The latest on limitations

The latest on limitations
From time to time through this space, I have brought readers up to speed on the latest rulings from the Ontario courts on limitation periods. Remarkably, while the Limitations Act, 2002 was supposed to achieve clarity and predictability in the determination of limitation periods, the act has continued to spawn litigation requiring adjudication and interpretation at the appellate level.

The latest Court of Appeal decision addressing limitation periods was released this month in the case of Longo v. MacLaren Art Centre.

The Longo case is interesting, not only for the legal proposition for which it stands, but also an update on the journey undertaken by a plaster sculpture named the Walking Man, allegedly attributed to the French master sculptor Rodin, but whose provenance is unproven. It may be nothing more than a foundry plaster, which was used as part of a failed leveraged charitable donation scheme, that involved in the background at least one individual of dubious repute [See Kossow v. Canada, for an explanation of a similar leveraged donation program involving alleged Rodin bronzes, the players, etc.].

The story of the tax scheme will await another day. Suffice it to say, the Canada Revenue Agency was not convinced of the supposed worth of the sculpture, and denied the plaintiffs’ claim for a significant tax credit. In the words of Justice Guy DiTomaso on the summary judgment motion, “Sadly, Walking Man is the subject of what in the art world is known as a failed ‘art flip’ for tax purposes. It has become the rejected gift that keeps on giving.”

Walking Man’s story begins when it was shipped from Italy to Barrie, Ont.’s MacLaren Art Gallery in 2000, where it was displayed once in September 2001 before being returned to the dark of its packing crate and into storage. Some time between a French expert’s inspection of the plaster in December 2004, and September 2007 when the packing crate was opened for a third time, the plaster was extensively damaged.

At issue in the present action is whether the plaintiffs or MacLaren bear responsibility for the damage, and if MacLaren is liable, then what loss the plaintiffs suffered, if any. The issues of liability, ownership, provenance, and valuation of the damaged plaster were not decided on the summary judgment motion given the lower court’s decision on the limitation issue.

However, on appeal the dismissal of the action based upon expiry of a limitation period was overturned. Presumably the motion will be remitted to the motions judge for determination of the remaining issues on the motion.

However, for present purposes, the focus is on the time from which the limitation period ran. The plaintiffs’ action was commenced against MacLaren on Nov. 19, 2009, seeking damages of $500,000. MacLaren alleged the plaintiffs had knowledge of the damage to the sculpture through their agents, by at least October 2007 or early November 2007, and hence the action was commenced out of time.

The issue on the appeal focused on the interpretation and application of the deemed knowledge section, s. 5(1) of the Limitations Act, which provides:
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).

Justice William Hourigan confirmed, in the appeal ruling, the factors listed in s. 5(1)(a) are conjunctive. Hence, time does not start to run until the plaintiff is aware, or ought reasonably to have been aware, of all four listed factors.

Nonetheless, a plaintiff cannot sit idle and “see no evil” once he or she is put on notice of circumstances that may potentially make for a claim, and they will be required to take reasonable steps to investigate. The extent of the inquiry will be fact specific. See: Soper v. Southcott, cited with approval by Hourigan.

The limitation will run from the time “that the plaintiff had prima facie grounds to infer that the acts or omissions were caused by the identified parties,” or they were actually exposed to a loss, and had a claim against the respondents in respect of the loss. In some, but not all, cases, this may require the plaintiff to obtain an expert opinion. This was a case where, the Court of Appeal found, an opinion on the extent of the damage was necessary.

“There was also no evidence before the motion judge that the damage was so obvious and well known that an inspection was unnecessary.”

Here, the Court of Appeal concluded the record did not clearly demonstrate the plaintiffs were in fact aware of all of the s. 5(1) factors in November 2007. Once alerted to the fact the sculpture had sustained some form of damage, the plaintiffs acted reasonably in arranging for an inspection, which occurred in January 2008 (and therefore within two years of the issuance of the statement of claim). Only once the results of that inspection were known were all four factors known to the plaintiffs.

This decision emphasizes the importance of having a strong evidentiary record clearly demonstrating the plaintiff was well aware of all the factors giving rise to a cause of action more than two years before the claim was issued before the court will grant summary judgment on the basis of expiry of a limitation period.

It is consistent with other, earlier decisions that have found the limitation period does not begin to run until the plaintiff has all the facts, including expert advice, where such advice is necessary to establish one or more of the s. 5(1)(a) factors is in fact present. See, for example, Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors.

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