Court File and Parties
Court File No.: CV-13-43611 Date: 2016-05-17 Ontario Superior Court of Justice
Between: CARGOJET AIRWAYS LTD., Plaintiff
And: AVEIRO CONSTRUCTORS LIMITED and HATCH MOTT MACDONALD LTD./ HATCH MOTT MACDONALD LTEE., Defendants
And: GREAT NORTHERN INSULATION SERVICES LTD., ERNEST H. HODGSON and LMDG BUILDING CODE CONSULTANTS LTD., Third Parties
Counsel: Christopher Stanek, for the Plaintiff/Responding Party Emily Stock, for the Defendant/Moving Party, Hatch Brendan Hughes, for the Defendant/Moving Party, Aveiro
Heard: Jan. 28 & Feb. 29, 2016
Before: The Honourable Justice C.D. Braid
Reasons on Motions
I. Overview
[1] The plaintiff brought an action for breach of contract and negligence in relation to the design and construction of a new aircraft hangar at the John C. Munro Hamilton International Airport (“the Hangar”). Portions of insulation have been falling off the underside of the roof since the construction of the Hangar was completed.
[2] The defendants move for summary judgment. They argue that the plaintiff was aware of the deficiency since 2009 and therefore this action is barred by the limitation period. The plaintiff opposes the motion and argues that the limitation period did not begin to run until the spring of 2013.
[3] For the reasons that follow, I find that the action is brought outside of the limitation period and should therefore be dismissed.
II. Facts
[4] Numerous affidavits, transcripts of cross-examinations and supporting documents were filed on these motions. Having reviewed the evidence, I make the following findings of fact:
A. The Parties
[5] The plaintiff, Cargojet Airways Ltd. (“Cargojet”), is a commercial airline carrier that provides air cargo services. Cargojet owns the Hangar.
[6] The defendant, Aveiro Constructors Limited (“Aveiro”), is a commercial and industrial contractor that Cargojet hired to design and construct the Hangar (“the Cargojet Contract”). Aveiro acted as the general contractor and subcontracted work to various service providers and consultants. Under the Cargojet Contract, Aveiro agreed to be fully responsible to Cargojet for acts and omissions of the subcontractors.
[7] The defendant, Hatch Mott MacDonald Ltd./Hatch Mott MacDonald Ltee. (“Hatch”), provides engineering consulting services to the construction industry. Cargojet retained Hatch as the consulting engineer for the Hangar project (“the Hatch Contract”) to ensure technical compliance and for construction administration.
[8] The third party, Great Northern Insulation Services Ltd. (“Great Northern”), is a company that provides insulation and weatherization services. Pursuant to a subcontract dated January 23, 2009, Aveiro retained Great Northern for the complete sourcing, supply and installation of the insulation that was applied to the underside of the Hangar’s roof.
B. The Cargojet Contract
[9] The Cargojet Contract included a warranty period of one year from the date of substantial performance of the work. Substantial completion was certified in May 2009.
[10] The Cargojet Contract also included a clause regarding defective work:
2.4 DEFECTIVE WORK
The Design-Builder shall promptly remove from the Place of Work and replace or re-execute defective work that has been rejected by the Consultant as failing to conform to the Contract Documents whether or not the defective work has been incorporated in the Work and whether or not the defect is the result of poor workmanship, design, use of defective products, or damage through carelessness or other acts or omissions of the Design-Builder.
C. The Hatch Contract
[11] Hatch was hired to represent Cargojet on the Hangar Project. The Hatch Contract set out various tasks that Hatch was required to complete under the contract, including reviewing design plans and specifications; providing ongoing responses to technical queries and evaluating proposed changes; and ensuring construction compliance by the contractor.
[12] In the Hatch Contract, article 7 provided for “extra services”:
The client shall have the right to request Consultant to perform services in connection with the Project that are in addition to the Services (“Extra Services”) and Consultant may, subject to agreement on the payment for such Extra Services, agree to perform such Extra Services...
[13] Article 10.2 of the Hatch Contract set out a contractual limitation period:
Any action or claim by the Client against Consultant in contract or in tort in connection with the Services shall be commenced within and not later than twelve (12) months after the date of performance of the Services hereunder.
[14] Between August 2010 and September 2012, there is no evidence of work being done by Hatch. Services were subsequently provided between September and December 2012, which were billed in February 2013.
