



COURT OF APPEAL FOR ONTARIO

CITATION: Gillham v. Lake of Bays (Township), 2018 ONCA 667

DATE: 20180727

DOCKET: C64532

Rouleau, Roberts and Fairburn JJ.A.

BETWEEN

Jack Gillham and Heather Gillham

Plaintiffs (Appellants)

and

The Corporation of the Township of Lake of
    Bays
,
Royal Homes Limited
and


J.D. MacKay o/a MacKay Construction

Defendants (
Respondents
)

David A. Morin, for the appellants

Stuart Zacharias, for the respondent, The Corporation of
    the Township of Lake of Bays

David Thompson, for the respondent, Royal Homes Limited

Heard: May 7, 2018

On appeal from the judgment of Justice Edward J. Koke of the
    Superior Court of Justice dated October 3, 2017, with reasons reported at 2017
    ONSC 5879.

Roberts J.A.:

A.

Overview

[1]

This appeal involves the discoverability of claims for damages arising
    out of construction deficiencies. The question for determination on this appeal
    is whether the motion judge erred by finding that the appellants claims were
    statute-barred because they were discoverable more than two years before the
    appellants issued their statement of claim.

[2]

The appellants appeal from the dismissal of their
    action. The respondents successfully moved for summary judgment of the
    appellants action against them on the basis that the applicable two-year limitation
    period under s. 4 of the
Limitations Act, 2002
,
    S.O. 2002, c. 24, Sched. B, (the Act), had expired.
[1]

[3]

The appellants assert that the motion judge erred in
    his approach to discoverability, specifically, that he erred in finding that by
    2009 the appellants had all the material facts they needed to start a claim
    against all of the defendants.

[4]

For the reasons that follow, I would allow the appeal.

B.

Factual background

[5]

The appellants action against the
    respondents arises out of alleged deficiencies in the construction of their prefabricated
    cottage. In May of 2006, J.D. MacKay excavated the foundation, the pier
    footings for the deck, and constructed and backfilled a stacked rock retaining
    wall. The purpose of the stone retaining wall was to ensure that the foundation
    of the cottage had the necessary depth of backfill to satisfy the requirement
    for frost protection for a foundation wall prescribed by Ontarios
Building
    Code
, O. Reg. 332/12. Royal Homes Limited constructed
    the footings and foundation for the cottage and deck, then assembled the
    prefabricated cottage and deck, completing its work in July 2006.

[6]

The appellants allege that the
    construction of the foundation of the cottage and the stone retaining wall was
    negligent because they were built on loose soil, which caused them to migrate
    down the slope of the property. The appellants plead that the
Corporation
    of the Township of Lake of Bays
was negligent in its
    oversight and approval of the construction of the cottage foundation and the stone
    retaining wall.

[7]

The
appellants first noticed a
    problem with one of the deck piers in the summer of 2009. Specifically, they observed
    that one of the deck piers at the northeast corner of the deck behind the stone
    retaining wall had sunk about 1 ¼ inches, pullin
g the
    deck post away from the cottage. They were initially concerned that the big
    foot sono tubes supporting the deck posts had not been installed to a
    sufficient depth.

[8]

The appellants approached Royal Homes
    seeking warranty assistance. Royal Homes initially advised the appellants that
    these issues had nothing to do with the cottage construction because it was a
    slope problem and that these issues were not serious in any event. It then
    suggested that the sinking deck pier did not appear to be caused by the pier installation
    but that the stone retaining wall erected by J.D. MacKay behind the deck seemed
    to be settling and pulling the deck pier with it. On Royal Homes recommendation,
    the appellants subsequently retained Trow Associates Inc., a structural
    engineering firm, to investigate.

