Archive for the ‘limitation periods’ Category

Ontario Court of Appeal: One-year statutory limitation period applies to business property loss claims

September 11, 2013

Here’s a wake-up call for those of you handling breach of insurance contract claims under commercial general liability (CGL) and other types of business insurance policies for clients. (more…)

Special Circumstances Doctrine Is Dead, Ontario Court of Appeal rules

March 20, 2012

Today’s decision of the Court of Appeal for Ontario in Streamline Foods Ltd. v. Jantz Canada Corporation, 2012 ONCA 174 ["Streamline Foods"] deals with amendment of pleadings after the expiry of a limitation period and confirms that, with the exception of the Solicitors Act, the doctrine of special circumstances has expired.

In Streamline Foods, The appellant moved unsuccessfully to amend its statement of claim by adding its parent corporation as a plaintiff and by adding assertions that it was the parent corporation that was entitled to some of the damages claimed. On appeal, the argument was that the motion judge erred in holding that this was not a case of misnomer and further erred in failing to find that s. 21(1) of the Limitations Act, 2002 did not apply to plaintiffs and that the doctrine of special circumstances continues to permit the addition of plaintiffs based on special circumstances.

The appeal panel (per Simmons, Cronk and Watt JJ.A.) agreed with the motion judge and dismissed the appeal, noting that” in order to advance a claim on behalf of the parent corporation, it was necessary to add the parent corporation as an additional party and also to plead additional material facts to support the parent corporation’s claims.” The Court of Appeal concludes:

[6]               This, in our view, is not misnomer or misdescription. The appellants were not seeking to correct the name of a party; rather, they were seeking to add a party and to pursue that party’s claims.

[7]              On these facts, the special circumstances doctrine, even if it survived the enactment of the Limitations Act, 2002, would not assist the appellants.

[8]               In any event, in our view, Joseph v. Paramount Canada’s Wonderland 2008 ONCA 469 stands for the proposition that the special circumstances doctrine did not survive the enactment of the Limitations Act, 2002, as the appellants seek to argue. A challenge to that determination would require consideration by a five-person panel of this court.

Failure to Renew Writ of Execution Within 20-year Limitation Period Bars Enforcement

August 25, 2011
Out Of Time Man

Image by stefanopa via Flickr

Kovachis v. Dunn, 2011 ONSC 4174 (CanLII) confirms that failure to renew a writ of fieri facias (also referred to as a writ of seizure and sale or writ of execution) within the 20-year limitation period under the old Limitations Act, R.S.O. 1990, c. L.15 (the old Act) results in a time-bar of the enforcement of the underlying judgment under the transition provisions of the Limitations Act, 2002, S.O. 2002, C. 24, Sch. B, (the new Act). (more…)

Ontario appeal court rules 2 year limitation period under Warsaw Convention is procedural

