Whither “Special Circumstances”?

Posted on July 24, 2007 by Stephen Cavanagh

UPDATE: A number of readers have inquired about the outcome of the motion in which our firm is involved and which is referred to in this post. The motion did begin, but the judge hearing it decided that he had a conflict of interest which prevented him from ruling on it. As a result, the motion was adjourned to be heard towards the end of this year. However, our office has another motion, dealing with s. 21(1) of the Limitations Act, 2002, to be heard next month. As well, readers have advised us of several such motions proceeding in Toronto this fall. So, this issue will probably be considered in several decisions before the end of the year. We’ll keep you posted. 

Just when it looked like it was clear that s. 21(1) of the Limitations Act, 2002 had ended the court’s power to add a defendant after the expiry of a limitation period, a new decision by Justice C. Raymond Harris has raised the question again. The decision also contained a discussion of “misnomer”, an issue which is undoubtedly alive and well under the Limitations Act, 2002.

In Scott v. Driver, the plaintiff had been one link in a chain-reaction series of rear-end motor vehicle collisions. She sued “John Driver” and “Fred Owner”. After the two-year limitation had passed, the plaintiff moved to substitute a real person (“Amy Rouillard”) in place of these fictitious names.

Justice Harris had no difficulty in finding that the requested amendment did not amount to the correction of a misnomer:

The accident involved multiple vehicles and drivers and it was not clear which one(s) were to be captured by the fictitious names used. Indeed, by the affidavit evidence presented, it appears the operator of Car 2 was involved in the suit at a preliminary stage, presumably under the “John Driver” umbrella. For John Driver to now refer to Ms. Rouillard indicates that John Driver is a “moving target”. Ms. Rouillard would not necessarily know, on reading the statement of claim, that she was the intended defendant. See: Kitcher v. Queensway General Hospital, [1997] O.J. No. 3305 (C.A.); Dukoff et al. v. Toronto General Hospital et al. [1986] O.J. No. 188.

His Honour held though, that the plaintiff could still obtain leave to add Ms. Rouillard as a defendant, notwithstanding that expiry of the limitation period, if he could demonstrate an absence of prejudice and the existence of “special circumstances”.

On the facts of this case, His Honour determined that special circumstances had not been established and so, he refused the amendment. But it seems to us that there is a more fundamental question: could Justice Harris have granted the amendment even if he had found that “special circumstances” had been proved?

We recently posted a comment about Meady v. Greyhound Canada Transportation Canada Ltd., in which Justice George Smith held that s. 21(1) of the Limitations Act, 2002 no longer permits courts to add defendants to proceedings after the expiry of a limitation period, except to correct a misnomer. Section 21 reads as follows:

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.

(2) Subsection (1) does not prevent the correction of a misnaming or misdescription of a party.

Smith J. also said that this section applies to motions to amend brought after January 1, 2004.

Inexplicably though, there have been several decisions handed down since January 1, 2004, in which courts have proceeded on the basis that they still have the power to add defendants after the expiry of a limitation period, provided “special circumstances” are present. In each such case, section 21 has not been referred to in the reasons, leading to the inference that the section’s effect was simply not argued. Scott v. Driver is another such decision.

Our office will be arguing a motion next week, in which s. 21’s applicability is a central issue. So, one way or the other, this issue should be clarified soon.

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Master Says Communications with Paralegal Are Privileged (in this case, at least)

Posted on July 24, 2007 by Stephen Cavanagh

In what is apparently the first case to consider the issue, Master R. Dash has held that communications passing between a paralegal and his client were privileged from production in a civil action. The case is an interesting one, partly because of the finding that the communications in this case were protected by privilege but also because of the master’s careful analysis of the principles underlying privilege generally and how paralegals fit into that body of law.

The plaintiff in Chancy v. Dharmadi is suing for damages to compensate her for personal injuries suffered in a motor vehicle accident. The defendant had been charged with careless driving under the Highway Traffic Act and had retained POINTTS to represent her in relation to that charge. She ended up pleading guilty to a lesser offence.

(POINTTS is an acronym for “Provincial Offences Information and Traffic Ticket Service”, a company which markets itself as “The Traffic Ticket Specialists”.)