D. The Fire Protection System
[15] A component of the construction of the Hangar project was the installation of a fire protection system at the Hangar. Aveiro originally proposed a “foam deluge system”, which is designed to protect high hazard areas that may contain a severe fuel hazard or other increased risk. This system is commonly used in airplane hangars and other industrial facilities that may contain highly combustible materials. This system must be connected to a water line, and there was a $500,000 fee for the system to be hooked up to the airport’s water system.
[16] Cargojet consulted with Aveiro, Hatch and Hamilton’s Airport Consultant, LMDG Building Code Consultants Inc., to determine whether there was an alternative to the foam deluge system. Cargojet decided to proceed with the installation of a spray-in-place system that was comprised of a semi-rigid layer of fire retardant and a sprayed layer of fibrous insulation for added retardant value. For ease of reference, I have referred to this spray-in-place system as the “insulation” in these reasons. The insulation was to be sprayed on the underside of the roof of the Hangar, and a regular sprinkler system would also be installed.
[17] In July of 2008, Cargojet and Aveiro entered into a work change order to reflect the change from the foam deluge system to the insulation, which constituted a mutually agreeable written amendment to the Cargojet Contract. This work change order resulted in a credit to Cargojet of approximately $500,000.
[18] Aveiro subcontracted with Great Northern to apply the insulation during the construction of the Hangar. Great Northern finished applying the insulation by April 2009.
E. Insulation Deficiencies
[19] Shortly after the Hanger was completed, portions of the insulation began to fall from the underside of the ceiling. Between 2009 and 2013, Great Northern re-applied the insulation and firespray on multiple occasions, at no cost to Cargojet. During that time, Aveiro and Hatch were examining and rejecting various proposed causes for the falling insulation and firespray. As recently as June 2013, Aveiro directed Great Northern to repair falling insulation.
F. Chronology of Relevant Events
[20] The following chart sets out the chronology of relevant events. Significant dates and portions of the description of events have been bolded or underlined for emphasis:
| Date | Description of Event |
|---|---|
| May 2, 2008 | Cargojet Contract (between Cargojet and Aveiro). |
| May 7, 2008 | Hatch Contract (between Cargojet and Hatch). |
| January 2009 | Great Northern retained to supply and install the insulation. |
| 2008 and 2009 | The Hangar was constructed. Al Pidgeon spearheaded the project on behalf of Cargojet. |
| April 2009 | The installation of insulation was completed by Great Northern. |
| May 2009 | Cargojet certified Substantial Performance of the Hangar construction. |
| April 13, 2009 | Email entitled “Insulation” from Pidgeon (Cargojet) to Aveiro: “I am hearing that some of the insulation and fire spray has been flaking off over the weekend. Could you provide a status on this in terms of cause, extent of the problem and corrective action to resolve?” |
| April 13, 2009 | Response from Aveiro to Pidgeon’s email: “Yes it has come off in numerous locations due to Great Northern applying Monoglass premature onto not dry firespray… I assure you Aveiro will take all measures possible to make Cargojet feel comfortable about this situation 100 percent.” |
| May 11, 2009 | Email from a pilot copied to Pidgeon (Cargojet) entitled “The sky is falling?”: “I couldn’t help but notice a section of insulation about 4’ x 6’ had fallen from the hanger ceiling and landed very close to where the (airplane) was parked ...” |
| May 19, 2009 | Memo from Hatch entitled “Project Deficiency Review Comments”: “6’ x 6’ section of fire spray again fell down from ceiling in the same place as last week... Re-spray.” |
| June 2, July 6 and August 21, 2009 | Emails setting out the monthly retainer agreement for Hatch’s continued assistance to Cargojet for the months of June, July and then extending into August and September, 2009. |
| July 2, 2009 | Email from Cargojet to Great Northern and Aveiro with cc to Hatch: “Some more insulation fell off the roof.” |
| August 5, 2009 | Email from Cargojet to Great Northern with cc to Aveiro and Hatch: “We have had another section of roof insulation fall down.” |
| August 17, 2009 | Email from Cargojet to Great Northern, Aveiro and Hatch: “we have had 5 more sections of roof insulation fall offs.” |
| September 14, 2009 | Email from Cargojet to Hatch: “… here is the size of pieces that fell on the weekend” (email included a photo) |
| September 14, 2009 | Email from Cargojet to Hatch regarding commitment letter request to be sent to Aveiro re: certain deficiencies (not including the falling insulation). For example: “(Aveiro) to provide a commitment that any problems with the parking lot are evident within the next 3 years will be corrected at (Aveiro’s) cost.” (request to extend warranty) Hatch emailed Cargojet to respond to their suggestions for the commitment letter: “We also believe you should identify your concerns with the continued falling insulation. It seems to be never ending.” |
| September 15, 2009 | Email from Pidgeon (Cargojet) to Aveiro with cc to Hatch requesting commitment letter from Aveiro with respect to certain deficiencies (did not include the falling insulation). |