October 28, 2010
Are limitation periods under international treaties and conventions, substantive or procedural, in nature?
According to the Court of Appeal for Ontario, which today released its decision in  Mosregion Investments Corporation v. Ukraine International Airlines 2010 ONCA 715 ["Mosregion"], the answer is: procedural.  This result is surprising given that the Ontario Limitations Act, 2002 deems that limitation periods under conflict of laws are substantive. Moreover, it is arguable that extending time for service of process after a limitation period under an international treaty has tolled, is anathema to the goal of uniformity that underpins international treaties and conventions, generally.
In Mosregion, the plaintiffs/respondents on appeal, issued a notice of action against the defendant/appellant, Ukraine International Airlines, and others regarding the destruction of documents contained in an Air France jet that overran the runway and caught fire at Pearson International Airport.
The appeal concerned the interpretation of the Carriage by Air Act, R.S. 1985, c. C-26, implementing the Convention for the Unification of Certain Rules Relating to International Carriage by Air, 12 October 1929, 137 L.N.T.S. 11 (the “Warsaw Convention”), which regulates liability for the international carriage of persons and property by air.  The notice of action was issued in Ontario within the two-year limitation period under Article 28 and Article 29 of the Warsaw Convention (as implemented in the Carriage by Air Act), reads as follows:
Article 28
(1) An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties…
(2) Questions of procedure shall be governed by the law of the Court seized of the case.
Article 29
(1) The right to damages shall be extinguished if an action is not brought within two years, reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the carriage stopped.
(2) The method of calculating the period of limitation shall be determined by the law of the Court seized of the case.
However, the respondents were unable to serve the claim on the appellant within the six-month period provided in Ontario’s Rules of Civil Procedure pursuant to Rule 3.02 of the Rules, which allows for the extension of time for service if the motion is brought either before or after the time for service has expired. The plaintiff/respondent in appeal thereafter brought an ex parte motion before Master Sproat for an order extending the time for service.  Master Sproat adjourned the motion for notice to be served on the appellant and the other defendants who had not yet been served.  The motion later returned for hearing before Master Hawkins, who granted the extension of time, nunc pro tunc.  The appellant did not appear before Master Hawkins, but afterward brought a motion for reconsideration before Master Dash, arguing lack of notice, or alternatively, failure to attend through mistake or insufficient notice.  Master Dash confirmed the decision, and a further appeal to the Divisional Court was dismissed
At the Court of Appeal, the appellant argued that the “extension of time was improper because the statement of claim had expired due to the failure to effect service before the extension was obtained and that given the language of article 29, the claim had expired and could not be revived.” (at para. 7).
Master Hawkins had applied the decision in Brown v. Humble, [1959] O.R.  586 (C.A.) which dealt with a statutory limitation period.  According to the per curiam opinion (per Sharpe, Blair and Rouleau, JJA):
“…In common law jurisdictions, the expiry of a statutory limitation period does not extinguish the underlying claim, but rather creates a procedural bar to proceeding with the claim.  The appellant submits that the two-year period laid down by the article 29 has a fundamentally different character and that after two years, the claim is extinguished.  It follows, in the appellant’s submission, that when the statement of claim expired for want of service after the two year prescription in article 29 had expired, the Warsaw Convention claim was extinguished and there was nothing to revive.

[9]               We disagree.  In our view, once a claim is issued within the two-year limitation period, article 29 of the Warsaw Convention has been satisfied and the claim then falls to be governed by the procedure in the jurisdiction where the claim has been issued.  Any subsequent procedural requirements, including those relating to the time for service or renewal of the statement of claim, are governed by the Rules.  This is apparent from article 28(2) of the Warsaw Convention, which specifically provides that the procedure of the court seized of the claim governs.  Indeed, the very requirement that service must be effected within six months is provided for by the Ontario Rules, not by the terms of the Warsaw Convention.

The Court of Appeal concludes:

[11]          Applying the Rules of Civil Procedure and this court’s decision in Brown v. Humble does not violate any of the provisions of the Warsaw Convention – once the respondents complied with the requirement in article 29 that a claim be issued within the two-year period, they brought themselves within Ontario’s Rules.  Pursuant to those Rules and the jurisprudence governing them, the nunc pro tunc extension to the time for service did not amount to the bringing of a new claim; the claim had already been “intentée” and the time for service  of the existing claim was extended in accordance with Ontario procedure.  Accordingly, we see no error in the master’s application of the Ontario Rules, as interpreted by decisions of this court.
Recall that Article 29(2) of the Warsaw Convention states that: “The method of calculating the period of limitation shall be determined by the law of the Court seized of the case.”
 