In this civil action, the plaintiff sought production of “the complete POINTTS file”. Counsel for the defendant refused, claiming that the file was privileged. The issue on this motion was whether a claim for privilege could validly be asserted by a paralegal.

Master Dash had already ruled, at a previous hearing, that (a) the question was relevant and (b) that litigation privilege did not apply (since the charge had been disposed of, thus ending the privilege).

The Master began by noting that privileged relationships can be of two types: “class privilege” which protects certain well-defined types of relationships, such as solicitor and client, and other relationships, not inherently protected by privilege but which may, on a case by case basis, give rise to privilege:

If a communication is made between parties that are covered by a class privilege, the communication will be excluded without satisfying the Wigmore criteria and it is up to the party seeking production to prove an exception. If it is not covered by a class privilege, the communication will not be excluded unless the party asserting privilege satisfies the Wigmore criteria on a case-by-case basis.

(“The Wigmore criteria” are four factors propounded by an American legal scholar as a test for determining whether privilege should be found to exist in a particular case.)

The Master felt that many of the same rationales that underlie solicitor-client privilege could also apply to the relationship between a paralegal and his/her client. However, he identified a basic problem: what is a paralegal? This was key because, as the Master said, “it is critical for recognition of a class that the participants in that class are specific identifiable actors”.

(The Access to Justice Act, 2002, will regulate paralegals in Ontario but those legislative reforms have not yet taken effect. It is expected that the first licences to paralegals will be issued next year.)

The Master concluded that “there is no principled reason why a class privilege should not be extended to paralegal-client communications, however it must be restricted to communications with an identifiable group, namely paralegals licensed by the Law Society. Since the paralegal with whom the defendant communicated was not a licensed paralegal, no class privilege can be said to apply.” He declined to find that the defendant’s communications with the POINTTS paralegal gave rise to a class privilege.

However, applying the Wigmore criteria, he was satisfied that a finding of privilege should be made in this particular case. The four factors are as follows:

  1. The communications must originate in a confidence that they will not be disclosed.
  2. This element of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties.
  3. The relation must be one which in the opinion of the community ought to be sedulously fostered.
  4. The injury that would inure to the relation by the disclosure of the communications must be greater than the benefit thereby gained for the correct disposal of litigation

Master Dash’s analysis of each of these factors has not been summarized here, but he found that all four requirements had been met on the facts of this case. Accordingly, even though the POINTTS file was not protected by a class privilege, it did qualify for privilege on the “case by case” approach of the Wigmore criteria.

The Master left the door (wide) open for the question of class privilege for paralegals to be revisited once the new system has gotten underway:

Once licensing of paralegals is in effect, the court may in an appropriate case revisit the idea of granting a class privilege to communications between a client and a paralegal licensed by the Law Society to provide legal services (paralegal-client privilege), rather than requiring the court to engage in a case-by-case analysis respecting each such communication.

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Impairment “Permanent”, “Important”, But Not “Serious”

Posted on July 13, 2007 by Stephen Cavanagh

In Kourtesis v. Joris, Mr. Justice Edward R. Brown dismissed an action for damages arising out of a motor vehicle accident that occurred during the “Bill 59” regime of the Insurance Act. He held that the plaintiff’s chronic pain injuries did not rise to the level of the threshold under s. 267.5(5) because the impairment resulting from them was not “serious”. He did think that the other elements of the threshold test had been met.

This action had proceeded to trial, where the jury had awarded general damages for non-pecuniary loss in the amount of $45,000 and $25,000 for future income loss. A threshold motion was brought. Justice Brown reviewed the caselaw and concluded that, in deciding that motion, he was not bound by the jury’s decision. However, he said that “[i]t is desirable that there be a reasonable relationship between the verdict of the jury and my conclusion, and I test my conclusion in that context.”

His Honour’s discussion of the jurisprudence provides a useful summary of the law governing the assessment of threshold issues.

Although he agreed with counsel for the plaintiff, that the impairment resulting from the plaintiff’s chronic pain condition was permanent and that it affected an important physical, mental or psychological function, it was not serious. He found that the plaintiff was still “able to do the usual tasks and activities of daily living and to have the usual enjoyment of life”.

