COURT FILE NO.: CV-15-526592 DATE: 20170705 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

NASR HOSPITALITY SERVICES INC. Plaintiff – and – INTACT INSURANCE Defendant

Counsel: Doug LaFramboise for the Plaintiff Sean McGarry for the Defendant

HEARD: June 23, 2017

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] On January 31, 2013, there was a flood in the premises of Nasr Hospitality Services Inc., whose principal is Elsayed Nasr. He immediately reported the loss to his insurer, Intact Insurance. Between February and May 2013, pursuant to the policy, there were payments made by Intact, but on July 22, 2013, it formally denied the property loss claim. On April 22, 2015, 21 months later, Nasr Hospitality sued to enforce the insurance contract. Intact defended, but it now moves for summary judgment on the grounds that Nasr Hospitality’s claim is governed by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B and is statute-barred.

[2] For the reasons that follow, I dismiss the motion, and I declare that Nasr Hospitality’s claim is not statute-barred. Its action should proceed to trial in the normal course.

B. Factual Background

[3] Nasr Hospitality carried on business in premises it owned at 5550 Stanley Avenue in Niagara Falls, Ontario.

[4] On January 31, 2013, the premises were flooded. Mr. Nasr immediately reported the flood, and Nasr Hospitality orally made a claim under its insurance policy with Intact.

[5] On February 14, 2013, pursuant to the insurance policy, Intact paid $20,000 to Nasr Hospitality on account of business disturbance loss.

[6] On April 23, 2013, Intact made another $20,000 payment on account of business disturbance losses.

[7] On May 2, 2013, Intact paid $2,000 to Nasr Hospitality to indemnity it for utility costs for the insured premises. This was the last payment made pursuant to the insurance policy.

[8] Between the time of the flood and June 2013, Nasr Hospitality submitted several proof of loss forms, but these were rejected, and the property damage claim was not resolved, and on July 22, 2013, Intact formally denied the claim.

[9] On April 22, 2015, 21 months later, Nasr Hospitality commenced an action against Intact.

[10] On July 3, 2015, Intact delivered its Statement of Defence. It did not counterclaim for repayment of the $42,000 it had paid between February and May 2013.

[11] Intact’s position is that the limitation period began to run as of February 1, 2013 and therefore, an action commenced in April 2015 is untimely and statute-barred.

[12] Nasr Hospitality’s position is that the running of the limitation period is a genuine issue requiring a trial, and it submits that its claim was timely because the limitation period either began to run on May 2, 2013, when it received the last payment from Intact or it began to run on July 22, 2013, when Intact repudiated the insurance contract.

C. Discussion and Analysis

[13] For the purposes of Intact’s summary judgment motion, there is only one issue to be determined; namely, when did the limitation period begin to run for Nasr Hospitality’s cause of action against its insurer. There is an adequate evidentiary record to decide this issue; the facts are simple and there are no issues of credibility. It is all of possible, fair, and in the interests of justice to decide this issue, and the case is appropriate for a summary judgment one way or the other on this issue.

[14] In deciding the motion, there is no issue of a promissory estoppel precluding Intact from relying on the Limitations Act, 2002. Nasr Hospitality conceded that this argument was foreclosed to it by Maracle v. Travelers Indemnity Co. of Canada, 1991 58 (SCC), [1991] 2 SCR 50 and Marchischuk v. Dominion Industrial Supplies Ltd., 1991 59 (SCC), [1991] 2 SCR 61.

[15] There is also no issue that Intact was not obliged to alert Nasr Hospitality about the running of the limitation period. LeBlanc & Royle Enterprises Inc. v. United States Fidelity & Guaranty Co. (1994), 17 OR (3d) 704 (CA) at para. 44 and Usanovic v. La Capitale Life Insurance Company, 2016 ONSC 4624, are authority that there is no obligation on an insurer to advise its insured about the operation of limitation period statutes or about the insurer’s basic position on coverage.

[16] There is also no issue about when Nasr Hospitality’s cause of action arose, because for the purposes of Intact’s summary judgment motion, I am prepared to assume, without deciding, that its submission that the cause of action for breach of insurance contract arose on February 1, 2013, is correct.

[17] I am also prepared to assume without deciding that February 1, 2013, was the day that Nasr Hospitality knew or ought to have known: (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; and (iii) that the act or omission was that of the person against whom the claim is made.

[18] I find, however, that it was not until between May 2, 2013 and July 22, 2013 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 it follows from that finding that Nasr Hospitality’s action brought on April 22, 2015 is not statute-barred.

[19] The relevant provisions of the Limitations Act, 2002 are sections 1, 4, and 5, which are set out below:

Definitions

1. In this Act, …

“claim” means a claim to remedy an injury, loss or damage that occurred as a result of an act or omission; ….