However, section 23 of the Limitations Act, 2002, S.O. 2002, chapter 24, Schedule B, reads as follows: 
Conflict of laws
23. For the purpose of applying the rules regarding conflict of laws, the limitations law of Ontario or any other jurisdiction is substantive law.” 2002, c. 24, Sched. B, s. 23.
Section 23 of the Limitations Act, 2002, codifies the Supreme Court of Canada’s ruling in Tolofson v. Jensen; Lucas (Litigation Guardian of) v. Gagnon, [1994] 3 S.C.R. 1022 (S.C.C.) where the majority of the Supreme Court rejected the traditional common law position that characterized limitation periods as procedural in nature and held that, generally, limitation periods in the conflict of laws context should be treated as substantive in nature. 
Furthermore, the House of Lords in Sidhu v. British Airways, [1997] 1 All E.R. 193 preferred a uniform and exclusive approach to interpretation under the Warsaw Convention, noting at p. 212 that:
“The language used and the subject matter with which it deals demonstrate that what was sought to be achieved was a uniform international code, which could be applied by the courts of all the High Contracting Parties without reference to the rules of their own domestic law. The convention does not purport to deal with all matters relating to contracts of international carriage by air. But in those areas with which it deals—and the liability of the carrier is one of them—the code is intended to be uniform and to be exclusive also of any resort to the rules of domestic law.”
A similar approach was taken in another recent Ontario decision in Ashad v. Deutsche Lufthansa Aktiengesllschaft (Lufthansa German Airlines), 2009 CanLII 64820 (ON S.C.) which involved a motion by the defendant for dismissal or a stay of the action on the grounds that this court has no jurisdiction over the subject matter of the action. On or about April 20, 2006, the plaintiff was a passenger on the defendant’s Flight 503 from Sao Paulo, Brazil to Frankfurt, Germany. The plaintiff alleged that he suffered personal injuries as a result of unintentionally swallowing pieces of shredded glass that were in a fruit bowl served to him on board the flight.  The plaintiff commenced  (“brought”) the action on April 18, 2008, but served the defendant after the 2 year limitation period had expired. On May 30, 2008, the defendant delivered a statement of defence challenging the jurisdiction of the court.
In obiter, Pitt, J., writes,
“[59] The plaintiff waited until two days before the expiry of the limitation period to issue his claim. There is no evidence that the defendant conducted itself in any way prejudicial to the plaintiff’s position. As the statement of claim was served after the expiry of the limitation period, nothing the defendant did could have any impact on the limitation issue. That said, I am not persuaded that the plaintiff is without remedy. I note that he was represented by a solicitor in issuing the claim (who was not counsel on the motion).”
Nudge, nudge, wink, wink. In other words, sue your lawyer for missing the limitation period.
In another English case, Hall v. Heart of England Balloons Limited [2010] 1 Lloyds Rep 373, the defendant brought an application to strike out the pleading on the basis that once the right to damages under the Montreal Convention  (the successor to the Warsaw Convention) is extinguished, it cannot be resurrected by the application of a rule of civil procedure. In the Hall case, the plaintiff moved to correct a misnomer incorrectly naming the defendants. Just before the two-year limitation period expired, the defendant was named as “Heart of England Balloons Limited”. This defendant applied  to strike the proceedings, arguing that it could not be liable for the claimant’s accident, since it did not exist when the claimant suffered her accident on September 17 2006.

On 13 October 2009, the claimant applied for permission to amend the Particulars of Claim to name “Mr Gabb t/a Heart of England Balloons” as the defendant in the limited company’s stead. However, the limitation period under the Montreal Convention had expired by then. While the Civil Procedure Rules in England and Wales (CPR Part 17.4(3) and CPR 19.5) allows for amendment to a party’s statement of case or a change of name of a party after expiry of a limitation period, the court held that the limitation defense under the Montreal Convention was substantive, and that procedural rules cannot normally be used to remove substantive rights.Under these circumstances, to allow a procedural amendment would be in conflict with the express provision of the Montreal Convention.

The Mosregion decision is the rare instance where the adage “better late than never” actually applies.

Foreign arbitral awards subject to provincial limitation periods, Supreme Court of Canada rules: Yugraneft Corp. v. Rexx Management Corp.

May 20, 2010
In its decision released this morning, the Supreme Court of Canada in Yugraneft Corp. v. Rexx Management Corp.,2010 SCC 19 (S.C.C.) has ruled that the two-year limitation period under s.3 of Alberta’s Limitations Act governs when a party seeks the recognition and enforcement in Alberta of a foreign arbitral award.

By way of background, a dispute between Yugraneft Corporation (Yugraneft), a Russian company, and Rexx Management Corporation (Rexx), an Alberta company based upon Yugraneft’s claim for money paid to Rexx for equipment which Rexx failed to deliver. Yugraneft then commenced foreign arbitral proceedings against Rexx. On September 6, 2002, the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation made an award in favour of Yugraneft against Rexx in the amount of $952,614.43 USD.

