



COURT OF APPEAL FOR ONTARIO

CITATION: Har Jo Management Services Canada Ltd. v. York
    (Regional Municipality), 2018 ONCA 469

DATE: 20180523

DOCKET: C63324

Feldman, Pepall and Huscroft JJ.A.

BETWEEN

Har Jo Management Services Canada Ltd.

Plaintiff (Appellant)

and

The Regional Municipality of York

Defendant (Respondent)

Shane Rayman and Conner Harris, for the appellant

Frank Sperduti and Andrew Baker, for the respondent

Heard: January 10, 2018

On appeal from the judgment of Justice J. Christopher Corkery
    of the Superior Court of Justice, dated January 12, 2017.

Feldman J.A.:

Introduction

[1]

The appellants property was damaged by flooding following two
    significant rainfalls on May 21 and May 28, 2013. The floodwaters came from
    adjacent land that the respondent municipality had expropriated in 2009 for a
    construction project. In 2011, the appellant instituted a proceeding before the
    Ontario Municipal Board (OMB) claiming damages for injurious affection in
    respect of that expropriation.

[2]

Following the flooding, on June 3, 2013, the appellants lawyer wrote a
    claim letter stating that the respondents construction activities resulted in
    the flooding and consequent damage to the appellants property, and indicating
    that the source of the flooding had to be understood without delay. In its
    response of June 28, 2013, the respondent advised that the flooding was not caused
    by its construction activities, but that there was a blocked catch basin on the
    appellants property that the appellant should arrange to flush.

[3]

The appellant instituted the within action on June 29, 2015, two years
    following the receipt of the June 28, 2013 letter (June 28, 2015 was a Sunday).
    The respondent pleaded that the action was statute-barred and brought a motion
    for summary judgment. The motion judge agreed, on the basis that the
    appellants claim was discoverable when the flooding occurred in May 2013.

[4]

I would allow the appeal.

[5]

In analyzing when the appellant knew or ought to have known that it had
    a claim for damages against the respondent, the motion judge failed to consider
    when the appellant knew or ought to have known that an action in Superior Court
    was the appropriate means to seek a remedy. In that context, he failed to
    consider the effect of the statutory scheme that grants the OMB (now the Local
    Planning Appeal Tribunal) exclusive jurisdiction over damages for injurious
    affection and to consider the evidence of the appellants lawyer that she began
    an action in Superior Court out of an abundance of caution, in the event that
    the flooding was not caused by the respondents construction but was still the
    fault of the respondent.

Background Facts

[6]

In 2009, the respondent expropriated some lands adjacent to the
    appellants property on Davis Drive in Newmarket, and began construction there.
    That construction was ongoing in 2013.

[7]

In January 2011, the appellant brought an Amended Notice of Arbitration
    under the
Expropriations Act
, R.S.O. 1990, c. E.26, seeking damages
    for injurious affection based on the expropriation and the construction. No
    response was filed by the respondent and that proceeding remains outstanding.

[8]

On May 21 and May 28, 2013, Newmarket experienced significant rainfall, leading
    to flooding on the appellants property. On June 3, the appellants lawyer
    wrote to the respondent claiming the construction caused the flooding. She also
    stated that the appellant could delay retaining an engineer to investigate the
    cause of the flooding if the respondent was taking steps to understand the
    problem and correct the deficiencies. The appellants lawyer further advised
    that the appellant would make a claim with respect to the damage resulting from
    the construction and a claim under s. 21 of the
Expropriations Act
. 
    She stated that the claim was in addition to the injurious affection claim already
    outstanding from January 2011.

[9]

By a responding letter dated June 14, 2013, the adjuster for the
    respondents insurer indicated that its investigation was ongoing, that the
    cause of the flooding had yet to be determined, and that it would advise of the
    respondents position on liability once it had completed the investigation. In a
    follow-up letter of June 28, 2013, the adjuster advised that its investigation,
    using a video of the sewer, showed a blocked catch basin located on the
    appellants property. The letter recommended the appellant flush the line, but
    made no statement regarding liability or causation.

[10]

The appellant brought this action on June 29, 2015, exactly two years
    after the letter of June 28, 2013 (accounting for the fact that June 28, 2015
    was a Sunday). The respondent filed a statement of defence, which pleaded that
    the action was statute-barred and, on that basis, it brought the motion for
    summary judgment under appeal.