| September 24, 2009 | Response from Aveiro to the “Commitment Letter” email from Cargojet, which provided commitments from Aveiro (did not include the falling insulation): “Our standard warranty applies at one year, however we can extend it by an additional year.” |
| In or about 2009 | Christopher Solecki (Hatch) told Pidgeon (Cargojet), as early as 2009: “If the deficiency (of the falling insulation) is not remedied properly then (Cargojet) may want to consider legal action.” (This evidence is from the cross-examination of Solecki; there is no responding evidence to contradict this evidence. It is notable that Pidgeon did not provide any evidence on these motions.) |
| December 8, 2009 | The insulation stopped falling during the cooler months of the year. Email from Pidgeon (Cargojet) to Aveiro: “As far as we know all issues with the insulation has stopped.” |
| May 3, 2010 | Emails from Cargojet to Aveiro: “Another section fell off this weekend. West side near parking lot door.” “Also 2 sections in main door pocket area.” Internal email at Cargojet: “We may need to do something other than just keeping re-spraying.” |
| May 3, 2010 | Email from Pidgeon (Cargojet) to Aveiro: “We have had a considerable amount of insulation coming off lately. It seemed to have stopped for a while but has started up again. I think we need to take a closer look and see if there is a systemic problem. Great Northern has been very good in touching up these areas but I don’t think they will continue to do this for ever. If it can be established that the areas affected are those that were sprayed originally, then we can perhaps assume that worst case they will need to redo the entire original area. If the areas that were repaired are also coming off then we have a bigger problem.” |
| June 2010 | John Kim (Cargojet) said that Pidgeon had the intention to start investigating whether the insulation and fire spray had been installed according to the specifications. Kim stated that he thought it was a warranty item and that is why Great Northern was coming back and respraying it (without charge). |
| June 4, 2010 | Internal email at Cargojet: “Lately as you may know it is falling in increasingly large amounts. The concern is the TLV (exposure limit) is unknown even when not handling the material. Kyle, the co-op student is experience daily nosebleeds. He saw his doctor, who explained that it is from fiberglass or dust particles.” |
| June 4, 2010 | Internal email at Cargojet: “I was in the hangar on Wednesday and there are very large chunks of material missing and on the floor …this is approved for use in the hangar and is not considered carcinogenic to humans. However there must be a warranty claim or follow up is required. I understand that material is starting to separate from the ceiling and continues to fall. This compromises the fire retarding qualities so we should push forward with this…” |
| June 4, 2010 | Email from Cargojet to Aveiro: “Sections are bulging and drooping down and then falling off. We have had at least 5 sections come down today. These areas are not from birds for they are all sealed...” |
| June 4, 2010 | Email from Paul Rinaldo (Cargojet) to Aveiro: “… we need to resolve the issue…otherwise, it will eventually resolve itself by completely falling off. This is unacceptable and needs to be corrected immediately.” |
| August 9, 2010 | Email from Pidgeon (Cargojet) to Aveiro: “the roof insulation and fire retardant material continues to fall off both in large sections and in continual drift down of fibre material. This situation needs to be resolved permanently.” Response from Aveiro on August 18, 2010: “In regard to the insulation fall off, our trade Great Northern Insulation has addressed all fall off reported. Also, during our meeting with Paul Rinaldo we identified that many of the insulation fall off were produce [sic] by the amount of birds coming into the hangar and setting nests. We agreed during that meeting that Cargojet is to control this situation using an expert on the subject. We haven’t been reported [sic] of any fall off the last month and we will continue addressing this situation as required.” |
| August 16, 2010 | Email from Hatch to Cargojet: “From the technical literature the prime causes for non-adhesion are related to: Temperature Surface finish on the deck (I am assuming that it is not falling from the structural steel elements - please confirm) Ventilation (given the expanse of the hangar volume this is unlikely)… Additional thought - WEIGHT ISSUE.” On August 17, 2010, Rinaldo (Cargojet) responded to Hatch re: the suggested causes: “Al, my 2 cents on this is that it must have been very difficult or the contractor that sprayed the product to control the temperature. Also it was very interesting that Alex brought up the fact that the surface finish or the primer needs to be removed according to the manufacturer’s instructions to ensure adequate bonding.” On August 18, 2010, Pielsticker (Cargojet) responded: “The only thing I would like to add is that humidity seems to play a role in this. After a day or two of high humidity there seems to be drop offs. Also I am not sure if the cladding had the primer removed for the roof steel was already installed before the decision was made to go with this product. Maybe they sprayed it with something to make it stick to the primer. I am not sure about that though.” |
