Oshawa (City), 2012 ONSC 5803 at paras. 35-41; Bolton Oak Inc. v. McColl-Frontenac Inc., 2011 ONSC 6657 at paras. 12-14; Bhaduria v. Persaud (1985), 1998 14846 (ON SC), 40 O.R. (3d) 140 (Gen. Div.).

[36] The circumstance that a potential claimant may not appreciate the legal significance of the facts does not postpone the commencement of the limitation period if he or she knows or ought to know the existence of the material facts, which is to say the constituent elements of his or her cause of action. Error or ignorance of the law or legal consequences of the facts does not postpone the running of the limitation period: Nicholas v. McCarthy Tétrault, 2008 54974 (ON SC), [2008] O.J. No. 4258 (S.C.J.), aff’d 2009 ONCA 692, leave to appeal to S.C.C. ref’d [2009] S.C.C.A. 476; Coutanche v. Napolean Delicatessen (2004), 2004 10091 (ON CA), 72 O.R. (3d) 122 (C.A.).

[37] Section 5(1)(a)(iv) of the Limitations Act, 2002 can have the effect of delaying the commencement of the running of limitation period. Where a person knows that he or she has suffered harm; i.e., when the plaintiff knows the elements of s. 5(1)(i), (ii) and (iii), the delay lasts until the day when a proceeding would be an “appropriate” means to remedy the harm having regard to the the nature of the injury, loss or damage. However, to have this delaying effect, there must be a juridical reason for the person to wait; i.e. there must be an explanation rooted in law as to why commencing a proceeding is not yet appropriate. The Court of Appeal’s decision in Markel Insurance Co. of Canada v. ING Insurance Co. of Canada; Federation Insurance Co. of Canada v. Kingsway General Insurance Co., 2012 ONCA 218 demonstrates this point.

[38] In Markel Insurance Co. of Canada, under the statutory benefits scheme of the Insurance Act, R.S.O. 1990, c. I.8, the insurer that was required to pay accident benefits to an injured motorist or passenger might be entitled to be indemnified by another insurer in accordance with loss transfer rules. The issue in Markel Insurance Co. of Canada was when did the two-year limitation period of the Limitations Act, 2002 commence to run for loss transfer claims between insurers. The Court of Appeal concluded that the limitation period began to run from the date that the insurer had a perfected claim for indemnification and not from the date when a demand was refused or from the date when the insurers disagreed about who was responsible to pay the statutory benefits. In the course of his analysis of when the limitation period began to run, Justice Sharpe discussed the operation of s. 5(1)(a)(iv) and stated:

34. This brings me to the question of when it would be "appropriate" to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5(1)(a)(iv) states that a claim is "discovered" only when "having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it", the word "appropriate" must mean legally appropriate. To give "appropriate" an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.

[39] Thus, s. 5(1)(a)(iv) means that for the limitation period to begin to run in addition to having discovered the material facts for a claim, the circumstances must be such as to make resort to court proceedings legally appropriate.

[40] Justice Edwards relied on s. 5(1)(a)(iv) in support of his decision in 407 ETR Concession Co. v. Day, 2014 ONSC 6409 about when a limitation period began to run against the owner of a private enterprise toll highway. The facts were that pursuant to the Highway 407 Act, 1998, S.O. 1998, c. 28, 407 ETR Concession Co. (“407 ETR”) was a private enterprise owner of a toll highway known as the 407 ETR. Under the Act, it could enforce collection of its tolls: (a) by issuing an invoice and then suing for non-payment; or (b) by relying on a provision in the Act that would deny vehicle owners a renewal of their vehicle’s licence plate, if there were unpaid tolls. Ira Day was a frequent user of the toll highway, and in June 2013, 407 ETR sued him for recovery of 2,914 unpaid toll invoices. Mr. Day pleaded that a portion of the claim was statute-barred because that portion was for invoices issued more than two years before the commencement of the action. Justice Edwards asked when 407 ETR could or should have discovered it had a claim against Mr. Day for the unpaid tolls and held that the limitation period ran from the date of licence plate denial. Although 407 ETR could and would know its invoice had not been paid shortly after its issuance, Justice Edwards concluded that it only made common sense that 407 ETR would not resort to litigation until after it learned that the Registrar of Motor Vehicles had placed Mr. Day into licence plate denial and the invoices remained unpaid.

3. Analysis

[41] Having reviewed the factual record, I am satisfied that the case at bar is an appropriate case for granting a summary judgment. There is is sufficient evidence to fairly and justly adjudicate the dispute, and a summary judgment would be a timely, affordable and proportionate procedure. A trial is not necessary to decide the merits of Mr. Greenspoon’s limitation period defence.

[42] Assuming Mr. Greenspoon was negligent, his negligence occurred between 2004 and 2007 when the approved lenders advanced the funds from the insured mortgage loans. From the evidence adduced on the summary judgment motion, there is no genuine issue for trial that CMHC did not have subjective knowledge of a claim against Mr. Greenspoon until 2012 after it reviewed the Law Society’s files. But to rebut the presumption of s. 5(2) that a claim is discovered on the day the negligence took place, i.e., between 2004 and 2007, when Mr. Greenspoon acted to close the mortgage transaction, CMHC must rebut both subjective and objective discovery of the claim.

