COURT FILE NO.: CV-19-006239891

DATE: 20210126

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Canning Construction Limited, Plaintiff

AND:

Amandeep S. Dhillon and Kramer Simaan Dhillon LLP, Defendants

BEFORE: Mr. Justice Chalmers

COUNSEL: R. Kennaley and J. Winter, for the Plaintiff

B. Bowles and J. Van Leeuwen, for the Defendants

HEARD: December 18, 2020, by videoconference

ENDORSEMENT

OVERVIEW

[1] The Defendants bring this motion for summary judgment pursuant to R. 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”), seeking dismissal of the Plaintiff’s action on the basis that it is statute barred. The Defendants argue that the Plaintiff knew or ought to have known by the exercise of reasonable diligence that it had a cause of action against the Defendants by October 14, 2014 at the latest. The claim was commenced more than two years later, on July 18, 2019, and is therefore barred by the expiry of the two-year limitation period provided for in s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (the “Act”).

[2] The Plaintiff argues that it did not “discover” its claim against the Defendants until it became apparent that it would not recover any funds from the bankruptcy proceedings of one of its creditors. The Plaintiff also argues that it did not know that such a claim was legally appropriate because it was following the legal advice of the Defendants and pursuing the alternative remedy of bankruptcy proceedings.

[3] For the reasons set out below, I find that the action was brought more than two years after the Plaintiff knew or ought to have known the facts necessary to commence an action against the Defendants. I also find that the Plaintiff failed to establish that it did not know or ought not to have known that a claim against the Defendants was legally appropriate until after July 18, 2017. The action is statute barred and I dismiss the action.

BACKGROUND FACTS

[4] Canning Construction Limited (“Canning”) is a general contracting company. It is owned by Darryl D’Silva, and its officers and directors are Darryl and his brother, Oscar D’Silva. Their father, Fred D’Silva, also plays a role with Canning. Canning provided construction services for a condominium project located at 3865 Lakeshore Boulevard West, Toronto (the “Project”). The Project was owned by Westport Beach Development Corporation (“Westport”). According to the First Report of the Receiver, Westport is owned in part by members of the D’Silva family, including Fred, Oscar, and Darryl. Oscar D’Silva, in his affidavit, states that this is not accurate, but that as he recalls, his mother held 20 percent of Westport in trust.

[5] Daniels Aquaview Incorporated (“Daniels”) was a secured creditor on the Project. Westport financed the construction by borrowing from Daniels, and the loan from Daniels was guaranteed by members of the D’Silva family. Daniels claimed that Westport failed to repay the loan as required and brought legal proceedings against the corporation. On June 11, 2012, Daniels obtained summary judgment against Westport and several members of the D’Silva family in the amount of $7,003,208.

[6] Canning performed work on the Project. It was not fully paid for its work and had a claim against Westport in the amount of $1,638,018.89. Canning retained Amandeep Dhillon and his law firm, Kramer Simaan Dhillon LLP, to pursue Westport for payment. On January 25, 2013, Mr. Dhillon registered a lien in the amount of $1,638,018.89. The lien was registered on title to nine condominium units in the Project.

[7] On January 28, 2013, Daniels obtained a Receivership Order against Westport. It provides that all assets of Westport will be held by the Receiver and paid out only in accordance with the Receivership Order or any further order of the court. At paragraph 11, the Receivership Order requires the consent of the Receiver or leave of the court to initiate or continue any legal proceedings against Westport. On February 26, 2013, Westport entered into a Subordination and Standstill Agreement with Daniels. That agreement subordinated Canning’s interests to Daniels and provided that Canning would not take any steps to enforce its claim for lien until Daniels was paid in full. The Subordination and Standstill Agreement did not prevent Canning from perfecting its lien.

[8] On March 11, 2013, Mr. Dhillon issued a Statement of Claim against Westport. He did not seek leave to issue the claim in accordance with the Receivership Order. To perfect the lien, it was necessary to file a Certificate of Action. Mr. Dhillon believed that Westport’s insolvency eliminated this requirement. The Certificate of Action was not registered within 90 days of the lien arising and, as a result, the lien expired as of March 16, 2013.

[9] Mr. Dhillon was not initially aware that the lien had expired. On February 11, 2014, Oscar D’Silva received an e-mail from the lawyer for the Receiver requesting that Canning release its lien because it was not perfected and had expired. The e-mail was forwarded to Mr. Dhillon with instructions to agree to a partial discharge of the lien against some of the condominium units. Although he agreed to carry out the partial discharge, Mr. Dhillon was not certain that the lien was invalid. He made further enquiries and determined that the lien had in fact expired as of March 16, 2013.