[11]

The appellants lawyer filed an affidavit on the motion. She was not
    cross-examined. She explained in the affidavit that she acts for the appellant
    on both the underlying action and an injurious affection claim before the OMB
    in respect of the damage caused to the appellants property by the respondents
    expropriation of Davis Drive, and its ongoing construction there. She then
    described the flooding in May 2013, and her clients attempts over the
    following year to contact the respondent to ascertain its responsibility for
    the flooding damage. Her view was that the respondent still had not addressed
    either the cause of the damage or its responsibility for it. The respondent had
    recommended the appellant report to its insurer, which it has done.

[12]

The lawyer then described her correspondence with the respondent,
    pointing out that her letter asked the respondent to cooperate and determine
    the source and cause of the flooding. In response, the adjuster for the
    respondents insurer said it was investigating, but in its final letter of June
    28, 2013, she was of the view that it neither identified the cause of the
    flooding nor the respondents position on liability. Further, despite repeated
    requests from the appellant, the respondent continued to refuse to show the
    appellant the video of its inspection, provide its investigation reports, or advise
    what position on liability it would take.

[13]

Paragraph 28 of the affidavit explains plainly the decision by the
    appellants lawyer to issue the Notice of Action in Superior Court:

While I did not believe that the Region denied
    liability in the June 28, 2013 letter nor was the cause of the flooding
    determined as at June 28, 2013, I nevertheless issued the Notice of Action out
    of an abundance of caution, to preserve Har Jos rights against the Region in
    the event that the damages were caused by factors unrelated to the construction
    activities and were found not to meet the definition of injurious affection
    pursuant to the [
Expropriation Act
].

The Motion Judges Reasons

[14]

The motion judge began from the premise that the appellants claim
    against the respondent is based on the allegation that the respondents
    construction on Davis Drive caused the flooding on its property. He drew that
    conclusion from the letter the appellants lawyer wrote to the respondent on
    June 3, 2013, which asserts that the construction work caused the flooding and
    states that the appellant would be making a claim for the damage from the
    construction in addition to a separate claim for injurious affection.

[15]

On the motion, the respondent argued that the letter demonstrated that
    the appellant knew the constituent elements of its claim as of the date the
    letter was sent.

[16]

The appellant argued, relying on
Crombie Property Holdings Limited
    v. McColl-Frontenac Inc. (Texaco Canada Limited)
, 2017 ONCA 16, 406 D.L.R.
    (4th) 252, that it had only a suspicion regarding the cause of the flooding,
    not actual knowledge. The motion judge rejected the appellants position. He
    found that the appellant had sufficient information to make out a
prima
    facie
case against the [respondent] on June 3, 2013, based on the content
    of the demand letter, stating:

The particulars [the appellant] knew about the
    construction enabled it to form an opinion that the [respondent]'s conduct
    caused or contributed to the flooding and the damages that flowed from the
    flooding. While ultimately expert opinion may be required for an ultimate
    determination, it was not necessary for the [appellant] to determine it had a
prima
    facie
case.

[17]

The
    motion judge went on to hold that if he was mistaken on the finding of
    sufficient knowledge on June 3, 2013, then the appellant also failed to lead
    evidence of any steps it took either before or after June 28, 2013 to meet its positive
    obligation to determine the cause of the flooding. He concluded that the
    appellant had not rebutted the presumption contained in s. 5(2) of the
Limitations
    Act, 2002
that it knew it had a claim on the date the flooding occurred.

Issues on the Appeal

[18]

The
    appellant raises the following three issues on appeal:

1)

Did the motion judge
    err in law or misapprehend the evidence by finding that the appellant had
    sufficient knowledge regarding the cause of the flooding on June 3, 2013, to
    commence an action against the respondent in Superior Court for damages that
    were not properly damages for injurious affection, and therefore not within the
    exclusive jurisdiction of the OMB?

2)

Did the motion judge
    err in law by finding that the appellant had an ongoing duty, up to the date it
    commenced the action, to discover the cause of the damage?

3)

Is the effect of recent
    case law from this court to postpone the commencement of the limitation period until
    the OMB determines its jurisdiction over the claim?

Analysis

(1)

Did the motion judge err by finding that on June 3, 2013, the appellant
    had sufficient knowledge regarding the cause of the flooding to commence an
    action for damages in Superior Court?

[19]

The
    basic two-year limitation period set out in s. 4 of the
Limitations Act,
    2002
begins to run on the day the claim was discovered. The date of
    discovery is governed by s. 5(1), which states that 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).

[20]

Therefore, a claim is discovered on the earlier of two dates: the day on
    which a plaintiff either knew or ought to have known the constitutive elements
    of the claim and that a proceeding in Superior Court would be an appropriate
    means to seek a remedy.