[9]

In its September 2009 report, Trow confirmed
    that the problem to be investigated was that:  the northeast corner of the
    deck is experiencing some settlement.  The focus of Trows investigation and
    report was on determining the appropriate course of action required to provide
    a solution to the settlement issues associated with the deck.  Trow identified
    a localized slope failure and/or localized consolidation of the underlying
    soils occurring at the north east corner of deck as the root problem,
    indicating that [t]he weight that was added by the construction of the stone
    retaining wall and the backfill that was placed behind it to raise the grade
    appears to be causing a failure of the lower retaining structure, causing it to
    move laterally towards the northeast. With respect to the cottage, Trow also
    noted that while this does not appear to have affected the dwelling yet, there
    is a hairline crack (less than 1 mm in width  typical of shrinkage cracks) in
    the basement floor that is located in the northeast corner of the basement.

[10]

Trow recommended several expensive investigative
    and remedial steps, including the removal of the stone retaining wall and the
    reconstruction of the deck pier foundations.  With the removal of the stone retaining
    wall, the grade against a portion of the foundation would be lowered and,
    because of frost, the underpinning of a portion of the dwelling foundation at a
    lower elevation would be required.  They also recommended further slope
    stability investigation. However, it cautioned that undertaking these steps
    will not guarantee that there will not be any further movement of the slopes
in
    this area
 [emphasis added] but that it should significantly slow the
    progress of any movement. Trow did not suggest that the stone retaining wall constructed
    by Mr. MacKay was failing

nor that there
    were any construction issues with the stone retaining wall or the cottage
    foundation.

[11]

The appellants discussed the problems with
    Mr. MacKay. His view was that these types of retaining walls often settled
    a bit. He told the appellants that they should just monitor the situation and
    wait and see if the stone retaining wall found its own level over the next
    year or two. As a result, the appellants took no further steps at that time.

[12]

Having watched the problems continue, the
    appellants retained Fowler Construction Company Ltd. to inspect the property in
    2012. Fowler recommended that a soil study be undertaken. Terraprobe Inc.
    conducted the study. In their report dated July 30, 2012, Terraprobe concluded
    that the stone retaining wall was failing and recommended that it be removed
    and reconstructed. In its report, Terraprobe opined that the wall and backfill
    materials have moved due to some construction issues. Specifically, Terraprobe
    stated that the wall had been built on very loose sand and fill without
    adequate support of the wall base/toe from the downgrade slope. Terraprobe
    recommended that it must be confirmed that the deck piers and house
    foundations are placed on native, undisturbed soils and/or bedrock capable of
    supporting the design loads. When Fowler commenced the remedial work in 2013,
    it discovered that the cottage foundation and footings had also been
    constructed on loose soil.

[13]

The appellants commenced their action
    on October 21, 2013.

[14]

In allowing the respondents motion for
    summary judgment and dismissing the appellants action as statute-barred, the
    motion judge concluded that the appellants knew or should have known in 2009
    that there were some problems with the construction of their cottage, with or
    without the Trow report.

C.

Analysis

[15]

In my view, the motion judge erred in
    his approach to the question of discoverability of the appellants claims and
    made palpable and overriding errors in his consideration of the evidence
    related to that question.

[16]

On the respondents motion for summary
    judgment, the motion judge was required to consider whether there were any
    genuine issues requiring a trial with respect to the discoverability of the
    appellants claims against the respondents. These claims were not limited to
    the negligent construction of the stone retaining wall built by J.D. MacKay but
    also comprised the negligent construction of the cottage foundation, as well as
    the Townships alleged negligence.

[17]

However, the motion judge
    misapprehended the evidence relating to the discoverability of the construction
    issues respecting the stone retaining wall and erred in law by failing to consider
    all the criteria for discoverability.

(1)

The legal framework

[18]

In his discoverability analysis, the
    motion judge was required to consider the provisions of s. 5(1) of the Act
[2]
, in the light of the governing principles regarding
    discoverability.

[19]

Section 5(1) of the Act provides as
    follows:

(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).