[10] On May 28, 2014, Mr. Dhillon spoke with Oscar D’Silva to advise that he had made a mistake and there was an issue with the lien. He recommended that Canning retain new counsel to discuss potential remedies in relation to the expiry of the lien. Mr. Dhillon also notified his professional liability insurer of his error. On June 19, 2014, Mr. Dhillon e-mailed Oscar D’Silva and again raised the issue of the lien and recommended Canning retain new counsel. On June 23, 2014, Mr. Dhillon e-mailed Oscar D’Silva and provided the contact information for Brandon Jaffe, a lawyer with expertise in insolvency matters.

[11] Oscar D’Silva, in his affidavit, deposes that after determining that the lien had expired, Mr. Dhillon advised Canning to pursue its claim in the bankruptcy. He also states that Mr. Dhillon told him that there were significant funds available in that bankruptcy. There is no documentary evidence that confirms that Mr. Dhillon provided this advice to Canning.

[12] On September 8, 2014, the Fifth Report of the Receiver was provided to Canning. The Receiver concluded that Canning’s lien was ineffective because it was not supported by a registered Certificate of Action. The Receiver recommended that the lien be disregarded for distribution purposes. The Fifth Report states that there are claims of more than $8,600,000 from secured creditors ranking subordinate to Daniels. Oscar D’Silva, in his affidavit, confirms that he received the Fifth Report of the Receiver. He states that the Fifth Report appears to show that after Daniels is paid out the settlement amount of $1,250,000, there was $6,350,000 in possible recoveries available. There was also $3,009,701 held by Delzotto Zorzi LLP on behalf of Westport and a potential CRA tax credit of $313,000, for a total of $9,672,702.

[13] On September 24, 2014, Fred D’Silva wrote to Mr. Dhillon and confirmed that Canning had retained Mr. Jaffe to represent its interests with respect to the Receiver. He wrote that Mr. Jaffe’s expertise lay in receiverships and bankruptcies and he was not confident in providing advice with respect to the lien. Mr. Jaffe had discussed the matter with construction lawyers and the consensus was that the Receiver would be successful in discharging the lien due to the failure to register the Certificate of Action. In the letter to Mr. Dhillon, Fred D’Silva stated that they were hoping to find some way of compensating the D’Silvas and that it was not their intention “to proceed on any other basis as we do value our relationship.”

[14] The Receiver issued a Notice of Bankruptcy/First Meeting of Creditors dated September 29, 2014. The Notice contained a creditor mailing list, which lists Canning as an unsecured creditor with a claim of $1,000,000. Mr. Jaffe is listed on the supplementary mailing list. Attached to the Notice was the Statement of Affairs dated September 24, 2014. The Statement of Affairs provides that Westport’s liabilities as of that date were $12,149,473.07 and its assets were $6,450,000. The amount owing to secured creditors was $6,450,000.

[15] Oscar D’Silva states in his affidavit that, based on what he was “hearing, discussing and reading” about the bankruptcy, he thought there was “lots of money to go around”. He further states that he can recall “briefly and on a cursory basis reviewing various (but not all) of the Reports”. He remembers thinking “that the Reports showed that there was enough money potentially available to pay out Canning.” Oscar D’Silva does not provide any details with respect to who he was discussing the bankruptcy with or which reports he had briefly reviewed that showed there was enough money to pay Canning. He does not refer to the Statement of Affairs in his affidavit.

[16] On October 9, 2014, Fred D’Silva wrote to Mr. Jaffe and Mr. Dhillon inquiring into the best avenue to recover the funds if the lien was not valid. On October 14, 2014, Mr. Dhillon wrote to Oscar D’Silva and advised that Canning did not have a valid lien against Westport. Mr. Dhillon again confirmed that he was in a conflict of interest and was unable to act for Canning. After October 14, 2014, Mr. Dhillon did not have any further discussions with Canning with respect to this matter. There are no further e-mails or correspondence between Mr. Dhillon or Canning with respect to this matter after this date.