Yugraneft then applied more than three years later pursuant to the International Commercial Arbitration Act (Alberta) for an order recognizing and enforcing the arbitral award in the province of Alberta. Rexx sought the dismissal of the application on the grounds that the limitation period had prescribed, or, alternatively, sought a stay pending resolution of a related RICO case pending in the U.S. which raised public policy defences that (1) Yugraneft had been fraudulently acquired by another company through corruption within the Russian judicial system; (2) forgery of shareholder meeting minutes, and (3) unlawful seizure of Yugraneft’s office by a “machine-gun toting private army”.

The application judge, Chrumka, J. rejected Yugraneft’s contention that there was no applicable limitation period for foreign arbitration awards based upon the definition of a “remedial order” in s.1(i)(i) of the Alberta Limitations Act, concluding that Yugraneft’s application was time-barred:Yugraneft Corporation v. Rexx Management Corporation, per Chrumka, J. at ¶¶’s 79-80.

Yugraneft appealed. On August 5, 2008, the Alberta Court of Appeal dismissed the appeal. Like the lower court judge, the Alberta Court of Appeal noted that since there are no comparable guidelines within the Model Law and the New York Convention, 1958 with respect to limitation periods, a foreign arbitral award, like a foreign judgment, was based upon a simple contract debt. As such, the action was statute-barred due to the expiry of the two-year limitation period set out in the Alberta Limitations Act.R.S.A. 2000, c. L-12, (as am): Yugraneft Corporation v. Rexx Management Corporation, 2008 ABCA 274 (CanLII).

Unlike most other Canadian provincial limitation statutes, the Alberta Limitations Act does not distinguish between substantive and procedural law and reads as follows:

Conflict of laws

12(1) The limitations law of Alberta applies to any proceeding commenced or sought to be commenced in Alberta in which a claimant seeks a remedial order.

(2) Notwithstanding subsection (1), where a proceeding referred to in subsection (1) would be determined in accordance with the law of another jurisdiction if it were to proceed, and the limitations law of that jurisdiction provides a shorter limitation period than the limitation period provided by the law of Alberta, the shorter limitation period applies.

Rothstein J. writing for the unanimous Court dismissed the appeal. The Court rejected the argument that foreign arbitral awards are not subject to a limitation period for enforcement purposes. The Yugraneft decision confirms previous Canadian jurisprudence that both foreign judgments and foreign arbitral awards are not automatically homologated and do not stand on equal footing with domestic judgments or domestic arbitral awards:

[49] Applying the limitation period set out in s. 3 is consistent with the overall scheme of Alberta limitations law. It also provides more generous treatment for foreign awards than for domestic awards and is therefore consistent with art. III of the Convention. The limitation period in s. 3 of the Limitations Act is subject to a discoverability rule, which is not the case for the time limit set out in s. 51 of the Arbitration Act governing domestic awards. This makes ample allowance for the practical difficulties faced by foreign arbitral creditors, who may require some time to discover that the arbitral debtor has assets in Alberta.

It is noteworthy that the two-year limitation period prescribed by section 3 of the Limitations Act (Alberta) incorporates a “discoverability” element, allowing for extension of the 2 year limitation period from the earlier of the dates on which the claimant either actually knew, or in the circumstances ought to have known, the necessary facts in relation to the putative claim. As Rothstein, J. explains:

[52] In order to determine whether a proceeding is time-barred, it is necessary to ascertain when the injury occurred. In the case of non-performance of an obligation, the question is when the non-performance occurred.

[53] In the context of a proceeding to recognize and enforce a foreign arbitral award, if non-performance is assumed to occur on the date the award was issued, Yugraneft would have commenced its proceeding in Alberta approximately 16 months after the two-year limitation period had expired. However, I do not think the date of the issuance of the award can normally be considered as the date of non-performance of the obligation to pay.

