Bridge Shipping v. Transport Co. Ltd., 2018 NLSC 11

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Bridge Shipping and Transport Co. Ltd. v. Avis , 2018 NLSC 11 Date : January 24, 2018 Docket : 201101G4911 Between: Bridge Shipping and Transport Co. Ltd. Plaintiff And: Nicholas J. G. Avis First Defendant And: Browne Fitzgerald Morgan & Avis Second Defendant Before: Justice Robert P. Stack Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: January 17, 2018

Summary: The Defendants brought an application pursuant to Rule 17A.01 of the Rules of the Supreme Court, 1986 , seeking a determination by

summary trial as to whether the within proceeding is statute-barred by virtue of

section 5 of the Limitations Act . The Court held that the matter was suitable for resolution by

summary trial in that (

a) it was able to find the facts necessary to decide the questions of fact or law and (

b) it would not be unjust to decide the issue on a

summary trial. The Court went on to hold that the Plaintiff knew, or ought to have known, the material facts giving rise to its alleged cause of action more than two years before the Statement of Claim was issued. The cause of action had therefore been extinguished pursuant to

section 17 of the Limitations Act . Consequently, the application was allowed and the action was dismissed with costs to the Defendants.

Appearances: Robert Buckingham Appearing on behalf of the Plaintiff Richard Gosse Appearing on behalf of the Defendants Authorities Cited: CASES CONSIDERED: Marco Ltd. v. Newfoundland Processing Ltd. et al., (NL SC), [1995] 130 Nfld. & PEIR317 (Nfld. S.C.T.D.); Noble v. Business Development Bank of Canada, 2013 NLCA 63; Dalley v. Northern Arm (Town), 2016 NLTD(G)68; Rowsell v. MacKinnon, 2010 NLTD 119; Central Trust Co. v. Rafuse, (SCC), [1986] 2 S.C.R. 147; Morgan v.Rogers, 2011 NLCA 27; Raymond v. Ballard, 2016 NLTD(G) 76. STATUTES CONSIDERED: Limitations Act, SNL 1995, c. L-16.1.

RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D. REASONS FOR JUDGMENT Stack, J.: INTRODUCTION [1] In November of 2006 the Plaintiff (“Bridge”) retained the services of Mr.

Avis, the First Defendant (“Avis”), and the lawfirm of Browne, Fitzgerald, Morgan and Avis, the Second Defendants (the “Law Firm”), to provide professional legal services relating tothe purchase of real property known as Lot 47 in a proposed golf resort development (the “Development”) by Timberland Golf ResortInc. (“Timberland”) in the Town of Pasadena, Newfoundland and Labrador (the “Town”). [2] With the consent of Bridge, Avis and the Law Firm also acted for Timberland on the transaction for Lot 47.

It closed with theregistration at the Registry of Deeds for Newfoundland and Labrador of a deed of conveyance for Lot 47 from Timberland to Bridge, onJanuary 22, 2007. [3] At some point subsequent to the close of the transaction for Lot 47, Bridge learned that the Development had been madesubject to a Stop Work and Restoration Order (“Stop Work Order”) issued by the Town.[1] [4] By a Statement of Claim filed on July 8, 2011, Bridge alleges that Avis and the Law Firm were negligent and that it hassuffered damages resulting from their failure to advise Bridge of: 1) the extent of the conflict of interest between Timberland and Bridge; 2) the fact that, prior to closing, the Stop Work Order had been issued against the Development by the Town of Pasadena; and

3) the fact that an injunction had been issued against the Development. [5] The Defendants have denied the claims made by Bridge. Moreover, they assert that the Statement of Claim was issued morethan two years after Bridge became aware of the material the facts underlying its claim, or they could have been reasonably discoveredby it. Consequently, they submit, the Statement of Claim was issued outside the limitation period provided for in

section 5 of theLimitations Act, SNL 1995, c. L-16.1, (the “Act”) and is therefore statute-barred. [6] This is my decision on the application brought by Avis and the Law Firm pursuant to Rule 17A.01 of the Rules of theSupreme Court, 1986, S.N.L. 1986, c. 42, Sch. D (the “Rules”) seeking a determination by

summary trial as to whether Bridge’s action isstatute-barred by virtue of

section 5 of the Act. issues [7] The issues that I will address are: 1. Is a Rule 17A

summary trial an appropriate means to decide the limitation period issue? 2. If the answer is yes, can the limitation period issue be determined on the basis of the material filed? Rule 17A [8] Rule 17A.01 provides: 17A.01