[17] In April 2017, Mr. Dhillon commenced an action against Canning in Small Claims Court for unpaid legal fees of approximately $3,000. Mr. Dhillon took steps to note Canning in default. Oscar D’Silva states in his affidavit that, at the time (April – June 2017), he did not believe Canning could assert a set-off claim because the bankruptcy had not run its course. In November 2019, after the date Canning states it discovered the claim against the Defendants, Canning paid the amount Mr. Dhillon was seeking without set off.

[18] Canning pursued its claim against Westport in the bankruptcy proceedings. On July 18, 2017, Conway, J. ordered that the Receiver was authorized to make a further distribution to secured creditors. Fred, Oscar, and Darryl D’Silva did not oppose the terms of that Order, which provides that they were represented by counsel. Canning takes the position that it was only after the Order of Conway, J. that it “discovered” its claim against the Defendants. At that point, it became clear there were insufficient assets to pay Canning’s claim in full. Canning did not recover anything in the bankruptcy.

[19] Canning issued the action against the Defendants on July 18, 2019, claiming damages in the amount of $1,638,018.89. Canning alleges that Mr. Dhillon was negligent for failing to file a Certificate of Action, which resulted in the expiry of the lien and the loss of its secured interest. There are no allegations of any acts or omissions on the part of Mr. Dhillon with respect to the Westport receivership/bankruptcy proceedings.

THE ISSUES

[20] The issue to be determined on this motion is whether the Plaintiff’s claim is statute barred. This requires a consideration of the following:

a. Is this an appropriate case for summary judgment?

b. When did Canning first know, or when would a reasonable person with the abilities and in the circumstances of Canning first ought to have known, of the matters referred to in s. 5(1)(a) of the Act?

c. When did Canning first know, or when would a reasonable person with the abilities and in the circumstances of Canning first ought to have known, that the proceeding against the Defendants was an appropriate remedy?

ANALYSIS

Is This an Appropriate Case for Summary Judgment?

[21] The court shall grant summary judgment if it is satisfied that there is no genuine issue requiring a trial. There will be no genuine issue requiring a trial when a judge is able to reach a fair and just determination on the merits of the motion because the record before the court:

a. allows the judge to make the necessary findings of fact,

b. allows the judge to apply the facts to the law, and

c. summary judgment is a proportionate, more expeditious, and less expensive means to achieve a just result than going to trial: see Hryniak v. Mauldin, 2014 SCC 7, at paras. 49 and 66.

[22] On a summary judgment motion to dismiss a plaintiff’s action on the basis that it was brought after the expiry of a limitation period, the judge is required to make the necessary findings of fact on one presumption and two dates, as set out in ss. 5(1)(a), 5(1)(b), and 5(2) of the Act. Those provisions state:

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 damages 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.

[23] In Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725, at para. 35, the Court of Appeal described the process to be followed on a summary judgment motion to dismiss an action on the basis that it was commenced beyond the limitation period:

Accordingly, a typical summary judgment motion involving the basic limitation period requires the judge to determine whether the record enables making a series of findings of fact, with the certainty required by Hryniak, on the following matters: (i) the date the plaintiff is presumed to know the matters listed in ss. 5(1)(a)(i)-(iv) — namely, the day on which the act or omission on which the claim is based occurred; (ii) the date of actual knowledge under s. 5(1)(a), in the event the evidence proves the contrary of the presumptive date; (iii) the s. 5(1)(b) objective knowledge date, based on the reasonable person with similar abilities and circumstances analysis; and (iv) finally, which of the actual knowledge and objective knowledge dates is earlier, for that will be day on which the plaintiff discovered the claim for purposes of applying the basic limitation period of two years.

[24] The judge on a summary judgment motion may, pursuant to R. 20.04(2.1), exercise the following powers: weigh the evidence, evaluate the credibility of a deponent, and draw reasonable inferences from the evidence. Pursuant to R. 20.02(1), the judge may, if appropriate, draw an adverse inference from the failure of a party to provide the evidence of any person having knowledge of contested facts.

[25] I am satisfied that the record enables me to make the necessary findings of fact with the certainty required by Hryniak.

When Did the Plaintiff First Know, or When Would a Reasonable Person with the Abilities and in the Circumstances of the Plaintiff First Ought to Have Known, of the Matters Referred to in [s. 5(1)](https://www.canlii.org/en/on/laws/stat/so-2002-c-24-sch-b/latest/so-2002-c-24-sch-b.html)(a) of the [Act](https://www.canlii.org/en/on/laws/stat/so-2002-c-24-sch-b/latest/so-2002-c-24-sch-b.html)?