[43] In other words, the issue to be determined in the case at bar is when objectively ought CMHC to have had knowledge of a potential claim against Mr. Greenspoon, including objective knowledge that an action was the appropriate means to obtain a remedy for the wrongdoing. It is the matter of an absence of objective knowledge that will rebut the statutory presumption that commences the running of the limitation period for claims against Mr. Greenspoon.

[44] Since CMHC’s claim was a subrogated claim to that of the approved lenders, Mr. Greenspoon argued that the limitation period of the negligence claim began to run when the approved lenders objectively ought to have known that they had a solicitor’s negligence claim against him. I disagree, because given that the approved lenders had obtained mortgage default insurance and having regard to the nature of their loss, i.e., a deficiency in recovery on the mortgage security, a proceeding against Mr. Greenspoon would not be an appropriate means to seek a remedy for the deficiency, precisely because the approved lenders had insurance for the eventuality of a deficient recovery on the defaulted mortgage.

[45] In other words, the benefits and burdens of discovering a claim moved from the approved lenders to their insurer, CMHC, which had a subrogated action in its own name pursuant to the National Housing Act.

[46] This analysis of who must discover the subrogated claim avoids the peculiar result that if the running of the limitation period for claims against Mr. Greenspoon was based on the knowledge of the approved lenders, then their insurer’s subrogated claim could be statutorily barred before the CMHC could bring an action in its own name.

[47] In my opinion, there is no genuine issue for trial that acting reasonably and using reasonable diligence, CMHC ought to have discovered its subrogated claim against Mr. Greenspoon around the time that it paid the approved lenders for the deficiency in the mortgage recovery. It was at that time that CMHC could have made inquiries of the approved lenders and required them to obtain Mr. Greenspoon’s report and conveyancing file material and anything else that it might require to follow-up on its own RFFI.

[48] Thus, in my opinion, the two-year limitation period began to run between 2004 and 2007, when CMHC paid the insurance proceeds to the approved lenders. The limitation period would have run its course between 2006 and 2009. Therefore, CMHC’s 2012 action is statute-barred.

[49] The coincidence and opportunism that followed Mr. Greenspoon’s phone call in 2012 is not the same as due diligence. The time for CMHC to exercise due diligence to determine whether it had a claim with respect to the mortgage default insurance was at the time when it paid the insurance. CMHC submits, however, that there is no obligation on a client to investigate whether he or she has a claim against his or her lawyer and that it is not the policy of the law or the intent of the Limitations Act, 2002 to require parties to commence actions before they know that they have a substantial chance to succeed in recovering a judgment. Further, CMHC submits there is no precedent for requiring a lender to turn its mind to what may or may not have been done by its lawyer in closing a mortgage transaction.

[50] I disagree with CMHC’s argument. The facts of the immediate case can be used to explain what is wrong with the argument. If the Royal Bank, the Bank of Montreal, or the Bank of Nova Scotia did not have mortgage default insurance, then it is likely that they would have turned their mind in 2004 to 2007 to suing Mr. Greenspoon for precisely the same reasons that became known to CMHC five to eight years later in 2012.

[51] Had the lenders not turned their mind to the fact that there was a problem with the mortgage transactions and thus a possible claim against Mr. Greenspoon, then under the provisions of the Limitations Act, 2002, it would be presumed that the limitation period for the claims against Mr. Greenspoon would have begun to run at the time of the closing of the transactions. Because they had not turned their mind to whether there was a claim against Mr. Greenspoon, the lenders would not have been able to rebut the statutory presumption that their claims had been discovered, because they would be unable to demonstrate that they had exercised due diligence around the time when the mortgage recoveries proved deficient.

[52] The design of the Limitations Act, 2002 is to encourage people to discover whether they have claims. This is not a matter of imposing any obligation or duty on plaintiffs other than the duty they owe themselves not to sit on their own legal rights.

[53] Section 5(1) of the Act defines discovery by relation to 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 that a wrong had been committed and that court proceedings would be an appropriate means to remedy the wrong. In the immediate case, in my opinion, a reasonable person with the abilities and circumstances of the CMHC ought to have known that it had a potential claim against Mr. Greenspoon around the time it paid the mortgage default insurance.

[54] In the case at bar, there are no genuine issues requiring a trial. CMHC ought to have discovered the subrogated solicitor’s negligence claim between 2004 and 2007. The two-year limitation period would have run its course between 2006 and 2009. The CMHC’s 2012 action is statute-barred.

D. CONCLUSION

[55] For the above reasons, I grant the summary judgment motion.

[56] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Mr. Greenspoon’s submissions within 20 days of the release of these Reasons for Decision followed by CMHC’s submissions within a further 20 days.

Perell, J.

Released: November 9, 2015

COURT FILE NO.: CV-12-453043

DATE: 20151109

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

CANADA MORTGAGE AND HOUSING CORPORATION
Plaintiff

– and –

IRA HOWARD GREENSPOON
Defendant

REASONS FOR DECISION

PERELL J.

Released: November 9, 2015