(1) A plaintiff or defendant may, after defence has been filed and at any time prior to the proceeding being placed on atrial list, apply to the Court with supporting affidavit material or other evidence for

summary trial seeking judgment on or dismissal of allor part of the claim in the statement of claim, as the case may be. [9] There is a significant amount of jurisprudence interpreting and applying Rule 17A, including Marco Ltd. v. NewfoundlandProcessing Ltd. et al., (NL SC), [1995] 130 Nfld. & PEIR 317 (Nfld. S.C.(T.D.)); Noble v. Business DevelopmentBank of Canada, 2013 NLCA 63; Dalley v. Northern Arm (Town), 2016 NLTD(G) 68 and Rowsell v. MacKinnon, 2010 NLTD 119. [10] The trial decisions in each of Dalley and Rowsell rely on the guidance provided by Green, J. (as he then was) in Marco.

Hestated in paragraph 76 that the object of Rule 17A is to promote the general objective of the Rules of providing the expeditious andinexpensive determination of proceedings on their merits by screening out claims that cannot survive a good hard look. [11] The legal test for

summary trial is outlined in Noble, where White, J.A. states: [36] As explained in Daley Brothers Ltd. v. Taito Seiko Co., 2001 NFCA 29, 201 Nfld. & P.E.I.R. 139 at para. 11 and Curtis v.Smith's Home Centre Ltd., 2010 NLCA 7, 295 Nfld. & P.E.I.R. 279 at para. 8, the Court may give judgment under rule 17A in twocircumstances: (

i) where there is no "genuine issue for trial"; or (ii) where, even if there is a genuine issue, the court is able "to find thefacts necessary" to decide the questions of fact or law and it would not be "unjust" to decide the issue on the application. Because a judgehearing an application for

summary trial may decide a genuine issue in a

summary way, a responding party has an evidentiary burdenplaced upon them to respond to the applicant's submission.

In this sense, it has been said that the parties must put their "best footforward". [12] Rule 17A is designed to achieve judicial efficiency, although not at the expense of procedural fairness. limitation periods and the discoverability principle [13] The parties agree that a two-year limitation period applies in the case of an action by a client against its solicitor forprofessional services rendered (section 5 of the Act). [14] Section 13(2) of the Act provides that in a case where the claim is for, inter alia, professional negligence, the cause of action isconsidered to arise and the limitation period commences to run on the date on which damage first occurs.

It is agreed by the parties thatin this case that date is when the transaction for Lot 47 closed. [15] By section 14(1) of the Act, however, the commencement of the limitation period in an action for professional negligence maybe delayed until the plaintiff knows or, considering all the circumstances of the matter, ought to know that it has a cause of action.

Bysection 14(2), the burden of proving that the running of the limitation period has been postponed or suspended is on the person claimingthe benefit of that postponement or suspension. [16] The expiry of a limitation period, even by a day, results in the inability to bring a cause of action.

Section 17 of the Actprovides: 17.

(1) A cause of action and the right or title on which it is based are extinguished upon the expiration of the limitation period forthat cause of action. [17] Bridge relies upon

section 14 of the Act, known as the “discoverability principle”, to argue that its cause of action did not arisefor purposes of the limitation period until the material facts upon which it is based were discovered or ought to have been discovered bythe exercise of reasonable diligence.