[26] It is alleged in the Statement of Claim that Canning sustained losses or damages as a result of Mr. Dhillon’s failure to file the Certificate of Action. Canning lost it’s secured position, because the Certificate of Action was not filed, and the lien expired on March 16, 2013.

[27] Section 5(2) of the Act provides that the plaintiff is presumed to have known of the matters listed in s. 5(1)(a) on the day the act or omission on which the claim is based took place. Here, as a result of the failure to file the Certificate of Action, the lien expired on March 16, 2013. This is the presumptive date from which the limitation period begins to run.

[28] The Plaintiff has the onus to prove that the claim was discovered sometime after the presumptive date: see Nelson v. Lavoie, 2018 ONSC 4489, at para. 36. The Defendants concede that neither party was aware the lien had expired until February 11, 2014. On that date, Canning received the e-mail from the lawyer for the Receiver advising that the lien was not perfected. Canning forwarded the e-mail to Mr. Dhillon. On May 28, 2014, Mr. Dhillon spoke with Oscar D’Silva and advised that he had made a mistake and there was an issue with Canning’s lien. On October 14, 2014, Mr. Dhillon wrote to Oscar D’Silva and advised him that Canning did not have a valid lien against Westport.

[29] The Defendants argue that by October 14, 2014 at the latest, Canning knew of the matters referred to in s. 5(1)(a). By that date, Canning had been advised that the lien had expired, that the lien expired as a result of Mr. Dhillon’s mistake, and that due to the expiry of the lien Canning had lost its secured position. The claim was issued on July 18, 2019, which the Defendants argue is more than two years after the date Canning first knew of the matters referred to in s. 5(1)(a). It is Canning’s position that it did not subjectively know and that a reasonable person with its abilities and in the same circumstances ought not to have known of the matters referred to in s. 5(1)(a) until July 18, 2017.

[30] The test for determining discoverability is both a subjective and modified objective test. In s. 5(1)(a), the test looks to the plaintiff’s actual knowledge to determine when the limitation period starts to run. If the plaintiff did not have actual knowledge of the cause of action, the modified objective test applies to determine when a reasonable person with the abilities and in the circumstances of the plaintiff first ought to have known of the matters in s. 5(1)(a): see Gillham v. Lake of Bays (Township), 2018 ONCA 667, at para. 20.

The Subjective Test, s. 5(1)(a)

[31] The Defendants argue that Canning had actual subjective knowledge of the claim by October 14, 2014. As of that date, Canning knew Mr. Dhillon had failed to file a Certificate of Action and that as a result, the lien had expired. Canning also had actual knowledge that, with the expiry of the lien, it had lost its position as a secured creditor. The Defendants note that the following allegations in the Statement of Claim are based on facts which were known to Canning on October 14, 2014:

13. The defendants, in breach of contract and negligence, failed to perfect the plaintiff’s Claim for Lien in accordance with the Act and, as a result:

a. the plaintiff’s claim for Lien expired;

b. the plaintiff lost its secured and priority position in the Receivership; and

c. the plaintiff was rendered an unsecured creditor in the Receivership.

16. The plaintiff states that but for the defendants’ breach of contract and negligence in failing to perfect the Claim for Lien, the plaintiff’s claim would have been secured in the Receivership such that it would have recovered the full quantum of its Claim for Lien.

[32] Canning takes the position that it did not have actual knowledge of the matters in s. 5(1)(a) until July 19, 2017. Canning concedes that it was aware that the claim for lien had expired by October 14, 2014; however, it believed it would recover the full amount of its lien in the Westport bankruptcy proceeding. Therefore, it did not know it had suffered any loss or damage until after the Order of Conway, J., at which time it was determined that there were no funds available to pay the unsecured creditors. Canning argues that it was only then that it knew it would not recover the full amount of its claim from Westport and therefore had suffered damages as a result of Mr. Dhillon’s negligence.

[33] Canning’s evidence with respect to its belief that it would recover the full amount of the claim in the bankruptcy proceedings is not persuasive. Oscar D’Silva, in his affidavit, states that based on his cursory review of some of the reports, he recalls thinking that there was enough money to pay out Canning. He does not set out which reports he is referring to. He does not address the Statement of Affairs, which shows a shortfall between the assets and the liabilities of Westport. Also, Canning has not put forward any evidence with respect to the advice it received from its insolvency lawyer, Mr. Jaffe. If he had advised Canning that, in his opinion, there would be full recovery of the amount of the lien in the bankruptcy process, I expect this evidence would have been tendered. I draw an adverse inference from Canning’s failure to put forward any evidence from Mr. Jaffe.