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Insurer Owes No Duty to Defend Additional Named Insured When It is Already Defending Named Insured

Posted on July 13, 2007 by Stephen Cavanagh

Madam Justice Nancy M. Mossip has refused to order an insurer to undertake, in whole or in part, the defence of an additional named insured. She reasoned that since the insurer was already defending its named insured, there was no basis for it to also have to defend the additional named insured in relation to its vicarious liability for the actions of the named insured.

In D’Cruz v. B.P. Landscaping Ltd. and Peel Housing Corporation, the plaintiff had slipped and fallen on property owned by Peel Housing. She sued the latter and its winter maintenance contractor, B.P. Landscaping. The contract between B.P. Landscaping and Peel Housing required that Peel Housing be added to B.P. Landscaping’s insurance policy as an additional named insured. This was done.

B.P. Landscaping’s certificate of insurance with Citadel Insurance provided that, “[t]he Regional Municipality of Peel and/or Peel Housing Corporation – O/A Peel Living have been added as additional insured’s [sic], but only with respect to their interest in the operation of the named insured.)”

On this motion, Peel Housing asked that the court rule that Citadel was obliged to defend and indemnify Peel Housing in relation to the plaintiff’s claims. It argued that because Citadel was obliged to defend it in relation to the acts of B.P. Landscaping, it must also defend Peel against other claims that were unrelated to actions of B.P. Landscaping. In other words, Peel Housing submitted that once the duty to defend had been triggered in relation to some of the claims against it, Citadel was obliged to defend all of the claims.

Justice Mossip dismissed the motion. She reasoned that because Citadel was already defending B.P. Landscaping (a co-defendant in the action) in relation to the allegations that had been made against it, there was no need for it to defend Peel Housing separately for Peel’s vicarious liability arising out of those same allegations. She said:

[16] It seems clear to me that there are separate and distinct claims of liability against Peel Housing set out in the Statement of Claim and which are unrelated to the acts covered in B.P. Landscaping’s insurance policy which are presently being defended. There is no need for Citadel to defend Peel Housing’s liability arising from B.P. Landscaping’s alleged negligence in winter maintenance; they are already doing that.

[17] Peel Housing’s operations themselves have to be defended by their own insurance company. Peel Housing has duties as an occupier that need to be defended in the main action. These are stand alone duties to any person on their property which Citadel has no duty to defend.

[18] Peel Housing is covered for the negligence of B.P. Landscaping with respect to winter maintenance as a named insured in that policy, but that is all. Their coverage for that negligence is presently defended by Citadel. They are not covered, as a named insured in that policy, for acts of negligence against the operations of Peel Housing itself as an occupier. That is no doubt covered by Peel Housing’s own policy of insurance, which premium would be based on that assessed risk.

If this decision is sound, one might wonder what benefit Peel Housing obtained by having contracted with B.P. Landscaping, to have itself included in Citadel’s policy as an additional named insured. It seems to us that the only benefit would be if the plaintiff had chosen not to sue B.P. Landscaping. In that case, presumably Mossip J. would have concluded that Citadel owed Peel Housing a duty to defend, at least in relation to claims against Peel Housing that were based on its responsibility for acts of negligence of B.P. Landscaping.

However, as a result of this decision, where both the named insured and the additional insured (“named” or otherwise) have been sued, it does not appear that the latter would get any benefit from being a named insured. Justice Mossip’s reasons make it sound like it was only necessary to defend the allegations of negligence on the part of B.P. Landscaping once. But in fact, B.P. Landscaping had to defend itself against those allegations and then Peel Housing also had to incur its own legal expense to defend itself against its potential vicarious liability for those same allegations.

Thus, it seems to us that Her Honour was wrong to conclude that just because B.P. Landscaping was already defending itself, Citadel owed no duty to defend the additional named insured, Peel Housing.

Arguably, this was a case of overlapping coverage (between Citadel and Peel’s own insurer), such that the appropriate disposition might have been to allocate the defence costs of Peel Housing between those two insurers. We can’t tell from the reasons of Mossip J. whether this issue was argued.