It goes on to argue that in this case it did not know, nor could it reasonably have been expected toknow, the material facts until sometime within the two-year period preceding July 8, 2011, when the Statement of Claim was issued. [18] The discoverability principle has been explained by the Supreme Court of Canada in Central Trust Co. v. Rafuse, (SCC), [1986] 2 S.C.R. 147, at paragraph 77, where the court stated that “a cause of action arises for the purposes of a limitationperiod when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise

of reasonable diligence ....” That is, a party need not have a legal opinion or other third party determination that he has a cause of action; all that is required to start the limitation clock ticking is that he knows, or ought to know, the material facts upon which a cause of action would be based. [ 19 ]

Section 14 refers to knowledge of a cause of action. The distinction between a cause of action and material facts is explained in Morgan v. Rogers , 2011 NLCA 27 , at paragraph 23 , where Hoegg, J.A. stated that knowledge of a "cause of action" for the purposes of

section 14 of the Act means knowledge of the material facts grounding the cause of action. At paragraph 26, she stated that determining the start of the limitation period should begin with an assessment of the plaintiff’s knowledge vis-à-vis each of the material facts of the action. [ 20 ] Raymond v. Ballard, 2016 NLTD(G) 76, was also a professional negligence case – there with respect to the duty of care owed by a dentist to his patient. The discoverability principle discussed there is the same as in this case where we have a claim against a law firm.

The analysis requires a determination of when the material facts on which the action is based were discovered or ought to have been discovered. [ 21 ] The material facts of the action in this proceeding must be assessed under three headings: was there a duty owed; was there a breach of that duty; and were compensable damages caused by the breach.

If there is no knowledge of the material facts supporting each of these elements, then there is no knowledge of a cause of action. issue 1 – DOE s Rule 17A PROVIDE an appropriate WAY to decide the limitation PERIOD issue raised? [ 22 ] There is a genuine issue for trial in this case. The dispute as to when the limitation period began to run is one grounded in the facts and requires resolution by resort to the evidence.

Nevertheless, as will be seen from my findings of fact and analysis that follow, I am satisfied that I am able "to find the facts necessary" to decide the necessary questions of fact or law on this application and it would not be "unjust" to decide the issue on the application. That is, the Defendants have met their onus and have established that this case is one appropriate for determination pursuant to Rule 17A.

Issue 2 – having answered the first question in the affirmative, can the limitation period issue be determined on the basis of the material filed? [ 23 ] Each party has put its “best foot forward” as is required of it in a Rule 17A

summary trial. An affidavit was sworn by Avis for the applicants and one was sworn by Robert Leek (“Leek”) for Bridge. Those affidavits included as exhibits the relevant correspondence and other documentation that each party felt was required to make out its case. In addition, each of Avis and Leek was cross-examined on his affidavit. Two additional exhibits were entered as evidence during the course of the hearing. [ 24 ] The deed of conveyance for Lot 47 was registered on January 22, 2007. The Statement of Claim, alleging professional negligence on the part of the Defendants, was issued on July 8, 2011.

Presumptively, the limitation period would begin to run once the professional services were substantially completed and any damage to Bridge would have accrued – here on the closing date. That date was significantly more than two years before the filing of the Statement of Claim. But, as we have seen, that does not end the inquiry. [ 25 ] I have already determined that Avis and the Law Firm have met the burden of demonstrating that the record will permit me to decide the matter in a manner that does not offend the principle of fairness.

The reasons for that determination will become clear as I address the second issue. [ 26 ] The second issue is whether Bridge has met its burden and has established that the material facts upon which its claim is based had not been discovered by it, nor could have been discovered by it through the exercise of reasonable diligence, within two years of July 8, 2011. We must look at each of the material facts in issue to determine whether Bridge has met its onus. [ 27 ] To repeat, the material facts in issue in this case go to answer the following questions: a. Did the Defendants owe Bridge a duty of care? b.

If so, did the Defendants breach that duty? c. If so, did the breach of duty cause Bridge to suffer compensable damages? [ 28 ] Because the first and the last of these are amenable to speedy analysis I will deal with them first. Duty of care [ 29 ] Bridge was a business enterprise based in the United Kingdom that decided to invest in real estate in the Province of Newfoundland and Labrador. Adrian Grimsey and Leek, the principals of Bridge who dealt with Avis, were businessmen.

I have no trouble concluding that they would have known from the outset of their retainer of the Law Firm that it owed them a duty to provide professional services in a competent manner and not to put the interests of themselves or another client ahead of those of Bridge. [ 30 ] That Avis and the Law Firm owed a professional duty of care to Bridge was therefore known to Bridge more than two years before July 8, 2011.