[34] The Defendants argue that whether Canning expected it would recover the full amount of the lien in the bankruptcy is not the issue. Canning knew that injury, loss, or damage had occurred as of October 14, 2014, even if it was not aware of the amount of the loss until after the bankruptcy proceedings were completed. “Damage” is the loss needed to make out the cause of action and “damages” are the monetary measure of the extent of the loss: see Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156, at para. 54. The Defendants argue that Canning knew it had suffered loss or damage because it knew that it was worse off than before the lien expired: see Cato v. Wojick, 2018 ONSC 3983, at para. 27.

[35] It is my view that Canning knew by October 14, 2014 that it had lost its secured and priority position because of Mr. Dhillon’s failure to file the Certificate of Action. As a result, Canning was required to retain Mr. Jaffe and pay legal fees to pursue the insolvency claim. Although Canning may not have known the full extent of the damages, it knew there would be additional costs and delay, which would not have been incurred if the lien had been perfected. Once Canning knew there had been a loss of its secured position, it could have advanced a cause of action against the Defendants. The action could be commenced even though the full extent of the loss would not be known until after the bankruptcy proceedings were completed.

[36] I conclude that by October 14, 2014, Canning had subjective knowledge that injury, loss, or damage had occurred as a result of Mr. Dhillon’s failure to file a Certificate of Action. Canning knew the lien had expired and that as a result it had lost its secured priority position. At that point, Canning knew it was worse off than it was before the error occurred.

The Modified Objective Test, s. 5(1)(b)

[37] The modified objective test applies only if a plaintiff does not have actual subjective knowledge of the claim. If I had not found that Canning had actual knowledge of the matters set out in s. 5(1)(a) of the Act, I would have concluded that a reasonable person with the abilities and in the circumstances of Canning ought to have known of the claim by October 14, 2014.

[38] Canning concedes that it knew the lien had expired as a result of Mr. Dhillon’s error by October 14, 2014, but takes the position that a reasonable person with its abilities and in the same circumstances would have first known it sustained injury, loss, or damage only after Conway, J. made her Order on July 18, 2017. As stated above, I am of the view that the damage sustained by Canning was the loss of its secured position, which was known as of October 14, 2014. I am also of the view that a reasonable person with the abilities and in the circumstances of Canning ought to have known that there would not be full recovery of the amount of the lien before the date of Conway, J.’s Order.

[39] Canning had a lien claim in the amount of $1,638,018.89. Canning knew that Westport went into receivership on January 28, 2013. On September 29, 2014, the Notice of Bankruptcy and Statement of Affairs was sent to the creditors. The mailing list names both Canning and its insolvency lawyer, Mr. Jaffe. In argument, Oscar D’Silva suggests that the Statement of Affairs may not have been attached to the Notice of Bankruptcy and may not have been read by Canning. He does not state in his affidavit that he did not receive the document. If Oscar D’Silva is taking the position that he did not receive the document, it is incumbent upon him to say so. In any event, I am of the view that the Statement of Affairs would have come to the attention of Canning and/or its insolvency lawyer, Mr. Jaffe, during the bankruptcy process. The Statement of Affairs describes Westport’s liabilities as $12,149,473.07 and its assets as $6,450,000. The amount Westport owed to its secured creditors was $6,450,000.

[40] I conclude that a reasonable construction company represented by counsel ought to have known there would not be full recovery of its unsecured claim from the bankrupt company. If Canning did not fully understand the effect of the Statement of Affairs, it was required to act with reasonable diligence to discover the facts necessary to proceed with an action. At a minimum, one would expect Canning to ask its insolvency lawyer about the meaning of the documents. As noted above, there is no evidence from Canning as to what advice it received from Mr. Jaffe. If Mr. Jaffe had advised Canning that it could expect to receive the full amount of the lien in the Westport bankruptcy proceedings, this evidence ought to have been tendered.