This decision also reminds us how important it is to draft additional insured endorsements properly. The wording of these endorsements is not uniform and varies from one company to another. This particular version was not very clear. What does it mean to say that Peel Housing was an insured under Citadel’s policy, but only with respect to Peel’s interest in the operation of B.P. Landscaping? What does “interest in the operation of” even mean?

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Jolly Jurist Juxtaposes Jocosely in Judgment

Posted on July 4, 2007 by Stephen Cavanagh

Mr. Justice David M. Brown hasn’t been a judge for very long (he was appointed to the Superior Court on September 14, 2006). Maybe he hasn’t lost his sense of humour. Or maybe the opposite is true: the job is already getting to him and he is desperately searching for something to relieve the tedium.

Whatever the explanation, we were struck by the opening words of his June 29, 2007 decision in Caneast Foods Limited v. Lombard General Insurance Company of Canada:

Pickle production was at its peak at the plaintiff’s processing plant when the power petered out in the great blackout of August 14, 2003.

Tailed off a bit there, towards the end, but not bad. Almost Denning-esque…

The actual case involved an insurance coverage dispute under a property policy. Caneast Foods, the insured, is a pickle manufacturer. It experienced a shutdown of its plant for 4-5 days due to the “great blackout” which most of us in eastern Ontario remember well. Much of Caneast’s inventory spoiled. It incurred clean-up costs and loss of profits, for all of which it made a claim to its insurer, Lombard.

Lombard denied the claim based on an exclusion in its policy for loss or damage caused directly or indirectly by “mechanical or electrical breakdown or derangement in or on the premises”.

(Justice Brown was particularly well-suited to decide this case. When he was in practice, he was listed for a number of years in LEXPERT’s “Leading 500 Lawyers in Canada”, as an expert in electrical energy.)

His Honour considered two previous decisions in similar cases, involving insurance disputes arising out of “the great blackout”. These were Fresh Taste Produce Ltd. v. Sovereign General Insurance Co. and 942325 Ontario Inc. v. Commonwealth Insurance Company. He concluded that those cases had turned on a “change of temperature” exclusion and that the Court of Appeal “has not yet opined on the interpretation of the language of the Mechanical Breakdown Exclusion in the circumstances of the Blackout”. He proceeded to undertake his own analysis.

Justice Brown felt that it was inapposite to describe what happened to the insured here as a “breakdown”. According to his reasons, he asked counsel whether a television set that went off during a blackout and then came back on when power was restored could be said to have “broken down”. Counsel for Lombard said that yes, he would consider that to have been a twenty-minute “breakdown” of the television. However, Justice Brown did not agree. In his view, a “breakdown” ordinarily denotes some problem internal to the machinery, not an external condition such as loss of electrical power. He referred to some caselaw that supported that interpretation.

Likewise, he considered that this was not a “derangement”. He thought that this term too referred to “some problem or defect internal to a piece of equipment”.

Accordingly, His Honour ruled that the exclusion in Lombard’s policy did not apply and the claim was covered.

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Death Benefits Not Deductible from Tort Damages

Posted on July 3, 2007 by Stephen Cavanagh

In brief supplementary reasons, given in Wright v. Hannon (the original reasons for judgment can be accessed here), Mr. Justice Randall S. Echlin held (or perhaps “confirmed” would be a better word), that statutory accident death benefits are properly characterized as “non-pecuniary” payments and so, are not deductible from an award of tort damages. Such benefits are, he said, “paid ‘in recognition of the values of life’ and therefore are clearly not deductible.” He felt that this issue had already been determined by the 2002 decision of Justice Spiegel in Di Girolamo v. Smolen. (That decision was also applied, to similar effect, in the 2004 case of Carter v. Sanders.)

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Defence Counsel Praised for High Quality of Work but Judge Says Law Clerks Should Have Been Used More

Posted on July 3, 2007 by Stephen Cavanagh

In 1175777 Ontario Limited v. Magna International Inc., Madam Justice Carolyn J. Horkins of the Ontario Superior Court had to fix costs following a 14-day trial in which she had found for the defendants.

The plaintiff had sued Magna and its principals (including Frank Stronach) for $35 million, alleging that they had breached a contract to have the plaintiff build a factory for one of Magna’s subsidiary companies. The plaintiff also claimed that Mr. Stronach had conspired to injure it by arranging to have the plant built by one of the plaintiff’s competitors.