| In or about 2010 | (This is from the affidavit of Solecki; there is no responding evidence to contradict this.) Solecki (Hatch) told Pidgeon (Cargojet): In the opinion of Hatch, the falling insulation was caused by the contractor not installing the fire spray in strict accordance with the specifications. Three possible solutions were discussed with Cargojet: (a) taking off all the ceiling spray and doing it all over again rigorously following the spray manufacturers’ instructions being mindful of environmental conditions; (b) going back to the original sprinkler design with a conventional ceiling insulation system; or (c) changing the rated roof system to another type with drop down ceiling panels. |
| August 30, 2010 | Email from Pidgeon (Cargojet) to Aveiro: “I am waiting to hear back from Ralph and see if we can release the holdback. The insulation is still an outstanding issue. Notwithstanding previous discussions, the birds are not the cause. Great Northern has been very good at replacing the sections that have fallen off but we have not yet established the root cause. The areas of insulation seem to sag (indicating that they have disboned) and then crack and fall off. The area of the roof cladding is clean, again suggesting that it has not properly bonded to the metal roof cladding. There is no disbond on the structural beams. We seem to have more occurrences during humid weather but the fallen material is not noticeably wet, and in any case, if properly bonded the humidity should not affect it…” |
| May 9, 2011 | Email from Cargojet to Great Northern with cc to Aveiro: “we have had 5 areas of insulation fall from the roof during last week and over the weekend. 2 are quite large…I am not sure why this is starting to happen again for there is no bird population like last year” |
| May 10, 2011 | Email from Great Northern to Cargojet with cc to Aveiro: “It is important to eliminate all possibilities to accurately correct or understand what is occurring. This is 3 years in a row with 6 months of heated season with no issue and then Mid April last year and May 1st this year fall off. This is occurring in perimeter areas with entire main center body of work intact from original application.” |
| May 21, 2011 | SAC Incident Report: “Occurrence description: While inspecting aircraft, some of the hanger ceiling fire insulation fell to the floor. My concern is 1) It could have injured anyone walking around the hanger and 2) if the aircraft is hit it may cause cosmetic/minor damage, like static dischargers being broken…This has been an ongoing issue since moving into the new facility.” |
| June 15, 2011 | SAC Incident Report: “Pidgeon has been in contact with the engineering firm and the builder regarding the issue. They have resprayed but it is still falling. Now it’s the worst it has ever been, it falls more with moisture and temperature.” |
| July 13, 2011 | SAC Incident Report: “The insulation company has been replacing insulation that had been falling, but there is still more insulation falling.” |
| July 14, 2011 | SAC Incident Report: “Paul R sent an email to Al Pidgeon requesting for a solution.” |
| July 19, 2011 | SAC Incident Report: “Meeting in YHM – Al Pidgeon, Glenn Simard, Mike McMahon & Mariana de Volpe.” “Discussion: Material that has been fixed is still falling. Insulation that is falling is damp.” |
| July 20, 2011 | SAC Incident Report re conference call - Al Pidgeon, Glenn Simard, Mike McMahon, Mariana de Volpe (all Cargojet employees); and Jeff Crawford (Great Northern). Meeting was followed by an internal email of July 27, 2011 at Cargojet from De Volpe: “Here are some notes from our Conference call on July 20th with Jeff Crawford… “ Possible Causes - - Elements to consider: Condensation & Frost. We are getting frost during the winter, and when it heats, condenses and disbands. - - Any area with risk of condensation can be a potential area that will have a problem. - - Different temperatures meeting and producing condensation Eliminated the option of the problem being caused by a roof leak, because the material is not 100% moisture resistant, and if there was a leak in the roof, we would have seen a puddle under it.” |
| July 27, 2011 | SAC Incident Report: “Material still falling, including one area in the main core of the roof.” |
| August 25, 2011 | SAC Incident Report: “Another very large piece of insulation fell down this morning. Location was on the west side nearer the middle. Fell on top of C-GCJB left wing.” |
| September 22, 2011 | SAC Incident Report: “Hangar air quality concerns raised at the last YHM H&S Committee meeting.” |
| June 7, 2012 | Email from Rinaldo (Cargojet) to Aveiro: “Cargojet is still experiencing the fire retardant/insulation falling from the ceiling in our hangar. This situation has been on-going since we took occupancy in August 2008. With the efforts of Aveiro, Northern Insulation and Cargojet, we have still not arrived at a solution to this matter. There have been many scenarios and solutions offered as to why the insulation is not adhering to the roof metal structure; none of these solutions implemented have solved the issue of the falling insulation which are approximately 4 feet by 8 feet…” “Gill over the past years we had Northern Insulation come to the hangar and respray the insulation and in some cases those areas have also failed. We need to come up with a solution to this matter that will resolve this issue once and for all. This situation has become a safety hazard to our employees and our property. Cargojet requests Aveiro’s assistance to provide a long-term solution to this ongoing issue.” |