[54] The Model Law provides that a party to an arbitration has three months to apply to the local courts to have an award set aside, beginning on the day it receives the award (art. 34(3) — see Appendix A). At least until that deadline has passed, the arbitral award may not have the requisite degree of finality to form the basis of an application for recognition and enforcement under the Convention. If an award is open to being set aside, it may be considered “not binding” under art. V(1)(e) of the Convention (Blackaby and Partasides, at pp. 649-50). The same can be said when proceedings to set aside the award are under way. Thus, if an award originates in a Model Law jurisdiction, or one with analogous provisions concerning the setting aside of an arbitral award, an arbitral creditor would not know and would have no reason to think that recognition and enforcement proceedings are warranted on the very date the award is rendered. In those circumstances, the limitation period under s. 3 of the Limitations Act will not be triggered until the possibility that the award might be set aside by the local courts in the country where the award was rendered has been foreclosed.

[55] That would appear to be the case here. Russia is a Model Law jurisdiction, and there is no indication in the record before this Court that Russia modified art. 34 in its adoption of the Model Law (Award of the Russian ICAC (English translation), A.R., vol. 2, at p. 84). Thus, the courts of any State party to the Convention would be entitled to refuse to grant recognition and enforcement of the award at issue in this case until the three-month appeal period had expired; or, if an appeal was launched, until the appeal was concluded.

[56] Accordingly, it is my view that for the purposes of the Limitations Act, Rexx’s obligations under the award did not crystalize until three months after Yugraneft had received the award. The award was issued on September 6, 2002, and Yugraneft has provided no indication that it received the award at a later date. As a result, non-performance of its obligation to pay Yugraneft would not have occurred before December 6, 2002. This would suggest that Yugraneft had two years after December 6, 2002, to commence proceedings against Rexx in Alberta, meaning that its action, which was brought on January 27, 2006, was clearly time‑barred.

Two potential discoverability arguments that Yugraneft appears not to have raised are: (1) whether any potential prejudice arose from delays in enforcement efforts in Russia, or (2) the extent of Yugraneft’s knowledge of the location and exigibility of Rexx’s assets in Alberta. Justice Rothstein outlines the factors relevant to the discoverability inquiry as follows:

[60] Section 3(1)(a)(iii) provides that the limitation period will commence only once the plaintiff knew or ought to have known that the injury it received warrants bringing a proceeding. Thus s. 3(1)(a) ensures that the scheme created by the Limitations Act balances the interests of both plaintiffs and defendants. However, much like its counterpart in the B.C. Limitation Act at issue in Novak v. Bond, s. 3(1) measures the conduct of the plaintiff against an “objective” standard. Section 6(4) of the B.C. Act provides that the limitation period will not commence until the facts available to the plaintiff are such that a “reasonable person . . . would regard those facts as showing” that the plaintiff was a) able to bring a claim, and b) that the claim had a reasonable prospect of success. Section 3(1) of the Alberta Act does not refer to a “reasonable person” and its discoverability criteria are not identical with those in s. 6(4) of the B.C. Act. However, it does subject the knowledge elements of its discoverability rule to an objective test: the plaintiff must know or “ought to have known” the elements that trigger the running of the limitation period. Thus, constructive or imputed knowledge, in addition to actual knowledge, will trigger the limitation period.

[61] Section 3(1)(a)(iii) therefore allows the courts to consider aspects of an arbitral creditor’s circumstances that would lead a reasonable person to conclude that there was no reason for the arbitral creditor to know whether proceedings were warranted in Alberta. For example, it is not infrequent for the parties to an international arbitration to have assets in a number of different states or jurisdictions within a federal state. An arbitral creditor cannot be presumed to know the location of all of the arbitral debtor’s assets. If the arbitral creditor does not know, and would have no reason to know, that the arbitral debtor has assets in a particular jurisdiction, it cannot be expected to know that recognition and enforcement proceedings are warranted in that jurisdiction. Thus, in my view, recognition and enforcement proceedings would only be warranted in Alberta once an arbitral creditor had learned, exercising reasonable diligence, that the arbitral debtor possessed assets in that jurisdiction.