Justice Horkins dismissed the action. Counsel for the defendants sought costs on a substantial indemnity basis, in the amount of $528,307.12 for fees, plus disbursements of $319,130.32 and GST.

The plaintiff challenged the costs on a number of bases. It argued that the defendants should be limited to costs on a partial indemnity scale and that the award be much less than the amount claimed. In the course of her detailed reasons, Justice Horkins provided useful insight into the principles that will guide the courts in fixing costs in such cases. She criticized counsel for the plaintiff for spending too little time on the case. But she also observed that counsel for the defence should have delegated to law clerks some of the work that had been done by junior lawyers.

Substantial indemnity costs

The defence sought costs on the higher scale because the plaintiffs had pursued a claim for “conspiracy to injure”. Horkins J. said that while substantial indemnity costs are the exception and not the rule, such awards are not limited to cases in which allegations of fraud have been made. She reviewed a number of authorities that supported this view and concluded that, “[u]nfounded allegations of improper conduct are equally capable of attracting substantial indemnity costs, particularly when the allegations are seriously prejudicial to the character or reputation of the individual.”

Applying these principles to this case, Her Honour felt that substantial indemnity costs were warranted.

Complexity

Although the liability issue in this case was only of average complexity, Justice Horkins considered that, “[o]n a scale of one to ten, with ten being the most complicated, this damage claim was a ten.”

Her Honour praised the work of counsel for the defence. She said that the defendants’ case was “thoroughly planned and focused” and resulted in a trial of relatively short duration.

Comparison of time spent by counsel for both sides

Justice Horkins requested time dockets and invoices from the lawyers for both sides. She acknowledged that the legal fees incurred by the losing party were a relevant factor to consider under Rule 57.01, when assessing the reasonableness of the fees claimed by the winning side. In this case, there was a marked discrepancy between the fees charged to the two sides: $650,000 by counsel for the defendants and about $250,000 by counsel for the plaintiff.

Justice Horkins compared the time spent by both sides at various stages of the litigation. Interestingly, she actually criticized counsel for the plaintiff for spending too little time on such tasks as preparation for discoveries and for trial.

She did not think that the time spent on the plaintiff’s case provided her with much assistance as to what was “reasonable”.

Continue reading →

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C.A Says Underinsured Auto Endorsement Does Not Cover Accident in Jamaica

Posted on July 3, 2007 by Stephen Cavanagh

In Pilot Insurance Company v. Sutherland, the Court of Appeal (Justices Rosenberg, Gillese and Lang) allowed an appeal from a decision of Madam Justice Margaret Eberhard of the Superior Court. Her Honour had held that a territorial limitation contained in a standard Ontario Automobile Policy was not specifically stated to apply to underinsured coverage. She went on to conclude that since any ambiguity in the policy language had to be construed against the insurer, the underinsured coverage must respond to a claim in which Plot’s insured (Sutherland) had been left a quadriplegic as a result of an accident in Jamaica.

In essence, the insured had argued that because the Ontario Policy Change Form 44R Endorsement (optional underinsured coverage) does not include an explicit territorial limitation (as does the compulsory uninsured auto coverage), no such restriction in coverage can be inferred. Eberhard J. accepted this argument, but the Court of Appeal did not.

Writing for the Court, Justice Susan Lang said that while it would have been possible for the underinsured endorsement to make its own specific provision for its territorial application, it did not do so. Instead, the endorsement said, in s. 22, that “Except as otherwise provided in this change form, all limits, terms, conditions, provisions, definitions and exclusions of the Policy shall have full force and effect.” The standard auto policy did contain a territorial limitation, restricting its effect to Canada, the United States and certain other jurisdictions, not including Jamaica. The Court of Appeal was satisfied that this provision had been incorporated into the underinsured coverage.

(The Court noted that “since the release of the motion judge’s decision in this case, another Superior Court judge has determined that the Policy’s territorial limitation applies to underinsured coverage” and cited a decision of Mr. Justice Larry Morin in Radu v. Hartford Fire Insurance. However, that case was in fact decided in 1997, some nine years before the ruling of Justice Eberhard in the present case. Justice Morin died several years ago.)