Summary

[41] I am satisfied that Canning knew or ought to have known of all the relevant facts necessary to bring an action in negligence against the Defendants by October 14, 2014 at the latest. By that date, Canning had actual knowledge that Mr. Dhillon had failed to perfect the lien and, as a result, it had lost its secured position. I am satisfied that Canning knew or ought to have known that it would not receive full recovery of the lien amount through the Westport bankruptcy proceeding. Based on the Statement of Affairs, the amounts owed to secured creditors met or exceeded the amount of the assets and, as a result, there were insufficient assets to pay the unsecured creditors. At the time the Statement of Affairs was sent, Canning was represented by an experienced insolvency lawyer who would have been in a position to provide advice as to whether the full amount of the lien claim would be recovered in the Westport bankruptcy proceedings. I draw an adverse inference from Canning’s failure to provide any evidence with respect to advice it received from Mr. Jaffe.

When did the Plaintiff Know, or When Would a Reasonable Person with the Abilities and in the Circumstances of the Plaintiff First Ought to Have Known, That the Proceeding Was an Appropriate Remedy?

[42] Canning relies on s. 5(1)(a)(iv) of the Act and argues that, having regard to the nature of the loss or damage, it did not “discover” that a proceeding against the Defendants was a legally appropriate way to remedy its loss until July 18, 2017.

[43] Canning must prove that it did not know, and that a reasonable person with its abilities and in its circumstances would not have known that a civil action against the Defendants was an appropriate remedy until July 18, 2017: see Gillham, at para. 34; Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851, at para. 70. Whether a proceeding is “legally appropriate” depends upon the factual or statutory setting of each case: see 407 ETR Concession Company Limited v. Day, 2016 ONCA 709, at para. 34. As stated by Sharpe, J.A. in Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218, at para. 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 the 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 limitations of action. [Emphasis added.]

[44] The test is whether it is “legally appropriate” to bring the action against the defendant. It is not an evaluation as to whether the civil proceeding will succeed: see Sosnowski v. MacEwan Petroleum Inc., 2019 ONCA 1005, at para. 19.

[45] There are two circumstances that most often result in a finding that the proceeding was not legally appropriate. These are where:

a. The plaintiff relies on the superior knowledge and expertise of the defendant, especially where the defendant undertook efforts to ameliorate the loss, and

b. The plaintiff pursues an alternative remedy which has not fully run its course: see Sosnowski, at para. 17.

Reliance on the Superior Knowledge and Expertise of the Defendants

[46] A legal proceeding against a professional may not be appropriate if the plaintiff is relying on that professional to resolve the wrongdoing without recourse to the courts: see Presidential MSH Corp. v. Marr Foster & Co. LLP, 2017 ONCA 325, at para. 20. It would not be appropriate to sue the professional while they are trying to fix complications that arose from the negligent act because the professional’s success in doing so would avoid the need for an action: see Brown v. Baum, 2016 ONCA 325, at para. 24.

[47] The mere fact that an action involves a professional may not be sufficient to render legal proceedings inappropriate. There must be evidence that the defendant was making ameliorative efforts and that the plaintiff relied on those efforts. As stated in Presidential MSH Corp., at para. 26:

Resort to legal action may be “inappropriate” in cases where the plaintiff is relying on the superior knowledge and expertise of the defendant, which often, although not exclusively, occurs in a professional relationship. Conversely the mere existence of such a relationship may not be enough to render legal proceedings inappropriate, particularly where the defendant, to the knowledge of the plaintiff, is not engaged in good faith efforts to right the wrong it caused. The defendant’s ameliorative efforts and the plaintiff’s reliance on such efforts to remedy its loss are what may render the proceeding premature.

[48] Here, Canning states that it was inappropriate to bring a civil action because it was relying on Mr. Dhillon’s expert advice. It is Canning’s position that after it discovered Mr. Dhillon failure to perfect the lien, Mr. Dhillon expressly advised Canning to pursue its claim in the bankruptcy and that there were significant funds available in that proceeding. There is no documentary evidence that Mr. Dhillon provided this advice to Canning. Rather, Mr. Dhillon, in his letter dated October 14, 2014, stated that he was in a conflict of interest and was unable to act for Canning. There is no evidence of any advice from Mr. Dhillon with respect to this matter after October 14, 2014.

[49] Canning retained Mr. Jaffe to provide legal advice with respect to the insolvency. Mr. Jaffe was acting on behalf of Canning at the time the Notice of Bankruptcy was sent on September 29, 2014. Canning takes the position that it continued to rely on Mr. Dhillon’s advice even after it retained Mr. Jaffe. However, Canning did not put forward any evidence with respect to the advice it received from Mr. Jaffe. It is reasonable to expect that Mr. Jaffe, retained as he was to represent Canning in the bankruptcy proceedings, would have provided advice with respect to the bankruptcy. If it is Canning’s position that it preferred and followed the advice of Mr. Dhillon over that of Mr. Jaffe, it is incumbent upon Canning to put forward evidence of the advice Mr. Jaffe provided. I draw an adverse inference from the failure to put forward any evidence with respect to the advice it received from Mr. Jaffe.