[21]

As is clear from the reasons of the motion judge, his analysis of the
    limitation issue focused on whether the appellant had sufficient knowledge of
    the cause of the flooding to commence an action against the respondent for
    damages. In my view, he erred in two ways: first in law, by not considering
    whether an action in Superior Court would be an appropriate means to seek a
    remedy; and second, by misapprehending the evidence of the appellants lawyer,
    which explained why up until June 26, 2013, the appellant believed that a claim
    before the OMB would be an appropriate means to seek a remedy for the flooding
    damage.

[22]

The motion judge noted that the appellants position was always that the
    respondents construction on the expropriated lands caused the flooding. And he
    observed that the Statement of Claim tracks the language of the June 3 letter
    to a large extent, which demonstrated that the appellant knew of its claim on
    that day.

[23]

However, in making this finding, the motion judge failed to consider the
    affidavit of the appellants lawyer, which explained that, to the extent that
    the damages from the flood properly formed part of a claim for damages for
    injurious affection under the
Expropriations Act
, they would be part
    of the appellants existing OMB claim, and that she only commenced this action in
    Superior Court out of an abundance of caution, in case it turned out that the
    flooding was not caused by the respondents construction on Davis Drive, but by
    some other factors that did not meet the definition of injurious affection.

[24]

This
    explanation is based on provisions of the
Expropriations Act
that
    provide for damages for injurious affection to landowners affected by an
    expropriation, and which give the OMB exclusive jurisdiction to award such
    damages. I refer to the definition of injurious affection in s. 1(1), the
    right to claim damages for injurious affection provided by ss. 21 and 26, and
    the exclusive jurisdiction of the OMB to adjudicate the claims under s. 29(1),
    as well as s. 36 of the
Ontario Municipal Board Act
, R.S.O. 1990, c.
    O.28.

[25]

Specifically,
    s. 1(1) of the
Expropriations Act
defines injurious affection as
    follows:

injurious affection means,

a) where a statutory
    authority acquires part of the land of an owner,

(i) the reduction in
    market value thereby caused to the remaining land of the owner by the
    acquisition or by the construction of the works thereon or by the use of the
    works thereon or any combination of them, and

(ii) such personal and
    business damages, resulting from the construction or use, or both, of the works
    as the statutory authority would be liable for if the construction or use were
    not under the authority of a statute,



resulting from the construction and not the use of
    the works by the statutory authority, as the statutory authority would be
    liable for if the construction were not under the authority of a statute, and
    for the purposes of this clause, part of the lands of an owner shall be deemed
    to have been acquired where the owner from whom lands are acquired retains
    lands contiguous to those acquired or retains lands of which the use is
    enhanced by unified ownership with those acquired;

[26]

Section
    21 provides an affected landowner with a right to compensation from a statutory
    authority (here, the respondent municipality) for injurious affection:

A statutory authority shall compensate the owner of
    land for loss or damage caused by injurious affection.

[27]

Where
    a statutory authority and landowner cannot come to an agreement regarding
    compensation for injurious affection, then under s. 26, either party may bring
    a claim before the OMB:

Where the statutory authority and the owner have not
    agreed upon the compensation payable under this
Act
and, in the case
    of injurious affection, section 22 has been complied with, or, in the case of
    expropriation, section 25 has been complied with, or the time for complying
    therewith has expired,

(a) the statutory authority or the
    owner may serve notice of negotiation upon the other of them and upon the board
    of negotiation stating that the authority or the owner, as the case may be,
    requires the compensation to be negotiated under section 27; or

(b) where the statutory authority
    and the owner have agreed to dispense with negotiation proceedings, the
    statutory authority or the owner may serve notice of arbitration upon the other
    of them and upon the Board to have the compensation determined by arbitration.

[28]

Regarding
    the OMBs jurisdiction to adjudicate injurious affection claims brought before
    it, s. 29(1) provides:

The Board shall determine any compensation in
    respect of which a notice of arbitration has been served upon it under section
    26 or 27, and, in the absence of agreement, determine any other matter required
    by this or any other Act to be determined by the Board.

[29]

Section 36 of the
Ontario Municipal Board Act
clarifies that this jurisdiction is exclusive:

The Board has exclusive jurisdiction in all cases
    and in respect of all matters in which jurisdiction is conferred on it by this
Act
or by any other general or special
Act
.