Damages [ 31 ] It is clear from the material filed, especially from correspondence from Leek to Timberland and to Avis, that Bridge has long maintained that had it been aware of the Stop Work Order prior to closing then it would not have proceeded. Bridge, therefore, asserts that its claim for damages arose upon its acquisition of Lot 47. Consequently, it would have known that it had suffered damages at the same time that it knew of the alleged breach of the Law Firm’s duty of care.

Breach of the duty of care [ 32 ] The determination of when Bridge acquired knowledge of the material facts to support the allegation that Avis and the Law Firm breached their duty of care is the key issue before me. The claim by Bridge has as its fulcrum the allegation that Avis knew of the Stop Work Order and failed to disclose that fact prior to closing.

The question, therefore, is whether the record is sufficient to permit me to determine when Bridge had knowledge of that material fact and, if it is, then whether I find that knowledge to have been acquired less than two years before the filing of the Statement of Claim. [ 33 ] I accept that at the time of closing Bridge was aware that the Development was a work in progress. I am not satisfied, however, that it was not until July of 2009 or later that Bridge concluded that Avis had failed to advise Bridge of the Stop Work Order.

It is true that following an email exchange between Leek and Avis that culminated on July 22, 2009, Bridge filed a complaint against Avis with the Law Society of Newfoundland and Labrador. That complaint was initiated by a letter dated August 11, 2009. Certainly, therefore, by the time the complaint to the Law Society was made, Bridge was asserting that Avis and the Law Firm had breached their duty of care.

But, that does not resolve the issue before me. [ 34 ] For the purposes of this application, Bridge submits that at the very earliest, it was sometime around July 20, 2009, following receipt of a “curt” email from Avis and discussions that Leek had with officials at the Law Society, that Bridge was able to conclude that it may have “reasonable and probable grounds” to take an action against the Defendants for professional negligence.

But, claims Bridge, it was not until after the decision of the Adjudication Tribunal empaneled to hear the complaint was issued on January 13, 2011 (the “Tribunal Decision”), that Bridge became aware of the full extent of the alleged “negligent acts, conflicts and omissions of candour attributed to Avis”. [ 35 ] The Tribunal Decision found Avis guilty of conduct deserving of sanction, by virtue of his failure to comply with the Rule under

Chapter III of the Code of Professional Conduct (advising clients) and the Rule under

Chapter V of the Code (impartiality and conflict of interest between clients). In particular, it found that Avis had no right to disregard the condition of the agreement of purchase and sale that there were to be no outstanding work orders on the property without specific instructions from Bridge. Consequently, Bridge says, it was only after learning of the results of the complaint on January 13, 2011, that it knew that it had a cause of action against Avis and the Law Firm. [ 36 ] On the evidence before me, I disagree with the position taken on behalf of Bridge.

As we have seen, it is not necessary that a person be aware that they have a cause of action, in the sense of an enforceable legal claim, for the limitation period clock to start; it is enough that they are aware of the material facts underlying a potential cause of action.

In most circumstances an aggrieved party will not be able to wait until they have received a legal opinion or the decision of some other tribunal before being imbued with knowledge of the facts material to the potential claim. [ 37 ] Although I am unable to determine exactly when Bridge had this knowledge, the evidence establishes that it must have been some time before June 29, 2009.

That is, although I find as a fact that by January of 2008 Bridge was aware that there had been a Stop Work Order issued against the Development prior to closing, I am unable to conclude precisely when, prior to June 29, 2009, it was aware that Avis knew of the Stop Work Order and failed to advise it. [ 38 ] Nevertheless, the proof that Leek, and therefore Bridge, was aware by June 29, 2009 that Avis knew of the Stop Work Order and failed to advise it is in Leek’s own correspondence.

This commences by an email from Leek to Avis on that date and ultimately concludes in a letter from him to the Law Society dated August 11, 2009. [ 39 ] The June 29, 2009 email from Leek to Avis said in part: […] what I cannot understand is why if the “stop work order” was issued in December 2006 how we were not made aware of that before we completed the transaction late in January 2007. [ 40 ] The June 29, 2009 email may be ambiguous as to who it was that Leek felt ought to have advised Bridge about the Stop Work Order – it could refer to Avis or, as Leek asserts, to Timberland.