The Court of Appeal also found no ambiguity between the underinsured endorsement and the Insurance Act. Section 243 of the Act sets out a territorial limitation on coverage for the standard auto policy. Rather, Justice Lang said that “[s]ince the Act neither precludes additional underinsured coverage nor prohibits a territorial limitation, at most it can be said that the Act is silent on the issue. In this case, silence does not amount to a conflict. There is no reason to infer that a territorial limitation is prohibited for underinsured coverage from the fact that one is mandatory for uninsured and unidentified coverage.”

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Settlement Agreements to be Evaluated Objectively, Not Subjectively: C.A.

Posted on July 3, 2007 by Stephen Cavanagh

In Olivieri v. Sherman et al., the Court of Appeal today allowed an appeal from a decision of Justice Colin Campbell, in which His Honour had refused to enforce a settlement of a defamation suit, involving claims for millions of dollars. The ostensible settlement had taken place at a mediation held in November, 2004. The terms of a counter-offer by the defendants were set out on several pages of a large “flip chart”. They included a “non-disparagement” provision.

The plaintiff accepted the counter-offer within the 48 hour “window” provided for in the proposal. However, a considerable amount of time then passed with no communication between the parties. On October 31, 2005, the plaintiff’s solicitor advised counsel for the defendants that the plaintiff was in a position to complete the settlement. The defendants then took the position that there was no settlement, as they claimed that the plaintiff had continued to disparage them after the mediation. They also contended that the terms of the counter-offer that had been written on the flip chart were an outline of an agreement only and were subject to further documentation.

The plaintiff brought a motion to enforce the settlement and that motion was dismissed by Justice Campbell. He concluded that there had been no “meeting of the minds” about the meaning of “disparage”. He felt that the parties, particularly the defendants, believed that there would be a more detailed description, in other documentation, of what constituted disparaging conduct.

The Court of Appeal (Justices Rosenberg, Gillese and Lang) allowed the plaintiff’s appeal and ordered that the settlement be enforced.

Writing for the Court, Gillese J.A. said that “a settlement agreement is a contract” and that “for a concluded contract to exist, the court must find that the parties: (1) had a mutual intention to create a legally binding contract; and (2) reached agreement on all of the essential terms of the settlement”.

Here, there was no doubt that the first requirement was met, given the context in which the flip-chart counter-offer had arisen (at a mediation). The issue was whether the second part of the test could be satisfied.

Justice Gillese said that Campbell J. had made an error in principle in the way that he had evaluated the settlement agreement. He had mistakenly relied on evidence from the defendants as to what had been going through their minds at the mediation. There was no evidence that the defendants’ subjective concerns had been conveyed to the plaintiff.

Instead, said Gillese J.A., Justice Campbell should have made his ruling based on an objective reading of the flip-chart counter-offer. According to the Court, that approach led to the conclusion that the counter-offer was straightforward and unconditional.

Justice Gillese went on to say that because the policy of the courts is to encourage settlement, the courts “‘should not be too astute to hold’ that there is not the requisite degree of certainty in any of an agreement’s essential terms”.

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Section 21 of Limitations Act, 2002 Doesn’t Permit Addition of Defendants After Prescription

Posted on June 29, 2007 by Stephen Cavanagh

In an important new decision, Mr. Justice George P. Smith has become the first judge (so far as we know) to consider in detail the effect of s. 21(1) of the Limitations Act, 2002. He has found that s. 21(1) now prevents the addition of parties after the expiry of a limitation period. Although his decision also addresses the former law (Rules 5.02 and 26.01 of the Rules of Civil Procedure and the jurisprudence dealing with “special circumstances”), his reasons make it clear that he was responding to an argument made in the alternative.