[30]

The effect of these provisions is to provide a process for compensation
    for damages for injurious affection, which includes reduced market value of
    lands affected by expropriation, as well as damages to the affected lands
    arising from the construction work done by the statutory authority on the
    expropriated lands.

[31]

In
Curactive Organic Skin Care Ltd. v. Ontario
, 2012 ONCA 81, 105
    L.C.R. 26, this court dismissed claims brought in a class proceeding because
    they were, in substance, claims for injurious affection beyond the jurisdiction
    of the Superior Court. The court held that the combination of the
Expropriations
    Act
and the
Ontario Municipal Board Act
confers exclusive jurisdiction
    over injurious affection claims on the OMB. The effect is that no matter the
    form of the claim, if it is, in substance, a claim for damages for injurious
    affection, it must be brought before the OMB and not to court.
[1]

[32]

Although the record in this case does not provide a full explanation of
    the progress or lack thereof of the injurious affection claim brought by the
    appellant in 2011, and any additional claim for damage caused by the flood, the
    affidavit of the lawyer for the appellant makes it clear that the appellant is
    first taking that route to compensation. Only if the OMB determines that the
    claim for damages is not properly before it because the respondents
    construction did not cause the flooding, will the appellant seek its damages
    from the respondent in court in this action. Furthermore, the appellants
    pleadings clearly include references to negligence and nuisance, which can
    properly form the basis for a claim in Superior Court, but not the OMB.

[33]

If in fact the flooding damage was caused by the respondents
    construction activities, there is no jurisdiction in the Superior Court to
    entertain such a claim. It is only if some other activity taken by the
    respondent or for which it is responsible caused the flood damage, that a claim
    is compensable through an action against the respondent in Superior Court.

[34]

The first time there was a suggestion that the flooding may have been
    caused by something other than the construction was in the June 28, 2013 letter,
    which advised the appellant that the respondents construction did not cause
    the flooding and that a blocked catch basin may be at fault. Therefore, it was
    only on that date that the appellant knew or ought to have known, in accordance
    with s. 5(1)(a)(iv) of the
Limitations Act, 2002
that, having regard
    to the nature of the injury, loss or damage, a [court] proceeding would be an
    appropriate means to seek to remedy it, and not a proceeding before the OMB.

[35]

Therefore, because the motion judge failed to consider when the
    appellant had or ought reasonably to have had sufficient knowledge that a court
    proceeding would be an appropriate means to seek a remedy, he misapprehended
    the significance of the evidence of the lawyer, erred in law by failing to
    consider this evidence in relation to the appropriate means requirement of s.
    5(1)(a), and ultimately in concluding that the action was commenced out of time.

[36]

I would therefore set aside the decision of the motion judge and dismiss
    the motion for summary judgment.

(2)

Did the motion judge err by finding that the appellant had an
    ongoing duty to discover the cause of the damage up to the date it commenced
    the action?

[37]

The
    respondent argues that, even if the motion judge erred on the first issue, the
    action is statute-barred on the motion judges alternative finding that the
    appellant did not rebut the presumption under s. 5(2) of the
Limitations
    Act, 2002
by failing to exercise due
    diligence.

[38]

In
    my view, the motion judge also erred in law  on this alternative ground by
    holding that the appellant had to show it acted with due diligence after it had
    actual knowledge of its claim, in order to rebut the presumption in s. 5(2)
.
Specifically, the motion judge said:

The plaintiff must put its best foot forward. If it takes the
    position that the limitation period had not commenced even after receipt of the
    June 28th letter and that it was not unreasonable for the plaintiff to await
    receipt of that letter, the plaintiff has led no evidence of steps it took to
    fulfill its positive duty to discover its claim after the letter.

Although I accept that the issue before the Court
    was whether or not the claim was discoverable prior to June 28th. In
    determining whether or not the plaintiff was taking reasonable steps to
    determine its claim, I may consider what it did before and after June 28th.

[39]

In
Fennell v. Deol
, 2016 ONCA 249, 97 M.V.R. (6th) 1, at paras.
    21 and 26, this court explained that s. 5(2) creates a presumption regarding
    when a person had actual knowledge of its claim under s. 5(1)(a), and that the
    presumption does not apply to the inquiry under s. 5(1)(b), which asks when the
    claim ought reasonably to have been discovered

[40]

A plaintiff rebuts the presumption under s. 5(2) by demonstrating when
    it gained actual knowledge of its claim (s. 5(1)(a)). A plaintiff need not show
    that it exercised due diligence in order to rebut that presumption, because due
    diligence is only relevant to the objective inquiry under s. 5(1)(b), not the
    inquiry into subjective knowledge under s. 5(1)(a):
Fennell
, at paras.
    23-24.

