When Does The Limitation Period Clock Start Ticking?

Ferrara v. Lorenzetti Wolfe Barristers & Solicitors^[1]

In 2006 Ferrara clearly knew someone thought his lawyer, Stephen A. Schwartz, was negligent. Arguably Ferrara would have to sue Schwartz by 2008^[2] or his action would be statute barred. The Ontario Court of Appeal concluded that the limitation period was not triggered until 2009 which meant that Ferrara had until 2011 to start the law suit^[3. In making that decision there was a divergence from a group of cases that suggested that the limitation period would have been triggered in 2006^[4]. But, that’s the end of the story. Let’s start at the beginning and review the implications on the issue of discoverability^[5].

The facts of this case are somewhat complicated, but for the purposes of focusing on the limitation period issue let’s set out a simplified version of what took place^[6]. There was a sale of property. The lawyers for the vendors inaccurately prepared a statement of adjustments.^[7] Schwartz, the lawyer for the purchaser Ferrara, also reviewed the statement of adjustments and approved of it. As a result of the mistake in the statement of adjustments Ferrara^[8] was credited with more money than he was entitled to receive. In September 2006, vendor, King Line Investments Inc. (“King Line”) sued both his lawyer for the negligent preparation of the statement of adjustments and sued Ferrara to get the money (excess credit) back. The courts referred to this law suit as the “deficiency action”. In 2009, the court found for the vendor, King Line^[9]. In 2011, Ferrara sued his own lawyer, Schwartz for negligence. Did Ferrara start his law suit too late? Schwartz made the argument that Ferrara’s claim was statute barred, an abuse of process and should be dismissed.

Schwartz brought a motion for summary judgment. He argued that pursuant to the Limitations Act, 2002^[10] the two year limitation period was triggered in 2006 when the vendor, King Line, sued Ferrara and its lawyer. Arguably, based on that law suit a reasonable person with the abilities and in the circumstances of Ferrara ought to have known that the same claim could be brought against Schwartz. Arguably, Ferrara should have known that if the vendor’s lawyer could be negligent because he approved of the statement of adjustments so too could Schwartz be negligent because he also approved of the statement of adjustments. The judge, Allen J., granted the summary judgment motion and ruled that that the fact that Ferrara did not appreciate the significance of the vendor’s law suit against its lawyer did not delay running of limitation period. Moreover, Ferrara’s discovery of the claim was not contingent on the results of the Vendor’s law suit against its lawyers and Ferrara[11]. Ferrara appealed and in a split decision^[12] the Ontario Court of Appeal granted Ferrara’s appeal. Let’s see why.

The Ontario Court of Appeal’s analysis of the law is instructive. In her dissent Gloria Epstein J.A. observed that “According to the principle of discoverability, ‘a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered by the plaintiff by the exercise of reasonable diligence’.^[13] Section 5 codified the common law which provides that the claim is discovered at the earlier of when subjectively the plaintiff first had actual knowledge of the material facts constituting the cause of action or where objectively a reasonable person in the claimant’s position would have been alerted to the elements of the claim.^[14] She believed that the triggering event occurred when Ferrara retained litigation counsel in the deficiency action. Justices Laskin and Sharpe disagreed.

For Justices Laskin and Sharpe the real question was whether Ferrara should have discovered his claim for damages for Schwartz’s alleged negligence before July 2, 2009 which was the date of the judgment of Belobaba J.’s decision in the vendor’s action against Ferrara. To that question Justices Laskin and Sharpe answered in the negative.

There were 3 possible dates that Ferrara could have discovered the claim:

1. September 2006 – The motion judge agreed with Schwartz who said Ferrara’s claim was discoverable on the date the statement of claim was issued in the deficiency action. Given the facts of this case, no one at the Court of Appeal agreed with this position.
2. November 2006 – While Epstein J.A. disagreed with the motion judge, she believed that the claim was discoverable on the date Ferrara retained litigation counsel in the deficiency action.
3. July 2009 – Ferrara argued that the claim was discoverable on the date Belobaba J. released his decision in the deficiency action. Justices Laskin and Sharpe agreed.

Some of the facts relevant to Justices Laskin and Sharpe include the following: Ferrara was a relatively unsophisticated client. Schwartz had acted for Ferrara for over 20 years and based on their history relied upon him. Both before the deficiency action began and throughout the litigation Schwartz continuously and repeatedly assured Ferrara that he, Schwartz, was right, and that Ferrara was entitled to a rollover credit^[15]. In other words, that there was no error to the value Schwartz ascribed to the roll over credit. Contrary to his obligations under Rule 6.09 of the LSUC Rules of Professional Conduct, Schwartz never advised Ferrara that he may have been wrong or may have made a mistake. None of the three litigation lawyers he retained in the deficiency action recommended suing Schwartz. In the deficiency action Schwartz testified in support of his position that the minutes of settlement authorized the rollover credit in favour of his client, Ferrara.

The majority of the Court of Appeal concluded that the date Ferrara’s claim was discoverable turns on the modified objective test in s. 5(1) (b) of the Act^[16]. Based on the facts reviewed above the Court of Appeal concluded that Ferrara showed that a reasonable person with his abilities and in his circumstances would not have known he had a claim against Schwartz until July 2, 2009, the date of Belobaba J.’s decision.

Two facts stood out to delay the discoverability of the claim until Justice Belobaba’s decision on July 2, 2009^[17]:

1. Schwartz’s repeated assurances that he was right; and
2. Ferrara’s contradicted evidence that no one told him otherwise. When Ferrara was defending himself against the 2006 law suit he had experienced litigators none of which advised Ferrara to sue Schwartz^[18].

All three justices of the Court of Appeal agreed with the comment of Molloy J. in Kenderry-Esprit (Receiver of) v. Burgess, MacDonald, Martin and Younger (2001), 53 O.R. (3d) 208, at para. 19: “The date upon which the plaintiff can be said to be in receipt of sufficient information to cause the limitation period to commence will depend on the circumstances of each particular case.”^[19]

This decision may very well make a substantive impact on solicitor negligence cases which involve limitation period arguments. Arguably, this Court of Appeal decision opens the door to argue that a claim is not discovered when an unsophisticated litigant reasonably relies on the advice provided by his lawyers, and or the lack of advice given by his lawyers, that such a claim can be made.