BASIC LIMITATION PERIOD

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.

[20] Prior to the enactment of s. 5(1)(a)(iv) of the current Limitations Act, 2002, the judge-made discoverability principle governed the commencement of a limitation period. The discoverability principle stipulated 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 v. Nielson (1984), 10 D.L.R. (4th) 641 (S.C.C.); Central Trust Co. v. Rafuse (1986), 31 D.L.R. (4th) 481 (S.C.C.); Peixeiro v. Haberman, [1997] 3 S.C.R. 549.

[21] The discoverability principle continues to operate, and indeed has been codified by the Limitations Act, 2002, but its operation has been adjusted by s. 5(1)(a)(iv), and thus subject to s. 5(1)(a)(iv), a limitation period commences at its earliest when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence, but because of s. 5(1)(a)(iv), discoverability may be postponed.

[22] The discoverability principle conforms with the idea of a cause of action being the fact or facts which give a person a right to judicial redress or relief against another: Lawless v. Anderson, 2011 ONCA 102 at para. 22; Aguonie v. Galion Solid Waste Material Inc. (1998), 38 OR (3d) 161 (CA) at p. 170.

[23] Section 1 of the Limitations Act, 2002 defines "claim" to mean: "a claim to remedy an injury, loss or damage that occurred as a result of an act or omission." A claim is a cause of action, which is the fact or facts which give a person a right to judicial redress or relief against another. See: Lawless v. Anderson, 2011 ONCA 102 at para. 22; Aguonie v. Galion Solid Waste Material Inc., supra, at p. 170. 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. This principle conforms with the generally accepted definition of the term 'cause of action' -- the fact or facts which give a person a right to judicial redress or relief against another"....

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), 39 OR (3d) 737 (CA) and McSween v. Louis (2000), 132 OAC 304 (CA).

[24] Subject to the adjustment made by s. 5(1)(a)(iv), with respect to the basic limitation period of two years under the Limitations Act, 2002, a claim is “discovered” on the earlier of the date the claimant knew — a subjective criterion — or ought to have known — an objective criterion — about the claim: Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851 at paras. 33 and 70.

[25] The discoverability of a claim for relief involves the identification of the wrongdoer and also the discovery of his or her acts or omissions that constitute liability: Aguonie v. Galion Solid Waste Material Inc., supra; Ladd v. Brantford General Hospital (2007), 88 OR (3d) 124 (SCJ).

[26] It is not enough that the plaintiff has suffered a loss and has knowledge that someone might be responsible; the identity and culpable acts of the wrongdoer must be known or knowable with reasonable diligence: Mark v. Guelph (City) (2011), 2010 ONSC 6034, 104 OR (3d) 471 (SCJ); Zurba v. Lakeridge Health Corp. (2010), 2010 ONSC 318, 99 OR (3d) 596 (SCJ).; Greenway v. Ontario (Minister of Transportation) (1999), 44 OR (3d) 296 (Gen. Div.).

[27] Section 5(1)(a)(iv) of the Limitations Act, 2002 adjusts the operation of the discoverability principle, and s. 5(1)(a)(iv) 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 ss. 5(1)(a)(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 nature of the injury, loss or damage.

[28] The appropriateness factor introduces some uncertainty in the operation of the Limitations Act, 2002 but it also introduces some flexibility and fairness in the application of the discovery principle, which presumptively operates against the claimant as soon as a cause of action becomes objectively apparent. Pepper v. Sanmina-Sci Systems (Canada) Inc., 2017 ONSC 1516 at para. 90.

[29] Justice Mew in his text, G. Mew, The Law of Limitations (3rd ed.) (Toronto: NexisLexis Canada, 2016) describes the effect of s. 5(1)(a)(iv) at pages 95-99 and notes that: it does not have a counterpart in the judge-made discoverability rule jurisprudence; it has been considered in a wide variety of circumstances; and it is not easy to reconcile all the judicial pronouncements on its operation. See: Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218; Kudwah v. Centennial Apartments, 2012 ONCA 777, rev’g 2012 ONSC 1112; King Lofts Toronto I Ltd. v. Emmons, 2013 ONSC 6113, aff’d 2014 ONCA 215; U-Pak Disposals (1989), Ltd. v. Durham (Regional Municipality), 2014 ONSC 1103 (Master); Brown v. Baum, 2015 ONSC 849; Kadiri v. Southlake Regional Health Centre, 2015 ONSC 621, aff'd, 2015 ONCA 847; Chelli-Greco v. Rizk, 2015 ONSC 6963; 407 ETR Concession Co. v. Day, 2016 ONCA 709, rev’g 2014 ONSC 6409.

