After the publication of my article on this subject in April of 2016, the Ontario Court of Appeal upheld the motion judge’s decision in Galota v. Festival Hall Developments Ltd. et al.
For a summary of the facts, please click here.
The unanimous decision of the Court was delivered by Justice Laskin, who held that the plaintiff’s claim against the landlord/owner of the property was brought in time despite being issued roughly five years after the date of loss.
In cutting right to the chase, the Court focused on when the plaintiff ought to have known of the claim against Festival Hall.
Festival Hall advanced to two primary arguments on appeal:
- The motion judge erred in finding the plaintiff did not show a want of due diligence because she took no steps at all to investigate her claim against Festival Hall until at least three and a half years after the accident.
- The motion judge erred by using his expanded powers on a motion for summary judgment to call for expert evidence on the standard of care of a solicitor prosecuting an occupier’s liability claim.
The Court of Appeal showed deference to the motion judge’s finding of fact that the plaintiff did not show a want of due diligence. The Court held that requisite due diligence is not a stand-alone consideration to determine if a claim has been brought outside of a limitation period. In its analysis of the first argument by Festival Hall, the Court looked at four considerations:
- The plaintiff sued the party occupying the premises and her claim was an insured claim.
- No one alleged that any other party was potentially liable.
- Festival Hall’s potential liability as owner was not obvious.
- The investigative steps suggested by Festival Hall’s expert would not have alerted the plaintiff to a claim.
While analyzing the first consideration, the Court noted that neither the plaintiff nor her lawyer could be expected to foresee the rare occurrence of an insurance company becoming insolvent. It is not clear to me how the foreseeability of insolvency is a factor of consideration for when one ought to have known of a claim.
With respect to the second consideration, the Court noted that the insurer’s adjuster did not suggest that another party may have been liable for the plaintiff’s injury. The Court referred to the decision of Justice Lauwers (as he was then) in Madrid v. Ivanhoe (2010 ONSC 2235). On the facts of that case, Justice Lauwers held that a naked denial of liability should not trigger a duty on the plaintiff to make further inquiries.
For the third consideration, the Court noted that Festival Hall was not an “occupier” pursuant to the Occupiers’ Liability Act, R.S.O. 1990, c. O.2 (the “Act”) simply because it was the landlord and owner. The Court held that on the date of the incident, the plaintiff could not have known that an act or omission of Festival Hall caused or contributed to her injuries. Festival Hall argued that the plaintiff should have conducted a title search and obtained a copy of the lease. Plaintiff’s counsel did not search title until long after it issued a statement of claim against Republik Nightclub, Festival Hall's tenant.
The Court held that although Festival Hall was not in physical possession of the premises it leased to Republik, whether or not it had the requisite “responsibility for and control over the condition of the premises” (within the meaning of section 1(b) of the Act, definition of occupier) would depend on the lease. Furthermore, the Court acknowledged that Festival Hall may have owed the plaintiff a duty under Section 8 of the Act, which stipulates that in tenancy when the landlord is responsible for maintenance and repair, it is the duty of the landlord to show the same duty of care in respect of dangers arising from any failure to carry out responsibilities as an "occupier" of the premises.
The Court found the lease was not a public document and there was no automatic ability to require Festival Hall to produce a copy of the lease before suing Festival Hall. At paragraph 35, the Court noted that “[p]resumably, she and her lawyer could have obtained the lease before the examination for discovery of Republik’s representative”, but Republik’s lawyer advised in 2011 that he would not be providing a copy of the lease because Republik was no longer his client.
The Court noted that the plaintiff’s counsel followed up with Festival Hall about his request for the lease in October of 2013. Festival Hall provided a copy of the lease in March 2014.
According to the Court, even if the plaintiff had obtained the lease at an earlier date, she could not reasonably have known that she had a claim against Festival Hall until she “married the terms of the lease" to the following facts:
- Republik extensively renovated the nightclub and dance floor before opening;
- the renovations may not have complied with the Building Code; and
- Festival Hall may have had some involvement in the renovations.
However, the Court did not indicate when this connection should have been made.
An issue with this analysis is its speculation that the plaintiff could not reasonably have known of potential non-compliance with the Building Code or the landlord's potential involvement in the renovations.
While the Court noted a request for a copy of the release in 2011, there was no follow up for what appears to be two years. When viewed in light of this potential lack of due diligence, the Court's judgment may have the effect of eroding the previously strictly enforced two-year limitation period (for example, Joseph v. Paramount Canada’s Wonderland,  O.J. No. 2339 (C.A.)).
For the fourth consideration, the Court looked at the expert evidence advanced. Festival Hall’s expert indicated that a competent lawyer would have done the following:
- Attended the nightclub to examine the premises generally or the elevated dance floor in particular;
- Arranged for measurements or photographs of the scene in general or the dance floor in particular;
- Retained the services of an engineer, building inspector, or contractor to determine if there were any Building Code or by-law restrictions or infractions relevant to the incident;
- Requested a copy of the lease; and
- Requested information concerning the person(s) responsible for constructing the elevated dance floor.
The Court of Appeal agreed with the motion judge in finding that a “wise” lawyer would have executed steps one to three. The Court had already addressed the fourth step and it simply dismissed the fifth step as “those inquiries could only have been made of potential adverse parties.” The plaintiff's failure to make inquiries of potentially adverse parties is the crux of the matter. Such inquiries would have and should have been part of a reasonable investigation into liability. The civil system in Canada provides potential litigants with the means to obtain documentation from non-parties – usually through a simple motion. The plaintiff did not bring such a motion.
As for the second argument by Festival Hall, the Court dismissed its submission that the motion judge erred in ordering expert evidence on the standard of care of a reasonably competent lawyer in an occupier’s liability case. According to the Court, nothing turned on the expert evidence.
This decision interprets the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B in a manner that diminishes the certainty surrounding claims to be issued within a two-year period. If the trend continues, underwriters may consider requesting extended record retention policies, but by how much? The statute provides an ultimate limitation period of 15 years from the day on which the act or omission on which the claim is based took place (with exceptions); however, is it possible that this period may also be extended through interpretation?
It looks like the Court of Appeal is the end of the road for this case. If that changes, another update will follow.