| July 18, 2012 | Email from Cargojet to Aveiro: “Have you had the opportunity to prepare a proposal for the hangar ceiling insulation falling issue. We have been experiencing multiple insulation drops during this humid hot weather and the issue is now becoming a health and safety concern with our employees” Responding email from Aveiro to Cargojet: “Our proposal is to provide 24ga. Galvalume liner to the underside…The areas of sprayed fire-proofing that have fallen down would need to be resprayed and touched up prior to installation of the metal cladding. Our Budget Price for this work is… $345,000.00 plus HST” |
| September 25, 2012 | There is no evidence that Hatch did work for Cargojet for the two years before this date. Solecki (Hatch) sent an email to Cargojet with the subject “Aveiro’s options to remedy the falling insulation”: “It is also our view, that the falling insulation problem is a building defect that implicates the design and construction of the building. As such, we cannot support any inference that Cargojet be made party to any payment associated with the remedial work.” Solecki states that this email was sent as a follow-up to a “litigation” meeting, and that he had a discussion with Kim about litigation against Aveiro. |
| February 21, 2013 | Invoice from Hatch Mott MacDonald for $2,283.13. |
| April 2, 2013 | Cargojet says this is the first time it learned it will have a loss. Before this date, Cargojet had never been asked to pay anything to fix it. Aveiro letter to Cargojet, setting out the contributing factors that it believed caused the falling insulation: high winds cause excessive vibrations which leads to breaks in the vapour barrier seal where condensation starts to set; the excessive weight of the insulation, together with the condensation, leads to large areas falling down; the excessive moisture in the air during seasonal changes contributes to the problem. It is notable that many of these possible causes were previously identified by De Volpe (Cargojet) in her email of July 27, 2011. Aveiro provided a quote to Cargojet to fix the problem for an additional fee of $412,782. |
| June 17, 2013 | Email from Aveiro to Great Northern, copied to Cargojet: “Product keeps falling off and just recently a large section fell on one of the aircraft. They are extremely concerned that one of these will hit one of the workers. Can you please …arrange to have some of these eminent areas that are about to fall, scraped off and resprayed with just the firespray perhaps, thus not creating the heavier load that may be contributing to these spalling occurences.” |
| June 25, 2013 | Cargojet says this is the first time that it knew that the design of the insulation was negligent. Meeting with Rinaldo (Cargojet) and Crawford (Great Northern), followed up by a June 26, 2013 email from Crawford to Cargojet summarizing the meeting. The email does not include any discussion of the cause of the falling insulation. Kim (Cargojet) states that Crawford said, at this meeting, that the falling insulation was a predictable result because the metal ceiling was exposed to the elements and was therefore subject to temperature variations and condensation. Kim further states that this was when “Cargojet finally learned the true cause of the falling insulation and fire spray.” Crawford states that this is not his opinion; and denies that this was discussed. |
| August 14, 2013 | Letter from Cargojet’s counsel at Gowlings to Aveiro and Hatch: “Earlier this year, Cargojet received an opinion as to the source of the problem from Great Northern… Great Northern has advised Cargojet the application of spray insulation and fire spray to a metal ceiling that is exposed to the elements is certain to result in failure of the insulation and fire spray to properly adhere to the roof due to temperature variations and resulting condensation. As such the falling fire spray and spray insulation such as Cargojet has experienced was a predictable result of the manner in which the insulation and fire spray was installed by Aveiro and approved by Hatch. Both Aveiro and Hatch ought to have known that the spraying of insulation and fire spray onto the inside of a steel roof that was exposed to the elements would result in the problem that Cargojet has experienced since the completion of the hangar.” |
| August 16, 2013 | Crawford (Great Northern) responded to the Gowlings letter: “Paragraph 5 is a complete 3rd party fabrication not discussed. It was NOT an “opinion meeting” on original building design but purely asking for ideas or permanent solutions that took cost effectiveness and least hangar disruption into account. The meeting summary below emailed to both of you on June 26th in no way describes or discusses anything to do with original design or requirements.” |
| October 11, 2013 | The Statement of Claim was issued. |
III. Nature of the Motions
[21] In the Statement of Claim, Cargojet seeks $1.6 million in general damages for breach of contract and/or negligence. The defendants, Aveiro and Hatch, have both moved for summary judgment. They request that the action be summarily dismissed on the grounds that the action was commenced after the expiry of the limitation period provided by the Limitations Act, 2002, S.O. 2002, c.24, Sched. B, s.4 (Limitations Act). In the alternative, Hatch argues that the action was commenced after the expiry of the contractual limitation period as set out in the Hatch Contract.