Subsequent correspondence from Leek makes the matter clearer, however. In an email to Avis “chasing him up” on the June 29 message, Leek wrote: […] my question referred specifically to the stop work order issued in December 2006 which was not noted in your statement to us [sent prior to closing]. [ 41 ] This email suggests that Leek’s concern was that Avis knew of the Stop Work Order prior to closing and failed to disclose it. [ 42 ] If any ambiguity remains, however, it is dispelled by Bridge’s complaint against Avis to the Law Society.

In his letter of August 11, 2009, Leek writes with regard to the Stop Work Order and other negative decisions relating to the Development taken at a Town council meeting: This meeting was held prior to our completion of the transaction and this information should also have been disclosed to us by Mr. Avis…We do not know why Mr. Avis failed to inform us of this information and have asked him why that occurred .

[Emphasis added.] [ 43 ] There was no evidence adduced as to any other instance at which Leek asked Avis why the Stop Work Order had not been disclosed prior to closing. Consequently, it must have been the June 29 email that posed the inquiry of Avis referred to in the August 11, 2009 letter.

Based upon the evidence as a whole, the inquiry in the June 29, 2009 email from Leek to Avis can be rephrased to the following effect: “What I cannot understand is why, if the Stop Work Order was issued in December 2006, YOU did not make us aware of that before we completed the transaction late in January 2007”. [ 44 ] Based upon the pleadings, the key material fact that would have to have been known to Bridge was that Avis was aware of the Stop Work Order prior to the close of the transaction for Lot 47 and that he failed to advise Bridge.

Whatever suspicions Leek may have had in this regard following learning of the Stop Work Order in January of 2008, the only reasonable inference that I can make is that he was aware of this fact when he challenged Avis on it on June 29, 2009. That is, Leek would not have posed the question to Avis regarding his alleged failure to notify Bridge about the Stop Work Order prior to closing if he did not believe it to be true at that time.

I therefore find as a fact that Bridge knew that material fact relating to the cause of action on or before June 29, 2009. [ 45 ] June 29, 2009 is more than two years before July 8, 2011, when the Statement of Claim was issued. Consequently, the action was commenced outside of the applicable limitation period and is a nullity, having been extinguished prior to the filing of the Statement of Claim. [ 46 ] Counsel for Bridge argues that this is a harsh result in the circumstances and is unfair. Nevertheless, that is the effect of

section 17 of the Act . I will not go into a discourse on the purpose for limitation periods and the certainty and finality that they bring to potential claims against defendants. I will say, however, that the purpose of the discoverability principle enshrined in

section 14 of the Act is to inject a measure of fairness for presumptive plaintiffs. It does this by delaying the commencement of the limitation period so that a plaintiff is not prejudiced by the passage of time when it does not know, or may not reasonably be expected to know, that it has a cause of action. disposition [ 47 ] The application by Avis and the Law Firm is allowed. This is an appropriate case for a

summary trial. The record is sufficient for me to make the required findings of fact such that the law may be applied to them. Furthermore, this is not a case where it would be unjust to refuse to deal with the matter summarily. Rather, the opposite is true - both parties benefit from the matter being finally determined at this point rather than facing the prospect of more time and expense being expended only to arrive at the same result further down the litigation road. [ 48 ] Having determined that this is an appropriate matter for a Rule 17A

summary trial, I am also satisfied that I can give a final determination of the substantive issue based upon the record before me. For the reasons stated above, any cause of action that Bridge may have had against Avis and the Law Firm has been extinguished by the passage of time. The action is dismissed. [ 49 ] On the issue of costs, counsel for Bridge argued that expenses incurred by both parties could have been saved had this application been brought sooner and so I should not award costs to the Defendants.

That is not, in my view, a sufficient reason to depart from the normal result that costs follow the cause. Because the Defendants have been successful they shall have their costs to be taxed in accordance with Column 3 of the Scale of Costs. ___________________________ ROBERT. P. STACK Justice