Section 5(1)(a)(iv) of the Limitations Act, 2002: When Alternate Means of Recovery Delays the Running of the Clock
June 7, 2017
In the recent decision of Presidential MSH Corporation v Marr Foster & Co LLP, 2017 ONCA 325, the Ontario Court of Appeal further clarified the discoverability principle pursuant to section 5 of the Limitations Act, 2002 with respect to the “appropriate means” element. Specifically, a proceeding may not be “legally appropriate” as required under section 5(1)(a)(iv) to commence the limitation period until after an alternate means of recovery has been exhausted.
In this case, Presidential MSH Corporation (“Presidential”) appealed the Order of Justice Dunphy dated July 6, 2016 granting the respondents summary judgment on the ground the action was statute-barred. The respondents, Presidential’s former accountant and his firm, filed the appellant’s corporate tax returns past their deadline. As such, the Canada Revenue Agency (“CRA”) denied the appellant available tax credits by Notice of Assessment in April, 2010, causing the appellant to suffer damages of approximately $550,000 in unpaid taxes, interest and penalties. Presidential retained a tax lawyer to appeal the CRA assessment who was assisted in that endeavour by the respondents.
During the CRA appeal process, Presidential did not commence a claim against the respondents for professional negligence. The CRA confirmed the assessments disallowing the tax credits in July, 2011, being approximately 15 months after Presidential received its Notice of Assessment. Ultimately the appellant issued its statement of claim against the respondents on August 1, 2012, which claim was declared statute-barred on the respondents’ motion for summary judgment.
The Ontario Court of Appeal overturned the lower court’s summary judgment decision on the basis the appellant did not and ought not to have known that its proceeding against the respondents was “legally appropriate” in April, 2010 when it first received the CRA assessments. Rather, Justice Pardu of the Court of Appeal held the limitation period began when the CRA advised the appellant in May, 2011 that it intended to confirm its initial assessments. The Court of Appeal also found the motion judge erred in his reasons by “equating knowledge that the defendants had caused a loss with a conclusion that a proceeding would be an appropriate means to seek a remedy for the loss.”
In determining when a proceeding would be “legally appropriate”, the Court of Appeal relied on a series of its prior decisions involving delays in commencing the limitation period in the following circumstances:
- When alternate dispute resolution processes dictated by statute have not been fully exhausted: 407 ETR Concession Company v Day, 2016 ONCA 709
- When professional advisors or experts attempt to ameliorate the loss caused by their professional negligence: Brown v Baum, 2016 ONCA 325; Chelli-Greco v Rizk, 2016 ONCA 489
Therefore, it would appear the limitation clock may be suspended while some alternate means of recovery is pursued, although not indefinitely as the Court of Appeal reaffirmed that the date on which “that alternative process has run its course or is exhausted must be reasonably certain or ascertainable by a court.”