[20]

The overarching question in the
    discoverability analysis under s. 5 of the Act is whether the claimant knew or
    reasonably should have known, exercising reasonable diligence, the material
    facts stipulated under s. 5(1)(a) that give rise to a claim:
Ferrara
    v. Lorenzetti, Wolfe Barristers and Solicitors
,
    2012 ONCA 851, 113 O.R. (3d) 401, at para. 32. Section 1 of the Act defines a
    claim as a claim to remedy an injury, loss or damage that occurred as a result
    of an act or omission. Section 2(1) provides that the Act applies to claims
    pursued in court proceedings (with certain enumerated exceptions that do not
    apply here).

[21]

Knowledge of the claim includes knowledge
    of the identity of a potential defendant, although it is not necessary for a
    claimant to know with certainty a potential defendants responsibility for an
    act or omission that caused or contributed to the loss. As this court observed
    in
Longo v. MacLaren Art Centre
, 2014
    ONCA 526, 323 O.A.C. 246, at para. 44: All that is required is that the
    plaintiff has
prima facie
grounds to
    infer that the acts or omissions were caused by the identified parties.

[22]

While neither the extent nor the type of loss need be known,
    the claimant must know that some non-trivial loss has occurred, and that a
    proceeding would be a legally appropriate means to seek to remedy it:
Markel
    Insurance Company of Canada v. ING Insurance Company of Canada
, 2012 ONCA 218, 109 O.R. (3d) 652, at para. 34.
The
    common law acknowledges that trivial damages do not trigger a limitation
    period, since a prudent plaintiff would not bring an action to recover a
    trivial loss: G
rey Condominium Corp. No. 27 v. Blue Mountain Resorts
    Limited
(2007), 277 D.L.R. (4th) 644 (Ont. S.C.J.), affd 2008 ONCA 384,
    90 O.R. (3d) 321, at para. 58.

(2)

The motion judges misapprehension of the evidence and flawed
    discoverability analysis

[23]

In the present case, the motion judge
    determined that the Trow engineering report alerted or ought to have alerted
    the plaintiffs to the fact that the problems were construction related and that
    they had a cause of action against the defendants. In particular, he stated
    that the Trow report identified that there was a failure of the stone wall
    constructed by J.D. Mackay.

[24]

The motion judges conclusions are
    problematic because they contain a fundamental misapprehension of the expert
    reports and reveal a flawed discoverability analysis.

[25]

First, the motion judges finding of
    discoverability is based on a fundamental misstatement of the Trow report. Contrary
    to the motion judges reasons, the Trow report stated there was a failure of
the
pre-existing lower wooden retaining structure
, and not
the stone retaining wall

constructed by J.D.
    MacKay. Rather, it is the Terraprobe report that stated that the stone
    retaining wall was failing due to having been built on loose soil.

[26]

Second, the main problem suggested in
    the Trow report is a localized slope failure and/or localized consolidation of
    the underlying soils occurring at the north east corner of deck, not the
    construction of the stone retaining wall or the cottage and its foundations. Certainly,
    Trow indicated that the weight of the latter exacerbates the movement of the
    deck pier. However, Trow identified a localized slope failure or
    consolidation of the underlying soils occurring at an isolated point on the
    property, rather than human error in the construction of the stone retaining
    wall or the cottage and its foundations. This explains Trows admonition that
    the remedial steps may not resolve the naturally occurring issues.

[27]

The respondents argue that the
    appellants claim against them is statute-barred because they knew or should
    have known of any construction deficiencies on receipt of the Trow report. 
    They submit that the concern raised by Trow that there was movement in the soil
    causing the pulling away of a deck post ought to have alerted the appellants
    that Royal Homes did not, as represented, build the cottage so as to ensure
    that it would not move toward the lake despite being constructed on a slope. 
    However, the Trow report does not reveal any problems with the cottage
    construction. Indeed, the reference to a hairline crack in the basement floor
    as typical of shrinkage cracks would not reasonably give rise to any concern
    but rather serve to dismiss it.