[62] Nevertheless, a delay on this account would not be open to Yugraneft in this case. The contract entered into by Yugraneft and Rexx on October 1, 1998, indicates that Rexx was identified as an Alberta corporation (Contract No. 157, A.R., vol. 2, at p. 41). An arbitral creditor might well not be expected to know every location in the world in which an arbitral debtor might have assets, but this cannot be said of the jurisdiction where the debtor is registered and where its head office is located. In such circumstances, Yugraneft has not claimed and could not claim that it did not know or ought not to have known that a proceeding was warranted in Alberta at the time of (or indeed earlier than) the expiry of the three-month appeal period following receipt of notice of the award.

[63] Thus, I have no difficulty concluding that even taking into account the discoverability rule in s. 3(1)(a) of the Limitations Act, Yugraneft’s proceedings are time-barred.

Implications of the Yugraneft Decision in Ontario

Under Ontario law, a foreign judgment is simply evidence of a contract debt and must be sued upon as an “action on the case”. The old limitation period for a “specialty” (i.e. a domestic judgment) was twenty (20) years, however, the Ontario Court of Appeal held that a “foreign judgment” was not equivalent to a domestic judgment unless there was reciprocal enforcement legislation from the originating jurisdiction which granted judgment. Therefore, the old limitation period in Ontario was six (6) years, but was only triggered when the judgment debtor returned to Ontario. Lax v. Lax (2004) 70 O.R. (3d) 520 (Ont. C.A.).This exception has limited application in circumstances where the debtor has no physical presence in Ontario, but simply has assets there. In any event, the new limitation period for most actions commenced after December 31, 2003 in Ontario is now two (2) years, a relatively short time to sue. By contrast, in the US, the Federal Arbitration Act lays down a time-limit of three years for the confirmation and enforcement of awards made under the New York Convention:Alan Redfern and Martin Hunter (with Nigel Blackaby and Constantine Partasides), Law And Practice Of International Commercial Arbitration, (4th Ed.-Student Version) (London: Sweet & Maxwell, 2004), Chap. 9, at §9-46, p.508.

This is further complicated by some drafting ambiguity in the Limitations Act, 2002 (the “Limitations Act, 2002”) which omits reference to the ICAA (incorporating the Model Law). Furthermore, the New York Convention is silent on limitation periods, which is a substantive issue to be determined by the either the lex arbitri or the lex fori (at least in Canada and the US). The following are relevant excerpts from the Limitations Act, 2002 and the Model Law (as incorporated by the domestic enabling legislation):

Limitations Act, 2002, S.O. 2002, c. 24, Sched. B

No Limitation Period

No limitation period

16. (1) There is no limitation period in respect of,

(a) a proceeding for a declaration if no consequential relief is sought;

(b) a proceeding to enforce an order of a court, or any other order that may be enforced in the same way as an order of a court;

(d) a proceeding to enforce an award in an arbitration to which the Arbitration Act, 1991 applies;

International Commercial Arbitration Act, R.S.O. 1990, c. I.9

10. For the purposes of articles 35 and 36 of the Model Law, an arbitral award includes a commercial arbitral award made outside Canada, even if the arbitration to which it relates is not international as defined in article 1 (3) of the Model Law. R.S.O. 1990, c. I.9, s. 10.

Enforcement

11. (1) An arbitral award recognized by the court is enforceable in the same manner as a judgment or order of the court. R.S.O. 1990, c. I.9, s. 11 (1).

Idem

(2) An arbitral award recognized by the court binds the persons as between whom it was made and may be relied on by any of those persons in any legal proceeding. R.S.O. 1990, c. I.9, s. 11 (2).

The Ontario Limitations Act, 2002 refers only to the domestic arbitration statute, namely, the Arbitration Act, 1991, S.O. 1991, c. 17 (as am.) but fails to refer to the international domestic statute, namely, the ICAA. The statutory interpretation argument that the interplay and combined effect of section 16(b) of the Limitations Act, 2002 and section 11(1) of the ICAA, means that, in Ontario, no limitation period applies to the enforcement of a foreign arbitral award will not likely succeed following Yugraneft.

Unless and until there is federal and/or inter-provincial legislative reform to harmonize or unify the law of limitations for both foreign judgments and foreign arbitral awards, a party seeking recognition and enforcement of a foreign arbitral award in an Ontario court is well advised to commence an application to enforce the final arbitral award within the new two (2) year limitation period, subject to any discoverability issues.


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