[41]

Here, by holding that the appellant failed to show that it took
    reasonable steps to investigate its claim after it knew of its claim on June
    28, 2013, the motion judges error went one step further.

[42]

A claim is discovered on the earlier of two dates: when the plaintiff
    actually knew of its claim, or when a reasonable person, with the plaintiffs
    abilities and in its circumstances, would have discovered the claim. If a
    plaintiff fails to exercise the diligence a reasonable person would, the claim
    is potentially discoverable earlier than the date the plaintiff had actual
    knowledge of the claim. Due diligence is therefore only relevant to the period
    of time preceding a plaintiffs actual knowledge of its claim, not the period
    after. Once a claim has been discovered, there is no ongoing duty on a
    plaintiff to further investigate the claim. Once the plaintiff has knowledge of
    its claim, then the limitation clock has begun running, and all the plaintiff
    is required to do is commence an action before the limitation period expires.

(3)

Application of
407 ETR Concession Company Limited v. Day
and
Presidential
    MSH Corporation v. Marr Foster & Co. LLP
to the issue of the
    commencement of the limitation period?

[43]

The appellant argued for the first time in oral argument that the recent
    decisions of this court in
407 ETR Concession Company Limited v. Day
,
    2016 ONCA 709, 133 O.R. (3d) 762 and
Presidential MSH Corporation v. Marr
    Foster & Co. LLP
, 2017 ONCA 325, 135 O.R. (3d) 321 apply, with the
    effect that the limitation period for this action will not begin to run until
    the OMB determines whether it has exclusive jurisdiction over the claim for
    damage arising from the flooding.

[44]

Case law suggests that in circumstances similar to those in this case,
    plaintiffs have often commenced two proceedings, one before the OMB and one in the
    Superior Court. Defendants may then seek a stay of the court proceeding pending
    a determination of jurisdiction by the OMB, or even dismissal of the court
    claim if it is clearly a claim for injurious affection: see
e.g.

Montana
    Equipment Ltd. v. Robert B. Somerville Company et al
, 2017 ONSC 3092;
Great
    Land (Westwood) Inc. v. York (Regional Municipality)
, 2016 ONSC 5975, 3
    L.C.R. (2d) 1; and
Curactive Organic Skin Care Ltd. v. Ontario
, 2011
    ONSC 2041, 120 L.C.R. 238, affd 2012 ONCA 81, 105 L.C.R. 26.

[45]

The appellants argument is that this courts decisions in
407 ETR
and
Presidential MSH
negate the need to start two proceedings in
    respect of claims that may potentially be characterized as claims for injurious
    affection, as the limitation period would not begin to run until the OMB
    decided its jurisdiction over the claims.

[46]

Because I have concluded that the appellants claim is not statute-barred
    in any event, it is not necessary to decide whether the
407 ETR
and
Presidential
    MSH
cases apply to postpone the commencement of the limitation period. As the
    issue was only raised by the appellant in oral argument on the appeal, and the
    court did not receive full written submissions, the appropriate course is to
    leave the issue undecided and not address it on this appeal.

Result

[47]

I would allow the appeal, set aside the dismissal of the action, and
    dismiss the motion for summary judgment. I would award costs of the appeal to
    the appellant fixed in the amount of $16,000 inclusive of disbursements and
    HST. I would also award costs of the motion to the appellant. If the parties
    are not able to agree on the amount, they may make brief written submissions
    (maximum two pages) within three weeks of the release of these reasons.

Released: G.H. May 23, 2018

K. Feldman J.A.

I Agree. S.E. Pepall J.A.

I Agree. Grant Huscroft J.A.





[1]

Although the OMB has been continued as the
    Local Planning Appeal Tribunal under s. 2(1) of the
Local Planning Appeal
    Tribunal Act
, 2017, S.O. 2017, c. 23, Sch. 1, which came into force April
    3, 2018, claims for injurious affection under the
Expropriation Act
remain within the exclusive jurisdiction of the new Tribunal by the virtue of
    ss. 2(2) and 11(1) of the
Local Planning Appeal Tribunal Act
. Subsection
    2(2) of that
Act
provides that any reference to the OMB in any Act or
    regulation is deemed to be a reference to the Tribunal, while s. 11(1) confers
    the Tribunal with exclusive jurisdiction to adjudicate matters within its
    jurisdiction.