[28]

The motion judge similarly misapprehends
    the contents of the Terraprobe report. While acknowledging the appellants
    argument that the Terraprobe report explicitly identified construction issues
    as the cause of the problems, the motion judge does not otherwise analyse the
    report. Rather, he appears to treat the Terraprobe report as confirming the
    issues raised in the Trow report.

[29]

This was an error. The Terraprobe
    reports conclusions differ importantly from those of the Trow report with
    respect to the issue of discoverability. Terraprobe identified the cause of the
    problems to be the negligent construction of the stone retaining wall on loose soil,
    which could have been prevented, and not the isolated, naturally occurring localized
    slope and/or soil problems raised by the Trow report. Further, the Terraprobe
    report raised for the first time the possibility of problems with the
    construction of the cottage foundation that had to be investigated.

[30]

The motion judge further erred by
    concluding that even without the Trow report, the appellants would have known
    that their cottage was not constructed properly and that they had a claim
    against the defendants because they had been assured that their new cottage
    would be built on a stable foundation and that they could leave their problems
    with the site conditions behind once the new cottage was built.  However, there
    was no evidentiary basis for the appellants to reasonably suspect that there was
    anything wrong with the cottage or its foundation until receipt of the
    Terraprobe report and its recommendation that it must be confirmed that the
    deck piers and
house foundations
are placed on native, undisturbed soils
    and/or bedrock capable of supporting the design loads [
emphasis added]
.  Again,
    it must be recalled that the stated purpose of the stone retaining wall was to
    provide adequate frost cover of the deck piers and not to provide stability.

[31]

The motion judges material
    misapprehension of the expert reports caused him to err in his discoverability
    analysis. It is not enough under s. 5(1) of the Act that the appellants were
    aware of a problem. As this court has said in
Fennell v. Deol
, 2016 ONCA 249, 97 M.V.R. (6th) 1, at para. 20:


The date of discovery is the earlier of the two dates under s.
    5(1)  when (a) the person with the claim had knowledge of, or (b) a reasonable
    person with the abilities and in the circumstances of the person with the claim
    first ought to have had knowledge of, the matters referred to in s. 5(1)(a)(i)
    to (iv).

[32]

The question is whether the appellants
    knew or reasonably ought to have known that the problem observed with the deck
    pier in 2009 was possibly caused by the acts or omissions of the defendants and
    gave rise to a claim (as defined under the Act) that was appropriately pursued
    in a court proceeding. Royal Homes and J.D. MacKay dismissed the issues with
    the stone retaining wall and deck pier as not serious and due to settling which
    should resolve.  Until receipt of the Terraprobe report in 2012, the appellants
    did not have the requisite knowledge that their loss was not trivial and
    possibly arose from the acts and omissions of the respondents, and that it was
    appropriate to pursue their claim in a court proceeding.

(3)

Failure to consider s. 5(1)(a)(iv) of
    the Act

[33]

The motion judge erred in failing to undertake
    an analysis of the criterion under s. 5(1)(a)(iv) of the Act. That the
    appellants might have a cause of action against the defendants, as the motion
    judge found, is not the end of the analysis under s. 5(1) of the Act. As this
    court said in
Kudwah v. Centennial Apartments
, 2012 ONCA 777
, 223 A.C.W.S. (3d) 225, at para. 2:

It is important when considering a limitation period claim to
    appreciate that the terms of the 2002
Act
must govern. A
    court considering the limitation claim must address the specific requirements
    of s. 5 of the
Act
, particularly on the facts of this case, the
    requirement of s. 5(1)(a)(iv).

[34]

Therefore, the motion judge had to
    consider whether the appellants had a claim as defined under the Act. In
    considering whether the appellants knew or should have known that they had a
    claim, the motion judge had to go on to consider whether, having regard to the
    nature of the injury, loss or damage, the appellants knew or should have known
    that a proceeding would be an appropriate means to seek to remedy it. This
    omission by the motion judge is an error of law:
Har Jo Management
    Services Canada Ltd. v. York (Regional Municipality)
, 2018 ONCA 469, at paras. 21 and 35.