[50] It is also my view that reliance on Mr. Dhillon’s advice with respect to the bankruptcy proceedings is not sufficient to support a finding that the action is not legally appropriate. There must be evidence that the professional was attempting to repair the damage arising out of the negligence which could make the civil proceeding unnecessary, and that the plaintiff was relying on those efforts. Here, there is no evidence that Mr. Dhillon was involved in any ameliorative efforts on behalf of Canning. Canning retained Mr. Jaffe to deal with the Westport insolvency and did not rely on Mr. Dhillon to repair the error. I conclude that in the circumstances of this case, there was no reliance on the knowledge or expertise of Mr. Dhillon to repair the error. Therefore, the limitation period is not extended.

Canning Was Pursuing an Alternative Remedy

[51] A proceeding would not be discoverable as legally appropriate if the plaintiff was pursing another resolution process that could eliminate the loss and thereby avoid needless litigation: see Lilydale Cooperative Limited v. Meyn Canada Inc., 2019 ONCA 761, at para. 60. The alternative procedure must be one that would resolve the dispute between the parties and, if successful, obviate the action: see 407 ETR, at paras. 30 and 39.

[52] Here, Canning argues that it was engaged in an alternative process, namely the Westport bankruptcy proceeding, and did not “discover” that the action against the Defendants was “legally appropriate” until after the bankruptcy proceedings were complete and it was determined that there was no money available to pay its claim. Canning argues that it is premature to bring a court proceeding against a tortfeasor if an alternative process offers an adequate remedy and the process has not fully run its course: see Presidential MSH Corp., at para. 29.

[53] I was not referred to any cases providing that an action against a tortfeasor is not legally appropriate while the plaintiff is participating in the bankruptcy proceedings of one of its creditors. Mr. Dhillon was not a creditor of Westport and was not involved in the bankruptcy. The bankruptcy proceedings could only determine the assets that may be available to pay Canning’s claim and could not determine the issues of liability as between Canning and Mr. Dhillon, or the amount of Canning’s provable damages in the tort action.

[54] In Gravelle (CodePro Manufacturing) v. Denis Grigoras LawOffice, 2018 ONCA 396, the plaintiff alleged that his former solicitors had provided erroneous advice with respect to an agreement of purchase and sale. The plaintiff pursued arbitration proceedings against the purchaser. After the plaintiff did not succeed in the arbitration, it commenced the action against his former solicitors. The action was brought beyond the two-year limitation period. The plaintiff argued that it was appropriate for him to delay bringing the action because, if successful in the arbitration, it would have been fully compensated for its loss and a tort action against its former solicitors would not be necessary. The court held that s. 5(1)(a)(iv) did not apply and dismissed the action against the former solicitors. In dismissing the appeal, the Court of Appeal stated at para. 6:

This is not a case in which the appellant was pursuing alternative means of resolving his negligence allegations against his former solicitors, the respondents. The appellant decided for tactical reasons not to bring his action against the respondents until the arbitration proceedings were completed. He was entitled to make this choice, but he must live with the consequences of it.

[55] In Lilydale, the Court of Appeal dismissed a third-party claim for being brought out of time. The action arose out of a fire at the plaintiff’s poultry processing plant. The plaintiff brought actions in both Alberta and Ontario against Meyn, the supplier and designer of a fryer and oven system, and EMK, the supplier of the thermal boiler for the fryer and oven system. Meyn moved to stay the Ontario action on the basis that Alberta was the most convenient forum or alternatively because the Ontario action was an abuse of process. Meyn’s motion was dismissed and the appeal was unsuccessful. After the Alberta action was discontinued, Meyn brought third-party proceedings in the Ontario action. The third-party claims were brought more than two years after Meyn was served with the Statement of Claim, but Meyn argued that it did not discover that it was legally appropriate to bring third-party proceedings until the forum issue was finally decided. It was Meyn’s position that if it had been successful in establishing that Alberta was the correct forum, the Ontario action would have been discontinued and there would have been no need for the third-party proceedings. This submission was rejected by the Court of Appeal on the basis that the forum challenge would not resolve the dispute between Meyn and the third party. The Court stated as follows:

[64] As in Ridel, Tapak v. Non-Marine Underwriters, Lloyd’s of London, 2018 ONCA 168, and Gravelle, in this case, there was no alternative resolution process to which Weishaupt [the third party] was a party that could have resolved the issue between it and Meyn. Rather, Meyn was attempting to have the whole Ontario action dismissed, obviating the need for the third party claim.

