Court File and Parties

COURT FILE NO.: CV-15-529519 DATE: 20190110

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1188032 ONTARIO LTD, operating as CAREER BLAZERS LEARNING CENTRE, NORINE ROUSSAIN, and PETER ROUSSAIN, Plaintiffs – AND – HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, Defendant

BEFORE: E.M. Morgan J.

COUNSEL: Yehuda Levinson, for the Plaintiffs Nikita Rathwell, for the Defendant

HEARD: January 9, 2019

Motion for Summary Judgment

[1] In this action the Plaintiffs, who are owners, operators and officers of a vocational college, claim damages in compensation for losses they incurred during what they allege to be an excessively protracted regulatory compliance process imposed on them by the province. The compliance inspection which found contraventions of the Private Career Colleges Act, SO 2005, c 28, Sch L, and regulations thereunder, occurred on February 16, 2010, but the Plaintiffs were not declared to be back in compliance until January 2012. During much of that time the Plaintiffs were under a Restraining Order and were unable to operate or earn fees.

[2] The action was commenced on June 3, 2015. The Defendant contends that the Plaintiffs delayed in bringing the action until they were out of time under the Limitations Act, 2002, SO 2002, c 24 (the “Act”). It brings this motion for summary judgment under Rule 20 of the Rules of Civil Procedure seeking to dismiss the action on the grounds that it is now limitation barred.

[3] Sections 4 and 5 of the Act provide for a limitation period of 2 years from the date the claim was discovered by a potential plaintiff. Discovery of the loss is defined in the Act as the day the plaintiff first knew [s. 5(1)(a)], or ought to have known [s. 5(1)(b)], that the claimed loss had occurred [s. 5(1)(a)(i)], that the loss was caused by someone’s act or omission [s. 5(1)(a)(ii)], that the named defendant is the person whose act or omission caused the loss [s. 5(1)(a)(iii)], and that a law suit would be an appropriate means to redress the loss [s. 5(1)(a)(iv)].

[4] Needless to say, determination of whether a person had or ought to have discovered a claim entails a fact-specific analysis. “The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against a defendant… [W]hat a prospective plaintiff must know are the material facts necessary to make a claim, whatever form they come in”: Lawless v Anderson, 2011 ONCA 102, at paras 22, 28.

[5] While the prospective claimant must know the material facts on which the claim is based, he or she need not know the full extent of the losses in order to have “discovered” the claim. For statutory purposes, “discovery” occurs once it is known that some losses have been incurred as a result of the factors listed in s. 5(1)(a)(i) through (iii): Beaton v Scotia iTrade, 2012 ONSC 7063, at para 13, aff’d 2013 ONCA 554.

[6] It must also be kept in mind that under s. 5(1)(a)(iv), the limitation clock only begins to run once the claimant is aware that bringing a claim would be legally appropriate. This requirement, however, is not to be read as a license for discretionary delay in starting an action. While there is no obligation to commence litigation prematurely, a party cannot delay the commencement of legal proceedings for tactical or other reasons. Rather, it must bring its case within two years of the date on which it became cognizant of a legally viable claim: Markel Insurance Co. of Canada v ING Insurance Co. of Canada, 2012 ONCA 218, at para 34.

[7] As indicated at the outset of these reasons, the chronology of events leading up to the case at bar begins in February 2010 with a compliance inspection of the Plaintiff’s business by an official of Ontario’s Ministry of Training, Colleges, and Universities (the “Ministry”). This was followed the next month, on March 15, 2010, with a Restraining Order prohibiting the Plaintiffs from carrying on business. The Plaintiffs responded to this Order within a week, on March 22, 2010, at which point the Ministry rescinded the Order to give the Plaintiffs a chance to bring their business into compliance.

[8] When the infractions identified in the Ministry’s inspection were not immediately remedied, the Restraining Order was re-issued and posted on the Ministry’s website on June 30, 2010. It is this second Restraining Order that is the subject of the damages claim. The Plaintiffs allege that once the Restraining Order was in place, the Ministry’s involvement with them diminished and its response times became excessively slow. Several months later, on September 9, 2010, counsel for the Plaintiffs wrote to the Ministry expressing the Plaintiffs’ frustration with the process and threatening to bring a legal action in respect of the Restraining Order.