[35]

Section 5(1)(a)(iv) represents a
    legislative addition to the other factors under the discoverability analysis. As
    Laskin J.A. explained in
407 ETR Concession Company Limited v. Day
, 2016 ONCA 709, 133 O.R. (3d) 762, leave to appeal to SCC
    refused, [2016] S.C.C.A. No. 509, at paras. 33-34:

The appropriateness of bringing an
    action was not an element of the former limitations statute or the common law
    discoverability rule. This added element can have the effect  as it does in
    this case  of postponing the start date of the two-year limitation period
    beyond the date when a plaintiff knows it has incurred a loss because of the
    defendants actions.

Also, when an action is appropriate
    depends on the specific factual or statutory setting of each individual case: see
Brown v. Baum
, 2016 ONCA 325, 397
    D.L.R. (4
th
) 161, at para. 21. Case law applying s. 5(1)(a)(iv) of
    the
Limitations Act
, 2002 is of
    limited assistance because each case will turn on its own facts.

[36]

One recognized reason why the
    legislature added appropriate means as an element of discoverability was to
    enable courts to function more efficiently by deterring needless litigation: see
407 ETR Concession Company
, at para. 48;
Markel Insurance Company of Canada v. ING Insurance Company of
    Canada
, at para. 34.

[37]

Here, the motion judge failed to
    consider the specific factual or statutory setting of the case before him and
    determine whether it was reasonable for the appellants not to immediately
    commence litigation but to wait and see if the 1 ¼ inch sinking of the deck
    pier observed in 2009 would worsen over time or if the issue would resolve once
    the stone retaining wall had settled, as had been suggested to the appellants
    by Mr. MacKay. Neither Royal Homes nor Mr. MacKay believed the
    problem was serious, or due to the manner of construction. This evidence does
    not support the conclusion that the appellants knew or ought to have known in
    2009 that their loss was not trivial and initiating legal proceedings was the
    appropriate means to remedy their loss.

(4)

Failure to consider the discoverability
    of the appellants claim against the Township

[38]

Finally, the motion judge erred by
    failing to consider whether the appellants knew or reasonably could have known
    the material facts giving rise to their claim against the Township more than
    two years prior to the commencement of their action. After the Terraprobe
    report, the appellants learned from the structural engineer retained by Fowler
    as part of the remediation that the Township should have required engineering drawings
    of the stone retaining wall. When Fowler started remedial work in 2013, it
    uncovered the foundation wall that had been approved by the Township and
    discovered that the cottage footings and foundation were also negligently
    placed on the same loose soil and organic materials as were under the stone
    retaining wall. There is no evidence that these material facts informing a
    claim against the Township were known to or reasonably discoverable by the
    appellants in 2009.

D.

Conclusion

[39]

These errors were material to the
    motion judges conclusion that the appellants knew or ought to have known the
    material facts giving rise to all of their claims against the respondents. If
    he had not made these errors, he would not have concluded that the appellants
    claims were discoverable in 2009 but at the earliest in 2012. As a result, the
    appellants claims are not statute-barred.  A trial is not necessary to
    determine this issue.

E.

Disposition

[40]

Accordingly, I would allow the appeal
    and set aside the judgment.

[41]

I would grant the appellants their
    costs of the appeal in the agreed upon amount of $5,000. I would also grant the
    appellants their costs of the motion below in the amount of $20,000, to be paid
    on an equal basis by the respondents. Both amounts are all inclusive of disbursements
    and applicable taxes.

Released: July 27, 2018 PR

L.B. Roberts J.A.

I agree. Paul Rouleau J.A.

I agree. Fairburn J.A.





[1]

The appellants settled their action with J.D. MacKay by way of
    a Pierringer Agreement.



[2]
The statutory presumption under s. 5(2) of the Act was not argued.