[30] In Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, supra, the Court of Appeal held that for s. 5(1)(a)(iv) to have a 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 was not yet appropriate. In Markel Insurance Co. of Canada, under the statutory benefits scheme of the Insurance Act, R.S.O. 1990, c. I.8, an insurer was required to pay accident benefits, but it claimed an entitlement 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 for reimbursement 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 at para. 34:

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.

[31] In 407 ETR Concession Co. v. Day, supra, the Court of Appeal considered the operation of s. 5(1)(a)(iv) of the Limitations Act, 2002. The facts were that 407 ETR Concession Co., which pursuant to special legislation was the operator of a public toll highway, sued Mr. Day for approximately $14,000 for unpaid tolls. Mr. Day argued that 407 ETR’s claim was statute-barred. One of the issues for the Court was when had 407 ETR discovered its claim so as to trigger the running of the limitation period. Five dates were suggested, and in the result, the Court of Appeal picked a date that responded to the imperatives of the statutory scheme under which 407 ETR operated.

[32] Justice Laskin, who wrote the judgment for the Court (Justices MacFarland and Roberts concurring), noted that s. 5(1)(a)(iv) altered the operation of the common law discovery principle and might have the effect of delaying the commencement of the running of a limitation period. The commencement of the running of the limitation period might be delayed because there might be a lag between the time when the plaintiff discovered the material facts of his or her cause of action and when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.” Justice Laskin observed that when resort to litigation would be appropriate depends on the specific factual or statutory setting of each individual case, including taking into account the particular interests and circumstances of the plaintiff.

[33] Appropriateness must be assessed on the facts of each case, and case law applying s. 5(1)(a)(iv) is of limited assistance: Brown v. Baum, 2015 ONSC 849 at para. 41; Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44.

[34] When resort to litigation would be appropriate depends on the specific factual or statutory setting of each individual case, including taking into account the particular interests and circumstances of the plaintiff: 407 ETR Concession Co. v. Day, supra; Unicorr Limited v. Minuk Construction & Engineering Limited, 2016 ONSC 7350. However, courts have held that a proceeding is not legally appropriate until other dispute resolution mechanisms, including statutory remedies, have been exhausted: U-Pak Disposals (1989) Ltd. v. Durham (Regional Municipality), 2014 ONSC 1103 (Master) at paras. 22-25; Kadiri v. Southlake Regional Health Centre, 2015 ONSC 621 at paras. 52-57.

[35] In my opinion, acknowledging that appropriateness must be assessed on the facts and circumstances of each individual case, including taking into account the particular interests and circumstances of the plaintiff, it is also helpful to consider appropriateness having regard to the policies behind limitation periods. Limitation periods exist for three purposes: (1) to promote accuracy and certainty in the adjudication of claims; (2) to provide fairness to persons who might be required to defend against claims based on stale evidence; and (3) to prompt persons who might wish to commence claims to be diligent in pursuing them in a timely fashion: M. (K.) v. M. (H.), [1992] 3 SCR 6; Novak v. Bond, [1999] 1 SCR 808; Frohlick v. Pinkerton Canada Ltd. (2008), 88 OR (3d) 401 (CA); Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44. These purposes are described as the certainty, evidentiary and diligence rationales.

[36] In my opinion, in the particular circumstances of the case at bar, it was appropriate for Nasr Hospitality to wait before commencing its action against Intact. Although I have assumed, without deciding, that the cause of action was ripe as of February 1, 2013, having regard to the $42,000 in payments that had been made between February and May 2013; i.e. having regard to the nature of the injury, loss or damage being suffered, it would not have been appropriate for Nasr Hospitality to resort to court proceedings until Intact had clearly repudiated its obligation to indemnify under the insurance policy, which did not occur until July 2013. It might have been possible for Nasr Hospitality to sue for a declaration or for an interpretation of the insurance policy before July 2013, but a claim for breach of contract would likely have been premature. The purposes of limitation periods are satisfied by commencing the running of the limitation period as of July 2013, and in this regard, there is no evidence to suggest that Intact has been harmed by loss of evidence or loss of repose from its exposure to honoring its insurance policies by an action commenced in April 2015.

[37] I, therefore, conclude that the limitation period did not begin to run until July 2013 and that Nasr Hospitality’s April 2015 action is timely.

D. CONCLUSION

[38] For the above reasons, I dismiss Intact’s summary judgment motion and I declare that Nasr Hospitality’s claim is not statute-barred. This action should proceed to trial in the normal course.

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

Perell, J.

Released: July 5, 2017

COURT FILE NO.: CV-15-526592 DATE: 20170705 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: NASR HOSPITALITY SERVICES INC. Plaintiff – and – INTACT INSURANCE Defendant REASONS FOR DECISION PERELL J. Released: July 5, 2017