[65] To allow parties to wait, at their discretion, for other court or arbitral proceedings to conclude, where the result could obviate the need to bring a claim that they know exists, is inconsistent with the purpose of the Limitations Act for two reasons. First, this approach could extend the limitation period well beyond the two year original threshold in an uncertain and unpredictable manner. Second, there were no significant savings to be achieved by not commencing the third party claim until the forum challenge was complete. Procedurally, a standstill or tolling agreement could be sought until the forum issue had been finalized by the court so that the third party would not be required to plead in response. However, it would be on notice that if the Ontario action proceeds, it is a named party, required to preserve its documents and respond to the action as advised.

[66] In my view, these factors drive the conclusion that the day Meyn was served with the statement of claim by Lilydale, it knew that a third party claim against Weishaupt was the appropriate means to seek a remedy from Weishaupt. It was therefore not “legally appropriate” for Meyn to wait until the forum issue had been decided before commencing the third party claim.

[56] As in both Gravelle and Lilydale, the Westport bankruptcy proceedings could not resolve the legal dispute involving Mr. Dhillon. Here, Canning knew it had a claim in negligence against the Defendants before the bankruptcy proceedings against Westport were concluded. Although the bankruptcy could have determined the amount of damages to be sought in the civil action, the proceedings could not determine the legal issues between the parties and were therefore not an alternative means of resolving the negligence allegations. I conclude that the Westport bankruptcy proceedings are not an alternative process which delays the start of the limitation period in the action against the Defendants.

[57] Even if a bankruptcy proceeding is an alternative remedy which could have the effect of delaying the start of the limitation period, it is my view that it does not do so in the circumstances of this case. Section 5(1)(a)(iv) of the Act is subject to the modified objective test. The determination of when a plaintiff “discovered” that the legal action against the defendant was legally appropriate takes into account what a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known. Here, Canning had an unsecured claim in the amount of $1,638,018.89. Based on the secured claims and assets of Westport as set out in the Statement of Affairs, there was no reasonable expectation that unsecured creditors would be fully compensated for their claims. I conclude that a plaintiff with the abilities and in the circumstances of Canning would have known that it would not fully recover its claim in the Westport bankruptcy and therefore would have known that a tort action against the Defendants was legally appropriate before the bankruptcy proceedings were completed.

Summary

[58] Pursuant to s. 5(1)(a)(iv) of the Act, a civil action may not be appropriate if the defendant is taking steps to ameliorate the error or if the plaintiff is pursuing an alternative process which would eliminate the need to bring a civil action. Neither circumstance applies in this case. Mr. Dhillon was not engaged in any repair efforts. He advised Canning in October 2014 that he was in a conflict and would be unable to act. He did not provide any advice or take any actions with respect to this matter after October 14, 2014, at which time Canning had engaged Mr. Jaffe to act on its behalf in the bankruptcy. Also, the bankruptcy proceedings are not an alternative process which could determine the rights as between the parties and thereby avoid unnecessary litigation.

DISPOSITION

[59] I find that Canning failed to commence the action against Mr. Dhillon within two years of when it knew or ought to have known of the claim. I am able to make these findings with the certainty required in Hryniak. I grant the Defendants’ motion for summary judgment and dismiss Canning’s action.

[60] The Defendants were successful on this motion and are entitled to their costs. They are seeking costs in the amount of $28,144.15 on a partial indemnity basis, inclusive of counsel fees, disbursements, and HST. Canning filed a Bill of Costs which provides that, if successful, it would have claimed partial indemnity costs in the amount of $31,394.88.

[61] In the exercise of my discretion with respect to fixing costs, I considered the factors identified in R. 57.01 of the Rules of Civil Procedure. I also considered the overall objective of any costs award: that it be fair and reasonable and within the reasonable expectation of the unsuccessful party to pay: see Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at paras. 26 and 38.

[62] I fix the Defendants’ costs in the amount of $25,000, inclusive of counsel fees, disbursements, and HST.

DATE: JANUARY 26, 2021