Lee v. Ponte1
In the recent case of Lee v. Ponte, the Court of Appeal for Ontario considered a novel argument about limitation periods. Others have written about the decision, but what piqued our interest was the Court of Appeal’s comment at the end of its short decision.2
“The appellant did not rely on s. 38(3) of the Trustee Act, R.S.O. 1990, c. T. 23, the application of which is preserved by s. 19 of the Limitations Act. We have not considered whether it has some bearing on the issue raised by this appeal.”
Neither of the parties raised this issue. Nonetheless, the Court of Appeal went out of its way to say they did not consider s. 38(3) of the Trustee Act. Why? Were they telling us it ought to have been considered? Were they inviting others with comparable issues to argue that section 38(3) was applicable?
First, let’s briefly review the facts and the decision of the Court of Appeal.
The deceased loaned $55,000 to the borrower. The promissory note was payable on the earlier of the sale of a specific property or upon demand. The deceased found out about the sale of the specific property on June 6, 2013. He died without making a demand for repayment. The estate trustee demanded payment in May 2015. A claim was commenced on July 17, 2015. The judge found the claim to be statute barred because more than two years had elapsed from the time the claim was discovered.
In a novel argument, the Estate Trustee relied on section 7(1) of the Limitations Act,3 which provides that section 4 of the Act4 does not run in circumstances where the claimant is incapable of commencing a proceeding and is not represented by a litigation guardian5 in relation to the claim. Section 7(3) of the Act provides that if the running of a limitation period is postponed or suspended and the period has less than 6 months to run then the period is extended to include the day that is six months after the day on which the postponement or suspension ends. The Estate Trustee argued that the deceased fell under this section and that the limitation period was effectively tolled for six months.
The Court of Appeal rejected the argument stating:
“The grammatical and ordinary sense of the words of s. 7 are simply not elastic enough to apply to a deceased person and to construe an estate trustee to be a litigation guardian.“
But, as we indicated earlier, the Court of Appeal also stated “The appellant did not rely on s. 38(3) of the Trustee Act, R.S.O. 1990, c. T. 23, the application of which is preserved by s. 19 of the Limitations Act. We have not considered whether it has some bearing on the issue raised by this appeal.”
So, how might s. 38(3) have impacted the court’s decision?
Section 38 of the Trustee Act states:
(1) Except in cases of libel and slander, the executor or administrator of any deceased person may maintain an action for all torts or injuries to the person or to the property of the deceased in the same manner and with the same rights and remedies as the deceased would, if living, have been entitled to do, and the damages when recovered shall form part of the personal estate of the deceased…
Limitation of actions
(3) An action under this section shall not be brought after the expiration of two years from the death of the deceased. [emphasis added]
Based on the wording of section 38, arguably, the Estate Trustee could have taken the position that it had two years from the death of the deceased to pursue the action. This would effectively have meant that the limitations period was tolled during the time. Is this what the Court of Appeal was hinting at? If so, it goes directly against a previous decision of the Court of Appeal.
In Camarata v. Morgan6 at paragraph 8 the Court of Appeal state:
“Section 38(3) of the Trustee Act does not have the effect of tolling a limitation period that excludes the limitation period made applicable to the action by ss. 4 and 5 of the Limitations Act. Section 38(3) creates a second limitation period that operates in addition to any limitation period that would have applied had the deceased been able to carry on with the action. In some circumstances, s.38(3) will effectively shorten what would otherwise be the applicable limitation period: see Swain Estate v Lake of the Woods District Hospital, supra. Section 38(3) cannot extend the limitation period that would have been applicable had the deceased not died and been able to carry on with his action.” [Emphasis added]
Unless the Court of Appeal wants to revisit the law articulated in Camarata v. Morgan, their comment in Lee v. Ponte appears to have been meant to convey something else.
Why the Real Property Limitations Act7, (the “RPLA”) does not apply
One might have wondered why neither the parties nor the Court of Appeal mentioned the RPLA. The answer is that the act did not apply to the case at bar because the debt was not collaterally secured by a charge on land. However, even if the debt had been secured by a mortgage, the applicability of the 10 year limitation period under the RLPA would depend on how the claim was framed. Suing on the covenant in the mortgage without seeking to recover the monies owed out of the land would preclude the RPLA from applying. In that scenario the two year limitation period under section 4 of the Limitations Act8 would apply9.
However, a creditor whose debt is collaterally secured by a mortgage against land has ten years to sue on the mortgage covenant to repay monies if the claim seeks to recover money out of the land itself10
The thrust of this blog has been to reflect on potential issues raised or hinted at by the Court of Appeal in Lee v. Ponte, when the court went out of its way to state that it did not consider section 38(3) of the Trustee Act. The fact is that it is unclear what the Court of Appeal was hinting at with its comment.