[9] The Ministry’s response came months later, in December 2010. In this correspondence the Ministry finally outlined its position with respect to the Plaintiffs’ non-compliance. The matter then came to a near halt. During the course of the next 9 months there was occasional correspondence between the parties, but the Plaintiffs allege that the Ministry failed to seriously address the matter or allow it to move ahead. On August 18, 2011, counsel for the Plaintiffs informed the Ministry that the Restraining Order and the Ministry’s actions (or, perhaps, its inaction) in dealing with the Plaintiffs was “effectively killing” the Plaintiffs’ business. This was followed up by an email from the Plaintiffs to the Ministry the following week, on August 23, 2011, in which the Plaintiffs advised that they may have to close their college due to a lack of students.

[10] The following month, on September 21, 2011, with the matter still at a standstill, the Plaintiffs made a complaint to the Ontario Ombudsman. The following week, on September 26, 2010, Plaintiffs’ counsel wrote to the Ministry indicating that it was contemplating a judicial review application to review the Ministry’s June 30, 2010 decision to re-impose the Restraining Order.

[11] Counsel for both parties here acknowledge that it was the involvement of the Ombudsman that finally resulted in the matter being addressed and the Plaintiffs being declared to be in compliance. On December 21, 2011, the Plaintiffs achieved full compliance with the regulations under the Private Career Colleges Act. A month later, on January 12, 2012, the Ministry finally acknowledged and confirmed this compliance and changed the Restraining Order to reflect a compliance date of December 21, 2011.

[12] The January 12, 2012 declaration of compliance did not end the Ombudsman’s involvement. There was sporadic correspondence between the Ombudsman’s office and the Ministry and between the Ombudsman’s office and the Plaintiffs from that date until a meeting which took place on March 12, 2012. At the meeting, the Ombudsman discussed with Ministry officials the issue of compensation for the Plaintiffs. There is no direct evidence identifying the subject matter of the January to March correspondence; however, one can assume it was also related to the prospect of monetary compensation for the Plaintiffs. This correspondence is listed in Schedule B list of privileged documents in each party’s affidavit of documents. The fact that the correspondence is privileged suggests that it contains discussions of a potential monetary settlement.

[13] The ongoing compensation discussions under the auspices of the Ombudsman lasted for over a year, until the Ombudsman closed its file on June 24, 2013. A month later, on July 31, 2013, the Ministry made its final offer to the Plaintiffs. The parties were unable to settle their monetary dispute, and on June 3, 2015 the Plaintiffs issued the Notice of Action and Statement of Claim in this action.

[14] Both sides take the position that, at least during the time in which the Ombudsman was mediating the monetary dispute, the limitation period did not run. This accords with the notion that the “discovery” of a cause of action may be suspended in order to exhaust an alternative process before the cause of action is crystallized: 407 ETR Concession Co. v Day, 2016 ONCA 709; and Presidential MSH Corporation v Marr, Foster & Co, LLP, 2017 ONCA 325. Where the alternative process might potentially resolve the dispute and compensate the Plaintiff for its loss, it may not be “appropriate” within the meaning of s. 5(1)(a)(iv) of the Act to commence an action until that process has run its course.

[15] The parties differ, however, in their view of when the limitation period actually began. According to Defendant’s counsel, the limitation period started running from the date the Restraining Order was re-issued, since as of that date the Plaintiffs understood that they were incurring the losses that they now claim. Defendant’s counsel concedes, however, that the limitation period was tolled from March 12, 2012 (the earliest date in which monetary compensation was without a doubt discussed) until June 24, 2013 (the date on which the Ombudsman’s file was closed). It is the Defendant’s view that compensation for monetary losses was on the table all along as far as the Plaintiffs were concerned, and that counsel for the Plaintiffs had threatened litigation well before the Ombudsman was engaged.

[16] It is also the Defendant’s position that the Ombudsman’s involvement was not a process that was specifically designed to bring the Plaintiffs’ business into compliance, but rather was an informal and voluntary function that was potentially available in all government matters. Counsel for the Defendants submits that it is only with the special discussions about monetary compensation for the Plaintiffs that the Ombudsman took on the role of an alternative process for the purposes of suspending the running of the limitation period. Since the Defendants are only willing to acknowledge that the monetary discussions began with the meeting of March 12, 2012, their proposed tolling of the limitation period began at that date and ended with the Ombudsman’s closing of its file a year and 3 months later.