[22] Great Northern and the other third parties did not participate in the motions for summary judgment.
IV. Analysis
A. Summary Judgment
[23] The court shall only grant summary judgment if it is satisfied that there is no genuine issue requiring a trial. Pursuant to rules 20.04(2)(a) and (2.1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the court shall consider the evidence submitted by the parties and may exercise any of the following powers for the purpose of determining whether there is a genuine issue requiring a trial, unless it is in the interest of justice for such powers to be exercised only at a trial:
- Weighing the evidence.
- Evaluating the credibility of a deponent.
- Drawing any reasonable inference from the evidence.
[24] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada clarified the test to apply on a summary judgment motion. There will be no genuine issue requiring a trial if the evidence permits the court to make a fair and just determination on the merits. This will be the case when a motion for summary judgment (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.
[25] What is fair and just depends on the nature of the issues, and the nature and strength of the evidence. There is an obligation on each party to “put its best foot forward.” The responding party must present its best case or risk losing: Canada Mortgage and Housing Corp. v. Greenspon, 2015 ONSC 6882, at para. 28.
[26] In a case involving a limitation period issue, the facts are particularly important. The limitation period begins when the plaintiff discovers or ought to have discovered, through reasonable diligence, the material facts on which the cause of action is based. This is a fact-based analysis which asks whether the plaintiff knows enough facts on which to base the claim: Lawless v. Anderson, 2011 ONCA 102, [2011] O.J. No. 519, at para. 23.
[27] In the case before the court, Cargojet argues that there are a number of material facts in dispute, and therefore this is not an appropriate case for summary judgment. However, most of the affidavit evidence is uncontradicted and there are numerous documents that show Cargojet’s knowledge of material facts. Although certain points are in dispute, it is my view that the facts that are relevant to the limitation issue can be properly determined on a summary judgment motion.
B. Limitations Act and Discoverability
[28] A claim is subject to the two year limitation period in section 4 of the Limitations Act, which states that “a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.”
[29] Section 5(1) of the Limitations Act sets out the circumstances in which a claim will be taken to have been “discovered”. It is subject to a presumption in s.5(2):
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).
(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.
[30] Section 5 sets out a subjective and an objective test. Each of the items in either the subjective test or the objective test must be satisfied for the limitation period to begin to run. It is a conjunctive test: Longo v. MacLaren Art Centre, 2014 ONCA 526.
a) Cargojet’s Position Regarding Discovery of the Cause of Action
[31] Cargojet suggests two possible dates when it discovered the cause of action. I have addressed those submissions below:
i. Was the Claim Discovered in June of 2013?
[32] Firstly, Cargojet says that it was not told the definitive cause of the falling insulation until June of 2013 at a meeting with Crawford of Great Northern. According to Cargojet, Crawford said that the falling insulation was a predictable result because the metal ceiling was exposed to the elements and was therefore subject to temperature variations and condensation. Crawford denies having provided the opinion that is attributed to him.
[33] Even if the court were to accept that Crawford provided this opinion, I reject the submission that the cause of action was discovered on this date. From 2009 to present, the parties had discussed various possible causes of the falling insulation, including temperature variations and moisture accumulation.
[34] Certainty of a potential defendant’s responsibility for an act or omission that caused or contributed to the loss is not required. Nor is it necessary that the plaintiff have knowledge of the precise cause of the loss. The plaintiff need only have prima facie grounds to infer that the acts or omissions were caused by the identified parties. The limitation period will not be tolled while a plaintiff sits idle and takes no steps to investigate whether it has a claim: Longo v. MacLaren Art Centre, at paras. 42-44; Kowal v. Shyiak, 2012 ONCA 512, at para. 18.