In Meady v. Greyhound Canada Transportation Corp., the plaintiffs had been injured in a December, 2000 bus crash. They alleged that one Davis had caused the accident by seizing the steering wheel of the bus. Before the two-year limitation period had expired, one of the defendants had added as a third party a physician who, it was alleged, had been negligent in treating Davis. In particular, it was alleged that the physician had been negligent in prescribing Dexedrine to Davis. The doctor defended both the third party action and the main action. In late 2006, the plaintiffs moved for leave to amend their claim, to add the doctor as a defendant in the main action. Counsel for the physician opposed the motion on the basis that the claim was prescribed and that s. 21(1) of the Limitations Act, 2002 prevented the plaintiffs from adding a new party after the limitation period had passed. In the alternative, counsel for the doctor argued that if the old law of “special circumstances” still applied, no special circumstances existed here to warrant the addition of a party after the expiry of the limitation period. The decision is under appeal.

Section 21(1) of the Limitations Act, 2002

Section 21(1) of the Act reads as follows: “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.” Justice Smith reviewed some of the consulting reports that led to the passage of the present legislation. In particular, he referred to a 1989 submission by the Canadian Bar Association—Ontario, commenting on the addition of parties after the expiry of a limitation period. The paper criticized the former practice as “one of the greatest areas of uncertainty in the present law”. One of the issues in the case was the fact that the doctor was already a party in the suit, having been sued as a third party. However, Smith J. held that this circumstance made no difference to the application of s. 21(1):

Had the legislature intended to exclude from the operation of s. 21(1) of the Act those situations where the proposed defendant is already a third party it would have said so.

…

The fact that one party (the Crown) has commenced a proceeding (the third party claim) prior to the expiration of the former limitation period and before the “effective date” (January 1, 2004) does not mean that the Act does not apply to a different party (the Plaintiffs) attempting to advance a similar claim against the same person after January 1, 2004 and after the former limitation period has expired.

His Honour then said, “I find that the Plaintiffs are statute-barred and cannot add Dr. James as defendant at this late date.” Finally, on this point, he rejected the plaintiffs’ argument, that applying s. 21(1) to this case would amount to giving retrospective effect to the legislation. He said, “I am not persuaded by this argument. The Act came into force on January 1, 2004. The Plaintiffs’ motion to add Dr. James was commenced in October 2006. There can be no retrospective application of the legislation in these circumstances.”

We have one small quibble with Justice Smith’s reasons. At paragraph 24, he said, “My reading of s. 21(1) of the Act is that the legislature intended to prevent claims of this nature which attempt to add a party to an existing proceeding (the main action) where the limitation period has expired before January 1, 2004.” [Emphasis added] In our view, this must have been a slip by Justice Smith. Section 21(1) prevents the addition of a party to an existing proceeding where the limitation period has expired, no matter when that event occurred. If the above-quoted passage were accurate, s. 21(1) would, for example, have no application to any cause of action accruing after the Limitations Act, 2002 came into force. It seems quite unlikely that this is what was intended by the legislature.

Although Smith J. concluded his analysis of s. 21(1) by saying, “the question remains whether the Rules of Civil Procedure and common law allow the Plaintiffs to add Dr. James after the expiration of a limitation period”, we have confirmed with counsel for the moving party, that the submissions dealing with the former law of “special circumstances” were made in the alternative to the s. 21(1) argument. Despite the fact that His Honour’s use of the phrase, “the question remains” might suggest otherwise, paragraph 3 of his reasons makes it clear that he considered the law of “special circumstances” only in the alternative to his finding that the addition of the doctor as a party was barred by s. 21(1). In his consideration of “special circumstances”, Justice Smith found that if the law laid down by such cases as Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 56 O.R. (3d) 768 (C.A.) still governed, the plaintiffs would have failed to make out “special circumstances” here. He reached this finding largely on the basis that the plaintiffs had made a deliberate decision not to sue the doctor within the limitation period.
Justice Smith’s ruling is quite significant. So far as we know, his is the first Ontario decision to have considered s. 21(1) in any detail. (In Pepper v. Zellers Inc. 2005 WL 5085667 (Ont. S.C.J.), 2005 CarswellOnt 9919, Justice Gordon Killeen expressed a similar view of the effect of that section, but did so almost in passing. He said that s. 21(1) “clearly precludes” a party being added “at this late date”. The decision was reversed on other grounds by the Court of Appeal, with no mention of s. 21(1).

We will post any information about the progress of the appeal of Justice Smith’s decision as soon as we receive it.

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