[17] Counsel for the Plaintiffs, on the other hand, submits that the limitation period could not have started to run prior to the Ministry’s acknowledgment on January 12, 2012 that the Plaintiffs’ school was back in compliance with the applicable regulations. As Plaintiffs’ counsel correctly points out, prior to that date it would not have been appropriate within the meaning of s. 5(1)(a)(iv) of the Act – or, for that matter within any other meaning – for the Plaintiffs to bring a claim for compensation. After all, before that date the Plaintiffs were offside the applicable regulations, and so any losses at that stage would likely have been attributed to their own non-compliance.

[18] Of course, prior to January 12, 2012 it may have been open to the Plaintiffs to commence a judicial review application addressing the Ministry’s decision to impose a Restraining Order; in fact, that is just what Plaintiffs’ counsel suggested in September 2011. I also agree with Plaintiffs’ counsel that had the Plaintiffs commenced an action for damages at that stage, as opposed to an application for judicial review, they would have run up against the notion that administrative proceedings must be permitted to run their course before judicial relief is appropriate: Volochay v College of Massage Therapists, 2012 ONCA 541, at para 68. An action by the Plaintiffs prior to their being declared in compliance would have doubtless been stayed or dismissed.

[19] Accordingly, the Plaintiffs correctly start from the position that the limitation period could only have begun when they were declared in compliance on January 12, 2012. As indicated, from that date there was sporadic correspondence whose privileged status indicates that the Ombudsman’s process of mediating a monetary settlement was already underway even before the first formal acknowledgement of it at the March 12, 2012 meeting. From this point of view, the Ombudsman moved seamlessly from getting the Ministry to acknowledge the Plaintiffs’ compliance (thus triggering the limitation period) to negotiating compensation for the Plaintiffs (thus tolling the limitation period). There was nothing in between those two start dates.

[20] The end date of the tolling would, of course, have been the date that the Ombudsman closed its file on the mediation – i.e. June 24, 2013. Again, Plaintiffs’ counsel correctly identifies that date as the starting date for the running of the limitation period. It would have been appropriate to bring an action any time after June 24, 2013, so long as the Plaintiffs did not receive compensation for their business losses. These losses could potentially include losses incurred prior to January 12, 2012, when the Plaintiffs were not in compliance due, allegedly, to delay by the Defendant in engaging the compliance process. But, in any case, the two-year limitation period began with the Ombudsman’s June 24, 2013 file closure.

[21] As I calculate it, the action was commenced within the two-year time period. Under ss. 4 and 5 of the Act, the Notice of Action and/or the Statement of Claim would have had to have been issued by June 23, 2015. As it turned out, they were both issued on June 3, 2015. The Plaintiffs’ claim made it by 20 days.

[22] All of the issues in this motion are issues of legal interpretation and/or the application of law to fact. The relevant communications are virtually all in writing between the parties (or between the parties and the Ombudsman). There are no real issues of credibility and, in fact, there are relatively few instances of disputed fact.

[23] In this circumstance, I am in a position to fairly and justly adjudicate the matter in issue in his motion: Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87, at para 66. On the basis of the record before me, I find that the limitation period did not expire prior to the commencement of the action. The Defendant’s motion is therefore dismissed.

[24] The Plaintiffs are entitled to their costs of this motion. Each counsel has submitted a Costs Outline setting out the cost recovery they would seek. Counsel for the Plaintiffs requests $12,052.67 as a total costs figure for the motion alone (not including the balance of the action, which is still alive). Counsel for the Defendants requests $21,259.96 as a total costs figure for the entire action, including the motion.

[25] It is difficult to precisely separate the motion from the balance of the action in the Costs Outline submitted by the Defendant. However, the amount of costs sought by the Plaintiffs comes to roughly one-half the amount sought by the Defendant. In my view, the Plaintiffs’ request is a reasonable one given the complexity of the motion, and it is not so far out of line with the Defendant’s own request that it would be beyond the Defendant’s expectations for a motion of this size and importance: see Rule 57.1(1)(0.b.).

[26] I will exercise the discretion given to me by s. 131(1) of the Courts of Justice Act to award the Plaintiffs a rounded-off version of the amount that they have requested. Accordingly, the Defendant shall pay costs to the Plaintiffs, including all fees, disbursements, and HST, in the total amount of $12,000.

Morgan J. Date: January 10, 2019