[35] For purposes of a limitation period, a cause of action arises when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff through exercising reasonable diligence: Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, at para. 89.
[36] Cargojet had prima facie grounds to investigate, much earlier than June of 2013, whether it had a claim against the defendants. This will be discussed in more detail below.
ii. Was the Claim Discovered in April of 2013?
[37] Secondly, Cargojet submits that it did not suffer damage until it was told that it would have to pay to rectify the falling insulation. Cargojet states that it reasonably believed Aveiro would fix the problem without cost to Cargojet until April 2, 2013, when it received an estimate requiring Cargojet to pay. It is therefore submitted that, prior to that date, Cargojet did not suffer injury, loss or damage within the meaning of s.5(1)(a)(iv) and therefore could not have known that a proceeding would be an appropriate means to seek to remedy the loss.
[38] During the first four years after the Hangar was completed, Great Northern returned periodically to re-spray areas where insulation had fallen. Arguably, this may have led Cargojet to assume that the problem might be remedied without cost to Cargojet. However, Cargojet did nothing to clarify whether this assumption was correct. There was no agreement to suspend the limitation period or to extend the warranty in relation to the insulation issue. Even more importantly, Cargojet knew that the defendants would not keep coming back indefinitely to re-spray and knew that the patching of the insulation was not a permanent solution.
[39] Cargojet’s argument on this point blurs the definition of the words damage versus damages. Damage is the loss needed to make out the cause of action. Damages is the monetary measure of the extent of loss. A plaintiff need only discover some damage for the cause of action to accrue and the limitation period to start: Hamilton (City) v. Metcalfe & Mansfield Capital Corp., 2012 ONCA 156, at paras. 54-61.
[40] To discover a claim, the precise nature and extent of the damages need not be ascertained. The plaintiff need only have facts of some actionable damage. Further, the start of a limitation period is not delayed by the defendant’s assurances that he would come to finish the work. Section 5(1)(a)(iv) of the Limitations Act requires that the plaintiff know that a proceeding would be an appropriate means, not the only means to remedy the damage: Peixeiro v. Haberman, [1997] 3 S.C.R. 549, at para. 18.
[41] “Appropriate” in s. 5(1)(a)(iv) means ‘legally appropriate’. Appropriate cannot be given an evaluative gloss allowing a party to delay starting an action for some tactical or other reason beyond the two year limitation period: Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, at para. 34.
[42] Once a cause of action has occurred, the limitation period will run even if the plaintiff is discouraged from starting an action, providing that it is not prevented from starting an action. The case before the court must be distinguished from cases where there is an inherent dependence between the parties, such as those involving lawyer-client or doctor-patient relationships. In those cases, assurances by the defendant lawyer or doctor that alleged errors will be fixed will, in appropriate circumstances, suspend the discoverability date: see Brown v. Baum, 2016 ONCA 325; Chelli-Greco v. Rizk, 2015 ONSC 6963; Ferrara v. Lorenzetti, Wolfe Barristers & Solicitors, 2012 ONCA 851; and Chang v. Boulet, 2012 ONSC 6382.
[43] In my view, the fact that the defendants assisted Cargojet in an attempt to fix the insulation problem did not postpone the running of the limitation period.
b) Findings Regarding Discovery of the Cause of Action
[44] The following is a summary of the material facts regarding discovery of the cause of action by Cargojet:
i. In the spring and summer of 2009, at least nine distinct pieces of insulation had fallen, and the falling insulation resumed in the spring of 2010. ii. In 2009, Hatch told Cargojet that, if the falling insulation was not remedied properly, then Cargojet may want to consider legal action. iii. In September of 2009, Hatch had recommended that Cargojet request a commitment letter from Aveiro to specifically identify the continued falling insulation that “seems to be never ending”. Despite this advice, Cargojet failed to seek an extension of the warranty for the insulation. iv. In an internal email dated May 3, 2010, Cargojet recognized that the falling insulation may be a systemic problem that may not be resolved with the re-spraying. Cargojet also knew that Great Northern would not continue to touch up the insulation indefinitely.
[45] I find that the limitation period began on May 3, 2010. By that date, Cargojet was familiar with all the material facts:
a) It had contracted with the defendants to have the work done. b) On a prima facie basis, the work appeared to be deficient. c) The warranty period under the contract had expired and Cargojet had not sought an extension of that warranty period in relation to the falling insulation. d) The falling insulation was potentially a systemic problem and the re-spraying may not provide a permanent solution. e) The defendants would not continue to touch up the areas indefinitely.