In her blog “Does a Person’s Death Alter Ontario’s 2 Year Limitation Period?” Marian Passmore suggested that the Court of Appeal’s comment amounted to them not closing the door on the ability of an estate trustee to commence an action beyond the 2-year limitation period. Maybe she is right. But, that logical deduction is undercut by the Court of Appeal’s decision in Camarata v Morgan, which concluded that section 38(3) does not have the effect of tolling a limitation period. It is possible that the Court of Appeal is hinting that it is prepared to revisit its previous decision. But, it is also possible that the Court of Appeal was not dropping any hints or extending any invitation at all. Perhaps they were just letting us know that section 38(3) was not relevant to the discussion or simply not considered.
- http://casealert.canadalawbook.ca/summaries/pdf/18347117.pdf ↵
- Rebecca Rauws’ blog “Can Limitation Periods be Extended for Estate Trustees?” at https://hullandhull.com/2018/12/limitation-periods-extended-trustees/ ,
- Gabriela Caracas’ blog , Tick Tock, Watch Your Clock http://mccagueborlack.com/emails/articles/litigation-guardian.html?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original and
- Marian Passmore’s blog “Does a Person’s Death Alter Ontario’s 2 Year Limitation Period?” at http://welpartners.com/blog/2019/01/does-a-persons-death-alter-ontarios-2-year-limitation-period/
- 7(1) of the Limitations Act provides: 7 (1) The limitation period established by section 4 does not run during any time in which the person with the claim, (a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and (b) is not represented by a litigation guardian in relation to the claim. Presumption (2) A person shall be presumed to have been capable of commencing a proceeding in respect of a claim at all times unless the contrary is proved. Extension (3) If the running of a limitation period is postponed or suspended under this section and the period has less than six months to run when the postponement or suspension ends, the period is extended to include the day that is six months after the day on which the postponement or suspension ends. ↵
- Basic limitation period
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. 2002, c. 24, Sched. B, s. 4. ↵
- Rule 7.01 of the Rules of Civil Procedure provides that parties are disability must be represented by a litigation guardian. ↵
- Camarata v. Morgan, (2009) O.J. No. 621 (Ont. C.A.) which can be accessed at http://canlii.ca/t/22j7n ↵
- The legislation can be found on line. See Real Property Limitations Act, RSO 1990, c. L.15 (“RPLA”); ↵
- See Limitations Act, 2002, S.O. 2002, c. 24, Sched. B ↵
- See John Delatre Falconbridge, W.B. Raynerr & Richard H. McLaren, Falconbridge on Mortgages, 4th ed. (Agincourt, Ont.: Canada Law Book Ltd., 1977) at 570:
“In Ontario, however, the view taken by the courts, and confirmed by the Legislature, is that the personal remedy on the covenant for payment comes within the provision relating to bonds or other specialities, and that the provision relating to an action to recover money secured by the mortgage applies only so far as it is sought to recover the money out of the land. On this view it is clear that the limitation as to the recovery of arrears of interest relates only to an action to recover money out of the land. Thus, it has been held in Ontario, in the case of mortgages made before the 1st day of July, 1894, that the action on the covenant for payment is not barred until after twenty years though the right to resort to the land may have been already barred, and similarly that in an action on the covenant arrears of interest up to twenty years may be recovered, although only six years’ arrears may be recovered out of the land. It follows that in the case of mortgages made on or after the 1st day of July, 1894, a personal judgment on the covenant may be recovered for ten years’ arrears of interest, although only six years’ arrears may be recovered out of the land.” ↵
- See previous footnote, Graeme Mew,The Law of Limitations, 2nd ed. (Markham, Ont.: LexisNexis Butterworths, 2004), pages 220-231 and section 43 of Real Property Limitations Act, R.S.O. 1990, c. L.15 which states,
43 (1) No action upon a covenant contained in an indenture of mortgage or any other instrument made on or after July 1, 1894 to repay the whole or part of any money secured by a mortgage shall be commenced after the later of,
(a) the expiry of 10 years after the day on which the cause of action arose; and
(b) the expiry of 10 years after the day on which the interest of the person liable on the covenant in the mortgaged lands was conveyed or transferred. 2002, c. 24, Sched. B, s. 26 (1).
Equity of redemption
(2) No action by a mortgagee against a grantee of the equity of redemption under section 20 of the Mortgages Act shall be commenced after the expiry of 10 years after the day on which the cause of action arose. 2002, c. 24, Sched. B, s. 26 (1).
(3) Subsections (1) and (2) do not extend the time for bringing an action if the time for bringing it is limited by any other Act. 2002, c. 24, Sched. B, s. 26 (1). ↵