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Appellate Litigation

In the course of a litigation file, misapprehensions sometimes occur. When there is confusion as to the identity of the proper defendant, sometimes the need to add a new party defendant to the action arises. Depending on how far into an action the new defendant is discovered, the statutory limitation period may help to provide the newly-added party with a defence in the matter. 

The Proper Defendant is Discovered After the Start of a Claim

Say that a plaintiff has commenced an action for damages relating to damages they suffered caused by a neighbouring property. The claim names two possible defendants, A and B, as the owner of the property which is alleged to have caused the damage. One of these defendants B, asserts that the other, A, is the owner and the plaintiff accepts that as fact, especially when A does not dispute ownership.

Some two and one-half years later, A delivers their Statement of Defence. One of A’s defences is that they are not the owner of the property in question, and they do not name an alternative owner of the property.

Shortly thereafter, the plaintiff comes across an article written some ten months before the damage-causing incident. This article mentions the past sale of the property by A to C and includes a copy of the agreement of purchase and sale. The plaintiff then provides the article to her lawyer, who then suggests that the plaintiff bring a motion to add C as a defendant to her claim. What role would the statutory limitation period play in this scenario?

The Limitations Act

The relevant portions of the Limitations Act read as follows:

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. 

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).

21 (1) If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding. 

Reasonable Discoverability Under s. 5(1)(b) of the Limitations Act

The plaintiff’s claim is subject to the two-year limitation. Was it statute-barred such that C could not be added pursuant to section 21(1) of the Limitations Act? The answer lies in whether the court can make a finding that the plaintiff first knew of the elements of her claim as listed in s. 5(1)(a) of the Act. 

If the date of actual discovery, as determined by the court, would bring the claim within the limitation period, the court must then determine under s. 5(1)(b) when a reasonable person in the same circumstances first ought to have known of the matters referred to in clause 5(1)(a). While a plaintiff’s due diligence is relevant to the finding under 5(1)(b), the absence of due diligence is not a separate basis for dismissing a claim as statute-barred.

This is the case whether the expiry of the limitation period is at issue in a motion for summary judgment or in a motion to add a defendant based on the Ontario Court of Appeal decision in Mancinelli v. Royal Bank of Canada, 2018.

Reasonable discoverability of a claim under s. 5(1)(b) of the Limitations Act that precludes adding a party contrary to s. 21(1) requires an evidentiary foundation. The court must be satisfied that a reasonable person in the plaintiff’s circumstances ought to have discovered the claim, and the date of such reasonable discovery must be determined. It is not sufficient for the court to say that the claim was discoverable “before the expiry of the limitation period”, without explaining why. It may be that the date of reasonable discoverability can only be determined at a later stage in the proceedings, at trial or on a summary judgment motion. In such a case, the motion to add the defendant should be granted, with leave for the defendant to plead a limitation defence.

The evidentiary burden on our plaintiff seeking to add C to her action after the apparent expiry of a limitation period is two-fold:

  1. She must overcome the presumption in s. 5(2) that she knew of the matters referred to in s. 5(1)(a) on the day the act or omission on which the claim is based took place, by leading evidence as to the date the claim was discovered according to her (which evidence can be tested and contradicted by the proposed defendant). The presumption is displaced by the court’s finding as to when she subjectively knew she had a claim against the C. To overcome the presumption, the plaintiff needs to prove only that her actual discovery of the claim was not on the date the events giving rise to the claim took place. It is therefore wrong to say that a plaintiff has an onus to show due diligence to rebut the presumption under s. 5(2).
  2. The plaintiff must offer a reasonable explanation as to why the claim could not have been discovered through the exercise of reasonable diligence. The evidentiary threshold here is low, and the plaintiff’s explanation should be given a “generous reading”, and considered in the context of the claim.

A court in a similar circumstance will have to determine the date that the limitation period began to run based on the plaintiff’s evidence and the “reasonable discoverability” principle. As demonstrated by this scenario, it is vitally important to ensure that the correct defendants are added to a claim at the earliest possible time and that a plaintiff (and their counsel) make efforts to determine the party as soon as possible.

At Milosevic & Associates, our team of Toronto corporate commercial lawyers regularly represent clients in complex commercial litigation matters ranging from straightforward contract and partnership disputes to complex multi-party commercial claims including dealing with claims of loss from real estate transactions. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself.  Call us at 416-916-1387 or contact us online to schedule a consultation.