[46] By May 3, 2010, Cargojet had the requisite knowledge of the evidence on which to base a claim. It had reason to investigate with respect to a potential claim and did not act with due diligence. Cargojet knew or had ready access to all of the facts necessary to seek legal advice but took no action, even after Hatch had recommended that Cargojet may want to consider legal action.
[47] The following events occurred after the limitation period began to run but more than two years before the Statement of Claim was issued. As of the dates listed below, the plaintiff had additional information that demonstrated to Cargojet that a legal proceeding would be appropriate:
i. By June 4, 2010, Cargojet recognized that a warranty claim or follow up was required. ii. By August 2010, Cargojet knew that the falling insulation was a significant problem and knew that corrective action was required. Hatch and Cargojet had discussed possible causes of the falling insulation, including temperature, humidity and condensation. iii. In 2010, Hatch advised Cargojet of their opinion that the falling insulation was caused by the contractor not installing the insulation in strict accordance with the specifications. Hatch suggested possible solutions, all of which required much more extensive work than simply patching the spots where insulation had fallen (including re-applying the fire spray or changing the entire roof). Cargojet believed that Aveiro was at fault and should be responsible for remedying the problem. iv. By July 19, 2011 (if not before), Cargojet knew that even the replacement insulation was falling. It was abundantly clear that simply re-spraying would not permanently resolve the insulation problem.
[48] In the case before the court, I find that the Statement of Claim against Aveiro, issued October 11, 2013, was commenced outside the statutory limitation period.
C. The Hatch Twelve Month Contractual Limitation Period
[49] Pursuant to section 22 of the Limitations Act, the parties were entitled to agree to vary the limitation period under the Act. An agreement to vary can only be used in business agreements.
[50] A contractual term to vary the limitation period must be in clear language, describe a limitation period, and exclude the operation of other limitation periods. However, specific reference to any statutory limitation being overridden is not required: see Boyce v. The Co-operators General Insurance Company, 2013 ONCA 298.
[51] In the case before the court, I find that the Hatch Contract was clearly a business agreement pursuant to s. 22(6) of the Limitations Act. Clause 10.2 of the contract clearly and unambiguously required that an action be commenced within 12 months after the date of performance of the services. I find that the Hatch Contract varied the limitation period to 12 months.
[52] Hatch argues that its advice provided to Cargojet following substantial completion of the Hangar was not under the original contract. However, there was no other written contract. I find that the work performed by Hatch following substantial completion of the Hangar in May 2009 was “extra services” which were part of the original contract.
[53] In this case, there is no evidence that Hatch did work for Cargojet from the fall of 2010 until September of 2012, which was a period of approximately two years. On a strict reading of the contract, the 12 month contractual limitation period began to run following the completion of the work in the fall of 2010. Any action should have been commenced no later than 12 months after the performance of the services, namely the fall of 2011. Once Hatch had not done any work for a full year, the limitation period expired with respect to the work completed.
[54] The limitation period could not be extended simply because Hatch performed additional services approximately two years later. Although Hatch provided additional services between September and December of 2012, the basis for damages against Hatch arose from their conduct during the work that had been completed two years earlier.
[55] The case law is unsettled in terms of whether the discoverability principle applies to contractual limitation periods: see Vine Hotels Inc. v. Frumcor Investments Ltd., [2004] O.J. No. 4997 (Div. Ct.). As noted above, I have found that the limitation period began on May 3, 2010. If the discoverability principle applies to the contractual limitation period, Cargojet’s claim against Hatch was still out of time.
[56] In the case before the court, I find that the Statement of Claim against Hatch, issued October 11, 2013, was commenced outside the contractual limitation period.
V. Conclusion
[57] Action on possible claims is not optional but imperative. The price of inaction can be severe, since possible meritorious claims will be barred without inquiry into the merits. This is one of those cases.
[58] The action against the defendant Aveiro is statute barred by a two year limitation period provided for in the Limitations Act and is therefore dismissed.
[59] The action against the defendant Hatch is barred by the contractual limitation period and is therefore dismissed.
[60] Counsel for Aveiro is directed to provide a copy of this ruling to counsel for the Third Parties within 15 days of the receipt of this decision.
VI. Costs
[61] In the event that the parties cannot agree as to costs, they are directed to provide written submissions as to costs. The submissions shall be no longer than two typed pages, double-spaced, in addition to any relevant offers or Bill of Costs. The defendants shall provide costs submissions by June 3, 2016 and the plaintiff shall provide any response by June 17, 2016.
Braid, J. Released: May 17, 2016